Civil Appeals Nos
819 823 of 1975
From the Judgment and order dated 15 3 1975 of the Patna High Court in Civil Writ Nos 1184 of 1974
AND CIVIL APPEALS Nos 824 827 and 1105 of 1975
From the Judgment and order dated 2 1 1973 of the Patna High Court in Civil Writ PC Nos
1239 to 1242 of 1971 and 153273 respectively
Basudeo Prasad In CAs
819 82775 for the Appellants in all the appeals
Balbhadra Prasad A G Bihar In Cas 819 823 U P Singh for Respondents In all the appeals The Judgment of the Court was delivered by SHINGHAL J
 These ten appeals against two judgments of the High Court of Judicature at Patna raise some common questions of law
They have been argued together and we shall examine them in this common judgment
Civil Appeals Nos 824 827 of 1975 arise out of a common judgment dated January 2 1975 in a bunch of civil writ petitions Civil Appeals Nos
819 823 of 1975 arise out of a common judgment dated March 15 1975 in another bunch of civil writ petitions while Civil Appeal No 1105 of 1975 is directed against the aforesaid judgment dated January 2 1975 by which the civil writ petition giving rise to it was also disposed of by the High Court along with the other petitions
Certificates of fitness have been granted for all the appeals
There is no controversy in regard to some of the basic facts and they are quite sufficient for the disposal of the appeals
36 A sale notice was published by the authorities concerned for the auction of licences to open country liquor shops in Singhbhum district with effect from April 1 1966 including an outstill shop at Bhirbhania
Appellant Ayodhya Prasad gave the highest bid which was knock ed down in his favour and he deposited two months  licence fee in advance at the rate of Rs 3650 per month
He applied on March 22 1966 to the Kolhan Superintendent of Singhbhum to settle a piece of land for establishing an outstill shop at Bharbharia but the application was rejected on September 27 1966 because of the objection raised by some members of the District Consultative Committee
The villagers of Bharbharia also opposed the opening of the outstill shop
The shop could not therefore be established there
The appellant how ever obtained a piece of land in village Chittimitti and applied on July 30 1966 for permission to open the outstill shop there
This was allowed and the appellant claimed that he began to collect the necessary material but a mob forcibly removed the building and the distillation material
He filed a report with the Police about the incident
The approval for opening the outstill shop at Chittimitti was however withdrawn on October 6 1966 and the appellant was asked to pay the monthly licence fee for the period April 1 1966 to January 1967
He denied his liability to pay the fee and claimed a refund of the money which had been deposited by him
His case was recommended by the Collector for remittance of the licence fee amounting to Rs 43800 for the entire year 1966 67
He also made an application to the Commissioner of Excise for refund of the deposit of Rs 7300 and for payment of compensation for loss of anticipated profits and dam ages but the application was rejected
It appears that the appellant went on bidding at the bids for the subsequent three years and laid similar claims for refund and damages but to no avail
He then filed the bunch of writ petitions referred to above for quashing the demand notices but they have been dismissed as aforesaid by the High Court s judgment dated January 2 1975
Civil Appeal No 825 relates to the bid for 1966 67 Civil Appeal No 824 relates to the bid for 1967 68 while Civil Appeals Nos 826 and 827 relate to the bids for 1968 69 and 1969 70
These may be said to be group A  appeals
Civil Appeals Nos
819 823 of 1975 relate to the applications of appellants Thakur Prasad Sao and others for reduction of the licence fees for outstill liquor shops at Gua Noamandi Kiriburu Andheri Goiekara Patajai and Dangusposi for 1974 75
In these cases the licensees were T P Sao or his relations or employees
They claimed that they incurred a loss of Rs 5587479 at Gua of Rs 2665145 at Noamandi of Rs 3938953 at Kiriburu of Rs 3516940 at Andheri of Rs 1164987 at Goekera of Rs 1170595 at Patajai and of Rs 1165721 at Dengusposi
The appellants claimed that there was rivalry and enmity with Bishwanath Prasad and his brother who made speculative bids at the auction as a result of which the outstill shops were settled for uneconomic amounts
Their grievance was that the Deputy Commissioner did not discharge his duty of refusing to allow the manifestly speculative bids although the percentage of increase in the licence fees ranged between 37 24 to 130 per cent when for other shops the increase was below 12 percent
The appellants filed application under section 39 of the Bihar and Orissa Excise Act 1915 hereinafter referred to as the Act for reduction of the fees for the year 1974 75 but they were rejected by he Board of Revenue
They then filed the aforesaid writ petitions in the High Court and have now filed the present appeals because the petitions have been dismissed by the High Court s impugned judgment dated March 15 1975
These will be referred to as group B  appeals
As has been stated the remaining Civil Appeal No 1105 of 1975 is also directed against the High Court s common judgment dated January 2 1975
It relates to the grant of a licence to the appellant for establishing outstill shops at Mahuadom Barahi Asnair Aksi and Kabri in Palamau district
The appellant applied for a direction for the refund of Rs 271340 which had already been realised from him and for restraining the realisation of a further sum of Rs 140680 on the ground that there was no quid pro quo for the fee but without success
The High Court has taken the view that the amounts in question were not due on account of fees but were payable for leases of the exclusive privileges which had been granted to the appellant in respect of the outstills
