HIGH COURT OF ORISSA: CUTTACK W.P.(C) No.16653 of 2010 In the matter of an application under Articles 226 and 227 of the Constitution of India. -------- Prawin Kumar, aged about 35 years, S/o. Sri Baidyanath Prasad, Permanent resident of Village/P.O./P.S. Imamganj, Dist: Gaya (Bihar) and a partnership Firm namely M/s. Prawin Kumar, At/P.O. Bansapani, Joda, Dist: Keonjhar. … Petitioner -Versus- State of Orissa & Others … Opp.Parties For Petitioner : M/s. Pradipta Mohanty, D.N. Mohapatra, Smt. J. Mohanty, P.K. Nayak & S.N. Das. For Opp. Party Nos.1 to 4 : Advocate General For Opp.Party No.5 : M/s. Narasingha Patra, A.K. Patra & B.N. Sarangi. ---------- P R E S E N T: THE HONOURABLE THE CHIEF JUSTICE SHRI.V.GOPALA GOWDA AND THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA Date of Hearing : 24.12.2010 Date of Judgment : 09.03.2011 B.N. Mahapatra, J. This writ petition has been filed for quashing order No.1843 dated 03.08.2010 (Annexure-28) passed by opposite party No.3-Collector & District Magistrate, Keonjhar by which he directed renewal of licence in favour of opposite party No.5-Rajesh Kumar Sahoo for the remaining period of 2010-11 subject to payment of VAT dues of Rs.36,28,770/- within a period of three months from the date of his order and on production of VAT clearance certificate before the Collector/Superintendent of Excise, Keonjhar and on regular payment of Excise/VAT dues in time. Further prayer of the petitioner is for issue of a writ of mandamus commanding opposite party Nos. 1 to 4-Excise Authorities and the Collector to renew the licence of ten O.S. Liquor Shops of Barbil Lot in favour of the petitioner exclusively subject to clearance of such dues and fulfilling all the formalities within a particular time. 2. Case of the petitioner, in nutshell, is that the petitioner was initially granted licence of exclusive privilege of ten O.S. Liquor shops for the year 2004-05. Subsequently, he entered into a partnership agreement to deal with the said shops in the name and style “M/s. Prawin Kumar and Rajesh Kumar” and on 01.05.2005 the said partnership firm was registered by the Inspector General of Registration, Orissa, Cuttack. When the petitioner applied for renewal of licence in respect of the aforesaid 10 O.S. liquor Shops in his favour for the year 2008-09, opposite party No.5 informed the Excise Department that he was running the business as the Managing Partner of the firm by virtue of partnership deed, so his name should be included in the renewal licence. Notice was issued to the petitioner to show cause as to why the Government should not be moved to cancel or suspend his licence. The petitioner challenged the said show cause notice issued by opposite party no.3-Collecter and District Magistrate, Kenonjhar in the writ petition bearing W.P.(C) No.5311 of 2008 before this Court. In the said writ petition, it was disclosed that the Collector vide order dated 31.03.2008 included the name of opposite party No.5-Rajesh Kumar Sahoo and Sri Satyajit Singh 2 in the renewal of licence for the year 2008-09 provisionally subject to confirmation by the State Government. The State Government, thereafter, also confirmed the same vide its order dated 26.05.2008. In view of the same, this Court disposed of the aforesaid writ petition on 18.02.2009 holding that the Collector’s order so also confirmation order of the State Government in renewing the licence in the name of all the partners, i.e., the petitioner-Prawin Kumar, opposite party No.5-Rajesh Kumar Sahoo and Satyajit Singh for the year 2008-09 is justified. While confirming the provisional renewal of licence granted by the Collector vide order dated 31.03.2008, opposite party No.2-Commissioner of Excise, suggested for fresh auction of the said shops and till then the renewal of licence in respect of the shops in question in the joint names of three partners was allowed. Thereafter, also in the year 2009-10 the aforesaid 10 O.S. liquor Shops were renewed in the names of the three partners. However, under Annexure-28, the Collector, Keonjhar directed for renewal of licence in the name of opposite party No.5-Rajesh Kumar Sahoo alone for the remaining period 2010-11. Hence, the present writ petition. 