Ediga Ramappa vs Govt. of A.P. and 2 others

Kondaiah

This writ petition gives rise to a short question of law relating to the scope and application of Rules 10 and 20 of the Andhra Pradesh Excise (Lease of Right to sell liquor in (sic) Rule. 1979 hereinafter called "the rules"). In the writ petition, it is averred that on account of the prevalence of illicit distillation and sale of arrack. In and around Kanakaveedu village in the district of Kurneol, (sic) his tender or bid in respect of Kanakaveedu arrack shop for the year 1970-71. Inspire of the assurance by the Excise authorities of all possible assistance to enable the auction purchaser to sell arrack and to out down illicit distillation and sale of arrack to that area. The petitioner, much against his will was induced by the Excise authorities on 15-10-1970 to sign the register kept under rule 15, as the highest bidder. The petitioner neither deposited the requisite earnest money and one month''s rental on that day as required by rule 16 nor paid the further amounts required to be paid under Rule 18 and 19 On 9-11-70, he issued a registered notice to the District Collector, Deputy Commissioner of Excise and the Superintendent of Excise, Kurnool and the Revenue Divisional Officer, Adorn, stating that he was forced to take the excise contract of the arrack shop and made to enter into an agreement under an assurance by the Excise authorities to protect him and clear off the illicit distillation of arrack in Kanakaveedu, that the departmental authorities did not take any pains to raid the village and seize the illicitly distilled arrack and stop sale by bootleggers named therein and that he apprehended danger to his life if he would sell arrack at Kanakaveedu, and therefore praying for cancellation of the agreement entered into by him and to take steps to re-auction the shop. As he did not receive any reply or communication from the Excise authorises till the expiry of that excise year, he was under the bona-fide impression that he was relieved of all the liability relating to the auction of the arrack shop. But to his surprise, he received a demand notice from the Tahsildar, Adoni dated 7-12-1970 for a sum of Rs. 2,468/- towards the loss said to have been caused by him to the Government. Subsequently on 13-12-1970, his property was attached pursuant to the recovery proceedings. Hence, he approached this Court on 18-12-1972 for the issuance of a writ of mandamus directing the respondents not to proceed with the recovery of the amount demanded by the Tahsildar from him as arrears of land Revenue.

In the counter field by the Excise Superintendent, Kurnool, it is stated that the petitioner (sic) in the open auction at his own free will and became the highest (sic) on 15-10-1970 in respect of the arrack shop at Kanakaveedu and signed in the register as per rule 15, but thereafter failed to deposit the requisite mounts under rule 16, 18 and 19 and obtained a licence. In paragraph, it is stated that "the issue of notice by the petitioner is not known to me". The shop could not be re auctioned during in lease year and the department has permitted the petitioner to participate in the auctions for the subsequent year by oversight although he was in arrears of the demanded amount. The demand, therefore, was said to be valid and enforceable.

The contention of Mr. T. Dasaratharamayya, counsel for the petitioner, that his client did not participate in the auction of his free will but was induced by the Excise authorities, to be the auction purchaser, that rules 16 and 20 are mandatory and that the (sic) of the Excise authorities to re-auction the shop as required by rules 16 and 20 could disentitle them to raise the impugned demand and proceed to recover the amount, is resisted by the Government Pleader for Excise contending inter alia that the petitioner bad given his bid voluntarily, that there was a concluded contract and therefore, he is liable for the impugned demand and that rule 16 and 20 are only directory and therefore, there is no merit in this writ petition.