It is in these circumstances that these appeals have come up for consideration before us
As has been stated the controversy in these appeals relates to the grant of licences for establishing outstill shops which are also known as jalti bhattis
That system has been described in paragraph 253 of the Bihar and Orissa Excise Manual Volume III hereinafter refer red to as the Manual as follows By this system a certain number of stills for the manufacture of country spirit are allowed within a certain area
The holder of an outstill licence pays a certain sum per men sem for manufacturing country spirit in his outstill and selling it by retail on his premises
No attempt is made to regulate the strengths or the prices at which spirit is manufactured or It has been stated in paragraphs 254 and 255 of the Manual that no 
definite area is fixed within which each outstill has the monopoly of supply of country spirit but their number is regulated according to rules and five miles is taken roughly as the minimum distance of one outstill from another
It has been argued on behalf of the appellants that what was granted to them was not the exclusive privilege of manufacturing and selling country liquor in retail in the areas for which the licences were granted and that the High Court erred in holding that such an exclusive privilege had been granted under section 22 of the Act
It has been urged that the licences in question fell within the purview of section 30 of the Act 38 We have described the essential features of the outstill system and there can be no doubt that the holder of a licence under the system acquires the right to manufacture country spirit in his outstill and sell it by retail in his premises without any restriction on the strength or price at which the spirit is manufactured or sold
Moreover he has the monopoly of manufacturing and supplying country liquor within his area
The right is therefore clearly an exclusive privilege within the meaning of section 221 d of the Act and it is futile to contend that the licences in question were merely licences for the retail sale o f spirit for consumption on the vendor s premises within the meaning of section 30 of the Act
The High Court was therefore quite correct in taking that view
It may be mentioned that the appellants have not produced their licences in support of the contention that exclusive privilege of the nature referred to above was not granted to them even though the licences were for establishing outstills in the area covered by them
It is however not disputed that the licences were granted in Form 30 Volume II Part I Bihar and Orissa Excise Manual on the condition that the appellants would pay to the government in advance
the monthly fee mentioned therein
It is nobody s case that the licences were cancelled or suspended under section 42 of the Act for any of the reasons mentioned in the section or that the licences were withdrawn under section 43 so as to entitle the appellants to remission of the fee payable in respect of them or to payment of compensation in addition to such remission or to refund of the fee paid in advance
It is also not the case of the appellants that they surrendered their licences within the meaning of sub section 1 of section 44 so as to justify the remittance of the fee payable by them or paid by them in advance
In fact it has clearly been provided in sub section 2 of section 44 that the provisions of sub section 1 shall not apply in the case of a licence for the sale of any country liquor in the exercise of an exclusive privilege granted under section 22
It is true that in its judgment under appeal in Civil Appeals Nos 824 827 of 1975 the High Court has observed that the petitioner before it was at liberty to surrender the license but it appears that in taking that view it did not notice sub section 2 of section 44 even though it had held that what was granted was an exclusive privilege under section 22
The licences of the appellants therefore remained in force for the periods for which they were granted and by virtue of the express provisions of section 45 they could have no claim to compensation
In such a situation counsel for the appellants have placed considerable reliance on paragraph 121 of the Manual and have argued that the High Court erred in taking the view that the instructions contained in it had no statutory force and its benefit was not available to the appellants
Reliance in this connection has been placed on Sukhdev Singh and others vs Bhagatram Sardar Singh Raghuvanshi and another1 Laljee Dubey and others vs Union of India and others2 Union of India vs K P Joseph and others3
1  2 3 39 Paragraph 121 of the Manual states inter alia that a person whose bid has been accepted by the presiding officer at the auction must pay the sum required on account of advance fee immediately
It states further that the purchaser would be liable for any loss that may accrue to government in case it becomes necessary to resell the shops for a lower sum in consequence of his failure to pay the sum at the time of the sale
Then there is the following subparagraph on which reliance has been placed by counsel for the appellants Deposits will be returned to a person to whom a licence may be subsequently refused because the Magistrate declines to grant him a certificate or because he is unable to obtain suitable premises and satisfies the Collector that he has made bona fide endeavor to secure such or if a licence be refused for any other adequate reason
 It would thus appear that the sub paragraph deals with the deposits made immediately on account of advance fees the consequences of the failures to make such payment and the return of those deposits to the person to whom the licence may subsequently be refused because 1 the Magistrate declines to grant him a certificate or because he is unable to obtain suitable premises in spite of his bona fide endeavors or ii for any other adequate reason
