PETITIONER:
A. DAMODARAN & ANR.
Vs.
RESPONDENT:
STATE OF KERALA & ORS.
DATE OF JUDGMENT23/03/1976
BENCH:
BEG, M. HAMEEDULLAH
BENCH:
BEG, M. HAMEEDULLAH
RAY, A.N. (CJ)
SINGH, JASWANT
CITATION:
1976 AIR 1533 1976 SCR (3) 780
1976 SCC (3) 61
CITATOR INFO :
R 1980 SC 680 (19)
R 1984 SC1326 (12)
ACT:
Kerala Abkari Act (1 of 1967), Ss. 18A and 28-`Grantee'
who is-Right of Government to recover dues from persons who
were permitted to carry on business of selling liquor even
though no agreements were executed or licences granted.
Section 18A(1) of the Kerala Abkari Act, 1967, shows
that the exclusive or other privilege of selling liquor by
retail may be granted on payment of rental in consideration
of the grant. The amount of rental may be settled by
auction, negotiation or by any other method. Section 28
provides that all amounts due to the Government by any
grantee of a privilege may be recovered from the person
primarily liable to pay as if they were arrears of land
revenue.
HEADNOTE:
The appellants bid at auction sales of some toddy
shops. The conditions of the sales, notified in pursuance of
the statutory provisions, were: (a) It was incumbent upon
the bidder to pay immediately 10% of the amount due; (b) The
successful bidder had to deposit 30% of the amount payable,
on demand by the Assistant Commissioner, and to execute
agreements before getting the necessary licences; and (c) If
the contract could not be executed, the whole amount was to
be forfeited and the shop itself was to be resold. The
appellants deposited the necessary amounts on demand and
were allowed to start business even before agreements were
executed or licences were issued. But the appellants failed
to pay the balance due to the State. The amounts were sought
to be recovered under s. 28, and the proceedings were
challenged, but the High Court held against the appellants.
In appeal to this Court, the appellants contended that
as no agreement was executed between the appellants and the
Government in the manner prescribed by Art. 299 of the
Constitution, the appellants had not become the `grantees'
of any privilege and hence were not liable to pay the
amounts sought to be recovered
Dismissing the appeal,
^
HELD : The Government had to perform its duty of
granting licences as soon as the appellants fulfilled the
conditions by paying up the remainder of the amounts due. In
the present case, Government had performed its part by
allowing the appellants to start selling liquor even before
execution of the agreements and the grant of licences. The
appellants, therefore, became liable and bound to perform
their corresponding obligations. This reciprocity of
obligations, quite apart from its basis in agreement, had
thus acquired an operative force resting on statutory
sanction and equity. [784G-785B]
(1) It is not a condition precedent to recovery of an
amount due and recoverable under the Act that it should be
due under a formally drawn up and executed contract. Under
the notification, in the event of the non-execution of a
contract, even if due to the unwillingness or inability of a
bidder to pay, the whole amount due could be forfeited.
[782C; 783E-F]
2(a) The acquisition of the status of a grantee for the
purpose of s. 18A, does not depend on the actual receipt of
a licence. Section 18A(2) lays down that no grantee of any
privilege under sub-s. (I) shall exercise it until the has
received a licence. This provision contemplates the
statutory status of a `grantee' even before the successful
bidder becomes entitled, as of right, to exercise the
privileges of a grantee on receipt of a licence even before
he receives his licence he is described as a grantee. [783F-
G, H-784A]
781
(b) The word `grantee' used in s. 28 carries this wider
connotation of persons who have been permitted by the excise
authorities, in recognition of their rights to receive and
in anticipation of the receipt of licences, to exercise the
privileges of grantees, and not necessarily only those who
have executed the written contracts and received licences.
[784A-C]
Madhavan v. Assistant Excise Commissioner, Palghat
I.L.R. [1969] 2 Kerala 71, approved.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1464 of
1971.
From the Judgment and order dated 18-3-71 of the Kerala
High Court in Writ Appeal No. 126 of 1971.
K. R. Sudhakaran and N. Sudhakara and P. K. Pillai for
the Appellants.
K. T. Harindranath and K. M. K. Nair for Respondent.
The Judgment of the Court was delivered by
BEG, J.-The appellants before us, by certification of
the case, had filed a petition to quash revenue recovery
proceedings started against them for realisation of the
remainder of the amounts due on account of their bids at
auction sales of some toddy shops for the period 1st April,
1967, to 31st March, 1969, by the Government of Kerala. The
amounts at which the shops were knocked down were:
1. Shop No. 1 = 84,000/- 2. Shop No. 4 = 46,500/- 3. Shop No. 8 = 56,100/- 4. Shop No. 11 = 1,50,000/-.
The notified conditions of the auction sales made it
incumbent upon the bidder to pay immediately 10% of the
amount due and to provide personal security for the rest.
