S.S. Chadha, J.
(1) This petition under Articles 226 and 227 of the Constitution of India seeks the quashing of the order dated April 23, 1980 passed by the Collector of Excise, Delhi imposing a penalty of Rs. 7,12,8001- under Rule 21 of the Delhi Country Liquor Bonded Warehouse Rules, 1976 (hereinafter called the Rules) for failure to maintain its regular supplies and failure to supply country liquor demanded by the Collector of Excise, the appellate order dated June 20, 1980 passed by the Commissioner of Excise, Delhi reducing the penalty to Rs. 4,69,800 and the order dated August 26, 1980 passed by the Lt. Governor, Delhi dismissing the appeal of the petitioner.
(2) By a public notice dated February 28, 1979 March 5, 1979, issued by the Commissioner uf Excise, Delhi tenders in the prescribed form were invited from the working distilleries only for the grant of licenses in forms CLW-I and L-9 as per the Rules for running the bounded warehouses in Delhi for supply of caramel coloured ordinary spiced country liquor during the period from April 1, 1979 to March 31, 1980. The terms and conditions for grant of CLW-I and L-9 licenses were duly notified. The last date of the receipt of the tenders was March 12, 1979 and the petitioner also submitted his tender. A high powered committee was appointed by the Delhi Administration to negotiate with the tenderers the price of liquor and other terms and conditions regarding supply of liquor to the Delhi Administration. The Commissioner of Excise by letter dated April I, 1979, informed the petitioner and M[s. Cooperative Company Limited, another tenderer that the Lt. Governor, Delhi was pleased to accept their tenders for supply of wholesale country liquor to Delhi in bottles of 750 ml. costing Rs. 23.20 per dozen bottles. They were called upon to make all arrangements to commence the supply immediately and strictly in accordance with the terms and conditions for the grant of license which were stated to have been accepted by them. The petitioner was called upon to complete the formalities so that license in Form CLW-I and L-9 could be granted to them. The formalities notified were :
'(I)You are requested to furnish a security deposit of Rs. 2 lacs in Fir or in bank guarantee or in Government promissory notes. (ii) You are required to execute an agreement in the Form prescribed by the Excise Department for due observation of the terms and conditions for the grant of licenses. (iii) license fee of Rs. 40,0001- each for CLW-I and L-9 licenses are also to be deposited before the grant of the license.'
The petitioner was called upon by the reminder dated April 20, 1979 to complete the formalities indicated in the letter dated April 1, 1979. The petitioner complied with the formalities mentioned at Seriall Nos. I and 3 above and was allowed to run wholesale business of country liquor and Bonded Warehouse No. 2.
(3) As the petitioner had not executed the agreement for due fulfillment of the terms and conditions, for the grant of license and the execution of bond for importing liquor into Delhi without payment of special duty as required under Role 16 of the Punjab Excise Act, 1914, a reminder was sent in the letter dated April 30, 1979 to complete the specified formalities. Another reminder was issued on May 17, 1979 to the petitioner. The petitioner however, did not execute those documents. On July 10, 1979, the licenses in Form No. CLW-I and L-9 for supply of country liquor in the Union Territory of Delhi for the year 1979-80 were issued. The petitioner become a license for the period April 1, 1979 to March 31, 1980 and continued to make the supplies.
