Appeal Nos
351 35972
Appeals from the Judgment and Order dated 7 5 1971 of the Orissa High Court in OJC Nos 1185 to 1190 1223 and 1224 of 1970 and 4171 and CiviI AppeaI Nos
1855 1863 209172 and 180274
Appeals by CertificateAppeals by Special Leave from the Judgments and Orders dated 7 5 1971 3 2 1971 and 28 3 1974 of the 814 Orissa High Court in OJC Nos
1185 1190 1223 1224 and 1226 70 85070 58972 and Civil Appeals Nos
1892 1893 of 1971 1302 2071 and 12351236 of 1972
Appeals from the Judgment and Orders dated 15 5 1970 16 41971 and 6 9 1971 of the Orissa High Court in OJC Nos 329 and 35770 78670 24267 859 and 86370
Vinoo Bhagat for the Appellants in CAs
351 35972 and RR
in CAs
1859 186272
Gobind Das and GS Chatterjee for the Appellants in rest of the Appeals except 180274 and RR
in CAs
351 35972
RK Garg and SC Agarwal for Appellants in CA 180274 and BP Maheshwari and Suresh Sethi for Respondents in CAs
1235123672
B Parthasarthy for RR in CA
180274
The Judgment of the Court was delivered by J
These appeals by certificate or special leave are directed against judgments of the Orissa High Court dated May 15 1970 February 3 1971 April 16 1971 May 7 1971 September 6 1971 and March 28 1974
They arise out of several writ petitions
The facts which gave rise to the petitions changed from time to time largely because of amendments in the law and that was the reason for the filing of separate writ petitions resulting in the impugned judgments of the High Court but we have heard them together at the instance of the learned counsel for the parties and will dispose them of by a common judgment
The nature of the controversy in these cases is such that it will be enough to state the basic facts for the purpose of appreciating the arguments of counsel for the parties
The Collector of Mayurbhanj issued a notice on February 3 1970 by which he invited tenders for the grant of li cences for establishing 70 outstill shops for 1970 71
Ajodhya Prasad Shah gave the highest bid for a group of seven shops in one lot for Rs 34000 per month
His bid was accepted and his name was entered in the prescribed register and the entry was signed by the successful bidder and the Collector
Ajodhya Prasad accordingly deposited Rs 68000 on account of two months  fees in ad vance as required by rule 103 of the Board s Excise Rules 1965
Raghunandan Saha who was the unsuccessful bidder felt aggrieved and filed an appeal but it was dismissed by the Excise Commissioner on March 16 1970
The Board of Revenue also refused to interfere
Ajodhya Prasad claimed that in the mean time he made arrangements for establishing his shops and incurred an expenditure of about Rs 150000 
He therefore approached the authorities concerned for the issue of the licenses for running the shops from April 1 1970
He approached  the Superintend ent of Excise for depositing Rs 34000 for the month of April but the Superintendent did not pass the deposit challan
Ajodhya Prasad thereupon filed a writ petition OIC No 329 of 1970 in the High Court with the allega tion that the Collector 815 was not acting according to the law as the State Government had issued instructions to him not to
issue the licenses
Ajodhya Prasad prayed in his petition for the issue of directions for  the issue of licenses and quashing the State Government s instructions to the contrary
Raghunandan Saha also filed a petition OJC No 357 of 1970 on April 13 1970
The Collector issued a notice for reauction on May 1 1970 and Ajodhya Prasad amended his petition for quashing the notice also
The State Government and the other respondents traversed the claim in Ajodhya Prasad s writ petition and pleaded inter alia that the bids at the auction were not satisfac tory and in the interest of the State revenue the State Government had passed the orders for not accepting Ajodhya Prasad s bids
The High Court examined the questions whether Ajodhya Prasad was entitled to the issue of the licenses for the seven shops and whether the State Govern ment had the authority to direct the withholding and reauc tioning of the licenses and held inter alia that the State Government had no power to interfere with the auction held by the Collector after it had become final in appeal and revision and could not direct a reauction
The High Court examined the nature of the realisation at the auction and held that it was a tax which was not contemplated by section 38 of the Bihar and Orissa Excise Act 1915 herein after referred to as the Act and that rule 1031 of the Board s Excise Rules in regard to the fees for the licenses was not authorised by the Act and was in excess of the rule making power of the Board
The High Court also held that the auction price for a license is not excise duty within the meaning of Entry 51 of List II of the Seventh Schedule to the Constitution and it was not open to
the Collector to follow the process of auctioning for deter mining the license fee which was really a tax in the garb of a fee
It held that the aforesaid rule 103 was incompe tent and ultra vires the Act
On the question of grant of the exclusive privilege under section 22 of the Act the High Court held that what was purported to be given under the sale notice was not the grant of an exclusive privi lege
In taking that view the High Court stated that notice had not been issued under section 22 1 of the Act and the Collector had no authority to issue such a notice In that view of the matter the High Court did not express any final opinion as to whether the licence was to be granted for an exclusive privilege to manufacture and sell liquor
The High Court accordingly quashed the direction of the State Government dated April 15 1970 for reauctioning the license and declared that rule 1031 of the Board s Excise Rules was ultra vires the Act
Appeals Nos 1892 and 1893 of 1971 are directed against that judgment of the High Court dated May 15 1970 on certificates
