IN THE HIGH COURT OF KERALA AT ERNAKULAM
WA No. 653 of 2004(A)
1. E.J.DAVIS, EDASSERY HOUSE,
... Petitioner
Vs
1. STATE OF KERALA, REPRESENTED BY THE
... Respondent
2. THE COMMISSIONER OF EXCISE,
3. THE DISTRICT COLLECTOR, ERNAKULAM.
4. THE ASSISTANT EXCISE COMMISSIONER,
5. RAJENDRAN, S/O. KRISHNAN,
6. WILSON S/O. KURIAN, KUTHINAPPILLY
7. THE EXCISE CIRCLE INSPECTOR, ALUVA.
For Petitioner :SRI.GEORGE POONTHOTTAM
For Respondent :GOVERNMENT PLEADER
The Hon'ble the Chief Justice MR.H.L.DATTU
Dated :16/10/2007
O R D E R
H.L.DATTU, C.J. & K.T.SANKARAN, J.
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W.A.No.653 of 2004-A, W.P.(C) No.39162 of 2003-K &
O.P.No.9789 of 2003-M
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Dated this the 16th day of October, 2007.
J U D G M E N T
Sankaran, J.
W.A.No.653 of 2004 arises out W.P.(C) No.1095 of 2004. That
writ petition was filed by E.J.Davis challenging Exts.P3 and P4 notices issued
by the Circle Inspector of Excise, Aluva directing the petitioner to deposit a sum
of Rs.19,05,385 and Rs.12,92,997/-. The learned Single Judge dismissed the
writ petition.
(2). W.P.(C) No.39162 of 2003 is filed by one Philomina
challenging Exts.P1 and P2 notices dated 31-10-2003 issued by the Circle
Inspector of Excise, Aluva directing her to pay the amounts as shown in Exts.P3
and P4 marked in W.P.(C) No.1095 of 2004 which is the subject matter in
W.A.No.653 of 2004.
(3). O.P.No.9789 of 2003 is filed by E.J.Davis and C.P.Maggi
challenging Ext.P9 requisition for recovery of an amount of Rs.30,00,440/- and
Ext.P10 letter dated 25-2-2003 issued by the Assistant Excise Commissioner,
Ernakulam directing the Collector to collect the sum of Rs.30,54,083/- from the
petitioners.
(4). In respect of Arrack Shops in Group II/93-94 of Angamali
Range, the auction purchasers, namely, Davis and Philomina transferred the
licence in favour of one Rajendran which was approved by the order dated
W.A.No.653 of 2004-A,
W.P.(C) No.39162 of 2003-K &
O.P.No.9789 of 2003-M
-2-
31-12-1993 issued by the Assistant Excise Commissioner, Ernakulam. In the
said order it is recorded that the licensees, namely, Davis and Philomina had
cleared the entire kist arrears and also the dues payable to the Abkari Welfare
Fund. The order would indicate that no amount was payable by the original
licensees. It is also recorded in the order that the transferee of the licence had
offered a surety for the due performance of his liabilities. One Mr.P.C.Joseph
was the surety and he had also produced solvency certificate. In the said
proceedings, it is held thus:
” In the circumstances the privilege of arrack shops in
Group No.II/93-94 of Ankamaly Range is transferred from
the Joint names of the first two applicants to the name of
the third applicant, Sri.Rajendran, S/o Krishnan, Chillikkattil
House, Rajakumari kara and village, Udumbanchola Taluk,
Idukki District along with the 30% security deposited by the
original purchasers, on the responsibility of the Excise
Inspector, Ankamaly for prompt collection of future dues.
The solvency produced by the original purchasers will not
be released till all the dues in respect of the group are
realised.”
(5). In respect of Arrack Shops in Group No.III/93-94 of Angamali
Range, Davis and Philomina transferred the licence in favour of one Mr.Wilson
and it was approved by Ext.P2 order dated 31-12-93 passed by the Assistant
Excise Commissioner, Ernakulam. Ext.P2 would also indicate that there was no
arrears on the part of the transferors and that the transferee had furnished
sufficient security for the due performance of his obligations under the Act and
W.A.No.653 of 2004-A,
W.P.(C) No.39162 of 2003-K &
O.P.No.9789 of 2003-M
-3-
Rules. Similar provision for retention of solvency was made in Ext.P2 as well.