(4) Show cause notices were issued on February 4, 1980 to the petitioner in the matter of failure to build up and maintain the minimum stock of country liquor and maintain regular supplies to accordance with the terms and conditions for various periods and the petitioner was called upon to show cause why a penalty under Rule 21 or the Rules be not imposed. The amount of penalty was separately specified in each show cause notice. By letter dated February 12. 198O the petitioner requested the collector of Excise to give him the copies of the slated documents to enable him to give an effective reply to the show cause notices. Copies of some of the documents were furnished and other were not supplied to the petitioner. He. however, sent a common reply to the show cause notices in reply dated March 7. 1980. The show cause notices and the written replies were considered by the Collector of Excise who came to the conclusion that there was no failure on the pan of the petitioner to build up the minimum stock of country liquor. The Collector of Excise, however, held that the petitioner tailed to make the supplies demanded h him and imposed a penalty of Rs. 2.00 per proof litre under Rule 21 lor the quantities not supplied but demanded by the Collector of Excise. Thus a penalty of Rs. 7.12,800 was calculated under the first impugned order. On appeal the Commissioner of Excise came to the conclusion half the supplies up to September 15. 1979 were not demanded by the Collector of Excise in the manner prescribed by the Rules, and thus there was no justification to impose penalties for the period up to 15th September. 1979. The penalties for that period amounting to Rs. 2.43.000- were set aside. For the remaining period the penalties amounting to Rs. 4.69.800 - were confirmed by the second impugned order dated June 20, 1980. The I.t. Governor. Delhi dismissed the appeal by the third impugned order dated August 26. 1980.
(5) The main submission of Shri Tirath Singh Munjral. learned counsel for the petitioner, is that the Delhi Administration was entering into the contract for the grant of licenses in exercise of its powers under Article 298 of the Constitution of India and the contract had to be in full compliance with the provisions of Article 299 of the Constitution of India. The counsel urges that the terms and conditions in the tender notice could not form part of the contract in the absence of the execution of an agreement in the form prescribed by the Excise Department for due observation of the terms and conditions for the grant of license. According to the counsel, the petitioner in the auction held by the Delhi Administration made a bid and signed the declaration necessary before he could bid but the making of the declaration under the bid could not amount to a contract between the petitioner and the Delhi Administration. There was no completed and concluded contract between the parties and thus the terms and conditions of the tender could not be enforced against the petitioner. Reliance is placed en K. P. Chowdhary vs . State of Madhya Pradesh : 3SCR919 , where in it was held that in view of Article 299(1) of the Constituent of India, there can be no implied contract between the Government and any other person, the reason being that. if such implied contracts between Government and any other person were flowed, that would in effect make Article 299(1) useless, for then a person who had a contract with Government which was not executed at all in the manner provided in Article 299(1) could get away by saying that an implied contract may be inferred by the facts and circumstances of a particular case. Reliance was also placed on Melamchand vs . State of Madhva Pradesh : 3SCR214 for the proposition that unless there is an agreement executed in accordance with the provisions of Article 299 of the Constitution and admittedly the petitioner in this case executed no such agreement he would no; be liable for any breach of the contractual obligation. Reference was also invited to an unreported judgment in First Appeal No. 5 of 1962 decided on April 2, 1968 by Allahabad High Court and upheld in the Supreme Court in the case reported as State of U. P. vs . Kishori Lal Minocha. : 2SCR724 . In that case the High Court held that there was no completed contract between the parties and consequently there could be no breach of the terms and conditions and no cause of action for the suit arose in the absence of a completed contract which satisfied the requirement of Article 299 of the Constitution.
(6) Another facet of the submission of the counsel is that the provisions contained in the Rules arc mandatory. Reference was also invited to the provisions contained under Section 22 and Section 24 of the Punjab Excise Act, 1914 as extended to Delhi (hereinafter called the Act). Under Rule 3 the license may be granted in Form L-9 and CIW-1 according to the terms and conditions laid down by the Excise Commissioner with the prior approval of the Lt. Governor, Delhi from time to time. Rule 4 provides that the licensee shall be required to deposit the .amount of security and also to furnish a surety who will execute a personal bond in the sum as prescribed by the Excise Commissioner for the due fulfillment of the terms and conditions of she license that he would be responsible to make necessary arrangement lor sale of country liquor of the prescribed specifications. Rule 4 further provides that if a person does not execute a bond and furnish suitable surety the offer of grant of license made could be withdrawn and in addition to the withdrawal of the offer the, carnet money of the petitioner could be forfeited and he could he black listed. From these statutory provisions and the admitted facts, the counsel urges the Court to draw an inference that there was no concluded contract and the matter remained at the stage of the filing of the fender documents. The submission further is that there is no provision in the Rules to give any relaxation of any provisions of the rule, and there was no power to waive the execution of the agreement and the surety bond and as such so concluded contract came into existence. Reliance is placed on State of Madhya Pradesh vs . Firm Goverdhan Dass etc. : AIR1973SC1164 wherein it was held that there was no power to waive the condition of deposit of 25 per cent of the purchase price as offered and in its absence there I was no concluded contract between the parties. These submissions cannot stand close scrutiny.
