IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 01.02.2010 CORAM THE HONOURABLE MR.JUSTICE S.MANIKUMAR W.P.No.3764 of 1998 Luke Stephen ... Petitioner Vs. 1.The Secretary to Government, Prohibition & Excise Department, Secretariat, Chennai-600 009. 2.The Commissioner of Prohibition and Excise, Chepauk, Chennai-600 005. 3.The Divisional Excise Officer, Periyakulam, Theni District. 4.The Tahsildar, Thodupuzah, Idukki District. Kerala State. ... Respondents Prayer: Writ Petition filed under Article 226 of the Constitution of India praying for a Writ of Certiorarified Mandamus, calling for the entire records of memo No.Roc.452/96-A dated 24.12.1996, of the third respondent and quash the same. For Petitioner :Mr.M.Murali For Respondents :Mrs.D.Geetha, AGP, M/s.O.K.Sridevin C.Godwin for R4 O R D E R The petitioner has challenged the Memo dated 24.12.1996, of the Divisional Excise Officer, Periyakulam, Theni District, third respondent herein. 2. Facts leading to the Writ Petition are as follows: Pursuant to a notification for sale of Arrack shops in Theni Town of Periakulam Taluk for the Excise year 1983-84, the petitioner submitted a tender, in respect of the Shop No.3 (Arrack Shop No.34) on 16.07.1983. The tender amount quoted by the petitioner was Rs.34,200/- . As the amount offered was below the upset price, the auction was not confirmed immediately. Nearly after 2= months, orders confirming sale of Arrack Shop No.34 was issued in favour of the petitioner and the same was received by him on 14.10.1983. Since the sale was not confirmed immediately, the petitioner decided to seek for refund of the amount and sent a petition dated 15.10.1983 seeking for refund. Instead of refunding the amount, the respondents 1 to 3, brought the shop for reauction and that the same was confirmed in favour of one Mr.Veerannan. Subsequently, the tender amount remitted by the petitioner was refunded. On an erroneous presumption that the petitioner had caused revenue loss to the Government to the tune of Rs.1,27,765/- on account of non-acceptance of the tender, a memo, dated 23.07.2006 was issued to the petitioner, after a lapse of 13 years, in which, the Divisional Excise Officer, Periyakulam, Theni District, third respondent, has stated that the write off proposals submitted by the Excise Officials were not accepted by the Government and therefore, the petitioner has to remit a notional loss of Rs.1,25,765/-. On receipt of the memo, the petitioner requested a month's time to submit his reply. Rejecting the same, the third respondent issued another memo, dated 24.12.1996, calling upon the petitioner to remit the notional loss. The Tahsildar, Thodupuzha, Kerala State, fourth respondent, has issued an order, threatening to take revenue recovery proceedings. Aggrieved by the rejection and the memo, dated 24.12.1996 of the third respondent, the petitioner has preferred the present Writ Petition to quash the same. 3. Relying on Rule 7 of the Tamil Nadu Toddy and Arrack Shop (Disposal in Auction) Rules, 1981, Mr.M.Murali, learned counsel for the petitioner submitted that the tender, once admitted shall not be withdrawn before the expiry of 60 days from the date of receipt of the tender or until the shop is finally sold in auction, whichever is the earliest. He further submitted that the petitioner offered the sale amount of Rs.34,200/- on 16.07.1983 and it was accepted on 04.10.1983 and that the acceptance order was received by the writ petitioner only on 14.10.1993. He submitted that the rule permits withdrawal from tender, after sixty days from the date of receipt of tender and therefore, the petitioner by letter dated 15.10.1983, intimated the authorities that he is not willing to run the shop, on the ground that the confirmation was made after 60 days, and that he cannot mulcted with any liability to make good the notional loss caused due to the delay on the part of the respondents in confirming the sale. 4. Learned counsel for the petitioner further submitted that the very object of Rule 7 is that Excise Officials cannot take their own sweet time in confirming an auction and cause prejudice to the tenderer, if the sale is not confirmed within the said period. According to him, on the expiry of 60 days, the respondents cannot fix any liability on the auctioner/tenderer. 5. Learned counsel for the petitioner further submitted that the very fact that the write off proposals were submitted to the Government shows that the respondents, in order to extricate themselves from the delay in confirming the tender, have submitted proposals and therefore, the petitioner cannot be held responsible for the notional loss. 6. Inviting the attention of this Court, to the difference in the quantum of notional loss, alleged to have been caused by the writ petitioner in the two memorandums, dated 23.07.1996 and 24.12.1996, respectively, learned counsel for the petitioner submitted that the assessment has not been done properly and that the variation in the quantum only reflects non-application of mind. He further submitted that the shop was brought for sale during 1983-84 and in the second auction, it was confirmed in favour of one Mr.Veerannan. After a period of 13 years, the third respondent has issued a demand for Rs.1,29,869.35. No reasons have been assigned for the inordinate delay in issuing the demand and for the abovesaid reasons, he prayed that the impugned order is liable to be quashed. 