Kunjandi and Co. by Managing Partner, K. Dharman vs The State of Tamil Nadu and Others

A. Subbulakshmy, J.—The original side appeal is directed as against the judgment of the learned single Judge in C.S.417 of 1983.

The plaintiff filed the suit for directing the defendants to pay a sum of Rs. 3,01,000 with interest at 12 per cent per annum contending as follows:

The plaintiff became the highest bidder for running arrack shop No. 43, Kottaimedu, Coimbatore Municipality in the auction held on 27.5.1981

and the plaintiff''s bid amount was Rs. 1,00,000 as monthly rent. That was confirmed on 4.6.1981 by the Collector of Coimbatore, the second

defendant. The plaintiff deposited three months rental advance viz., a sum of Rs. 3,00,000 and the earnest money of Rs. 1,000. The plaintiff chose

a site for locating the arrack shop and after entering into an agreement with the concerned owner, paid the necessary rental advance for one year

to the owner and effected necessary construction to make it suitable for running the arrack shop by spending a sum of Rs. 16,970 and Rs. 2,025

towards establishment charges such as furniture, utensils, furnishings, etc. The plaintiff did everything on his part for setting up the shop. The site

chosen by the plaintiff satisfied the requirement laid down as per Rule 6 of the Tamil Nadu (Arrack Shops) Rules. The plaintiff states that the local

muslim population of that locality began squatting and shouting slogans in front of the premises and threatened the plaintiff on the life of the

plaintiff''s partners if the business is commenced in that place. The plaintiff was put to lot of inconvenience and hardship. The plaintiff further states

that they tried to find out other suitable place, but could not succeed and as the defendants did not take any steps to prevent the muslim from

objecting to the location of the shop in the place selected by the plaintiff and as they did not help the plaintiff to locate the shop in that place, the

plaintiff requested the defendants to refund the deposit amount, but they did not comply with the request of the plaintiff. But, they issued notice on

17.8.1981 calling upon the plaintiff to remit the kist for the shop from 16.7.1981 to 15.8.1981 which demand was not legal. It is also stated by the

plaintiff that the third defendant had resorted to the step of resale of the shop. It had become impossible for the plaintiff to commence and carry on

the business though the plaintiff was ready and willing to do so and so, the plaintiff requested the defendants to refund the money at the earliest

opportunity and so, the plaintiff is entitled to refund of the three months'' rental advance viz., a sum of Rs. 3,00,000 and the earnest money deposit

of Rs. 1,000.

The second defendant filed written statement contending as follows:

The privilege of selling arrack in respect of arrack shop No. 43, Kottaimedu was auctioned on 28.5.1981. The plaintiff was the highest bidder for

the arrack shop on a monthly rent of Rs. 1,00,000 and the sale was confirmed by the Collector in favour of the plaintiff. After receipt of

confirmation order, the auction purchaser shall apply for the issue of licence in Form 2 after remitting the two and a half months rent as advance

within 7 days from the date of receipt of orders of confirmation. The plaintiff applied for the issue of licence. But, the location was objected by the

local muslim population. The plaintiff did not select an alternative unobjectionable site and applied for issue of licence and hence, it was brought to

resale. Necessary licence had been issued to the successful bidders in July, 1981. The payment made by the plaintiff is only at the plaintiff''s risk

and the defendants have nothing to do with that. As the plaintiff was not able to select an alternative site for locating the arrack shop, the

defendants issued notice for resale and as there was stay of resale obtained by the plaintiff, the shop could not be sold in auction and hence, there

was a revenue loss sustained by the Government. The plaintiff has to make good the loss sustained by the Government and the Government

reserves its right. Only the plaintiff had to reimburse the loss sustained by the Government and the plaintiff is not entitled to any amount claimed.

Defendants 1 and 3 have adopted the written statement filed by the second defendant.

The learned single Judge dismissed the suit.

As against that, the present original side appeal is filed by the plaintiff.

Point for consideration is whether the plaintiff is entitled for the amount claimed.

