Meenakshiammal vs The Taluk Excise Officer Egmore-Nungambakkam Taluk

D. Murugesan, J.—In this writ petition, the Petitioner has prayed for issuance of a Writ of Certiorari, calling for the records of the

Respondent, pertaining to the notice issued in E/1521/89 dated 26.07.2000 and to quash the same.

The Petitioner herein is the wife of Late Sivapragasa Mudaliar, who was the successful bidder and a grantee of a license to run an arrack shop

No. 13 of Egmore-Nungambakkam Taluk in A.S. No. 13/81-82 on a demand of Rs. 62,500/- . The said license was granted under Rule 14(1) of

the Tamil Nadu Arrack Shop (Retail Sales) Rules 1981. As per the said rules, the said Sivapragasa Mudaliar deposited three months rent for the

excise year from the month of June 1981 of May 1982. The Petitioner herein received a notice dated 22.04.2000 from the Respondent stating that

a sum of Rs. 3,34,769.70/- being the approximate loss arising out of the arrack shop run by the Petitioner''s husband became payable and if the

amount was not paid within seven days from the date of receipt of the notice, steps would be taken under Revenue Recovery Act to realize the

said amount. To the said notice of the Respondent, the Petitioner sent a reply dated 20.05.2000 through her counsel, disputing the claim of arrears

of rent and also the Petitioner had no knowledge as to whether there were any arrears of kist by her late husband. After the Respondent

acknowledged the said notice, there was no reply to the Petitioner. Suddenly, after a lapse of five months the Respondent sent another notice

dated 26.07.2000 informing the Petitioner that her husband was granted licence during the year 1981-82 for the arrack shop No. 13 and the

license was cancelled on account of non-payment of rent and therefore, the shop was brought for re-sale and thus, the notional loss to the tune of

Rs. 3,61,927/- was incurred and therefore, the Petitioner, being the legal heir of her late husband is liable to pay the rental arrears. The Petitioner

again sent a reply through her counsel stating that the Petitioner did not have any idea of what her husband''s business was and how the demand of

such huge amount was made after a period of 10 years. The Petitioner also informed the Respondent that her late husband did not leave any

property either movable or immovable in her favour at the time of his death. Even though the very stand has been taken by the Petitioner in her

earlier reply dated 10.11.1992, the Respondent still persisted for the payment of rental arrears, failing which, action will be taken under Revenue

Recovery Act to recover the rental arrears. Hence, the Petitioner is constrained to file the writ petition for the relief as stated above.

Mr. G.M. Nathan, learned Counsel appearing for the Petitioner submitted that when the notice dated 22.04.2000 of the Respondent has been

issued to the Petitioner, she has suitably given a reply contending that she was not aware of the business run by her late husband and she was not

aware of as to whether any arrears of rent was payable by her husband and in any event, she disputed the amount demanded under notice and

once dispute is made, the Respondents are not empowered to adjudicate upon the question as to the breach of contract and arrive at a quantum of

damages. Moreover, the alleged rental arrears was in respect of the excise year 1981-82 and for the collection of rental arrears, the Respondent

issued notice only on 27.10.1992, after a lapse of nine years and even thereafter, the impugned notice was issued only on 26.07.2000, after a

lapse of eight years, without considering the objections raised by the Petitioner in her earlier reply notice dated 10.11.1992.

To sustain his contention that the authorities are not empowered to adjudicate upon the question as to whether the party has committed breach

of contract and assess damages for breach of contract which is not admitted by the other side, learned Counsel relied upon the decision of the

Supreme Court in State of Karnataka Etc. v. Shri Rameshwara Rice Mills 1987 (100) L.W. (S.C.) 657. The learned Counsel further submitted

that the Respondent are not entitled to proceed with the properties belonging to the Petitioner when the Petitioner has specifically informed the

Respondent is her reply notice dated 10.11.1992 that at time of death of her husband, he did not leave any property either movable or immovable.

Learned Special Government Pleader submitted that it is not true that action was not taken to recover the arrears of rent from the Petitioner.

When the husband of the Petitioner did not pay the rental amount for the months of September and October 1981, notices were sent to him on

11.09.1981 13.10.1981 respectively. The husband of the Petitioner did not give any reply and therefore, the Excise officer in his proceedings

dated 20.10.1981 ordered that arrears of rent for the said arrack shop due for the months of September and October 1981 amounting to Rs.

1,25,000/- be adjusted from the security deposit and cancelled the license with effect from 31.10.1981. Thereafter, the shop was brought to re-

sale and the license was granted to one V.C. Sethu for the period from 14.12.1981 to 15.07.1982, subject to the payment of a monthly rent of

Rs. 19,500/- under Rule 21(2) of the Tamil Nadu Toddy and Arrack Shops (Disposal in Auction) Rule 1981. Therefore, there was notional loss

to the tune of Rs. 3,61,927/- and a notice was issued to the Petitioner on 22.04.2000 and thereafter only the impugned notice dated 26.07.2000

was issued, calling upon the Petitioner to pay the arrears of rent, failing which action under Revenue Recovery Act will be taken. Therefore,

learned Special Government Pleader submitted that when the notional loss is arrived on the basis of the re-sale conducted due to the failure on the

part of the husband of the Petitioner to remit the rental amount for the months September and October 1981, there is no question of any dispute

which necessitate to adjudicate upon by a Civil Court. Moreover, the delay as referred to by the Petitioner cannot be put against the Respondent

in view of the fact that the Respondent had taken immediate steps to recover the arrears as early as on 20.11.1981. Hence, learned Special

Government Pleader submitted that the Petitioner, who is the legal heir of late Sivapragasa Mudaliar is liable to pay the notional loss payable by her

husband.