But it was not the case of the appellants that the licences were subsequently refused to them for any reason whatsoever
So even if it were assumed for the sake of argument that the instructions contained in paragraph 121 were binding on the authorities concerned that would not matter for purposes of the present controversy as it does not relate to refund of the deposits referred to in paragraph 121
In this view of the matter it is not necessary for us to examine here the larger question whether the instructions contained in the Manual were made under any provision of the law and created any rights in favour of persons whose bids were accepted at public auctions of the shops
It may be mentioned that counsel for the appellants have not been able to refer to any other provision of the law under which the appellants could claim remission  of the price or the consideration for the exclusive privilege of manufacturing and selling country liquor
It has however
been argued that as appellant Ayodhya Prasad did not succeed in locating the outstill shop at Bharbharia in spite of his best efforts and he was also not successful in locating it at Chittimitti he was not liable to pay the fee
It has been pointed that even the approval for locating the shop at Chitimitti was withdrawn by the Superintendent of Excise on October 6 1966 and Ayodhya Prasad s case for remitting the sum of Rs 43800 was recommended by the Deputy Commissioner of Singhbhum on May 3 1967 on the ground that he could not open the shop for reasons beyond his control
It has therefore been urged that there was no lack of bona fides on the part of the appellant and it was a matter of no consequence that he did not surrender his licence
It will be recalled that it was an incident of the outstill system that the holder of an outstill licence was allowed to manufacture country 4 390SCI76 40 spirit within a certain area and he paid a certain sum of money per mensem for manufacturing country spirit in his outstill and selling it by retail on his premises
It was therefore permissible for appellant Ayodhya Prasad to locate the shop at Bharbharia or at some other suitable place within his area with the permission of the Collector
The notice which had been issued for the public auction is on the record and condition No 5 thereof expressly states that the department would not be responsible for providing the place for the location of the outstill
Moreover it was expressly stated that the outstill at Bharbharia would be settled purely as a temporary measure on condition that an undisputed site was made available for it
There is therefore nothing wrong with the view taken by the High Court that the responsibility for finding a suitable site was of the appellant and there is no justification for the argument that nothing was payable by him because he could not locate the shop in spite of his best efforts
It may be that the Deputy Commissioner recommended his case for remission but that I would not matter when the appellant was liable to pay the money under the law governing his licence
The appellant in fact retained the 1 licence all through and continued to make the highest bids at the subsequent public auctions for the years 1967 68 1968 69 and 1969 70 and thereby prevented others from undertaking the responsibility of establishing the outstill and paying the price admissible to the department
As has been stated the approval for opening the outstill shop at Chittimitti was withdrawn on October 6 1966 and the demand for the licence fee was made on January 9 1967
Even so the appellant did not take any action to save himself from any such liability in the future and on the other hand went on making the highest bids in the subsequent years and incurring similar liability to pay the price even though he was not able to establish his outstill anywhere in any year
It is therefore difficult to reject the contention in the affidavit of the respondents that there must have been some other reason for him to do so particularly as the location of his shop was to be on the border of l the State
It has also been contended that the High Court erred in holding that the State Government had the power to require the appellants to pay the amounts under demand as they represented consideration for the contracts
It has been argued that this Court s decision in Nashirvar etc
vs State of Madhya Pradesh and others1 and Har Shankar and others etc
vs The Deputy Excise and Taxation Commissioner and others etc2 related to the Excise laws of other States and did not bear on the present controversy
The argument is however futile for we have given our reasons for holding that what was granted to the appellants was the exclusive privilege of manufacturing and selling country liquor within the meaning of section 221 d of the Act and it has been expressly 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
The decisions of this Court in Nashirwar s case and Har Shankar s case have set any controversy in 1  2  41 this respect at rest so that it is well settled that as the State has the exclusive right and privilege of manufacturing and selling liquor it has the power to hold a public auction for the grant of such a right or privilege and to accept the payment of a sum therefor
It was therefore permissible for the State to frame rules for the grant of licences on payment of fees fixed by auction for that was only a mode or medium for ascertaining the best price for the grant of the exclusive privilege of manufacturing and selling liquor
As has been stated Group B  appeals relate to the claim for reduction of the licence fees for the liquor shops concerned