I shall first advert to the point whether the petitioner was the auction purchaser at all in respect of the arrack shop at Kanakaveedu. Except the ipse dixit statement of the petitioner that he was induced to take part in the auction and he was asked by the Excise authorities to sign in the register under rule is as the highest bidder, there is absolutely no material worth mentioning in support of his plea. Admittedly, he has signed in the register maintained under rule 15. Such an entry would substantiate the claim of the respondents that the petitioner was declared to be the highest bidder on 15-10-70 in respect of the arrack shop at Kanakaveedu. The conduct of the petitioner in not raising this dispute till 9-11-1970 when he issued the notice to the Collector and other authorities would also disprove his contention that he was forced to sign the register as the highest bidder. For all the reasons stated, I have no hesitation to hold that the petitioner had participated in the auction where he was declared to be the highest bidder who is entitled for the grant of a licence for the excise year 1970-71 on payment of the sums specified in rules 16, 18 and 19 and after executing the the counter part agreement under rule 21.

It next falls for me to examine whether the petitioner has requested the authorities to cancel the auction and to re-auction the shoo as contended by him Admittedly, the petitioner did not pay the earnest money as well as one month''s rental on 15-10-1970 itself as required by rule 16. He did not also deposit the two months'' rental either in cash or in fixed deposit certificates of a scheduled bank taken for the period of the lease-as per rule 18 nor did he pay the advance amount as required by rule 19. According to the petitioner, he has sent a registered notice on 9-11-1970 requesting the authorities to re-auction the shop as he apprehended danger to his life at the hands of the bootleggers who were freely manufacturing and selling illicitly distilled arrack in and around Kanakaveedu. He has specifically stated so in paragraph 5 of the writ petition and has filed a copy of the notice issued by him on 9-11-1970 to the District Collector, the Deputy Commissioner of Excise, the Superintendent of Excise and the Revenue Divisional Officer. A copy of the notice dated 9-11-1970 and a copy of the writ petition were served on the Excise Superintendent, the 2nd respondent herein, who filed a counter affidavit. He has not categorically denied that any such notice as alleged by the writ petitioner was issued to him or to the other persons mentioned therein The Government Pleader contends that there is no specific admission on the part of the Excise Superintendent that such a notice was received by him or others. However, the respondents have a duty to specifically indicate whether they received or did not receive such a notice. The statement of this respondent that the issue of such a notice by the petitioner is not known to him is so vague that it can be interpreted in different ways. However, I am satisfied that there is no specific denial of the receipt of the notice dated 9-11-1970. When the petitioner alleged that he issued such a notice, it is the duty of the respondents to specifically deny or admit the receipt of it. That apart, even though rule nisi has been issued, the original records of the Excise authorities have not been produced before this Court I am sure that from the records it could have been easily known whether such a notice was issued or not. It is the duty of the concerned authorities, the respondents herein, to Place before the Court all the necessary records, when Rule Nisi has been issued. On a careful consideration of the facts and circumstances, I am inclined to accept the statement of the petitioner supported by a copy of the notice dated 9-11-1970 then he has in fact, issued such a notice to the District Collector, the Deputy Commissioner of Excise, the Superintendent of Excise and the Revenue Divisional Officer requesting them to cancel the agreement entered into by him in respect of the arrack shop and take steps to re-auction the same in the interests of the Department.

This brings me to examine the question whether the impugned demand is valid and intra vires as contended by the Government Pleader of without jurisdiction illegal and violative of the principles of natural justice as contended by the petitioner. The answer to this question depends upon the scope and application of the latter part of Rule 16 and Rule 20 which read thus :

Rule 16: Payment of rental by the auction purchaser:-The auction purchaser shall pay 2% of the annual rental as earnest money to ether with one month''s rental on the day of the auction immediately after the acceptance of the tender or bid as the case may be. The earnest money and one month''s rental shall be in addition to the rental deposit required in rule 18. In case of failure to remit the earnest money and one month''s rental on that day, the shop or ground of shops shall be re-auctioned.

Rule 20: Re-auction in the case of failure to deposit moneys:-(1) In case of father to pay the deposit or advance money within the specific period, the auction shall be cancelled by the auctioning authority, the earnest money and any amount deposited under rules 16 and 18, shall be re-auctioned or alternative arrangements made at the risk of the original auction purchaser who shall be liable in respect of the lease till the auction purchaser in the re-auction takes it over.