(7) The law is well titled that any contract, which is required to be exclude in accordance with the provisions of Article 299 of the Constitution of India, is nullified and becomes void. if the contract is not executed in conformity with those provisions and there is no question of any estoppel or ratification in such cases. But the provisions of Article 299 are applicable only to contracts made in executive powers of the Union or State. Article 299 however, does not apply to transactions in exercise of statutory powers. It has no application to a case. where a particular statutory authority, as distinguished from the Union or Stale, in terms of a statute issues the licenses such as the case before me under the Punjab Excise Act, 1914 as in force in the Union Territory of Delhi (the Act) read with the Delhi. Country Liquor Bonded Warehouse Rules. 197C) (the Rules). Manufacture. possession and sale of in taxiing is regulated by the provisions contained in Chapter Iv of the A.ct. The sale -of liquor is prohibited except under the authority and subject to the terms and condil^on' ol' a license granted in that hchalf. It is not disputed that the Rules are statutory and were published in Delhi Administration Notification dated 6-8-76 in the official Cla/.ette. Tenders in the prescribed form were invited from the working distilleries only for the grant of licenses in form CLW-I and L-9 as per the Rules for running the Bonded Ware- houses in Delhi. The terms and conditions for the grant of licenses in Form L-9 and CLW-I. Vice notified by the F - ei:e Com- missioner and after having obtained the approval of the Lt. Governor as required by Rule 3. Sub-rule (2) of Rule 3 em- powers the Lt. Governor to decide whether the licenses in Form L-9 and CLW-I may be granted either on fixed fee or by inviting tender or ope'n application. The Lt. Governor decided in this case to invite tenders in exercise of his statutory power. The petitioner Along with other tenderers filed its tender documents. Ultimately the tender filed by the petitioner and another was accepted by the Lt. Governor and the acceptance communicated to the petitioner in the letter dated April 1. 1979. The petitioner was called upon to complete the formalities so that licenses in Form CLW-I and L-9 could be granted. The petitioner furnished the security deposit and deposited the license fees as' required by Rule 4, but did not execute the agreement for the due performance of the terms and conditions for the grant of licenses and the surety bond. The licenses in form CLW-l and L-9 were however issued to the petitioner lor the supply of country liquor. It was open to the Excise Commissioner to withdraw the offer of grant of licenses to the petitioner on the failure on the part of the petitioner to execute the bond and to furnish suitable surely. This was not done. The licenses were issued in Form C.L.W.-l and L-9 subject to the provisions of the Act and all the Rules- made there under and all amendments made to the Rules from time to time. Rule 32 also says that the license shall be bound by the provisions of the Act and by all rules which may be prescribed under the Act in this behalf from time to time. The Government has granted the privilege to the petitioner of supplying the country liquor in exercise of the statutory functions under the Act and the Rules. The petitioner is bound by the terms and conditions of the license irrespective of the fact whether an agreement to that effect was executed or not. The supply of the intoxicant by the petitioner is subject to the terms and conditions of a license granted in that behalf and includes the ubserva.nce by I lie petitioner of the provisions of the Act and the Rules. In this case the violation is alleged of Rule 21 and the impugned penalties have been imposed by resort to the statutory provistion. Rule 21 reads as under :
'21.Penalty : Failure to build up and to maintain the minimum stock of country liquor and failure to maintain its regular supplies as prescribed by the Collector of Excise, from time to time and[or failure to supply comity liquor within time which the Collector of Excise deems reasonable, will render the licensee liable to pay penalty not exceeding Rs. 2 per proof litre of country liquors demanded but not supplied. Aggrieved by the order of the Collector of Excise, the licensee shall have right of appeal to the Excise Commissioner whose decision shall be final and binding upon the licensee.'