7. Reiterating the averments made in the counter affidavit filed by the Additional Secretary to Government, Prohibition and Excise Department, Secretariat, Chennai, Mr.S.Geetha, learned Additional Government Pleader submitted that the auction sale of Arrack Shop No.34/83-84 was notified on 02.06.1983 for the Excise year 1983-84, for the period from 16.07.1983 to 15.07.1984. Since there was no bid on the notified dates, the auction sale was adjourned to 14.06.1983 and subsequently, on 24.06.1983. Even thereafter, the sale was once again adjourned to 16.07.1983. Out of the two individuals, who participated in the sale , the tender offered by the writ petitioner was accepted. Agreeing to abide by the rules and regulations relating to the conduct of Arrack shop auction, the petitioner remitted Rs.17,500/-, being the advance half month rental on 21.07.1983 and Rs.8,000/- towards 1/5th Security Deposit on the same day. He also paid Rs.1,000/- Earnest Money Deposit. The bid amount of Rs.34,200/- furnished by the petitioner was lower than the upset price of Rs.38,515/- fixed and notified to the above said shop. 8. Learned Additional Government Pleader further submitted that as the bid amount was lower than the upset price, a necessity arose to obtain the concurrence of the higher authority to confirm the sale in favour of the tenderer for an amount lower than the upset price notified for the said shop. The Commissioner of Prohibition and Excise, Chennai, agreed to confirm the sale for Rs.37,200/- and accordingly, the confirmation order was issued by the District Collector, Madurai on 04.10.1983. The said order was served on the petitioner on 14.10.1983. A memo was also issued to the writ petitioner on the same day, directing him to remit 2= month's rental for a shop and to apply for licence. 9. Learned Additional Government Pleader further submitted that instead of applying for licence, after remitting 2= month's rental, the petitioner sent a petition, dated 15.10.1983, which was received in the Office on 01.11.1983. In his petition, dated 15.10.1983, the petitioner informed the respondents that he is not willing to conduct the Arrack shop, as the sale was confirmed after the expiry of 60 days from the date of furnishing the tender. As the petitioner has refused to conduct the shop, the District Collector, Madurai, by his telegram, dated 12.11.1983, directed the shop for re- sale. Accordingly, re-sale was conducted on 28.11.1983 by the Assistant Collector, Periyakulam and that the sale was knocked down for Rs.30,100/- by one Mr.Veeranan and that the same was confirmed, vide proceedings of the District Collector, dated 19.12.1983. 10. Learned Additional Government Pleader further submitted that at the time of participating in the auction sale by furnishing tender, the petitioner has entered into an agreement to abide by the rules, conditions and regulations agreeing to run the arrack shop and the delay in issuance of the confirmation order was only due to the above said bona fide reason of getting the confirmation from the higher authority for the price, which was lower than the upset price fixed by the Department. The petitioner, having agreed by the terms and conditions of the sale, cannot take advantage of the delay of just over a month in getting the confirmation from the higher authority. 11. Learned Additional Government Pleader further submitted that during the course of audit of accounts for the excise years 1982-83 and 1983-84, the Accountant General, Chennai, has raised objections that there was a loss of revenue to the tune of Rs.1,29,869/- and that the liability has to be fixed on the persons, who had caused loss. As the delay in confirmation was on account of administrative reasons, proposals were submitted by the District Collector, Madurai, dated 12.07.1994, to the Commissioner of Prohibition and Excise, Chennai, to write off the notional loss pointed out by the Accountant General, Chennai. However, the said proposals were rejected and the Government, in their letter (2D) No.33, dated 08.05.1996, Prohibition and Excise Department, directed to fix liability on the individual, who offered the tender, for the recovery of the notional loss, pointed out in the audit. Since the write off proposals were not accepted by the Government and having regard to the further instructions to fix the liability on the tenderer, the petitioner, vide Office Roc.No.452/96A, dated 17.06.1996, was directed to remit the amount within 15 days from the date of receipt of notice. In this connection, the Special Deputy Collector (Revenue Recovery Act), Idukki District, Kerala State, was also requested to furnish the particulars for the issue of a Certificate under the Revenue Recovery Act. 12. Referring to Rule 7 of the Toddy and Arrack (Disposal in Auction) Rules, 1981, learned Additional Government Pleader submitted that a tender once submitted shall not be withdrawn before the expiry of 60 days from the date of receipt of the tender or until the shop is finally sold in auction whichever is earlier. It does not follow that after the expiry of 60 days from the date of receipt of the tender, the tender offered will become automatically invalid. Inasmuch as the contract has already come into existence on the acceptance of offer, there is no question of withdrawal of an offer, after the same has been duly accepted. Therefore, she submitted that the petitioner cannot wriggle out the terms and conditions of the contract. 13. Learned Additional Government Pleader further submitted that as per Rules 16 and 17 of the above said Rules, the petitioner ought to have remitted the balance deposit of 2= month's rental as advance and should have applied for the issue of licence within one week from the date of receipt of the order of confirmation, i.e., before 20.10.1983. But, he did not pay the rentals nor applied for licence within the above said period. Instead letter, dated 15.10.1983, he had backed out of the tender, which resulted in the shop being sold in a subsequent auction with lower rate and thus, there was a revenue loss caused to the Government to the tune of Rs.1,29,869/- . She further submitted that on receipt of the orders from the Government, a memo, dated 17.06.1996, was issued by the third respondent, instructing the petitioner to remit a sum of Rs.1,29,869/- within 15 days from the date of the order. For the abovesaid reasons, she prayed that the petitioner is liable to pay the notified loss and the action taken by the respondents is in accordance with the rules. Hence, she prayed for dismissal of the Writ petition. 