The plaintiff became the successful bidder for running the arrack and toddy shop No. 43, Kottaimedu, Coimbatore Taluk. The plaintiff paid a

sum of Rs. 1,000 towards earnest money deposit as evidenced by Ex.P-3 before the auction and after the auction, his bid was accepted by the

auctioning authority and the plaintiff paid half month''s rent of Rs. 50,000 as evidenced by Ex.P-4. The auction was confirmed on 4.6.1981 by the

Collector and the plaintiff paid the balance of rental amount for three months at the rate of Rs. 1,00,000 per month including the amount paid for

half month''s rent on the date of auction. The plaintiff contends that after the deposit, he was not in a position to find a suitable place for locating the

arrack shop and as such, he requested the Collector to cancel the auction and to refund the amount deposited and as there was impossibility of

running the shop by the plaintiff, the plaintiff is entitled to refund of that amount. The defendants contend that only the plaintiff must take all the steps

for running the shop by selecting a suitable place and the plaintiff also prevented the defendants from conducting auction for resale of the shop by

obtaining an order of stay and because of the action of the plaintiff, only the defendants sustained loss and they must be reimbursed and the plaintiff

is not entitled to the amount claimed.

The plaintiff had sent petition to the Collector on 7.7.1981 under Ex.P-2 to cancel the licence and to refund the earnest money deposit stating

that he was not able to find a suitable place for running the arrack shop. P.W. 1 states that he tried to get a suitable place in that area, but he could

not do so, because there was strong objection by the muslim people of that locality and as he was not able to find a suitable place, he sent the

petition to the Collector under Ex.P-2. Ex.P-7 is the communication sent by the Excise Officer to the plaintiff which states that the plaintiff must

locate a suitable place for locating the arrack shop and apply for licence failing which the plaintiff would be liable for the loss. The plaintiff sent their

reply under Ex.P-8 to the Excise Officer stating that on receipt of confirmation order, they searched for a suitable and unobjectionable place for

locating the arrack shop in Kottaimedu and as they were not able to get a suitable site due to strong objection of the people of that locality, they

applied for cancellation of the licence and refund of the deposit made. It is further stated in Ex.P-8 that at last they were able to select one place

and applied for licence, but, they have not received any licence. The evidence of P.W.I is very specific that he was not able to select any

unobjectionable place for locating the arrack shop and so, the plaintiff is entitled to refund of deposit amount.

Ex.D-1 the objection letter given by the people of that locality reveals that inhabitants of that locality opposed to opening of arrack and toddy

shop in that area and it is also stated that if arrack and toddy shops are opened that will lead to trouble in that area. Basing on this objection letter

Ex.D-1, counsel for the appellant/plaintiff submitted that because of the strong opposition by the local muslim people of that locality, the plaintiff

was not able to find any unobjectionable place for running the arrack shop and so, there is no fault on the part of the plaintiff and there was

impossibility of performance on the part of the plaintiff and the plaintiff is entitled to refund of the deposit amount. The plaintiff states that in spite of

best efforts, he was not able to find any unobjectionable place. The plaintiff had participated in the auction having full knowledge of the conditions

of the auction. The plaintiff was fully aware that he must find out an unobjectionable place for running the arrack shop even before his participation

in the auction. Having participated in the auction and deposited the rental amount, the plaintiff is not entitled to contend that he was not able to find

out any unobjectionable place and so, he is entitled to refund of the amount. From the evidence of P.W.I and Ex.D-1, it is evident that there was

objection from the muslim people of that locality and there was no objection from any other source. The plaintiff, after the auction was confirmed,

was duty bound to find out a place for locating the arrack shop in that area. He had to abide by the terms and conditions of the auction. P.W.I has

categorically admitted that he knows the terms and conditions of the auction and he is also aware of the conditions in Clause 20. He has also

admitted that it is the responsibility of the plaintiff to select an unobjectionable place for locating the shop and the Government has no responsibility

to select a place for the plaintiff. So, on a perusal of the evidence of P.W.1 it is seen that the plaintiff, after his participation in the auction, did not