The State Government issued the Bihar and Orissa Excise Orissa Amendment Ordinance of 1970 and the State Govern ment issued a fresh order dated August 19 1970 under the provisions of the amended section 292 of the Act for fresh settlement of the shops and wrote to the Collector of Mayurbhanj to call for tenders in accordance with that order
The Collector called for tenders within a week
816 Ajodhya Prasad thereupon filed another writ petition OJC No 850 of 1970 for quashing the Collector s tender notices and for a direction to the authorities con cerned to grant a license to him on the basis of the earlier auction
The Bihar and Orissa Excise Orissa Amendment Act 1970 was passed on October 5 1970 and the ordinance was re pealed
That was followed by the Orissa Excise Exclusive Privilege Rules 1970 which were made under section 89 of the Act
The respondents in Ajodhya Prasad s writ petition No 850 of 1970 pleaded that the amendments to the Act were valid and that the State Government had the right to grant an exclusive privilege for the purposes mentioned in section 22 of the Act
The money so realised was consideration for the exclusive privilege under section 22 and was neither an excise duty nor a tax nor a fee
It was also pleaded that the tender was in accordance with the rules as the authority to accept the tender was the State Government
The High Court examined Ajodhya Prasad s writ petition No 850 of 1970 in its Judgment dated February 3 1971
It held that the order of the State Government dated August 19 1970 for inviting tenders was invalid as the authorities for fixing the procedure under the amended section 292b had not been specified the Government had appropriated for itself absolute and naked and arbitrary power  to accept any tender or reject any tender for any reason whatsoever or without any rhyme or reason and the order left it to the uncontrolled discretion of the authority concerned to determine the adequacy of the amount offered in the tender
As regards the claim for the issue of a license under sec tion 6 the High Court held that as the petitioner was the highest bidder on February 20 1970 and his name was entered in the bid register and the entry was signed the petition er was entitled to the grant of the exclusive privilege under section 22 by virtue of section 6a of the Amending Ordinance irrespective of the validity of rule 103 1 of the Board s Excise Rules
The High Court accordingly held that section 6a of the Amending Ordinance was valid and the grant of seven  shops to the petitioner for the manu facture and retail sale of country liquor was therefore validated as the grant of an exclusive privilege under section 22 of the Act and he was entitled to license under sub section 2 of that section
The Order of the State Government dated August 19 1970 and the Collector s tender notice were quashed and the Collector was directed to issue the license for the seven shops to him
Siba Prasad Saha who filed the writ petition No 786 of 1970 in August 1970 after the first judgment of the High Court dated May 15 1970 for refund of the license fee and for non payment of any fee in the future as he was a licen see for several liquor shops amended it in the light of the subsequent developments
The High Court took the view in its judgment dated April 16 1971 that sections 2 to 5 of the Amending Ordinance or the Amending Act 17 of 1970 were not made retrospective
It took note of this Court s 817 decision in Krishna Kumar Narula etc
vs The State of Jammu and Kashmir and others1 that a citizen had the fundamental right to carry on business in liquor and all that the State could do
was to impose reasonable restric tion thereon
It also held that in so far as section 292 of the Act provided that the sum payable under sub section 1 thereof shall be determined otherwise than by calling tenders or by auction it was unconstitutional That portion of sub section 2a was therefore struck off
The High Court held further that what was realised by the State was not a fee or tax as the primary purpose of the Act was to
restrict the manufacture and sale of country liquor
It accordingly held as follows We are therefore satisfied that the provi sion in Section 22 of the Act for grant to any person of the exclusive privilege of manufac ture and sale of country liquor for a sum the method of determination of which is provided in Section 29 are provisions which are calcu lated to restrict and control trade in liquor although incidentally revenue is earned for the State thereby and that Entry in List II of the Seventh Schedule confers power on the State Legislature to enact such a regulatory measure and consequently the State Legislature has legislative competence to enact Sections 22 and 29
 The High Court accordingly held that section 22 and section 29 without the expression or otherwise in clause a of sub section 2 were valid and constitutional
The High Court then examined the effect of section 6 of the Amend ing Act of 1970 and held that as retrospec tive effect was not given to sections 2 to 5 of that Act the validity of the money rea lised by the State had to be judged with reference to the unamended provisions and held as follows It therefore follows that by reason of the fact that Sections 2 to 5 of the Amending Act were not made retrospective in operation the effect of Section 6 is that thereby the Legis lature had directed the State to disregard the decision given by this Court in Ajodhya Pra sad s case ILR 1971 Curt 51  that the amount realised by the auction is illegal
This virtually amounts to judicial exercise of power by the legislature a power which the Legislature does not possess
We therefore hold that Sections 2 to 5 of the Amending Act having not been made retrospective Section 6 is ultra vires the powers of the Legislature
 The High Court however held that although the  license fee collected by the State was illegal the petitioner had already enjoyed the benefit under the license and had volun tarily participated in the auction and was not entitled to an order for its refund