14. Heard the learned counsel for the parties and perused the materials available on record. 15. In order to adjudicate the issue as to whether the petitioner can be fastened with a liability to pay the revenue loss to the government, it is necessary to extract few provisions of the Tamilnadu Prohibition Act, and the Rules, governing the auction of shops. Section 18(1) of the Tamil Nadu Prohibition Act, 1937, deals with the recovery of amount due to the State Government and it reads as follows: "(i) Notwithstanding anything contained in this Act or in any other law for the time being in force and without prejudice to any other mode of recovery which is being taken or may be taken, any amount due to the State Government under any of the provisions of this Act or the rules made thereunder along with interest, at such rate as may be specified by the State Government, may be recovered, by the officer empowered by the State Government, - (a) by deducting the amount due with interest from any money owing to the person which may be in the hands or under the control or disposal of any officer of the State Government; or (b) by recovering the amount due with interest by attachment and sale of excisable articles belonging to the persons from whom such amount is due. (2) If the amount due to the State Government with interest cannot be deducted or recovered in the manner provided for in sub-section (1) or the money so deducted or recovered is not sufficient to satisfy the amount and interest so due, the officer empowered may prepare a certificate signed by him specifying the amount with interest due or, as the case may be, the balance of the amount due from the person and send it to the Collector of the district in which such person resides or carries on business and the Collector, on receipt of such certificate, shall recover the amount with interest specified therein as an arrear of land revenue from the said person. (3) Notwithstanding anything contained in any law for the time being in force and subject to the prior claim, if any, of the State Government in respect of land revenue, any amount due to the State Government with interest shall be a first charge upon the property or interest in the property of the person from whom the amount is due." A conjoint reading of Section 18(1) of the Tamilnadu Prohibition Act and Rule 21 of the Toddy and Arrack Act (Disposal in Auction) Rules, 1981, makes it clear that the statute itself has adopted the procedure stated in the Revenue Recovery Act. Before adverting to the facts of this case, this Court also deems it fit to consider some of the decisions of the courts relating to notional loss caused to the Government. As per Rule 16 of the Toddy and Arrack Shops (Disposal in auction) Rules, the Sale Officer, if he accepts provisionally the bid of the auction purchaser shall issue a notice to the auction purchaser to pay as advance, in any case within seven days from the date of the sale, an amount equal to three months rental' in addition to the earnest money deposit already made under rule 8 but inclusive of half a month's rental paid at the close of the sale under rule 15. As per Rule 17(1)(a), the auction purchaser, after paying the advance, shall apply to the Excise Officer in form No.2 within a week from the date of receipt of the order of confirmation under rule 20 for the issue of a licence with the details of site selected for the location of the shop. Rule 20 deals with confirmation of sale by district collector:(1) Every bid provisionally accepted the by the Sale Officer shall be subject to confirmation by the Collector and on such confirmation the orders of the Collector shall be final, unless it is revised by the Commissioner for special reasons to be recorded in writing. The Commissioner may, on appeal or revision or suo motu, revise any order of the Collector confirming a bid provisionally accepted by the Sale Officer, after issuing a show cause notice to the person affected and considering his representations, if any,. Any order of the Collector confirming the sale of a shop in favour of a person may be cancelled by the Commissioner even subsequent to the grant of a licence to him for reasons to be recorded by him and after giving an opportunity of making representation to all persons concerned. (b) If any person who, for valid reasons, fails to bid in the auction, desires to take the privilege of selling, by retail, arrack at a higher amount than the amount actually fetched at the time of auction sale, he may apply to the Collector before confirmation of the auction sale of the shop in favour of the auction purchaser, or to the Commissioner, if the orders of confirmation are passed by the Collector. Before making such application, three months' rental offered by him shall be remitted by him in advance. Such offer of enhanced monthly rental shall be more than 25 per cent of the highest bid already fetched at the auction sale or Rs.500 (Rupees five hundred only) whichever is higher. On receipt of such application, the Collector may refuse to confirm the highest bid and direct the resale of the shop from the point at which a higher amount is offered by the person who failed to bid in the auction