In 'A. Damodaran and another vs . State of Kerala' : 3SCR780 , a question arose before the Supreme Court as to whether the auction bidders of reddy shops were liable to pay the dues arising out. of bid for grant of privilege for the toddy shops in the absence of any formal agreement as required by Article 299 of the Constitution. It was held that statutory duties and liabilities may be enforced in accordance with statutory provisions and that for the recovery under Section 28 of Kerala Abkari Act, it is not a condition precedent to recovery of amount due and recoverable that it should be under a formally ]drawn up and executed contract. It was ruled :
'INMadhavan's case K. K. Mathew, J. repelled the contention that the execution of an agreement in accordance with the provisions of Article 299 of the Constitution was a condition precedent to the creation of liability to be proceeded against under Section 28 of the Act for recovery of the balance of the rentals due. He said (at P. 94): It was contended on behalf of the petitioners in some of these cases that no agreements were executed by them, and thereforee, the Government arc not entitled to recover any amount by way of rental. Reliance was placed upon the decisions of the Supreme Court in K. P. Chowdhary v. State of M. P. and Mulam Chand v. State of M. P. (supra) for the propositions that unless there is an agreement executed in accordance with the provisions of Article 299 of the Constitution, the petitioners in the case where no agreements have been executed, would not be liable to pay rental. The argument was that the liability to pay rental arises only out of the agreement. and if there is no agreement, then there is no liability to be enforced. As I have indicated the liability to pay the rental arises not only by virtue of the agreement but also by the provisions of Section 28 of the Act. The decision of the Supreme Court in K. P. Chowdhary v. State of M. P. would make it clear that if there arc provisions in the Act, the liability to pay the rental can be enforced. I think that even if no agreement has been executed, there was the liability under Section 28 of the Act, and that the liability could be enforced under the provisions of the Revenue Recovery Act. (Sec sections 6 and 62 of the T. C. Act). 13. The appellants become entitled to get licenses from the Government which had to perform its duty to execute written agreements and grant licenses as soon as the appellants fulfillled required conditions by paying up the remainder of the amounts due. The Government had performed its part of the bargain and even allowed the appellants to start selling liquor. The appellants also became liable and bound to perform their corresponding obligations under the conditions of the auctions imposed in pursuance of statutory provisions. This reciprocity of obligations, quite apart from its basis in agreement, had thus acquired an operative force resting on statutory sanction and equity.'
(8) A Full Bench of the Madhya Pradesh High Court in 'Ram Rattan Gupta vs. State of M. P.', reported as : AIR1974MP101 came to the conclusion that on acceptance of highest hid a concluded contract comes into existence under the Madhya Pradesh Excise Act. Such a contract is in exercise of statutory power and not in exercise of executive power and Article 299 is not attracted. A Division Bench of the Patna High Court in A 'Mis. Shree Krishna Gyanoday Sugar Ltd. vs. State of Bihar', reported as : AIR1975Pat123 was concerned with a case under the Bihar and Orissa Excise Act, 1915. It was held that where the State Government, in exercise of the powers under Section 22 of the Act, I grants the exclusive privilege to any person on certain conditions under Section 22(1) and a license is received by that person under Section 22(2). it cannot be contended that it amounts to a contract made in exercise of the executive power of the State Government within the meaning or Article 299.
(9) It is not necessary to deal separately with the case of 'K. P. Chowdhary' (supra) or 'Mulam Chand' (supra) and others cited by the counsel for the petitioner as they were considered by the Supreme Court when it was held that the obligations acquired an operative force resting on statutory sanction in regard to licenses for supply of intoxicants. The license in. this case has been granted, for the supply of articles covered by the Act and the Rules and it is a statutory license. The licensee is bound by the provisions of the Act and the Rules. The petitioner is at the same time liable for penalties livable under Rule 21 for failure to maintain a regular supply of the country liquor demanded but not supplied. The main contention fails.