It has been argued by counsel for the appellants that as the Collector did not discharge his duty under the instructions contained in paragraph 130 read with paragraph 93 of the Regulations the Board acted arbitrarily in refusing the order reduction of the amounts of the fees which were the subject matter of the demands under challenge
It has been urged that the bids were highly speculative and should have been reduced
It has been strenuously argued on behalf of the respondent State of Bihar that the instructions contained in the Regulations were not issued under any provision of the law and could not give rise to any right in favour of the appellants
Reference in this connection has been made to Ms Raman and Raman Ltd vs The State of Madras and others1 and R Abdulla Rowther vs The State Transport Appellate Tribunal Madras and others2
It has been pointed out that there are three volumes of the Bihar and Orissa Excise Manual 1919
It has been stated in the preface to Volume I that it is complete in itself and contains the whole of the law and the rules which have the force of law relating to excise opium Volume II contains the whole of the law and the rules which have the force of law relating to excisable articles other than opium
 It has been stated in the preface to Volume III that it consists of the Board s instructions with regard to excisable articles other than opium and that references have been made to the Government Rules and the Board s Rules having the force of law
There is however no such reference to any rule in regard to instructions Nos 130 and 93
But quite apart from the question whether these instructions were legally enforceable we have examined the question whether they could justify the argument that the appellants were entitled to reduction of the amounts of the fees payable by them
Instruction No 93 mentions the circumstances when it would be advisable to accept bids other than the highest
It states that it is not an absolute rule that the highest bids must on every occasion be accepted
It states further that the presiding officer at an auction may also refuse bids which he considers to be purely speculative or which are the outcome of private enmity and that what is desired is not the highest fee obtainable but a fee that can fairly be paid out of the profits of a shop without recourse to malpractices
There is there fore nothing in the rule which could be said to give rise to a right in favour of the appellants for reduction of the amounts demanded from them
Instruction No 130 merely states that reduction of licence 1 1959 Supp
2 SCR 227
2 AIR 1959 SC 896
42 fees during the currency of a licence can be made by the Board under section 39 of the Act
It does not therefore advance the case of the appellants for under that section the Board has been given that power if it thinks fit to order a reduction of the amount of fees payable in respect of a licence during the unexpired portion of the grant which is not the case of the appellants
In fact all that has been argued on behalf of the appellants is that as the instructions contained in the note appended to paragraph 130 of the Regulations have not been complied with their legal right to claim the benefit of the note has wrongly been denied to them
The note reads as follows Note ordinarily it is not the policy of Government to allow reduction in excise settlements
The licensees to a large extent have only themselves to thank if they exceed in their bidding the figure which should return them a reasonable profit under normal conditions and they are not therefore entitled to any reduction of fees as of right
The observance of this principle is the more important because it must be remembered that each remission is likely to aggravate the evil and encourage speculative bidding in the hope that should the speculation turn out a failure Government will not insist on full payment
A remission should not be granted merely because working at a dead loss has  been actually proved
Each case should be dealt with on its own merits
Where for example it is proved that the Collector has not fulfilled his duty in refusing to allow manifestly speculative bids and has failed to stop the bidding when a figure has been reached which under normal conditions might be expected to return a reasonable rate of profit to the vendor the question would be whether the action of the Collector was so flagrantly opposed to the principles enunciated from time to time by Government as to necessitate remedial action
Such action should not take the form of any promise of resettlement with the existing licensees
It can only take the form of a reduction in the amount of the existing licensees
It should not be very difficult for an officer in a contract supply area to realise the stage at which bidding becomes purely speculative
He knows the issues of spirit during the previous year and the cost to the vendor including duty carriage establishment charges and the like and should thus be able to estimate the figure beyond which a prudent man would not bid
If after warning the bidder that this point has been reached the latter still wishes to take the risk no case for remission can arise
The case is however different where exceptional reasons which would not at the time be
foreseen operate adversely to the interest of the licensee but at the same time it is not the duty of Government to safe guard licensees from the effects of their own imprudence or ignorance
 43 It would appear that there is nothing in the note to justify the argument that it gave rise to a right in favour of the appellants to obtain a reduction of the fees
As has been pointed out that was clearly a matter within the discretion of the Board of Revenue under section 39 and the wordings of the note appended to paragraph 130 could not overreach that provision of the law