3. Mr. Pradipta Mohanty, learned counsel appearing on behalf of the petitioner, submitted that the Excise Department of the State Government has prescribed the Excise Policy and the guidelines for the excise year 2010-11 and in its letter No.923 dated 25.02.2010 the same was communicated to the Excise Commissioner, Orissa, Cuttack. As per paragraph 21(a) of the said guidelines, the licences of all the existing O.S. liquor shops operating in 21 districts including Keonjhar district shall be renewed for the year 2010-11 with 10% increase over and above the existing consideration money and on production of VAT clearance certificate. Since 3 Rajesh Kumar Sahoo was the Managing Partner and had been doing all the business transactions, it was incumbent upon him to submit renewal application along with all the required documents and challan showing deposit of required fees and also clearance of government dues in all respects and licence should have been renewed in the name of the firm M/s. Prawin Kumar & Rajesh Kumar. On receipt of letter No.327 dated 02.03.2010 issued by the Superintendent of Excise, Keonjhar, the petitioner came to know that on failure to submit the renewal application along with required document and challan showing deposit of required fees by 15.03.1010, it would be presumed that the petitioner is not willing to renew the shops in question for the next financial year i.e. 2010-11 and further steps would be taken for settlement of the shops in question for the said year as per law. From the said letter, it reveals that similar letters were also issued to other two persons, namely, Rajesh Kumar Sahoo and Satyajit Kumar Singh. But subsequently on receiving letter No.454 dated 20.03.2010 (Annexure-10) issued by the Superintendent of Excise, Keonjhar, the petitioner came to know that the application for renewal of licence along with required documents was not filed by 15.03.2010 and time was allowed up to 26.03.2010. It was also intimated that if the application for renewal is not received by 26.03.2010, it would also be presumed that the petitioner is not interested for renewal of the shops in question for the year 2010-11 and necessary steps would be taken for settlement of the shops in question for the said year. This letter was issued in the name of the petitioner and Satyajit Kumar Singh excluding the name of opposite party No.5-Rajesh Kumar Sahoo. 4. Mr. Mohanty, learned counsel for the petitioner placing reliance upon Rule 102(A) of the Board’s Excise Rules, 1965 (for short, “Board’s Excise Rules”), 4 submitted that the opposite party department has wrongly entertained the renewal application in respect of eight shops exclusively held by opposite party No.5-Rajesh Kumar Sahoo as there was outstanding dues against ten O.S. liquor shops in question which stood jointly in the names of three partners including opposite party No.5. This fact was brought to the notice of the Superintendent of Excise by the petitioner. The petitioner vide letter dated 30.03.2010 expressed his willingness to clear up all the dues outstanding against the said ten shops provided licence would be renewed exclusively in his name. In spite of that the Superintendent of Excise did not issue necessary challan in the name of the petitioner and issued letter No.549 dated 31.03.2010 (Annexure-13) to the petitioner directing him to clear up the sales tax dues and to enclose the challans of four months advance consideration money and other fees and also to furnish local surety and adequate solvency. In the said letter, the petitioner was intimated that the licences of the aforesaid lot have been provisionally renewed in favour of the other partner Sri Rajesh Kumar Sahoo for a period of two months without prejudice to the claim of the petitioner and the contention for inclusion of his name in the lot subject to compliance to the aforesaid conditions and without prejudice to the Government revenue. Vide application dated 31.03.2010 (Annexure- 14), the petitioner objected to the issuance of licence in the name of opposite party No.5-Rajesh Kumar Sahoo in respect of 10 shops in question before the Collector, Keonjhar. Sri Sahoo on the basis of clearance certificate in respect of other shops in Nuapada district managed to get the provisional certificate for ten O.S. liquor shops in question for a period of 2 months fraudulently. Licence for the year 2008-09 in respect of 10 shops in question was issued by opposite party-department in favour of three 5 partners which was upheld by this Court. In the worst case, the licence can only be granted in the name of the petitioner who was issued with the original licence. In this regard, the petitioner sent a representation dated 04.05.2010 by registered post with A.D. to the Government as well as Excise Commissioner, Orissa. Since the petitioner’s claim was not considered by opposite party-department, the petitioner approached this Court in W.P.(C) No.8572 of 2010 and this Court by order dated 08.07.2010 disposed of the same by quashing the provisional renewal of licence granted in favour of opposite party No.5-Rajesh Kumar Sahoo and remitted the matter back to the Collector, Keonjhar for consideration afresh. Pursuant to the direction of this Court in W.P.