Raghunath Das vs The State of Punjab and Others

D.K. Mahajan, J.—This order will dispose of three petitions, Civil Writs Nos. 376, 377 and 378 of 1962. The petitioners are different licensees of liquor shops. I call them licensees, because they were the successful bidders at the auctions and their bids-were ultimately confirmed by the Excise and Taxation Commissioner who-under the notification exercises the powers of the Financial Commissioner under the Act, the Act being the Punjab Excise Act (No. 1 of 1914) hereinafter called the Act. So far the facts go, there is no dispute. The licences for the wholesale and retail sale of country liquor for various places in the Punjab are auctioned each year. In these three petitions we are concerned with the sale of licences for country liquor for Faridkot and Kotkapura for the year 1962-63 in Civil Writ No. 376 of 1962, with the sale of licence for foreign liquor for Faridkot for the year 1962-63 in Civil Writ No. 377 of 1962 and with the sale of licence for foreign liquor for Bhatinda for the year 1962-63 in Civil Writ No. 378 of 1962. The auctions were fixed for 8th of February 1962. The petitioners bids were accepted for various amounts for the aforementioned places. These bids were accepted by the officers who conducted the auctions and were approved by the Excise and Taxation Commissioner on the 20th of February 1962. The petitioners were asked to deposit by a letter dated the 15th of March 1962 the one-sixth of the licence money for the year 1962-63. These amounts were duly deposited, but before the licensees could commence business, the licences were fixed for reauction for the 30th of March 1962. This reauction was advertised without any notice to the petitioners. They were neither heard nor called upon to show cause why these licences should not be reauctioned. When the petitioners came to know of this, they came rushing to this Court and filed the aforesaid petitions and the Bench admitting these petitions directed that they be heard on the 4th of April 1962. As the State had not filed the written statements on that date, they were adjourned for hearing for today. The State has filed the written statements and all the allegations made in the petitions are accepted and the stand taken by the State is very short and simple and that is based on the provisions of section 8 and section 41.

At this stage it will be proper to go through the scheme of the Act and the rules made thereunder. The rules are called the Punjab Liquor Licence Rules, 1956, and were promulgated by a notification dated the 2nd of April 1956 and have been enacted in pursuance of the powers conferred by section 59 of the Act. Section 26 of the Act provides that no liquor shall be bottled or sold except under the authority and subject to the terms and conditions of a licence granted in that behalf. There is no provision in the statute as to how a licence is granted. For that one has to refer to the Rules, and the relevant rule in this connection is rule 36 which deals with grant of licences by auction, and in the present petitions we are concerned with grant of licence by auction. Rule 36 has as many as 24 clauses and they prescribe the procedure for the sale of the licence. It is not necessary to state all the clauses excepting clauses 18, 19, 22, 23 and 24. These clauses are in these terms:-

(18) All bids accepted by an officer subordinate to the Collector require the Collector''s sanction. All sales are open to revision by the Financial Commissioner.

(19) If the Collector refuses to sanction a sale or if a sale is set aside by the Financial Commissioner on revision the Collector may resell the license by auction or by tender: if the resale is by tender, these rules shall apply as far as may be.

(22) The Collector shall forward to the Financial Commissioner statements in forms M. 14 and M. 14-A, showing the locality of each shop sold, the probable sales during the year (which shall be stated in gallons equivalent to London proof), the lowest fee determined under clause (1) of this rule, the name of the persons to whom the shop has been sold, the amount for which it has been sold compared with that of the preceding year, and, in any case in which the shop has not been sold for the highest bid, a short statement of the reasons for rejecting it. If no intimation to the contrary is received within three weeks, the Collector may assume that the Financial Commissioner has accepted his proposals The Excise and Taxation Officer shall forward a list of licenses and the shops held by them to the Superintendent of Police of the district, and, to the managers of all distilleries licensed in Punjab. The lists shall be forwarded to the Managers of the distilleries before the 1st March, each year, copies being sent simultaneously to the offices of the Collector and the Financial Commissioner, Punjab.

(23) A person to whom a shop has been sold shall pay one-sixth of the annual fee within seven days of the auction (any deposits already made shall be taken into account, and any excess shall be either returned to him or credited to future payments). By the 7th of the month in which he begins his business under his licence and by the 7th of every subsequent month, the licensee shall pay one-twelfth of the annual fee till the whole fee is paid. But he may at any time pay the whole amount due if he wishes. If the total amount due is less than Rs. 100, it shall be payable in one sum unless the Collector for special reasons, allows payment to be made by instalments. If any person whose bid has been accepted by the Presiding Officer at the auction fails to make the deposit of one-sixth of the annual fee or if he refuses to accept the license, the Collector may resell the license, either by public auction or by private contract, and any deficiency in price and all expenses for such resale or attempted resale shall be recoverable from the defaulting bidder in the manner laid down in section 60 of the Punjab Excise Act.