Moreover the question whether the circumstances mentioned in the note were at all in existence in the case of the appeals under consideration was a question of fact which could not be tried in these proceedings
The decision in Rohtas Industries Ltd vs section D Agarwal and another1 to which our attention has been invited on behalf of the appellants can be of no avail to them
As has been stated the writ petition which has given rise to Civil Appeal No 1105 of 1975 raised the question whether the refund of fees claimed by the appellant was permissible on the ground that there was no quid pro quo for the same
The High Court has rightly rejected that contention for the reason that the amounts in question were payable for the licences which had been granted for the exclusive privilege in question and as has been shown that argument is no longer available to the appellant in view of this Court s decisions in Nashirwar s case supra and Har Shankar s case supra
There is thus no force in all these appeals and they are hereby dismissed with costs
It is however ordered that as has been agreed by the Advocate General the authorities concerned would recover the amounts in question in instalments spreading over a period of three years in case of those appellants who are able to furnish security for payment within that period
PBR Appeals dismissed


Summary:
Under the Bihar  Orissa Excise Act the holder of an outstill licence for country liquor pays a certain sum per mensem for manufacturing country spirit in his outstill and selling it by retail in his premises
No definite area is fixed within which each outstill has the monopoly to supply country spirit but their number is regulated according to rules and five miles is taken as the minimum distance between one outstill and another
The appellants in all the appeals were the holders of licences for the manufacturing and sale of country liquor
In the first batch of cases the appellant could not open the outsill even after more than six months of its grant despite his best efforts
The approval for opening the outstill was withdrawn and he was asked to pay the monthly licence fee according to the terms of licence
The appellant s claim for refund of the money deposited by him together with compensation for loss of anticipated profits and damages was rejected
Despite this the appellant continued to bid for licences during the subsequent three years and claimed refund and damages which claim was rejected by the authorities
In the second batch of appeals the appellants claimed reduction of the licence fee for outstill liquor shops on the ground that they incurred losses because of the speculative bids at the auction should have been prevented by the authorities
In the third batch of cases the appellants claimed refund of sums realised from them on the ground that there was no quid pro quo for the fees
In all the cases the High Court dismissed their writ petitions
On appeal it was contended that the High Court was wrong in holding that exclusive privilege had been granted under section 22 of the Bihar  Orissa Excise Act 1915 but that the licences fell within the purview of section 30 of the Act
Dismissing the appeals  HELD 1 It is futile to contend that the licences were merely licences for the retail sale of spirit for consumption on the vendor s premises within the meaning of section 30 of the Act
The essential feature of the outstill system is that the holder of a licence acquires the right to manufacture country spirit in his outstill and sell it by retail in his premises without any restriction on the strength or prices at which the spirit is manufactured or sold
He has a monopoly of manufacturing and supplying country liquor within his area
The right is therefore an exclusive privilege within the meaning of section 221d of the Act
38A C 2 The licences of the appellants remained in force for the purposes for which they were granted and by virtue of the express provisions of section 45 they could have no claim to compensation
38 G 3 Even though the High Court has held that what was granted was an exclusive privilege under section 22 it did not notice section 442 while taking the view that the petitioner was at liberty to surrender the licence
Section 442 clearly provides that sub section
1 of that section shall not apply in the case of a licence for the sale of any country liquor in exercise of an exclusive privilege granted under section 22c
38 F G 4 There is nothing wrong in the view taken by the High Court that the responsibility for finding a suitable site was that of the appellant
There is no 35 justification for the argument that nothing was payable by the appellant because he could not locate the shop in spite of his best efforts
The appellants retained the licence all through and continued to make higher bids at the subsequent public auctions thereby preventing others from undertaking the responsibility of establishing the outstills
40 B D 5 It was permissible for the State to frame rules for the grant of licences on payment of fees fixed by auction for that was only a mode or medium for ascertaining the best price for the grant of exclusive privilege of manufacturing and selling liquor
41 A 13 Nashirwar etc
vs State of Madhya Pradesh  Ors
 and Har Shankar  ors
vs The Deputy Excise  Taxation Commissioner  Ors etc  explained
6 In the second group of appeals there is nothing in the rules which could be said to give rise to a right in favour of the appellants for reduction of the amounts demanded from them
43 A B 7 Id the third group of appeals the High Court was right in holding that the amounts in question were payable for the licence which had been granted for the exclusive privilege
The argument that there should be refund of fees because there was no quid pro quo is no longer available to the appellants in view of this Court s decision in Nashirwar s case and Har Shankar s case
43 C D