(10) The question whether the statutory provision is mandatory or directory does 'not depend upon the form of the provision but it depends upon the intention of the Legislature. Each case has to be considered on its own provisions in order to find out whether a particular provision is mandatory or directory. No hard and fast rules have been or can be laid down for that purpose. No single test can possibly be evolved and applied. Several methods have been applied to explain the intention of the legislature in enacting a particular provision. The purpose for the provision and its nature, the serious general inconvenience or injustice to person resulting from whether the provision is read one way or the other, the language of the provision have to be taken into consideration. There have been even noticed in the case relied upon by the counsel for the petitioner, namely 'Rajainailaiah and another vs. Anil Kumar & Ors' 1980 U. J. S.C. 583.
'The question whether a provision is mandatory is nut to be resolved merely by reference to the emphatic or gentle language employed in the provision, nor even by the presence or absence of an express stipulation regarding the consequence of a breach of the provision. These are circumstances of importance which naturally have to be considcred. But one must give greater consideration to the statutory design and the importance of the provision in the context of that design. Generally one may say a provision which insists upon recording of reasons before an action is taken must prima facie be considered to be mandatory, as it is' aimed at preventing arbiterines. Where the rights of citizens are involved there can be no question that such J. provision should be regarded as mandatory.'
Under Rule 4 the license is required to deposit immediately, after the decision has been communicated to him. the amount of Security as well as the license fee. This has been dose. The licensee is also required to execute a fond and to furnish a suitable surety other than himself, as provided in Rule 4(a). If these conditions are not complied with the Rule says that 'the offer of grant of license made to him shall be withdrawn.' The mere use of the word 'shall' docs not lead to the necessary inference that the offer had. to be withdrawn in all cases. The use of the word 'shall' is inconclusive and in each the Court has to find the legislative intent. The scheme of the statutory rule suggests that it can be worked by substantial compliance. The security has been deposited and the license fee furnisned. Terms and conditions for the grant of license arc statutory. Merely because a suitable surety is not furnished, the offer had to be withdrawn if it is construed as mandatory. The furnishing of the surety is an additional security which may or may not be insisted. The execution of the bond for the terms and conditions of the license is also one of the requirements of the Rule. It is a superfluous requirement as the licensee is bound by the provisions of the Act and the Rules. To construe the Rule mandatory would mean that in the absence of the execution of the bond the offer had to be withdrawn. Each could never have been the legislative intent. If the provision is to be read as mandatory than the earnest money deposited by the defaulter has also to be forfeited and the defaulter has also to be black listed because the word 'may' is not conclusive. The Legislature could never have intended such consequences on the default of a licensee. Even though a duty has been imposed and the manner of performance of the duties is indicated in imperative language. the provision cannot be regarded as mandatory as it may result to general inconvenience and injustice to the defaulting tenderers. The Excise Commissioner received the security deposit as well as the license fee and chose to grant the licenses. A licensee is bound by the terms and conditions for the grant of license being statutory. There was only failure of furnishing a surety who had. to execute a personal bond in the sum prescribed by the Excise Commissioner. The only effect of this is that there is no surety but that does not mean that there is no completed transaction in the absence of a surety. There is a substantial compliance of the provisions of the Rules.
(11) Another argument feebly urged is that the amount of penalty imposed is not recoverable as arrears of land revenue. Under Section 60 of the Act. the kind of money is specified as are recoverable as arrears of land revenue; namely, inter-alia. all excise revenue'. By virtue of definition contained in Section 3(I). 'excise revenue' means revenue derived or derivable from any payment, duty fee. tax, confiscation or fine. imposed or ordered under the provisions of the Act. or of any other law for the time being in force relating to liquor or intoxicating drug but does not include a fine imposed by a Court of law. The penalty imposed under Rule 21 is' thus clearly within the ambit of the excise revenue and is recoverable as arrears of land revenue.