(C) No.8572 of 2010, the petitioner appeared before opposite party No.3-Collector & District Magistrate, Keonjhar through his counsel and filed a written submission (Annexure-23). Before the Collector, the petitioner offered solvency of Rs.35,00,000/- (rupees thirty-five lakhs) as against requirement of Rs.30,00,000/- (rupees thirty lakhs) but the same was not accepted by the Collector on the ground that after the order is passed it may be required to be furnished. So far as the bank guarantee is concerned, the petitioner’s bank guarantee of Rs.8,00,000/- (rupees eight lakhs) was already with the Collector. However, opposite party No.3-the Collector, illegally passed the impugned order under Annexure-28 directing that the licence in respect of 10 O.S. liquor shops may be renewed in favour of opposite party No.5-Rajesh Kumar Sahoo for the remaining period of 2010-11. The impugned order suffers from various irregularities of fact and law inasmuch as the said order has been passed without proper application of mind. The direction of the Collector is contrary to the provisions of Rules 45(2)(a) and 45(3) of the Orissa Excise Rules and also Rule 102(A) of the 6 Board’s Excise Rules. In case for any reason, if the licence could not be renewed in the name of the partnership firm, the same should have been settled by a fresh auction. 5. Mr. Ashok Mohanty, learned Advocate General appearing on behalf of opposite party Nos. 1 to 4 supported the impugned order under Annexure-28 passed by opposite party No.3-Collector, Keonjhar. He argued that the Collector has passed a reasoned order and there is no infirmity in the impugned order for the reasons stated in paragraphs 10.3, 10.4 and 10.5. 6. Mr. N. Patra, learned Senior Counsel, appearing on behalf of opposite party No.5-Rajesh Kumar Sahoo, submitted that the writ petition is not maintainable and the petitioner has got alternative remedy by way of appeal. Since the petitioner failed to produce VAT clearance as required under paragraph-21(a) of the Excise Policy for the year 2010-11 and also failed to fulfill the other terms and conditions to the satisfaction of the competent authority under the Act, no relief can be granted by this Court by exercising power under Articles 226 and 227 of the Constitution of India. The petitioner has not furnished the local surety besides adequate solvency and Bank Guarantee. Since the petitioner could not get adequate local surety and solvency, he approached opposite party No.5-Rajesh Kumar Sahoo to stand as local surety with local solvency for which a Registered Partnership Deed was executed between them on 01.05.2005 w.e.f. 01.04.2005 with certain terms and conditions. On acceptance of the same, licence in respect of the shops in question was renewed in favour of the petitioner for the years 2006-07 and 2007-08. As the petitioner did not take steps to include the name of the opposite party No.5-Rajesh Kumar Sahoo as co-licensee in respect of the shops in question as per the terms and conditions of the Registered 7 Partnership Deed, opposite party No.5 filed applications on 06.10.2007 and 26.03.2008 along with all necessary documents before the Collector, Keonjhar to include his name along with the petitioner for renewal of licence of the shops in question for the year 2008-09. The Collector considering the documents issued licence in the joint names of the petitioner, opposite party No.5 and one Satyajit Kumar Singh for the year 2008-09. The petitioner in his individual capacity operated the shops in question from 01.04.2008 till March, 2010 as per the orders of this Court dated 15.04.2008 and 23.04.2008 passed in W.P.(C) No.5311 of 2008 and did not allow opposite party No.5 to operate the said shops even after the judgment of this Court and also the order of the Hon’ble Supreme Court. Therefore, the petitioner is liable to pay all the Government dues including the sales tax dues in respect of the shops in question for the years 2008-09 and 2009-10. As per the order dated 08.07.2010 of this Court passed in W.P.(C) No.8572 of 2010, the Collector after giving opportunity of hearing to the parties and considering the documents filed by the respective parties passed a reasoned order and came to a finding that the petitioner was in arrears of sales tax dues amounting to Rs.36,28,770/- and he became a defaulter under Rule 45 of the Orissa Excise Rules, 1965 and therefore he was not entitled to hold a licence under the Excise Act. The Collector further held that since opposite party No.5 had no outstanding arrears, he was eligible to hold the licence independently in his name and he was also willing to renew the licence on the terms and conditions prescribed under law and he is ready to abide by the provisions of the Act having solvency certificate to the tune of Rs.1.00 crore. In compliance with the order of the Collector, opposite party No.5-Rajesh Kumar Sahoo paid Rs.36,28,770/- on behalf of the petitioner. There is no 8 illegality in the order passed by opposite party No.3-Collector, Keonjhar. Therefore, he submitted that the writ petition being devoid of merit is liable to be dismissed. 