(2) If the re-auction or the other arrangements result in monetary benefit to Government the original auction purchaser shall have no claim over it, but, if it results in monetary loss or if the right remains unsold, for want of bidders, the original auction purchaser shall be liable to indemnify the Government for the resultant loss.

(3) The provisions of sub-rules (1) and (2) shall apply in relation to the auction purchaser in re-auction as they apply in relation to the auction purchaser in the original auction.

Rules 4 to 15 relate to the procedure prescribed for conducting the auction of liquor shop. From Rule 16 onwards the rules refer to the obtaining of licence by the auction purchaser on fulfilling certain conditions specified therein. Rule 16 enjoins the auction purchaser to pay 2% of the annual rental as earnest money together with one month''s rental on the date of the acceptance of the tender or bid. Any default of the auction purchaser in payment would entail the re-auction of the shop or group of shops. The use of the word "shall" in the first as well as the latter part of rule 16 leaves no doubt in my mind to hold that rule 16 is mandatory. The submission of the Government Pleader that the term ''shall'' in the latter part of rule 16 should be construed as ''may'' and therefore the auctioning authority may or may not re-auction the shop or group of shops even if the auction purchaser failed to remit one month''s rental and earnest money on that day, cannot be acceded to. His submission that the first part of this rule is mandatory whereas the latter part is only directory, is devoid of any merit. The object and intendment of this rule is to compel the auction purchaser to pay the amounts then and there without leaving any choice for him to reconsider the matter and to make it obligatory on the part of the auctioning authority to re-auction the shop forthwith in case of default in payment of the amounts referred to above. Such a course would make it convenient for the intending bidders to participate in the re-auction and the public would not be deprived of their right to have liquor from the shop. That is why the rule-making authority, in its wisdom and experience, intended the re-auction of the shop to take place forthwith. If the re-auction is not made forthwith or immediately thereafter, the people of that area would be deprived of their right to have liquor. In such an event, the people of that locality would suffer for want of liquor and the Government also would lose public revenue which could have accrued to it by way of monthly rentals as well as sale and distribution of liquor. That apart, it would avoid further publication of the auction and delay. This rule being statutory and mandatory, both the auction purchaser as well as the Excise authorities are obliged to carry out their duties indicated therein. Any failure on their part to perform the duty or obligation would, in my considered opinion, attract the penal consequences specified therein. In the present case, the Excise authorities did not take any action under rule 16 which is self-contained. The right of the Excise authorities for the default committed by the auction purchaser under rule 16 is to re-auction the shop forthwith. Even if the expression ''forthwith'' is construed liberally in favour of the State, the re-auction should have take place as early as possible. The respondents have not satisfied me that they could not conduct re-auction immediately or within a reasonable period. They slept over the matter for more than a year without taking any steps to re-auction the shop. Such conduct would disentitle them from raising the impugned demand for arrears of rentals for the entire excise year. That apart, rule 16 does not empower the Excise authorities to collect the arrears of rentals for the entire excise year. If there was re-auction forthwith, the petitioner would have been liable only for the resultant loss, if any to the State The respondents, in order to sustain the impugned demand and the recovery proceedings initiated on the basis of such demand, must fall back upon any other provision of the Act or the rules made thereunder but not upon rule 16.

