G. Shankar Reddy vs Prohibition and Excise, Superintendent and Others

B.K. Somasekhara, J.—The petitioner held IMFL-24 licence of M/s. Goutam Wines at Yallur, Kurnool district bearing licence No. 21/1990-91 for the period from 1-10-1993 to 30-9-194. He had paid Rs. 18,750/- towards first instalment and for the balance of the licence fee of Rs. 56,250/- he had given the bank guarantee No. 1/93 dated 8-10-1993. In the meanwhile, the Excise authorities seized the shop and the licence inspection book etc., regarding the petitioner on the allegation that he had violated the terms of the licence and a crime was registered in Crime Number 22/93-94 for an offence punishable u/s 34 (a) read with Section 45 (i) and (ii) of the Andhra Pradesh Excise Act and consequently his licence came to be cancelled under Re. No. C2. 4317/3 dated 27-1-1994. The petitioner, thus prevented from continuing with the business under the licence, sought for return of the bank guarantee. The respondent No. 1, namely, the Prohibition and Excise Superintendent, Kurnool District refused to return the bank guarantee which was taken with Respondent No. 2 on the ground that the Commissioner of Prohibition and Excise, Andhra Pradesh had issued instructions in Cr. Number 39115/95/8/EX/G2 dated 19-5-1995 not to return the bank guarantee where there were cases pending against the licensees and since the petitioner was involved in another crime, i.e., Cr. No. 22/93-94 for an offence punishable u/s 34(a) read with Section 45 (i) and (ii) of the A.P.Excise Act pending against him for the year 1994 the bank guarantee could not be returned to him. That is the stand taken by the respondents in the counter also.

Mr. W.B. Srinivas, the learned Advocate of the petitioner has contended that there was no justification for the respondents to withhold the bank guarantee when the petitioner''s licence was cancelled preventing him from pursuing the business under the terms of the licence and secondly, according to him, as per the settled law, merely on the ground that some other case was pending, such a bank guarantee which was given for the performance of the terms of the licence could not be withheld as has been done in the present case.

The learned Government Pleader contends that in law, the petitioner is not entitled to the return of the bank guarantee which amounts to refund of licence fee which was payable in advance and further, the authority is entitled to forfeit such amount both under Rule 25 (4) and 25 (5-A) of the Indian Liquor and Foreign Liquor Rules, 1970 (for short ''the Rules''). He has also placed reliance on Section 31 (3) of the A.P. Excise Act, 1968 to contend that the holder of a licence or permit shall not be entitled to any compensation for its cancellation or suspension nor to the refund of any fee paid or deposit made in respect thereof and particularly, in this case, the petitioner, having paid the licence fee in advance and when his licence was cancelled as stated above, is not entitled for the refund and return of the bank guarantee means that the licence fee paid in advance would be refunded and therefore, the petition has no merit.

The simple question involved in this writ petition as on the admitted facts supra, are nothing more than to consider whether the respondents or the concerned authority can refuse to return the bank guarantee to the petitioner in view of the cancellation of the licence and in view of the pendency of another case against him. The second ground has no merit in view of an unreported decision of this Court in W.P. No. 27294 of 1996 dated 20-12-1996 wherein it is declared that the mere pendency of criminal proceedings against the licensee whose licence is cancelled is no bar for the respondents to refund the licence fee to the petitioner/licensee. Regarding the first contention some examination of the law may be necessary.

Mr. D. Vijaykumar, the learned Government Pleader for Prohibition & Excise is right in pointing out that by virtue of the relevant provisions and the Rules supra, the licence fee will have to be paid in advance as a whole although it is permitted to be paid in instalments to mean thereby that notwithstanding the consequences subsequently, the licence fee becomes an advance stipulated condition to be paid without having the consequences of events. The second aspect of the proposition requires to be examined. It is true that Rule 25 of the Rules prescribes payment of licence fee for various types of shops etc., under the licence. There is a tabular column under Rule 25 (2) regarding the number of instalments being four with a period of three months each, namely, 1st October to 31st December, 1st January to 31st March, 1st April to 30th June and 1st July to 30th September payable on particular dates mentioned in Clauses (4) and (5) of the table. In the present case the first instalment was paid as stipulated and as contemplated in the very rule for the remaining amount of licence fee, bank guarantee was given by the petitioner. There is no need to indicate in any of the provisions of Rule 25 that licence fee is paid as a whole whether the licence remains or frustrates. The very fact that it is permitted to be paid in instalments periodically shows that it has force in the contingencies of either the petitioner not pursuing the licence or it is going to be cancelled or frustrated for various reasons. In the present case it is frustrated due to operation of law on the ground that the petitioner had committed an offence violating the terms of the licence and therefore, the licence was cancelled. Therefore, merely on that ground there was no justification for thinking that the whole licence fee has to be paid in advance whether the licencee is permitted to continue the licence or not for any reason. Although the learned Government Pleader relied upon Sec. 31(3) of the A.P. Excise Act and Rule 25 (4) and 25 (5-A) of the Rules as to the legal consequences of the cancellation of the licence, it is difficult to accept the contention that either the licence fee or the bank guarantee becomes not restorable or automatically to be forfeited in law. The answer lies in Sub-clause (4) and (5-A) of Rule 25 of the Rules which read as follows:-