7. On the rival contentions, urged on behalf of the parties, the questions that fall for consideration by this Court are as under: (i) Whether the order No.1843/Ex dated 03.08.2010 (Annexure-28) passed by opposite party No.3-Collector, Keonjhar directing renewal of licence in favour of opposite party No.5-Rajesh Kumar Sahoo for the remaining period of 2010-11 subject to his clearance of VAT dues of Rs.36,28,770/- within a period of three months from the date of his order and on production of VAT clearance certificate before the Collector/Superintendent of Excise, Keonjhar and on payment of Excise/VAT dues in time on regular basis is sustainable in law? (ii) What order? 8. The Government of Orissa in Excise Department vide memo No.923/Ex. dated 25.02.2010 issued Excise Duty, Fee Structure and Guidelines for the year 2010- 11. Paragraph-21(a) of the said guidelines reads thus: “21 OUT-STILL SHOPS. (a) The licenses of all the existing Out Still shops operating in 21 districts namely Sambalpur, Bargarh, Jharsuguda Deogarh, Sundargarh, Bolangir, Sonepur, Kalahandi, Nuapara, Boudh, Koraput, Rayagada, Malkanagiri, Nabarangpur, Angul, Keonjhar, Mayurbhanj, Ganjam (including newly created Berhampur excise district after bifurcation of Ganjam district into two excise districts), Gajapati, Dhenkanal and Kandhamal shall be renewed for the year 2010-11 with 10% increase over and above the existing consideration money and while renewing VAT clearance may be called for.” 9 Thus, as per the above said guidelines, licence granted in respect of the existing Out-Still Shops will be renewed for the year 2010-11 with 10% increase over and above the consideration money after observing all the formalities. 9. In the present case the undisputed facts are that initially during the year 2003-2004 ten O.S. Liquor shops were settled provisionally by the Collector in favour of one Prawin Kumar. On 1.5.2005 a registered partnership firm was constituted between the petitioner-Prawin Kumar and opposite party no.5- Rajesh Kumar Sahu under the name and style of “M/s. Prawin Kumar and Rajesh Kumar” giving effect from 1.4.2005. The Collector, Keonjhar included opposite party no.5 Rajesh Kumar Sahu and one Satyajit Kumar Singh at the time of renewal of licence for the year 2008-09. Subsequently, 10 O.S. Liquor shops , namely, (1) Palaspanga, (2) Bansapani , (3) Jurali, (4) Kalimati, (5) Barbil, (6) Bhadrasahi, (7) Thakurani, (8) Bolani, (9) Rimuli & (10) Jhumpura were renewed jointly in favour of petitioner-Prawin Kumar, opposite party no.5-Rajesh Kumar Sahu and Satyajit Kumar Singh for the year 2009-10. 10. However, while renewing the licence for the year 2010-11 opposite party no.3-Collector directed renewal of licence in respect of ten O.S. Liquor shops exclusively in the name of opposite party no.5-Rajesh Kumar Sahu. While doing so, opposite party no.3 came to a conclusion that the petitioner Prawin Kumar is squarely liable for non-payment of VAT for the period of 2008-09 and 2009-10 as he had obtained TIN registration in the name of the firm M/s. Prawin Kumar and taken over the responsibility of clearing VAT dues. He further held that Prawin Kumar is a defaulter in terms of Rule 45 of the Orissa Excise Rules, 1965 read with Rule 102 (A) of the Board’s Excise Rules, and he was debarred from holding any licence in the district 10 of Keonjhar under the Excise Act. Placing reliance upon a decision of this Court in the case of Trinath Sahoo v. Government of Orissa and others reported in 68(1989) CLT 481 opposite party no.3 held that Rajesh Kumar Sahoo is a separate and distinct person from M/s. Prawin Kumar and Rajesh Kumar. He has obtained up-to-date VAT clearance certificate in his name and there is no government dues outstanding against him. With these findings, opposite party no.3-Collector passed the impugned order directing renewal of the licence for the remaining period of 2010-11 in favour of opposite party no.5-Rajesh Kumar Sahoo in respect of 10 O.S. liquor shops on fulfillment of certain conditions. 11. The above findings of opposite party no.3-Collector are not sustainable in law for the following reasons. Since the exclusive privilege licence in respect of ten O.S. Liquor Shops for the years 2008-09, 2009-10 was issued by the Collector in the joint names of petitioner-Prawin Kumar and opposite party no.5-Rajesh Kumar Sahu and Satyajit Kumar Singh, they are all jointly and severally liable for discharge of Government dues outstanding in respect of the said ten O.S. Liquor shops. There is no contract among the three persons to show that the petitioner-Prawin Kumar is responsible to discharge the Government dues. In absence of such contract, opposite party no.3-Collector is not justified to hold the petitioner responsible alone for payment of the Government dues. For the same reasons, opposite party no.3 is also not justified to hold that the petitioner-Prawin Kumar is the defaulter in terms of Rule 45 of the Orissa Excise Rules, 1965 read with Rule 102(A) of the Board’s Excise Rules, and debar him from holding the licence of the district of Keonjhar. 