(6). It would appear that the transferees of the licences committed
default in payment of excise duty. It would also appear that the amount could
not be realised from the transferees. One of the transferees (Rajendran) had
applied to declare him as insolvent and the Court had passed an order declaring
him as insolvent. Since the authorities could not recover the amount from the
transferees, Exts.P3 and P4 notices dated 31-10-2003 were issued to the
transferors by the Circle Inspector of Excise, Aluva directing them to pay the
arrears payable by the transferees. These notices were challenged in W.P.(C)
No.1095 of 2004 from which W.A.No.653 of 2004 arose. Similar notices are
under challenge in W.P.(C) No.39162 of 2003 filed by Philomina.
(7). Petitioners in O.P.No.9789 of 2003 had transferred licenses
issued in their favour to third parties and Exts.P1 and P5 orders dated
30-11-1993 were issued by the Assistant Excise Commissioner, Ernakulam
approving the transfer. In those orders also it is mentioned that the transferors
had no subsisting liability and the transferees have furnished sufficient security
for their performance of obligations. In respect of these transferees-licensees as
well arrears were there and the arrears are sought to be recovered by recourse
to revenue recovery proceedings against the petitioners in O.P.No.9789 of 2003
(transferors) and they challenge the same in the writ petition. It is also stated
W.A.No.653 of 2004-A,
W.P.(C) No.39162 of 2003-K &
O.P.No.9789 of 2003-M
-4-
that during the pendency of the writ petition, they were compelled to pay the
amounts as evidenced by Exts.P16 to P19 in O.P.No.9789 of 2003.
(8). The learned Single Judge held in W.P.(C) No.1095 of 2004
that in Exts.P1 and P2 orders approving transfer of licences it was mentioned
that the solvency produced by the original purchasers will not be released till all
the dues in respect of the Group are realised. It was held that there is nothing
which prohibits the Assistant Excise Commissioner in imposing any condition
while granting the transfer. It was also held that the transfer is based on a
contract between the transferor and transferee and the security furnished by the
petitioner for the group of shops as a whole was retained as additional security
for the liability of the abkari dues of the transferred shops. Learned Single Judge
took the view that the condition in the orders passed by the Assistant Excise
Commissioner that the solvency shall be retained would enable the respondents
to proceed against the petitioner for realisation of the amount due from the
transferees of the petitioner.
(9). Learned counsel for the appellant and writ petitioners submit
that the transferors having transferred the licence with the permission of the
Assistant Commissioner of Excise and they being not in arrears of either the kist
or welfare fund or excise duty, the transferors could not be proceeded against for
realisation of any arrears due from the transferees. Learned Senior Government
W.A.No.653 of 2004-A,
W.P.(C) No.39162 of 2003-K &
O.P.No.9789 of 2003-M
-5-
Pleader on the other hand relies on Rule 5 (16) of the Abkari Shops (Disposal in
Auction) Rules to contend for the position that the solvency could be invoked and
the amount could be realised from the petitioners. Rule 5 (16) of the Abkari
Shops (Disposal in Auction) Rules reads as follows:
” A resale or disposal of the shop effected under sub-rules
(10) & (15) shall always be at the risk of the original auction
purchaser, who cannot lay claim to any gain accruing from
the resale but in the event of loss to Government he shall be
required to make good the deficiency between the total
amount payable for the whole period under terms of the
original sale and the total amount payable by the resale
purchaser. The liability against the original auction
purchaser and the resale purchaser shall be calculated
respectively upto and from the date of confirmation of the
resale. In the event of loss to Government the forfeited
deposit shall be deducted from the loss arising from the
resale and the reminder, if any, with interest at 18 percent
or such other rate of interest as may be fixed by the
Government from time to time thereon shall be recovered
from the defaulter in the same manner as if it were an
arrear of land revenue. If the forfeited deposit is greater
than the loss by resale the whole of such deposit shall be
credited to the Government. When the rental fetched at a
resale is higher than the original rental, the amount of liability
against the original auction purchaser shall be calculated at
the rate of the original rental upto the date of confirmation of
the resale. A defaulting auction purchaser or resale
purchaser shall be similarly liable, if the privilege is disposed
of subsequently and such disposal results in loss to the
Government as compared with the original sale. Disposal
otherwise than by resale includes closure or departmental
management. The departmental management fee collected
from a shop while it was under departmental managementW.A.No.653 of 2004-A,
W.P.(C) No.39162 of 2003-K &
O.P.No.9789 of 2003-M
-6-due to default of payment of security, kist, etc., shall be
liable to forfeiture at the discretion of the Excise
Commissioner.”
