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Judgment
Ashok B. Hinchigeri, J.—The petitioners are all former excise contractors. The Government of Karnataka has come out with a scheme called ''Kara Samadhana Scheme-3'' which provides for the waiver of interest on the payment of the principal excise arrears. The petitioners'' grievance is that the earnest money deposits forfeited to the State are not being given any credit while computing the petitioner''s liability. Demanding that the credit be given for the forfeited earnest money deposits, these petitions are instituted.
Sri M.R. Naik, the learned Senior Counsel appearing on behalf of the petitioners submits that while computing the loss, the respondents have not acted in the light and spirit of this Court''s order in the case of Guruvamma v. State of Karnataka reported in AIR 2007 Kar 99, wherein it is held that the computation of loss cannot be by excluding the amount which has been received by the State by way of forfeiture of the amount of the bidder or in any manner. The learned Senior Counsel further submits that the said order of the learned Single Judge is confirmed by the Division Bench of this Court by its judgment, dated 21.01.2008 passed in W.A. No. 1298/2007.
Sri Naik further submits that the order as passed by the learned Single Judge and as confirmed by the Division Bench have attained finality. Therefore the respondents are bound to recompute the petitioner''s liability by giving credit for the forfeited earnest money deposits. He submits that the petitioners have suffered enormous losses.
The learned Advocate General, Sri Ashok Haranahalli appearing for the respondent submits that the forfeiture of amounts on account of the breach committed by the petitioners is independently of the Excise Commissioner''s obligation to compute the losses and recover the said amount from the contractors who have defaulted. He submits that the act of forfeiting the earnest money has nothing to do with the Government making profit or incurring loss on account of the re-auctioning of the vending right of arack.
The learned Advocate General further submits that there is no analysis of Rule 19 and 20 of the Karnataka Excise (Lease of the Right of Retail Vend of Liquors) Rules, 1969 (''1969 Rules'' for short) in the orders passed by the learned Single Judge and the Division Bench. The said Rules are extracted hereinbelow:
Adjustment of deposits- (1) All deposits, unless forfeited in accordance with these rules shall be adjusted towards the final monthly rents payable by the person to whom licences are issued:
Provided that the Excise Commissioner may, if he considers it expedient, permit the adjustment of one and a half month''s cash deposit made under Rule 13 towards the rental of any of the last four months of the lease period;
Provided further that an amount not exceeding one month''s rent may be retained by the Deputy Commissioner or the Excise Commissioner for a period not exceeding three months after the expiry of the lease period in order that adjustment towards any sums that may be found due to the State Government under these rules may be made and the said amount of any part thereof as are not adjusted shall be refunded on the licensee producing a ''no due'' certificate issued by the Deputy Commissioner or the concerned.
Refund of deposits- The earnest money or other deposits made under the rules, unless forfeited or adjusted, shall be refunded to the depositor.
Based on the afore-extracted Rules, the learned Advocate General would submit that once the amounts are forfeited, the question of adjusting them would not arise at all.
For advancing the contention that if a party to the contract has committed the breach, he is required to pay the damages to the other party whether or not the other party has actually sustained any loss, he has read out the provisions contained in Section 74 of the Indian Contract Act. He also brought to my notice the Apex Court''s judgment in the case of Shri Hanuman Cotton Mills and Others Vs. Tata Air Craft Limited, . The relevant paragraph of the said judgment is extracted hereinbelow:
24.From a review of the decisions cited above, the following principles emerge regarding "earnest":
(1) It must be given at the moment at which the contract is concluded.
(2) It represents a guarantee that the contract will be fulfilled or, in other words, "earnest" is given to bind the contract.
(3) It is part of the purchase price when the transaction is carried out.
(4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.
(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest.
He also brings to my notice that the petitioner''s request for the refund of the earnest money is turned down long ago.
Sri M.R. Naik. the learned Senior Counsel appearing on behalf of the petitioners submits that the lis between the former Excise Contractors and the Government in these petitions is not to forfeiture of the amounts. The grievance in these petitions revolves round the computation of the loss incurred by the Government. He also submits that the prayer (a) in W.P. No. 7.5329/10 is independently of the prayer (b). The petitioners'' grievance over the computation formula adopted by the Excise Commissioner is that it is not in keeping with the order passed by the learned Single Judge in W.P. No. 42013/99 as confirmed by the Division Bench in W.A. No. 1298/2007. He also submits that the Rule 19 of the said Rules has been expressly considered by the learned Single Judge in Smt. Guruvamma''s case (surpa). He further submits that by implication Rule 20 of the said Rules is also considered, though without expressly-mentioning it.