There was no assurance or guarantee given there that
prohibition will not be removed in future by the Government
in any area in the State or about any other matter of future
policy of the Government relating to intoxicants. According
to notified conditions, the successful bidders had to
deposit 30% of the total amount payable on demand by the
Assistant Commissioner and also to execute agreements before
getting the necessary licences. The petitioners had
deposited the necessary amounts on demand. They were also
allowed to start the business of running their toddy shops
even before the licences were issued in their favour.
The petitioners’ case is that, at the time of bidding,
there was an understanding that the respondent State will
not remove prohibition so that they expected adequate
profits. As observed above, there is nothing in the notified
conditions to indicate this. It appears that in April, 1967,
the respondent State announced removal of prohibition from
1st May, 1967. The appellants allege that they suffered
heavy losses due to this policy of the State and were unable
to make the remainder of the payments which were sought to
be recovered under section 28 of the Abkari Act (hereinafter
referred to as `the Act’). It is difficult to see what the
removal of prohibition had to do with alleged
782
losses to the appellants. Abandonment of Prohibition either
totally or partially, should, ordinarily, not diminish sales
of liquor. One should expect such a development to increase
sales of liquor.
The appellants contend that, as no agreement was
executed between them and the Govt. in the manner prescribed
by Article 299 of the Constitution, they are not liable to
pay the amounts sought to be recovered. This is their main
contention.
A learned Judge of the Kerala High Court who heard the
petition held that the notification in persuance of which
the shops in question were auctioned provided that, if the
contract could not be executed, the whole amount was to be
forfeited and the shop itself was to be resold. Thus, non-
execution of the contract due to the unwillingness or
inability of a bidder to pay was not a contingency outside
the notification for auction the validity of which is not
challenged. The notification did not lay down that, in that
case, the payment of the remainder will be remitted. On the
other hand, the condition was that the whole amount due
could, in such an event, be “forfeited”.
The Kerala High Court held that, despite the absence of
a contract executed in accordance with the provisions of
Article 299 of the Constitution, the amounts due could be
recovered under Section 28 of the Act which reads as
follows:
“28 Recovery of duties.-All duties, taxes, fines
and fees payable to the Government direct under any of
the foregoing provisions of this Act or of any licence
or permit issued under it, and all amounts due to the
Government by any grantee of a privilege or by any
farmer under this Act or by any person on account of
any contract relating to the Abkari Revenue may be
recovered from the person primarily liable to pay the
same or from his surety (if any) as if they were
arrears of Land Revenue, and, in case of default made
by a grantee of a privilege or by a farmer the
Commissioner may take grant or farm under management at
the risk of the defaulter or may declare the grant or
farm forfeited, and re-sell it at the risk and loss of
the defaulter. When a grant or farm is under management
under this section, the Commissioner may recover any
moneys due to the defaulter by any lessee or assignee
as if they were arrears of Land Revenue.”
The appellants submit that they had not become
“grantee” of any privilege without the execution of
contracts complying with the requirements of Article 299 of
the Constitution. The learned Judge of the Kerala High Court
relied on Madhavan v. Assistant Excise Commissioner,
Palghat, affirmed by a Division Bench in Damodaran v. State
of Kerala. It appears that, although the Division Bench did
not specifically consider whether a bidder at an auction of
the kind before us was the “grantee” of a privilege within
the meaning of Section 26 of the Act, yet, it held that the
liability to satisfy the dues arising out of a bid was
enforceable under Section 28 of the Act quite
783
apart from any contractual liability. Reference was also
made, in this connection, to the decision of this Court in
Union of India v. A. L. Ralia Ram, for contending that the
absence of a formal contract is not fatal in all cases so as
to make the whole transaction null and void ab initio.