take any interest for locating the arrack shop in that locality. The learned single Judge has also found that though P.W.I has stated that the plaintiff

had advertised for a place for running the shop, no such advertisement has been filed and it is also clear that the plaintiff filed a writ petition and

obtained stay and subsequently the writ petition was dismissed. Even after the Excise Officer asked the plaintiff under Ex.P-7 to select a site and

apply for licence, the plaintiff did not select a site. In spite of sufficient opportunity given, the plaintiff did not choose a site for running the arrack

shop. It is the duty of the plaintiff to select a site for himself. D.W.I has also spoken to the effect that the plaintiff neither selected a site nor applied

for licence and the breach is on the part of the plaintiff. He further stated that for the failure on the part of the bidder to select a site and apply for

licence, only the bidder, the plaintiff will be responsible for the loss and the plaintiff did not take any steps to select a site and apply for licence.

As per the rules, the plaintiff has to select an unobjectionable place and apply for licence. The plaintiff has miserably failed to do so. The

plaintiff became the highest bidder in the auction after conforming to the terms and conditions of the contract. But, as per the terms and conditions

of the contract he did not act. From the facts and circumstances of the case and the documents, it is very clear that the plaintiff miserably failed to

select a place for running the shop. So, it can be safely concluded that the plaintiff committed breach of conditions. If there is any supervening

impossibility of performance, which was beyond the control of the plaintiff, then, of course, it can be stated that there was impossibility of

performance of the contract which but for such supervening impossibility could have been carried out. The facts and circumstances of the case do

not warrant any such impossibility of performance of the contract by occurrence of any unexpected event beyond the control of the plaintiff. The

plaintiff was under obligation to locate and run the arrack shop. As per the terms and conditions of the contract, the plaintiff has to find out a

suitable place for running the shop. He miserably failed to do so. Having failed to abide by the terms and conditions of the agreement by selecting a

suitable place for running the shop, the plaintiff cannot take shelter under Ex.D-1 the objection letter given by the muslim people of that locality to

absolve his liability by contending that there was impossibility of performance and hence, he is entitled for refund of the amount deposited. Because

of the failure on the part of the plaintiff to locate and run the shop, the loss had occurred only to the Government. It is significant to note that even

the plaintiff had prevented the Government from reselling the arrack shop by obtaining an order of stay from the court and thereby also caused

substantial loss to the Government. The plaintiff has not acted as per the terms and conditions of the contract and he has not follows the rules.

The Supreme Court has held in Har Shankar and Others Vs. The Dy. Excise and Taxation Commr. and Others, , that

Those who contract with open eyes must accept the burdens of the contract along with its benefits.... Reciprocal rights and obligations arising out

of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract.

It has been laid down in State of Haryana v. Jage Ram AIR 1980 S.C. 2018, that,

It cannot ever be that a licensee can work out the licence if he finds it profitable to do so; and he can challenge the conditions under which he

agreed to take the licence, if the finds it commercially inexpedient to conduct his business.

State of Haryana and Others Vs. Lal Chand and Others, , it has been held that,

One who makes a bid for the grant of such privilege with a full knowledge of the terms and conditions attaching to the auction cannot be permitted

to wriggle out of the contractual obligations arising out of the acceptance of his bid by a petition under Article 226. Consequently, where there is

auction of liquor vend and the petitioner''s bid is accepted but there is non-compliance and there is re-auction of the vend, the State Government is

entitled to realise the difference between the amount which the petitioner had agreed to pay under the terms of the auction of liquor vend and the

amount realised on re-auction of the vend.

On a perusal of the oral and documentary evidence, we are clearly of the opinion that there is breach of contract on the part of the plaintiff and

only the plaintiff failed to select an unobjectionable place for running the arrack shop and there is utter violation of the terms and conditions on the

part of the plaintiff.

Taking into consideration of the facts and circumstances of the case and also the principles laid down in the decisions cited supra, we hold that

the plaintiff is not entitled to refund of the amount. We are entirely in agreement with the finding of the learned single Judge.

In the result, the original side appeal is dismissed.