A similar view was taken in the judgment dated April 161971 in OJC No 242 of 1967 and the judgment dated May 7 1971 in 1  818 OJC NOS
1185 1190 1223 1224 and 1226 of 1970
Those judgments have given rise to civil appeals Nos 2071 1855 1863 and 351 359 Of 1972 cross appeals
OJ Cs
Nos 859 and 863 of 1970 were diposed of by separate judgments dated September 6 1971 which followed the earlier judgment dated April 16 1971 in Siba Prasad Saha s case and that has given rise to appeals Nos 1235 and 1236 of 1972
The Bihar and Orissa Excise Orissa Second Amendment Act 1971 10 of 1971 was passed to set right the defects in the law
Stated briefly that Act made the amendments to sections 2 7 29 37  and 90 retrospective and validated the earlier acts
A writ petition O JC No 589 of 1972 was filed to challenge the vires of section 22 and 29 of the Act
The main judgment in the matter was delivered in OJC No 1036 of 1971 on January 3 1974
In that judgment the High Court examined the challenge to the vires of sections 22 and 29 of the Act and the claim for refund of the money already paid with reference to the amendments to the Act
It fol lowed the earlier decision in Siba Prasad Saha s case of April 16 1971 I LR1971 Cuttack 777 and dismissed the writ petitions and thatms led to the filing of civil ap peals Nos 1235 and 1236 of 1972
The last judgment was delivered on March 28 1974 in OJC No 589 of 1972 in Siba Prasad saha s case
The petitioner there was the grantee of the exclusive privilege for sale of country liquor during the year 1972 73 for some shops in Mayurbhanj district
The  petitioner challenged the vires of sections 22 and 292 as amended and prayed for the consequential reliefs
The High Court held that the case was completely covered by its decision dated January 3 1974 in OJC No 1036 of 1971 and dismissed the peti tion
It will tires appear that these appeals are inter con nected and that is why we have thought it desirable to examine them in a common judgment
As has been stated Civil Appeals Nos
1892 and 1893 of 1971 arise out of  OJ Cs
392 and 357 of 1970 which have been decided by the judgment of the High Court dated May 15 1970
It has been argued by Mr Govind Das on behalf of the appellants that the High Court erred in hold ing that the sale notice issued by the Collector was not for the grant of an exclusive privilege under subsection 1 of section 22 of the Act because the Collector had no authority to issue a notice under that sub section as the power of the  State Government in that respect had been delegated to the Board of Revenue
Sub section 1 of section 22 of the Act provides that the State Government may grant to any person On such condi tions and for such periods as it may think fit the exclu sive privilege inter alia of manufacturing or selling retail any country liquor
The proviso to the sub section requires that public notice shall be given of the intention 819 to grant any exclusive privilege of that nature and that a decision would be taken after considering the objections made in that respect
Once a decision is taken under sub section 1 to grant the exclusive privilege within any specified area sub section 2 provides that no grantee of such a privilege shall exercise the same unless or until he has received a license in that behalf from the Collector or the Excise Commissioner
 It has been stated at the Bar by Mr Govind Das and has not been controverted that as had been averted in  the memorandum of appeal the requirement of sub section 1 of section 22 had already been complied with by the State Government and that the Collector was not concerned and did not in fact issue any public notice for purposes of sub section 1 of section 22
A reading of the Collector s notice which admittedly was in Form GL 10 shows that it related to the auction of the right to open a shop at the site named in the notice and the payment of the license fee therefor
The High Court therefore went wrong in holding that the issue of the notice in Form GL 10 negatived the contention that what was proposed to be given was the exclusive privilege to manufacture and sell country liquor
By virtue of section 71 the administra tion of the Excise Department and the collection of excise revenue within the district vested in the Collector and we are unable to think that his notice in Form GL 10 was sufficient to show that the exclusive privilege for retail sale of country liquor under the outstill system was not proposed to be given to the successful bidders at the auc tion
The true nature of the proceeds of the auction held by the Collector in such a case has been examined by this Court in Nashirwar etc
vs The Slate of Madhya Pradesh C Har Shankar and others vs The Dy
Excise and Taxation Com missioner and others2 and Thakur Prasad Sao and others vs The Member Board of Revenue and others etc
  In Na shirwar s case supra this Court examined the constitution al validity of the provisions in the Central Provinces Excise Act for granting leases in respect of liquor by public auction and of the Abkari Act of the Kerala State placing restrictions on the manufacture and sale etc
of liquor
After considering all the decided cases includ ing Narula s case supra in which it was held that a citizen had a fundamental right to
do business and deal in liquor this Court referred to its decision in State of Orissa and others vs Harinarayan Jaiswal and others4 in which Narula s case was explained and held as follows For these reasons we hold that the State has the exclusive right or privilege of manufacturing and selling liquor
The State grants such right or privilege in the shape of a licence or a lease
The State has the power to hold a 1  2  3  4 19723 SCR 784
820 public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease
 While taking this view this Court held that the State Legislature was authorised to make a provision for public auction by reason of the power contained in Entry 8 List II of the Seventh Schedule to the Constitution and that there was no fundamental right of citi zens to carry on trade or to do business in liquor
 The matter again came up for consideration in Har Shankar s case supra with reference to the provisions of sections 27 and 34 of the Punjab Excise Act 1914 where the appellants gave bids at public auctions
It was held that the amount payable by them as licensees was neither a fee in the technical sense nor a tax but was in  the nature of price of a privilege and that auctions were only a mode or medium for ascertaining the best price obtainable therefor
Thakur Prasad s suprawas a case directly under the provisions of the Act
It also related to the outstill system
It was held that the State has the exclusive right and privilege of manufacturing and selling liquor and that it has the power to hold a public auction for the grant of such a right or privilege and to accept payment of a sum therefor
 It was accordingly held that the right granted to the appellants by public auction and the li censes issued to them was clearly an exclusive privilege within the meaning of section 221 of the Act and that it has expressly been provided in section 29 that it would be permissible for the State Government to accept payment of a sum in conSideration of the exclusive privilege under section 22
There can be no doubt therefore that the High Court erred in taking a contrary view
The High Court has tried to support its view by refer ring to the condition stated in Form GL 10 for the opening of additional shops during the currency of the license and has stated that an exclusive privilege under section 22 cannot comprehend exercise o such power once it is granted for a specified period
 This was clearly an erroneous view because it is not disputed before us that no such condition was inserted in the license at all
What the licensee therefore received under the license was an exclu sive privilege of manufacturing and selling liquor under the outstill system within the meaning of section 22 of the Act
The High Court has held that after the acceptance of the bid all that remained was to issue a license and that the Collector committed an illegality in ordering a reauction under the directions of the State Government
Such a view presupposes that a binding obligation had come into existence in favour of the bidder by accepting a deposit from him even though this was done on the express condition that it was tentative and was not an acceptance of his bid
We do not think that what the High Court held to be an acceptance of the bid at the auction even after the announcement of an express condition 821 attached to it that the knocking down of the bid would not really be an acceptance of it by the Government could be an acceptance of the bid at all
In the peculiar facts and circumstances of the auction the bids were apparently nothing more than offers in response to invitation to make tenders and such auctions were the mode of ascertaining the highest offers
The basic conditions for the emergence of rights through offers or conditions made and accepted and acted upon by paying any specified or agreed price as consideration were thus wanting in this case
In fact the express and advertised terms of the auction made it clear that the money tendered was to be deemed to be deposited tentatively pending the acceptance of the bid
So what we have before us are neither offers nor acceptance by the Government
There were only offers by the bidders to pur chase the rights subject expressly to their acceptance or rejection by the State Government
The essentials of any agreement and the mutuality of obligations were thus absent altogether
Moreover it was not an ordinary auction where binding agreement could be deemed to be concluded at the fall of the hammer creating mutually enforceable obligations
Those were only so called auctions adopted as means for ascer taining the highest offers for the exclusive privileges which the Government alone could grant for carrying on a trade or business
considered noxious under the law and which because of its special character could be regulated in any way or even prohibited altogether by the Govern ment
This special character of the trade or business would appear from the power of the State Government to grant the exclusive privilege to
carry on trade in the manufacture and sale of liquor
It will be recalled that section 221 provides that the State Government may grant to any person on such conditions and for such periods as it may think fit the exclusive privilege in question Sub section 2 of section 22 enacts that a grantee of such a privilege shah not exercise it unless or until he has received a license in that behalf from the Collector or the Excise Commission er
 The powers of the Government to reject a bid were thus reserved both under the provisions of law and by the express declarations made before the auction
At any rate we do not find any basis for the creation of a right merely by making a bid
The extent of the powers of the government in such matters has been indicated by this Court in State of Orissa and others vs Harinarayan Jaiswal and others supra
So long as these powers are not used in an unreasonable or mala fide manner their exercise cannot be questioned
In the cases before us it could not be said that either the Gov ernment or any of its officers abused the power by acting either unreasonably or in a mala fide manner and we find no justification for the argument that it was not permissi ble for the State Government to issuethe directions for reauction even when it found that the bids at the auction were unsatisfactory
The High Court has taken the view that rule 1031 of the Board s Excise Rules regarding the manner of fixation and realisation 822 of the consideration for the grant of a license for the exclusive privilege of retail vend of country spirit was incompetent and ultra vires the act