(10). Rule 5 (16) contemplates a situation where a resale or
disposal of a shop becomes necessary and the sub-rule provides that it would
always be at the risk of the original auction purchaser. The contingency as
contemplated in sub- rule 16 is not available in the present case. There was no
re-auction nor was there any default on the part of the original licensees. There
was a transfer from the original licensees to third parties which was approved by
the Assistant Commissioner of Excise as per Rule 6 (22) of the Abkari Shops
(Disposal in Auction) Rules. Rule 6 (22) provides that licensee shall not sell or
otherwise transfer his contract or licence without the written consent of the
Assistant Excise Commissioner concerned. The Assistant Excise Commissioner
having granted the written consent there can be no liability on the transferors for
any dues from the transferee after the transfer is effected, unless of course
there is a contract to the contrary or a statutory provision making the transferor
liable for the liability of the transferee as well. The learned Government Pleader
was not in a position to point out any such contract to the contrary or any such
statutory provision which would enable the authority to proceed against the
transferor for the dues from the transferee.
W.A.No.653 of 2004-A,
W.P.(C) No.39162 of 2003-K &
O.P.No.9789 of 2003-M
-7-
(11). The contention that the order to retain the solvency
certificate would enable the respondents to realise the dues from the
transferors, is without substance. Rule 5 (10) of the Abkari Shops (Disposal in
Auction) Rules would indicate that the solvency certificate is required for 30% of
the bid amount. Sub-rule 10 of Rule 5 provides that the person declared to
be auction purchaser shall make a deposit in cash or Bank draft or both at the
time of signing the agreement and sale list of an amount equivalent to not less
than 30% of the amount of his bid or such other higher amount as may be fixed
by the officer conducting the sale and shall also furnish personal sureties if so
required by such officer. He shall also produce before the auctioning officer a
solvency certificate for an amount not less than 30% of the bid amount or in lieu
of solvency certificate additional cash security or Bank draft or Bank guarantee
for an amount not less than 30% of the bid amount. In the case on hand, while
effecting transfer, 30% security has also been transferred to the benefit of the
transferee and therefore, in our opinion, the solvency certificate loses its
significance and operation, when such transfer of security is effected to the
benefit of transferee. The contention put forward by the respondents that the
transferors continue to be liable for the dues from the transferee is therefore
unsustainable.
(12). For the afore-said reasons, we are unable to agree with
W.A.No.653 of 2004-A,
W.P.(C) No.39162 of 2003-K &
O.P.No.9789 of 2003-M
-8-
the view taken by the learned Single Judge. W.A.No.653 of 2004 is allowed
and Exts.P3 and P4 are quashed. W.P.(C) No.39162 of 2003 is also allowed
and Exts.P1 and P2 are quashed. O.P.No.9789 of 2003 is also allowed and
Exts.P9 and P10 are quashed. Any amount paid by the petitioners in O.P.9789
of 2003 pursuant to the revenue recovery proceedings, as evidenced by
Exts.P16 to P19 shall be refunded to the petitioners therein. It is submitted
by the appellant in W.A.No.653 of 2004 and the petitioner in W.P.(C) No. 39162
of 2003 that the petitioners in those writ petitions have also paid amounts due,
pending the proceedings. If any such payment is made, the petitioners therein
would also be entitled to get refund of the same.
(13). In view of the orders passed in the writ appeal and writ
petitions, all pending interim applications are closed.
Ordered accordingly.
(H.L.DATTU)
CHIEF JUSTICE
(K.T.SANKARAN)
JUDGE
MS