(12) The next submission of the counsel for the petitioner is that no penalty could be imposed without the application of the mind by the authorities under the Act as required by rule 21. It is urged that a bare persual of the Rule shows that before any penalty could be imposed the Collector has to ascertain the facts concerning any breach. This could not he done without reference to the actual contract entered into between the parties and if that contract has actually been entered into to apply the provisions of clauses (20) and (21) of the tender notice. In so doing, the Collector has to determine the probable estimated quantity of supplies of liquor agreed to be made by the licensee or other licensees, their respective shares in the suplies, the quantity which is' essential for immediate day to day requirements of country liquor in Delhi. The respective share of each of the licensees has to be determined with reference to their capacity in the first instance and later on with reference to their performance judged by taking the average of supplies on fortnight basis from the date of the grant of the license. The findings of the authorities in the impugned orders that the powers of the Collector in raising demands was to meet the day to day requirement is argued as without any relevant and germane material on the record. It is argued that nothing has been averred for less proved that the demands raised by the Collector were based on relevant or reliable material concerning day to day requirements or whether the said demands were made on account of the reasonable quantity of supplies expected from the petitioner, with reference to other license and whether as averred by the petitioner and even found correct by the Collector, their supplies were being utilised for the failure of other licensee to make the same. Clause 20(a) of the terms and conditions says that allocation of alcohol to the licensees would be made on the basis of their performance judged by taking ever- age of the supplies on fortnight basis reckoned from the date of the grant of license. The petitioner says that after the show cause notices were issued be respected the Collector of excise to give the copies of the various documents mentioned in the letter dated February 12, 1980 and documents were refused. Amongst those documents, the petitioner asked for the copies of the orders fixing the supplies of country liquor by the petitioner for the year 1979-80 on 33 per cent of the total supplies: the copies of the orders' fixing the supplies of the country liquor of the petitioner prior to the passing of the order for 33 per cent; copies of the orders fixing the supplies of other bonded warehouse licensees of country liquor; copies of the allotment orders made in favor of different licensees for the year 1979-80 in different sizes of bottles and copies of statement of supplies made by other licensees of country liquor to Delhi State. These documents were not supplied. The submission is that there has been a denial of adequate opportunity of being heard and there has been violation of the principles of natural justice.
(13) Each of the show cause notices mentioned that the petitioner failed to meet the requirements contained in the Collector's letter (detailed therein) and the extent of supply of the quantities made during the fortnight in question. It then stated that as to why a penalty not exceeding Rs. 2 per proof litre of country liquor demanded but not supplied under Rule 21 be not imposed. Rule 21 empowers the imposition of the penalty for failure to maintain its regular supplies as prescribed by the Collector of Excise, from time to time and/or failure to supply country liquor within the time which the collector of Excise deems reasonable. Then the liability is to pay penalty not exceeding Rs. 2 per proof litre of country liquor demanded but not supplied. It was brought on the record before the Collector of Excise that no supply orders were placed for the period 1-4.79 to 15-9-79. It was only with effect from the fortnight ending 30-9-79 that supply orders were placed. Those supply orders contained the particulars of the quantity demanded for supply in truck loads of country liquor in 750 ml. bottles. The Collector of Excise had thus from time to time prescribed the quantity to be supplied' as also the time during which it had, to be supplied. The only question is whether the quantity required to be supplied by the petitioner should have been limited to a particular percentage of the total quantity required by the Delhi Administration during 1979-80. The Collector of Excise in the impugned order dated 23-4-1980 considered this question by appreciating facts. He referred to the fortnightly orders to see whether the petitioner could be expected to supply the quantity demanded, by comparing it with the consumption pattern of country liquor in the pas( two years in the corresponding period. It was noticed that the consumption of country liquor in bottles of 750 ml. during the quarter ending 30-9-78 was 316 truck loads and during 30-9-77 was 406 truck loads. There were two supplies. On this an inference was drawn that it was not unreasonable to expect from the petitioner to supply quantity of 180 truck loads during the quarter ending 30-9-79. The quantities demanded for the six fortnights from 1-10-79 to 31-12-1979 are 50, 30, 32, 32, 30 & 32 truck loads, as compared