Statutory duties and liabilities may be enforced in
accordance with statutory provisions. Equitable obligations
may also arise and be enforced by decrees of Courts quite
apart from the requirements of article 299 of the
Constitution. Mulamchand v. State of Madhya Pradesh(2)
affords an instance where on a claim for compensation or
restitution under Section 70 of the Contract Act, this Court
relied upon the principle stated, in Nelson v. Harbolt(3) as
follows (at p. 222) :
“It is no longer appropriate to draw a distinction
between law and equity. Principles have now to be
stated in the light of their combined effect. Nor is it
necessary to convass the niceties of the old forms of
action. Remedies now depend on the substance of the
right, not on whether they can be fitted into a
particular framework. The right here is not peculiar to
equity or contract or tort, but falls naturally within
the important category of cases where the Court orders
restitution if the justice of the case so requires”.
In the case before us, we are concerned really with the
legality of proceedings under Section 28 quoted above of the
Act. It is evident that these proceedings can be taken in
respect of “all amounts due to the Government by any grantee
of a privilege or by any farmer under this Act or by any
person on account of any contract relating to the Abkari
Revenue”. It is clear that dues may also be “recovered from
the person primarily liable to pay the same or from his
surety (if any)”. It is not a condition precedent to
recovery of an amount due and recoverable that it should be
due under a formally drawn up and executed contract.
Section 18 of the Act shows that the exclusive or other
privilege of selling liquor by retail may be granted on
payment of rental in in consideration of the grant. The
appellants made all the initial payments of rent. We do not
think that acquisition of the status of a grantee, for the
purposes of Section 18A, need await the actual receipt of a
licence. The conditions of the grant are to be laid down by
the Government. The amount of rental “may be settled by
auction, negotiation or by any other method as may be
determined by by the Government, from time to time”. The
amounts due “may be collected to the exclusion of, or in
addition to, the duty or tax leviable under Sections 17 and
18.
Section 18A(2) lays down that “no grantee of any
privilege made sub-section (1) shall exercise the same until
he has received a licence in that behalf from the
Commissioner”. It will be seen that this provision
contemplates the statutory status of a “grantee” even before
784
he becomes entitled, as of right, to exercise the privileges
of a grantee on the receipt of a licence. What is noticeable
is that even before he receives his licence he is described
as a “grantee”. The successful bidders, in the case before
us, had been permitted by the excise authorities, in
recognition of their rights to receive and in anticipation
of receipt of licences, to exercise the privileges of
grantees. They were thus treated as grantees in anticipation
of execution of contracts and grants of licences. Grantees
under Section 29 of the Act are those who have received the
privilege and not necessarily only those who have received
the written contracts and licences. The word “grantee” used
there seems to us to carry this wider connotation with it.
In Madhavan’s case (supra) K. K. Mathew, J., repelled
the contention that the execution of an agreement in
accordance with the provisions of Article 299 of the
Constitution was a condition precedent to the creation of a
liability to be proceeded against under Section 28 of the
Act for recovery of the balance of the rentals due. He said
(at p. 94) :
“It was contended on behalf of the petitioners in
some of these cases that no agreements were executed by
them, and therefore, the Government are not entitled to
recover any amount by way of rental. Reliance was
placed upon the decisions of the Supreme Court in H. P.
Chowdhry v. State of M.P. (AIR 1967 SC 203) and
Mulamchand v. State of M.P. (1969(II) S.C.W.R. 397),
for the proposition that unless there is an agreement
executed in accordance with the provisions of Article
299 of the Constitution, the petitioners in the case
where no agreements have been executed, would not be
liable to pay rental. The argument was that the
liability to pay rental arises only out of the
agreement, and if there is no agreement, then there is
no liability to be enforced. As I have indicated the
liability to pay the rental arises not only by virtue
of the agreement but also by the provisions of section
28 of the Act. The decision of the Supreme Court in H.
P. Chowdhry v. State of M.P. would make it clear that
if there are provisions in the Act, the liability to
pay the rental can be enforced. I think that even if no
agreement has been executed, there was the liability
under section 28 of the Act, and that the liability
could be enforced under the provisions of the Revenue
Recovery Act. (See Sections 6 and 62 of the T.C.Act)”.
The appellants became entitled to get licences from the
Government which had to perform its duty to execute written
agreements and grant licences as soon as the appellants
fulfilled required conditions by paying up the remainder of
the amounts due. The Government had performed its part of
the bargain and even allowed the appellants to start selling
liquor. The appellants also became liable and bound to
perform their corresponding obligations under the
785
conditions of the auctions imposed in pursuance of statutory
provisions. This reciprocity of obligations, quite apart
from its basis in agreement, had thus acquired an operative
force resting on statutory sanction and equity.
Consequently, we affirm the view of the Kerala High
Court and dismiss this appeal.
Parties will bear their own costs throughout.
V.P.S. Appeal dismissed.
786