(24) When a license has been cancelled, the Collector may resell it by public auction or by private contract and any deficiency in price and all expenses of such resale or attempted resale shall be recoverable from the defaulting licensees in the manner laid down in section 60 of the Excise Act. The license shall be disposed of for a fixed sum. A gallonage rate shall not be accepted.

It will be apparent from the scheme of these clauses that the sale can be by any officer subordinate to the Collector or by the Collector himself. In case the sale is by an officer subordinate to the Collector, the confirming authority is the Collector, but the order of confirmation by the Collector is subject to revision by the Financial Commissioner or in the Punjab now by the Excise and Taxation Commissioner. If the sale is by the Collector, the confirmation or approval is by the Excise and Taxation Commissioner, but no revision against this confirmation is provided in the Rules. Looking at these provisions, it is apparent 1hat the moment the confirmation is made and the licensee is prepared to pay the instalments of the licence-money as fixed at the auction, he automatically becomes the licensee. What later on has to be given to him is merely the paper which may hereinafter be called the licence, or, in other words, merely a formality thereafter has to be gone into. According to the terms of the licence, he then becomes entitled to vend liquor with effect from the date from which the licence becomes operative, i.e. 1st of April of that year. There is no provision in the Rules or in the Act giving power either to the Financial Commissioner or to the Government to set aside the confirmation of the sale or, in other words, to cancel the licence for reasons other than those mentioned in sections 36 and 41. It is common ground that the cancellation in this case is neither u/s 36 nor u/s 41, nor in the nature of things it could be under these provisions. What is contended for by Mr. Doabia, learned counsel for the State, is that the State has the supervisory power u/s 8 of the Act, whereunder they could cancel the licence, or, in other words, cancel the confirmation of the auction, and this power the State has exercised in these cases and, therefore, the order of the State reauctioning these licences is in order. Therefore, the short question that falls for determination is whether section 8 authorises the State to cancel the confirmation of the licences as urged by the learned counsel for the State. Section 8 is in these terms:-

Superintendence and control of the excise administration and excise officers:-

(a) Subject to the control of the State Government and unless the State Government shall by notification otherwise direct, the general superintendence and administration of all matters relating to excise shall vest in the Financial Commissioner.

(b) Subject to the general superintendence and control of the Financial Commissioner and unless the State Government shall by notification otherwise direct, the Commissioner shall control all other excise officers in his division.

(c) Subject as aforesaid and to the Control of the Commissioner and unless the State Government shall by notification otherwise direct, the Collector shall control all other excise officers in his district.

It will be apparent from this provision that the general superintendence and administration of all matters relating to excise vests in the Financial Commissioner and that power is subject to the control of the State Government. Therefore, it is only that power of the Financial Commissioner which is subject to the control of the State Government which the Financial Commissioner possesses under the Act and as I have already mentioned, the Financial Commissioner has no power of revision qua the confirmation of the sale of licences under the Act excepting in the case of a sale by an officer subordinate to the Collector where that sale is required to be confirmed by the Collector, or, in other words, where the sale is under clause (18) of rule 36. Where the sale is by the Collector, the confirmation or approval has to be by the Financial Commissioner, but there is no provision for revision in such a case. Therefore, section 8 does not confer any jurisdiction on the State Government, after the licence has been validly sold, to cancel the same. Nothing has happened so far which would entail cancellation of the licence either u/s 36 or section 41 of the Act. In this view of the matter, the contention of the petitioners must be accepted.

The second contention of the learned counsel is that in the meantime the State Government his resold the licences and, therefore, these petitions have become infructuous. I am unable to agree with this contention. The petitions were filed before the resale was held and at the time when the petitions were filed notice of the same was given to the State. Therefore, any resale held after such notice would not take effect to the prejudice of the petitioners who had, by the first valid sale, acquired a vested right to work the licences acquired by them at the auction.

The third contention advanced by the learned State counsel is that in any case subsequent purchasers of the licences should be made parties to these petitions and their rights cannot be affected behind their backs. This argument must also fail on the short ground that they acquired their rights during the pendency of a lis and, therefore, their rights can have no precedence over the rights which had already been validly acquired by the petitioners. Moreover, this argument is not open to the State counsel, because he cannot plead their rights to cover up the State''s default. If those persons have any right and are affected by this order, it is for them to move in the matter and inspite of the fact that these petitions have been pending in this Court now for nearly a month, none of these subsequent transferees have come forth with a prayer to be impleaded as party in these petitions. Therefore, this contention also must be repelled.

For the reasons given above, I allow these petitions and hold that Government had no power to resell the licences which had been validly sold to the petitioners and direct that the petitioners be permitted to work these licences forthwith. The petitioners will have their costs which are assessed at Rs. 100/- per petition.