to the total consumption of country liquor in 750 ml. bottles during 1977-78 and 1978-79 which had been 1700 and 1177 truck loads respectively. From it the inference of fact drawn that it is reasonable to have placed those fortnightly orders on the petitioner. Those demands were considered essential by the Collector to meet the day-to-day requirements of the country liquor vends, and there is no material on the record to hold otherwise. The duty to supply the quantities demanded of the petitioner is not excused or affected by the non-supply or non-performance of the other licensees. The documents demanded by the petitioner and not furnished relating to other licensees has thus no relevancy. No prejudice has occurred to the petitioner for its non-supply. The reasonableness of the demand and the fixation of the time during which the supply is to be made are the two relevant considerations for decision under Rule 21 and this was present and determined by the authorities under the impugned orders when it was held that the demand of the liquor was linked with the consumption of the same at retail vends. The decision of the authorities under the Act and the Rules on a question of fact which it has jurisdiction to determine is not liable to be questioned in the proceedings under Article 226, unless it suffers from an error of law apparent on the face of. the record. The High Court can interfere with an order of a subordinate authority resting purely on facts only when the order passed is perverse and the error amounts to a defect in jurisdiction. The authorities under the Act have jurisdiction to determine whether there has been failure to supply country liquor within the time which the Collector of Excise deems reasonable. The failure is established on the record from. the demands made and the supplies effected. The quantities demanded and not supplied have been calculated. The demands are not unreasonable as it was found as a fact that they were linked with the consumption of the same at the retail vends. Those findings are not open to judicial review in these proceedings under Article 226 of the Constitution.
(14) The last submission of the counsel for the petitioner is that the penalty could not be imposed and that also to the maximum unless there was proof for the loss. Reliance is placed on 'Union of India vs. Rampur Distillery' : AIR1973SC1098 , wherein it was found that the rum supplied under the contract by the Company to the Government was not in conformity with the quantity stipulated. It was held there that the amount deposited as security to ensure due performance cannot be regarded as earnest money and that the term authorising forfeiture of security is in the nature of penalty and only reasonable compensation could be awarded. In my opinion the argument proceeds on the erroneous assumption that the rights between the parties are governed by contract. Section 74 of the Indian Contract Act, 1872 applies only to cases where the aggrieved party is seeking to receive the amount on breach of contract. The penalty in this case is being imposed in exercise of statutory power. Penalty under Rule 21 is specified by the legislature to be imposed when the quantities of liquor are demanded and not supplied. If the licensee fails to maintain the supplies to the bonded warehouses, it is open to Delhi Administration to procure country liquor from any other distillery at the risk and cost of the licensee and all extra expenditure incurred is recoverable from the licensee. In that case it has to be limited to actual loss which has to be proved as a fact before recovery can be made. The licensee in addition is' liable to action under the Act and the Rules. The penalty in this case is the subject matter of a breach of statutory duty. In ordinary parlance, it may embraces penalty for avoidance of civil liability which docs not. constitute offence against the State. The pecuniary penalty for the violation of the provisions of Rule 21 is intended to protect public revenue. The quantifies demanded by the Collector of Excise are not supplied by the licensee with the result that they arc not available for sale at the retail vends, ultimately causing loss to the State exchequers on account of lower revenue.
(15) The language of the Rule suggests that the penalty could be imposed for failure to perform the statutory obligation of an amount not exceeding Rs. 2 per proof litre of country liquors demanded but not supplied. There is discretion of the authorities under the Act to be exercised quasi-judicially and on a consideration of all the relevant facts. The authorities are required to apply their mind to the facts and circumstances of the case. The Collector of Excise in the impugned order had noticed the upper limit of the penalty which could be imposed and then chose to impose the maximum, as the quantities supplied, were mostly less than half. The appellate order says that the failure to meet the day to day requirements of the retail vends as assessed by the Collector was breach of the obligation and the loss and damage to the Government on account of lower revenue and inability to meet the requirements of the public is obvious enough. The penalty is then calculated at the upper limit. I do not find any error of jurisdiction in this behalf.
(16) The result of the above is that the writ petition fails and is dismissed with no orders as to costs.