 The High Court took that view under the mistaken impression that the State was not entitled to collect a tax under the garb of a fee and the auction price for a license is not duty within the meaning of Entry 51 of List 11 of the Seventh Schedule to the Constitution
 But as has been shown what was sought to be raised was consideration and not fee
The use of the expression fees in the rule is therefore inaccurate but that cannot detract from the real nature of the recov ery
Mr SC Agarwal has challenged the validity of rule 103 on another ground and we shall deal with it when we come to the judgment of the High Court dated April 16 1971
The next judgment of the High Court is that dated February 3 1971 in OJC No 850 of 1970 which has given rise to civil appeal No 209of 1972 by the State of Orissa
We have already stated the findings of the High Court in regard to it
It has been argued by Mr Govind Das that even if the State Government failed to specify the authority which was to determine the mode of determining the sum payable under sub section 1 of section 29 that could not be said to matter because it was the Collector who was incharge of the administration of the Excise Department and Collection of the excise revenue under section 7 of the Act who took the action to issue the auction notice for the grant of the license
for the retail sale of country liquor
Moreover the State Government did not object to his authority to do so
and on the other hand directed him to make a reauction merely on the ground of the insufficiency of the bids
The Collector called for fresh
tenders
It was not in dispute before the High Court that the State Government issued a special order under section 29 by which it nominated itself to be the authority to determine the sufficiency of the sum payable under section 291 of the Act
There is nothing in sub section 2b to show that that was not permissible
The other question in this respect is whether the fol lowing direction in the State Government s order dated August 19 1970 was valid It shall be at the discretion of the State Government to accept or reject any tender without assigning any reason therefor to order for calling of fresh tender or other wise as the case may be
 It will be recalled that the High Court has taken the view that the order dated August 19 1970 and the tender notice issued in pursuance thereof were bad in law and were liable to be quashed
The High Court has taken the view that section 292a did not authorise the exercise of such absolute and naked power in determining the sum of money as was sought to be done by the order dated August 19 1970
It appears to us however that the power to accept or reject a tender without assigning any reason cannot be said to be 823 arbitrary as section 292 which has been amended with retrospective effect itself provides
that i it shall be exercised in the interest of the Excise revenue ii by the specified authority and iii under such control as may be specified
As has been stated the State Govern ment retained the power of accepting or rejecting the tender or for calling of a fresh tender to itself and such an order cannot be said to be an absolute or naked power of the nature apprehended by the High Court
Refer ence in this connection may be made to the decision in Jaiswal s case supra mentioned above
Moreover it is not disputed before us that the power to accept or not to accept the highest or any bid was expressly reserved under the impugned sale notification
Sub section 2 of section 79 of the Act was also amended by the Bihar and Orissa Excise Second Orissa Amendment Act 1971 Act 10 of 1971 with full retrospective effect
Section 17 of the Act validated both the licenses granted and amounts paid or payable therefor and its validity has not been challenged before us
It will be remembered that Siba Prasad Saha had filed OJC No 786 of 1970 after the first judgment of the High Court dated May 151970 for refund of the license fee and for non payment of the fee in future
The State of Orissa feels aggrieved against the decision of the High Court in that case dated April 161971 that a citizen has a fundamen tal right to deal in liquor
In taking that view the High Court relied on this Court s decision in Narula s case supra
The decision in Narula s case was considered and explained by this Court in Nashirwar s care supra and it has been held as follows It is not correct to read in the deci sion in Narula s case that there is a funda mental right to do business in liquor
The decision is that dealing in liquor is busi ness and a citizen has a right to do business in that commodity and the State can impose reasonable restrictions on the right in public interest
If the State can prohibit bussiness in liquor as is held in State of Bombay and Another vs
FN Balsara 1951 SCR682 this establishes that the State has exclusive right of privilege of manufac ture possession sales of intoxicating liquor and therefore the Slate grants such a right of privilege to persons in the shape of license or lease In reaching this conclusion this Court took note of the decision in Bharucha s case1 that there was no inherent right in a citizen to sell intoxicating liquors by retail and that it is not a privilege of a citizen of the State and observed that as Bharucha s case was a Constitution Bench decision like Narula s case the latter could not be said to have overruled the former
As has been stated the matter again came up for consideration in Har Shankar s case supra with specific reference to Narula s case and it was reiterated that there is no fundamental right to do trade or business in intoxicants and that in all their mani festations these rights are vested in the State and indeed without such vesting there can be no effective regulation of 824 various forms of activities in relation to intoxicants