The only other rule on which reliance is sought to be placed by the Government Pleader, is rule 20. Rule 20 comes into play when there is no deposit or payment of advance money as required by rules 16 and 18 Where the auction purchaser commits default in depositing or paying the sums required as per rules 18 and 19, the auctioning authority shall forfeit to the Government the earnest money and any amounts deposited under rules 16 and 18 and re-auction the right to sell of the defaulting auction purchaser and make alternative arrangements at his risk. The word used in rule 20 also being ''shall'', the submission of the Government Pleader that the auctioning authority may or may not cancel the auction and conduct re-auction as required by that rule, cannot be given effect to. Where the auctioning authority re-auctions, the consequences that flow on such re-auction are indicated in sub-rule 2 thereof. The original auction purchaser, under sub-rule 1, shall be liable to indemnity the Government for the resultant loss, if any. Where the re-auction or other arrangement results, however in monetary benefit to the Government, it shall not go to the original auction purchaser. This sub-rule makes it also clear that if the right of the defaulting auction purchaser remains unsold in the re-auction, the original auction purchaser would still be liable to indemnify the Government for the resultant loss. On a careful perusal of the entire rule, in the set up in which it has been framed. I am satisfied that it is mandatory but not directory, if what the Government Pleader contends for is accepted, it would lead to anomalies resulting in great hardship and injustice to the auction purchasers. If the interpretation that it is not obligatory or mandatory but discretionary to the Excise authorities to conduct re-auction under this rule is permitted, they may demand the entire arrears of rentals and other amounts from the defaulting auction purchasers even if the Excise authorities slept over for the entire remaining period of the excise year. The re-auction wherever is provided for, must be conducted by the Excise authorities either immediately or at the earliest possible moment. The sub-rule (2) which makes the original auction purchaser liable to indemnify the Government for the loss if there are no bidders in the re-auction, would clearly indicate the mind of the rule making authority that the Excise authorities have to make every reasonable effort to re-auction the shop as early as possible. The reasons stated by me, such as the disadvantages that ensue to the general public and the original auction purchasers as well as to the State Government while dealing with the mandatory character of rule 16 would equally apply to this provision also.

The contention of the Government Pleader that the leasehold right of the petitioner remained unsold before the expiry of the excise year for want of bidders and, therefore, the petitioner is liable to indemnify the Government for resultant loss as per the provisions of rule 20 (2) of the rules, merits rejection. What exactly has been stated in the counter on this aspect may be extracted :

As the shop could not be re-auctioned during the lease year, the petitioner has got to pay the amount of Rs. 2,468/- being the resultant loss.

The onus is on the Excise authorities to establish that the original auction-purchaser''s right to sell liquor remained unsold for want of bidders. Whether such right could not be sold for want bidders is a question of fact. Except the bald averment referred to above, no material in support of this plea has been placed before me by the respondents. The allegation as such does not indicate the reasons for not conducting the re-auction of the shop in question. There may be several reasons including the want of bidders for not holding the re-auction. It is only in cases where the re-auction could not be held for want of bidders sub-rule (2) of rule 20 would come into play. There is absolutely so evidence to show that the Excise authorities have made an honest and sincere attempt to hold re-auction of the shop at any time before the close of the excise year. For the reasons stated, I am of the firm view that no effective steps have been taken to hold re-auction. In any event, I am satisfied that the respondents have not proved that re-auction could not be held either immediately or bet ore the expiry of the excise year for want of bidders so as to being their case within the meaning of sub-rule (2) of rule 20

Lastly it is urged by the Government Pleader that the impugned demand arises cut out of what is basically called contractual obligation and the petitioner is (sic) for the entire year notwithstanding his attempt to (sic) the contact by issuing the notice dated 9-11-1970, The Full Bench decision of this Court in Writ Appeal No. 519 of 1969 dated 16-12-19/2 rented upon by the Government Pleader does not advance his plea. Therein the contractor''s right was re-auctioned by the Excise authorities relating in a loss to the State and such loss only was sought to be re-covered. In those circumstance, it was held that the contractor was not entitled to question the validity of the demand raised therein. In the present case, no re-auction as contemplated by the statutory rules has been conducted by the Excise authorities. Hence, it is not open to the respondents to contend that the entire demand could be validly raised and recovered from the petitioner unless is a satisfactorily established that the demand is valid and sustainable, a cannot be enforced against the petitioner. The impugned demand cannot, therefore be sustained even on this ground. In the result, the impugned demand must be and is hereby quashed and the writ petition is allowed with costs Advocate''s fee Rs. 100/-.