"(4) In the event of failure to remit the instalment with the late fee by the last date specified in clause (5) of the table in Sub-rule (2), the licence shall stand cancelled automatically on the expiry of such last date for payment of instalment and all the deposits/bank guarantees shall stand forfeited to Government.

(5-A) Where a licence stands cancelled or suspended for any violation of the Rules and conditions of licence, the Commissioner of Excise may order forfeiture of the bank guarantee furnished by the licensee either in full or in part depending upon the nature of violation and such forfeited bank guarantee shall be made good by the licensee within the time fixed by the Commissioner of Excise. In case the licensee fails to make good the extent of forfeited bank guarantee within the time fixed the licence automatically stands cancelled."

Simply stated from these provisions, a licence can be cancelled automatically on the expiry of the last date for payment of instalment which will be an event occurring due to the conduct of the licensee himself and secondly, a licence stands cancelled or suspended for any violation of the Rules. Rule 25 (5-A) in particular contemplates that where a licence stands cancelled or suspended for any violation of rules or the condition of licence, the Commissioner of Excise may order forfeiture of the bank guarantee furnished by the licensee either in full or in part depending upon the nature of the violation and such forfeited bank guarantee shall be made good etc., as contemplated in the provision. Therefore, to read Section 31 (3) of the A.P. Excise Act with Rule 25 (4) and 25 (5-A) of the Rules, normally speaking the petitioner has no right to get refund of the licence fee (which includes the bank guarantee also) subject to passing of an order of forfeiture by the Commissioner in accordance with the Rules stated above. In other words, mere cancellation of the licence does not automatically result in the forfeiture of the amount paid in cash or guarantee in any manner as in the present case. One more thing is apparent from Rule 25 (5-A) of the Rules that the expression used therein is ''may'' and therefore, it is in the discretion of the Commissioner of Excise to pass order of forfeiture of the bank guarantee either in full or in part not meaning thereby that the whole licence fee will be automatically forfeited. It is possible that having due regard to the facts and circumstances of a case, the forfeiture may not be full and possibly, while exercising discretion, that may also be waived. The use of the word ''may'' importing discretion to such an authority means that every case of cancellation of licence may not be infested with automatical forfeiture of the payment of the licence fee whether in part or in full. Having vested with such a discretion in an authority to forfeiture on any ground, the consequences having the evil effect of not only forfeiting the amount as a civil liability, but also putting the sufferer a condemnation in law and in fact and therefore, the law has an inbuilt natural justice to give an opportunity to the licensee before passing such an order.

In the present case, the bank guarantee of the petitioner is withheld based on a communication issued by the Commissioner not to return the bank guarantee wherever a case is pending which is neither made on source from any law nor from any rule or by authority, possibly except as an administrative instruction which has no enforceable strength. If at all the Commissioner can proceed in the matter, it should be only taking resort to Rule 25 (4) or Rule 25 (5-A) of the Rules as the case may be. Therefore, reading Section 31 (3) of the A.P. Excise Act, 1968 and Rule 25 (4) and 25 (5-A) of the Rules, such a communication issued by the Commissioner of Excise depended upon by the respondents cannot be legally recognized to stall the right of the petitioner to get back the bank guarantee. It is also clear that unless an order of forfeiture is passed in accordance with law as a statutory basis as stated above, the forfeiture for violation of the terms of a licence amounts to forfeiture of any amount given in deposit or earnest under the terms of a contract. Such a forfeiture may amount to a legal enforcement of a right under the terms or the contract. It may either become penal u/s 74 of the Indian Contract Act or hit Section 23 of the Contract Act depending upon the facts and circumstances of each case if such an amount is automatically forfeited without recourse to the contractual consequences or the statutory implications. Therefore, the conduct of the respondents is clear that the petitioner is prevented from having return of the bank guarantee without any justification and without any recourse to law as indicated above.

In the result, the petition is allowed. The respondents shall return the bank guarantee to the petitioner as claimed. However, this shall not debar the respondent No. 1. or any authority to pass appropriate orders or order of forfeiture in accordance with the law in the light of the observations made above, however, subject to the opportunity to be given to the petitioner before passing any adverse order. No costs.