 The contrary view of the High Court in impugned judgment is incorrect and must be set aside
The other grievance of the appellant State is that the High Court struck down the expression or otherwise from clause a of subsection 2 of 29 of the Act as unconstitu tional
We have given our reasons for the contrary view and the High Court therefore went wrong in striking down the expression or otherwise
The High Court has also held that as sections 2 to 5 of the Amending Act of 1970 were not made retrospective in operation the effect of section 6 amounted to a direction by the Legislature to the State to disregard the decision in Ajodhya Prasad s case that the amount realised by auction was illegal and that section 6 was therefore ultra vires the powers of the Legislature
It will be sufficient to say in this connection that the Bihar and Orissa Excise Second Orissa Amendment Act 1971 Act 10 of 1971 has made good the deficiency if any by stating that the amending provi sions shall be deemed always to have been so added or inserted or substituted
In this respect also the impugned judgment of the High Court must be rectified
Mr SC Agarwal has argued that the amount realised by the State for grant of the exclusive privilege under sec tions 22 and 29 was nothing but a tax and no such tax was permissible under Entries 45 to 63 of List II of the Seventh Schedule to the Constitution and that it was not excise duty within the meaning of Entry 51 or a fee under Entry 66
It has also been argued that Entry 8 embodying the Police powers of the State could not be invoked to sustain such an imposition
Mr Bhagat has also argued that the collection was in the nature of a tax and section 29 was therefore ultra vires the Constitution
Mr Bhagat has also urged that the State was not the owner of the exclusive privilege to manufacture or sell liquor and that the Act did not empower it to part with that right on payment
We have given our reasons already for taking a contrary view with refer ence to
the decisions in Nashirwar s case and Har Shankar s case
The State has the exclusive right or privilege to manufacture store and sell liquor and to grant that right to its license holders on payment of consideration with such conditions and restrictions for its regulation as may be necessary in the public interest
The argument to the contrary is futile and is rejected
It has been argued by Mr Agarwal that although the Amending Act of 1970 Act 17 of 1970 was enacted for the purpose of getting over the High Court s declaration in OJCNo
357 of 1970 that rule 103 of the Board s Excise Rules 1965 in so far as it directs that fees for license for the retail vend of excisable articles shall be fixed by auction was ultra vires the Act rule 103 continued to remain invalid even after the promulgation of that Act because
such a rule could not be made under section 907 of  the Act
Counsel has argued that as the rule was in valid it was not permissible to hold the impugned public auction because that was not permissible under any other provision of the Act
This argument is also futile because section 5 of the Bihar and Orissa Excise Second Orissa Amendment 10 of 1971 has substituted a new sub section 2 for the old sub section as follows providing for auction and it has been stated that it shall be deemed always to have been substituted 2 The sum payable under sub section 1 shall be determined as follows a by auction or by calling tenders or other wise as the State Government may in the interest of excise revenue by general or special order direct Then follow other clauses with which we are not concerned
Moreover section 17 of that Act has validated all grants made by way of licenses for manufacture and retail sale of country liquor in respect of any place on or after the 7th day of August 1965 on which date the Board s Excise Rules including rule 103 admittedly came into force
In this view of the matter it is not necessary for us to examine the other arguments of Mr Agarwal Which have been adopted by Mr Bhagat regarding the invalidity of rule 103
It is not necessary to deal separately with the judgment of the High Court dated April 16 1971 in OJC No 242 of 1967 which has given rise to civil appeal No 2071 of 1972 or with its decision dated May 7 1971 in OJCs
No 1185 1190 1223 1224 and 1226 of 1970 which has given rise to civil appeals Nos
1855 1863 of 1972 and cross appeals Nos
351 359 of 1972 because they are based on the afore said decision dated April 16 1971 in OJC No 786 of 1970
So also it is not necessary to deal separately with the decision dated September 61971 in OJCNo 859 of 1970 and 863 of 1970 which have given rise to civil appeals Nos 1235 and 1236 of 1972 for the same reason
This takes us to the judgment of the High Court dated March 28 1974 in OJCNo589 of 1972 which has given rise to civil appeal No 1802 of 1974
That decision is based on the decision dated January 31974 in OJCNo
1036 of 1971
The petitioner in that case was a licensee for the retail sale of country liquor in Mayurbhanj district
He chal lenged the vires of sections 22 and 29 of the Act and claimed that the monthly consideration for the license was not due from him and that he was entitled to a refund of the money already paid by him
The High Court followed that decision and dismissed the writ petition
In doing so it relied on its decision dated April 16 1971 in Siba Prasad Saha vs State of Orissa and other ILR 1971 Cut tack 777 and the decision of this Court in Jaiswal s case supra and dismissed the petition
We have already dealt with the points which arise for consideration in this case while examining the earlier cases and we see nothing wrong with the impugned judgment of the High Court by which the writ petition has been dismissed
In the result we order as follows Civil Appeals Nos
1892 and 1893 of 1971 are allowed the impugned judgment of the High Court dated May 151970 is set aside and writ petitions Nos