Heard the submissions of the learned Counsel for the Petitioner and the learned Special Government Pleader for the Respondent.

When the Respondent issued notice, demanding the payment of rental arrears dated 22.042000, the Petitioner in her reply dated 20.05.2000

had specifically stated that she did not have any idea of what her husband''s business was. She also disputed the huge amount demanded by way of

arrears and that too after a period of ten years; the Petitioner was totally handicapped for her defence. It was also her specific case that her

husband did not leave any property either movable or immovable in her favour for being proceeded under the Revenue Recovery Act. The

Respondent has not considered the said explanation of the Petitioner in the impugned notice, as the impugned notice does not even refer to the said

explanation. Moreover, neither in the counter affidavit nor in the submissions of the learned Special Government Pleader, the inaction on the part of

Respondent to initiate proceedings to recover the notional loss from the husband of the Petitioner is not explained, except alleging that the then

Excise Officer in his proceedings dated 20.10.1981 ordered adjustment of a sum of Rs. 1,25,000/- from the security deposit and cancelled the

license with effect from 31.10.1981. Thereafter, except issuing another notice dated 27.10.1992 to the Petitioner, the Respondent took no further

action. The husband of the Petitioner died on 10.05.1990. For eight long numbers of years, the Respondent has not taken action against the

licensee to recover the alleged notional loss. Even though, there is no prohibition on the part of the Respondent to demand and collect the rental

arrears, the inaction on the part of the Respondent in not taking any steps to collect the rental arrears from the licensee, the late husband of the

Petitioner for over eight years assumes significance when notice of demand of arrears is issued to the wife of the licensee for the first time on

22.042000, after nearly a lapse of 17 years. As rightly contended by the counsel for the Petitioner, the Petitioner may not be aware of actual

transaction of her late husband and as to whether there was any arrears of rent in fact was to be paid to the Respondent. Moreover, the Petitioner

disputed the huge amount demanded by way of arrears.

In the judgment relied upon by the learned Counsel for the Petitioner, the Supreme Court while considering Section 74 of the Contract Act and

the applications of the Revenue Recovery Act for question of damages for breach of contract has held thus:

The State is not competent to adjudicate upon the question whether such a person committed breach of contract and that the State is not

competent to assess damages for any breach of the contract which is not admitted by the other side

The judgment rendered by the Supreme Court relates to contract and consequential assessment of damages, it may not be strictly applicable to the

case of recovery of the notional loss to the Government from the licensee. When the license is granted to the licensee, it is made clear that rents for

every month should be paid on or before 10th of each month. In the event of failure to make the payment of rent, the license is liable to be

cancelled and the shop will be brought up for re-auction. If the shop fetches lower rent in the re-auction, the difference in the rent between the first

auction and the re-auction shall be collected as notional loss. The notional loss is quantified and there need be any real assessment on the part of

the Respondent in respect of the quantum. However, it may be justified if such notional loss is demanded from the licensee himself immediately on

his default in payment of rent and immediately the shop was brought up for re-auction. When such proceedings are initiated, the licensee would be

in a position to put forth his defence as to the non-compliance of the conditions of the license in payment of monthly rent and also would have an

opportunity to dispute the re-auction. However, when such demands are made on the legal heirs that too after a lapse of 18 years, the Respondent

cannot expect the legal heirs to put forth their defence as to the claim of rental arrears. As claimed by the Petitioner in her notice dated

10.11.1992, the Petitioner was not aware as to whether there was really any arrears of rent and whether the license was cancelled on the fault of

the licensee. Due to efflux of time, the Petitioner would be helpless to defend the demand notice. In the absence of any particulars as to the license

granted to her late husband and the actual arrears of rent to be paid by the licensee and as to whether the shop fetched lower price in the re-

auction, the assessment made by the Respondents on the basis of their records of the year 1982 for issuing a notice in the year 2000 in my

considered view will put the Petitioner in a highly disadvantageous position rendering of defenseless. In such circumstances, this Court can usefully

rely upon the judgment of the Supreme Court cited supra, wherein the Supreme Court held thus:

Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should

be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute

or there is consensus between the contracting parties regarding the breach of conditions. In such a case, the Officer of the State, even though a

party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of Clause 12. We

are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private

person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where

the breach of conditions is admitted or it is not disputed. It cannot be argued that a right to adjudicate upon an issue relating to breach of conditions

of the contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess

damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for argument''s

sake that the terms of Clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as

well as assess the quantum of damages, we do not think that adjudication by the Officer regarding the breach of the Contract can be sustained

under law because a party to the agreement cannot be an arbiter in his own cause.

In view of the above pronouncement and also in view of the fact that the Petitioner had disputed the claim and also had expressed her total lack

of knowledge to the license granted to her husband and the arrears to be paid by him, it would not be in the interest of justice to allow the

Respondent to proceed with the impugned notice against the Petitioner herein, without there being an adjudication by a competent Civil Court.

Accordingly, the impugned notice of the Respondent dated 26.07.2000 is set aside and the writ petition is allowed. The Respondent is given

liberty to establish then-right in the Civil Court as to the actual quantum of arrears of rent, if any, payable by the Petitioner. No costs. In view of the

order passed in the main writ petition, no order is necessary in the connected W.M.P., and the same is closed.