Sri R. Devdas, the learned Additional Government Advocate submits that the Excise Commissioners order, dated 9.8.2002 is impugned in W.P. 25329/10 after eight years of its passing. He further submits that the said order was challenged by way of revision. Even when the Revision Authority has dismissed the revision petition, the order passed by the Revision Authority in 2006 is not challenged.
The learned Additional Government Advocate submits that the clarification to column 5 of the application under the Kara Samadhana Scheme-III is that "Type of principal amount ASR/TSR/TTR/OTH/DDA/LOSS." Therefore, the petitioners'' applications and the respondents'' consideration thereon has to include the loss. He submits that the Kara Samadhana Scheme-Ill is a beneficial scheme. It has no compulsive element whatsoever. It is open to the petitioners not to avail of the special scheme and have the lis pertaining to their dues concluded in the regular proceedings. He also submits that the Rule 19 and 20 of the said Rules are not considered by the learned Single Judge. He submits that once the deposits are forfeited, the amounts cannot be adjusted at all. That forfeited amounts cannot be adjusted or refunded is the emphatic submission of Sri Devdas.
In the course of his rejoinder, Sri Naik submits that the outcome of the revision petition is not made known to the majority of the petitioners. Only in one case, the Revision Authority has communicated the order on the revision petition and in the said case (W.P. No. 2G542/10), the order passed by the Revision Authority is also challenged.
My perusal of the Kara Samadhana Scheme-III reveals that it is a beneficial scheme intended to give relief in respect of interest and penal interest, provided the defaulters pay the principal dues. Clause 1 of the scheme only speaks of the payment of the entire principal amount so due as reflected in the books of account of the Excise Department. It does not provide for or prescribe any method of computation as such. The liability of the defaulters is as shown in the books of account. Clause 1 of the said scheme is extracted hereinbelow:
Under the Karasamadhana Scheme-III, a defaulter who is in arrears of payment of excise dues pertaining to period prior to 30-06-2007 and comes forward to pay the entire principal amount so due as reflected in the books of account of the Excise Department shall be eligible for waiver of up-to-date interest pertaining to the principal payable under Rule 15 of the Karnataka Excise Licences (General Conditions) Rules, 1967.
It is not in dispute that the similar schemes were also issued in the past twice. They stood the test of time.
Column No. 5 in the application prescribed under the scheme reads as follows: "Outstanding amount of arrears pertaining to principal". Two asterisks/given to Column No. 5 with the clarification as "Type of principal amount ASR/TSR/TTR/OTh/DDA/LOSS.
No challenge whatsoever is raised to Clause 1 of the scheme or column 5 of the application thereunder. In the absence of any challenge, no directions can be issued on how to compute the amounts.
Further it is doubtful whether the order passed by the learned Single Judge in W.P. No. 42013/99 as confirmed by the Division Bench in W.A. No. 1298/2007 have retrospective or prospective effect. If the retrospectivity effect is given, it may also have the effect of opening the Pandora''s box. It may have the unsettling effect, as the similarly placed defaulters who made the demands in response to earlier two schemes, may demand the reopening of their cases also.
As far as the challenge to the original authority (Excise Commissioner)''s orders passed in 2002 and the Revision Authority''s orders stated to have been passed in 2006 is concerned, what is to be noticed is that the challenge is raised after eight years and four years respectively. The delay and laches also militate against the petitioners.
For all the aforesaid reasons the reliefs prayed for cannot be acceded to. However, this does not mean that even if there are some errors in the books of accounts, the petitioners are precluded from challenging the same. But the stage for challenging the same would arise when the decision-maker passes the order on the petitioners'' applications filed in response to the Kara Samadhana Scheme-Ill. Reserving the liberty to the petitioners to challenge the wrong entry and/or wrong totaling, if any, these petitions are dismissed. No order as to costs.