OJC 329 and 357 of 1970 are dismissed
826 Civil Appeal No 2091 is allowed the impugned judgment of the High Court dated February 3 1971 is set aside and the writ petition No 850 of 1970 is dismissed
Civil Appeal No 1302 of 1972 is allowed the impugned judgment of the High Court dated April 16 1971 is set aside and the writ petition No 786 of 1970 is dismissed
Civil Appeal No 2071 of 1972 is allowed the impugned judgment of the High Court dated April 16 1971 is set aside and the writ petition No OJC 242 of 1967 is dismissed
Civil Appeals Nos
1855 1863 of 1972 are allowed the impugned judgments of the High Court dated May 7 1971 are set aside and OJ Cs
1185 1190 1223 1224 and 1226 of 1970 are dismissed
Cross appeals Nos
351 359 of 1972 are dismissed
Civil Appeals Nos 1235 and 1236 of 1972 are allowed the impugned judgments of the High Court dated September 6 1971 are set aside and OJ Cs
Nos 859 and 863 of 1970 are dismissed
Civil Appeal No 1802 of 1974 fails and is dismissed
In the circumstances of these cases there will be no order as to he costs


Summary:
Section 221 of the Bihar  Orissa Excise Act 1915 provides that the States may grant to any person on such conditions and for such periods as it may think fit the exclusive privilege of manufacturing or selling in retail count try liquor
The proviso provides that a public notice shall be given of the intention to grant such exclu sive privilege and that a decision would be taken after considering objections
Sub section 2 provides that no grantee of such a privilege shall exercise it unless or until he has received a licence in that behalf from the Collector or the Excise Commissioner
In the present case the Collector issued a notice in form GL 10 relating to the auction of the right to open a liquor shop at the site named in the notice and the payment of the licence fee therefor
The respondent was a success ful bidder at the auction
He deposited the money under r 103 of the Excise Rules but the Government did not grant him the licences
In a writ petition filed by the respond ent the State Government alleged that the bids at the auc tion were not satisfactory and that in the interest of revenue the State Government did not accept the bids
The High Court held i that the State Government had no power to interfere with the auction held by the Collector after it had become final and could not direct reauction and ii that the realisation at the auction was not a fee but a tax not contemplated by the Act and that the auction price for a licence was not excise duty within the meaning of Entry 51 of List II and hence r 1031 of the Rules providing for fixation of licence fee by auction was in excess of the rule making power of the Board
The High Court also held that what was purported to be given under the sale notice of the Collector was not the grant of exclusive privilege under section 22
By the Bihar  Orissa Excise Orissa Amendment Ordi nance 1970 which later became the Act section 292 was amend ed
The State Government issued an order for fresh settle ment of the shops and the Collector accordingly called for tenders
In the respondent s writ petition the High Court held that the State Government s order was invalid as the author ities for fixing the procedure
under section 292 as amended had not been specified and the order left it to the uncon trolled discretion of the authority concerned to accept or reject any tender and to determine the adequacy of the amount offered in the tender
The State Government s order and the Collector s tender notice were quashed and the Collector was directed to issue licence to the respondent
The High Court accordingly held that the respondent was entitled to the grant of the exclusive privilege under section 22 because he was the highest bidder in the auction
The High Court also held in a petition filed by another respondent that in so far as section 292 provided that the sum payable under sub section
1 thereof shall be determined other wise than by calling tenders or by auction it was uncon stitutional that portion of section 292
should therefore be struck down that section 6 of the Amending Act 1970 was ultra vires as there was exercise of judicial power by the legis lature and therefore the licence fee collected by the State was illegal but that as the respondent had already enjoyed the benefit of the licence and voluntarily partici pated in the auction he wag not entitled to its refund
3 1338SCI76 812 Therefore the Second Amendment Act 1971 was passed
The vires of the amended sections 21 and 29 was challenged in writ petitions but the High Court dismissed them
In appeals to this Court HELD 1 The provisions of the Act and the express declarations make clear that the State Government had the power to reject a bid
In any event no right is created in the bidder by making a bid
The administration of the Excise Department and the collection of revenue within the district vest in the Collector
It is not correct to say that the notice issued by the Collector in form GL 10 was sufficient to show that the exclusive privilege for retail sale of country liquor was not proposed to be given to the successful bidders at the auction
The High Court erred in holding that a condition regarding the opening of additional shops was inserted in the Form  820E b It has been held by this Court that the State has the exclusive right or privilege of manufacturing and sell ing liquor
The State grants such right or privilege in the shape of a licence or a lease
The State has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease that the amount payable by the bidders as licensees was neither a fee in the technical sense nor a tax but was in the
nature of price of a privilege and that auctions were only a mode or medium for ascertaining the best price obtainable thereof