11 12. The principle decided in the case of Trinath Sahoo (supra) relied upon by opp. party no.3 has no application to the present case as the facts of both the cases are completely different. In that case, this Court held that the company being a distinct legal entity cannot be equated with an individual Managing Director and there cannot be a bar for granting licence in favour of the Managing Director. This judgment was rendered on 27.04.1989. Rule 102(A) of the Board’s Excise Rules was inserted on 07.12.1996. While examining the scope, object and construction of Rule 102(A) of the Board’s Excise Rules, this Court in the case of Raj Dayal Saha vs. State of Orissa and others, 95(2003) CLT 128, held that “Rule 102(A) was brought into the statute book with a view to prevent licensees who acquired disqualification during a particular excise year and hence became disentitled to have their licences renewed, getting the same knocked down in the name of a relative, family member or associate or firm of which he is a partner or in the name of a company in which has a substantial interest. It could happen and it did happen that when a licensee who had failed to lift the minimum guaranteed quota and had not paid the consideration he was bound to pay and was in arrears to the Government and as a result disqualified to have a renewal of the licence by himself or to bid for a licenses, obtaining the licence in the name of his wife or a member of his family or in the name of an association or company in which he had a substantial interest, thereby getting over the bar created by Rule 45 of the Bihar and Orissa Excise Rules. There was also the mischief of a licensee of more shops than one not taking the renewal of the licensee of more shops than one, not taking the renewal of the (sic) licence of a loss making shop even while taking a renewal of the licence of a profit making shop leading to the non-renewed shop having to be re-auctioned leading to non-settling of that shop for the year or at least to delay in settling that shop and the consequential loss of revenue. This mischief was sought to be remedied by the introduction of Rule 102(A) of the Board’s Excise Rules. While considering the scope of a rule like Rule 102(A) of the Rules, one has necessarily to advert to the mischief that was 12 sought to be remedied when making the rule. So understood, it is clear that what the rule intends is that a person who is otherwise not entitled to a licence or to its renewal, should not have the benefit of the licence though not directly but indirectly. On a plain reading of Rule 102(A) of the Board’s Excise Rules, it is clear that a person who willfully or otherwise, omits to renew his existing, licence or licences on the terms and conditions prescribed, is not entitled to a renewal of his licence or licences.” Therefore, the Collector is not justified to hold that opposite party No.5- Rajesh Kumar Sahoo is a separate and distinct person from the registered Partnership Firm and not a defaulter in terms of Rule 45 of Orissa Excise Rules, 1965 read with Rule 102(A) of the Board’s Excise Rules. 13. We are shocked to know that though licence was granted in the joint names of three persons including the petitioner in respect of ten O.S. liquor Shops in question for the years 2008-09 and 2009-10 and there was an arrears of Rs.36,28,770/- towards VAT for the assessment period December, 2008 to February, 2010 in respect of those shops in question at Barbil and all the three partners/persons were defaulters in terms of Rule 102(A) of the Board’s Excise Rules read with Rule 45(2)(a) and Rule 45(3) of the Orissa Excise Rules and no licence could be granted in the name of any one of them, to our utter surprise we find that under Annexure-13 while the petitioner was asked to clear up the arrears of dues for renewal of licence in respect of the said shops for the year 2010-11, the same has been granted in favour of opposite party No.5-Rajesh Kumar Sahoo for a period of two months. Such renewal in the name of opposite party No.5 is not only illegal but also show that the opposite party-department has acted whimsically contrary to the statuary provisions. 13 14. It is the settled law that when any action of the State or its instrumentalities is not in accordance with the rules or regulations and supported by the statute, the Court must exercise its jurisdiction to declare such act as illegal and invalid in law. In Sirsi Municipality by its President, Sirsi Vs.