Therefore the right granted to the bidders by public auction and the licences issued to them was clearly an exclusive privilege within the meaning of section 221  of the Bihar Act and it was expressly provided in section 29 that it would be permissible for the State not to accept payment of a sum in consideration of the grant of the exclusive privilege
819 H 820A D Nashirwar etc
vs The State of Madhya Pradesh   Hat Shankar  ors
vs The Dy
Excise and Taxa tion Commissioner  ors
  Thakur Prasad Sac  ors
vs The Member Board of Revenue  ors  State of Orissa  ors
vs Harinarayan Jaiswal  ors  applied
c The view of High Court that after the acceptance of the bid the Collector should have issued the licence and that he committed an illegality in ordering reauction pre supposes that a binding obligation had come into existence in favour of the bidder by accepting a deposit from him even though this was done on the express condition that it was tentative and was not an acceptance of his bid
In the peculiar facts and circumstances of the auction the bids were nothing more than offers in response to an invitation to make tenders and such auctions were the mode
of ascer taining the highest offers
The basic conditions for the emergence of rights through offers or conditions made and accepted and acted upon by paying any specified or agreed price as consideration were wanting in this case
The express and advertised terms of
the auction made it clear that the money tendered was to be deemed to be deposited tentatively pending the acceptance of the bid
The bids were neither offers nor acceptance  by the Government
They were only offers by the biddersto purchase the rights
The essentials of an agreement and mutuality of obligations were absent altogether
Since auction is only a mode of ascer taining the highest offer the State Government can deter mine the sum payable by any other method and hence
the High Court was wrong in striking down the expression other wise from section 292a
820 H 821 A C d These auctions are not ordinary auctions where a binding agreement could be deemed to be concluded at the fall of thehammer creating mutually enforceable obliga tions but
are a means for ascertaining the highest offers for the exclusive privileges which the Government alone could grant for carrying on a trade or business considered noxious under the law and which because of its special character could be regulated m any way or even prohibited altogether by the Government
This special character of the trade or business would appear from the power of the State Government to grant the exclusive privilege to carry on trade m the manufacture and sale of liquor
821 F G e There is no justification for the argument of the
respondents that it was not permissible for the State Gov ernment to issue directions for reauction even when it found that the bids at the auction were unsatisfactory
So long as the powers of the Government to reject a bid are not used in an unreasonable or mala fide manner their exercise cannot be questioned 821 G 2a The High Court s view that r 1031 was ultra
vires was taken under the mistaken impression that the State was collecting a tax under the garb of a fee and that the auction price for a licence could not be treated as duty within the meaning of Entry 51 List II of the Seventh Schedule
But what was sought to be raised was considera tion and not fee
The use of the expression  fees in the rule is inaccurate but thatcannot detract from the real nature of the recovery
822 A B b The argument of the respondent that r 103 continued to remain invalid even after the promulgation of the Amend ment Act is not correct because section 5 of the Second Amendment Act has substituted a new sub section
2for the old subsection providing for auction and this sub section stated that it shall be deemed always to have been substituted
Section 17 has validated all grants made by way of licences for manufacture and retail sale of country liquor and the amounts paid or payable therefor
824 G H 825 C c The power to accept or reject a tender without assigning any reason cannot be said to be arbitrary as section 292 which has been amended with retrospective effect itself provides that i it shall be exercised in the inter est of the Excise revenue ii by the specified authority and iii under such control as may be specified
In the instant case the State Government retained the power of accepting or rejecting the tender or for calling of a fresh tender to itself and such an order cannot be said to be an absolute or naked power of the nature apprehended by the High Court
Moreover the power to accept or reject the highest or any bid was expressly reserved under the im pugned sale notification
823 A C 3 Even though no authority was specified for taking action under section 291 it was the Collector who is in charge of the Excise Administration that took action in the present case and his action was approved by the State Gov ernment
Moreover the State Government issued a modified order under section 29 nominating itself as the authority to determine the sufficiency of the
sum payable
822 D 4 It has been held by this Court that there is no fundamental right to do trade or business in intoxicants and that in all their manifestations these rights are vested in the State and without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants
There is no inherent right in a citizen to sell intoxicating liquors by retail
823 H Krishan Kumar Narula etc
vs The State of J  K  ors   Nashirwar etc
vs The State of MP   Har Shankar  ors
vs The Dy
Excise  Taxation Commissioner  ors
  Coovetlee Bharucha vs The Excise Commissioner  fol lowed
5 Since the Bihar  Orissa Excise Second Orissa Amendment Act 1971 has made good the deficiency if any by stating that the amending provisions in sections 2 to 5 of the Amending Act 1970 shall be deemed always to have been so added or inserted or substituted the High Court was wrong in holding that there was any exercise of judicial power by the Legislature
824 C D