for valid reasons. If such an application is received by the Commissioner after confirmation of the auction sale by the Collector, the Commissioner may, after issuing a show cause notice to the person affected and after considering his representations, if any, cancel the orders of the Collector for reasons to be recorded by him and direct him to conduct a resale of the shop from the point at which a higher amount is offered by the person who failed to bid in the auction for valid reasons. Provided that any application to the Commissioner shall be made within 15 days from the date of confirmation of the sale by the Collector and that it shall be open to the Commissioner for valid reasons, to condone the delay for a period not exceeding 15 days. (2) On receipt of the order of confirmation from the Collector and the application for licence in Form No.2 form the auction purchaser, the Excise Officer shall scrutinise the application and forward the same along with his recommendation to the Assistant Commissioner of Prohibition and Excise having jurisdiction over the area,w ho may, subject to the provisions of rule 17, issue a licence in Form 3 under Section 17-C (2) of the Act. (3) If the Collector considers any bid to be inadequate, he may refuse to confirm the provisional acceptance of the bid, and direct the resale of the shop from the point at which it was last left on such date and at such time and at such place as may be fixed by him. The conditions of resale shall remain unaltered, unless and otherwise directed by the Collector. Three days notice of such resale shall be given to the person affected by the order of the Collector and notice of such resale giving details shall be exhibited in the notice board of the Taluk Office or in any other office where auctions are generally conducted and necessary publicity shall also be made by beat of tom tom in the area concerned and around. (4) Any resale ordered to be made under sub-rule (3) shall begin with the bid provisionally accepted by the Sale Officer at the original sale and in the name of the individual who offered it. If at such sale a higher bid is offered and is provisionally accepted by the Sale Officer, the bid with which such sale began shall lapse. But, if no higher bid is accepted by the Sale Officer, the matter shall be reported to the Collector, who may pass orders confirming the bid provisionally accepted at the original sale or again direct that the sale be continued from the point at which it was left at the original sale, and the order of the Collector shall be final, unless it is revised by the Commissioner on appeal or revision. (5) The provisions of sub-rule (4) shall apply to any sale, the re-opening of which is directed under any other circumstances. (6) No bid which has been provisionally accepted by the Sale Officer shall be withdrawn before it lapses under sub-rule (4) or before orders are passed confirming or refusing to confirm it, and if the bidder commits any breach of the conditions, he shall be liable to make good the difference between his bid and any lower bid which may be finally accepted. Rule 21 speaks about re-sale of shops:--(1) On the failure of any person to make a deposit or apply for a licence or to comply with any requisition under these rules the shop may be resold under the orders of the Collector or on a report from the Assistant Commissioner or the Sale Officer, the Collector may otherwise dispose of the shop. Resales under this rule shall be at the risk of the defaulting bidder, who shall forfeit all gain, if any, that may secure by the resale and in the event of a loss by resale, the defaulting bidder shall be required to make good the difference between the total amount payable for the whole period under the terms of the original sale and the total amount payable by the successful bidder at the resale. In the latter case, the deposits already made by defaulting bidder, excluding the amount of earnest money deposit, if any, shall be recoverable in the same manner, as if it were an arrear of land revenue. Should, however, the deposit be greater than the loss by resale, only such part of the deposits as is necessary to cover the loss by resale shall be forfeited and the balance refunded to the defaulter. The defaulting bidding shall be similarly liable if the shop is disposed of otherwise than by resale and such disposal results in loss to the State Government as compared with the original sale. 16. In Har Shankar Vs. Deputy Excise and Taxation Commissioner, reported in 1975 (1) SCC 737, the Supreme Court held that Writ jurisdiction of the High Court under Article 226 of the Constitution of India was not intended to facilitate avoidance of obligations voluntarily incurred. The Apex Court further held that one who makes a bid for the grant of privilege to vend liquor in wholesale or retail with full knowledge of the terms and conditions attaching to the auction cannot be permitted to wriggle out of the contractual obligations arising out of the acceptance of his bid. Dealing with the provisions of Punjab Excise Act, 1914, and of the Punjab Liquor Licence Rules, 1956, the Supreme Court held as follows. "The announcement of conditions governing the auctions was in the nature of an invitation to an offer to those who were interested in the sale of country liquor. The bids given in the auctions were offers made by the prospective vendors to the Government. The Government's acceptance of those bids was the acceptance of willing offers made to it. On such acceptance, the contract between the bidders and the Government became concluded and a binding agreement came into existence between them.... The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force." 17. In State of Haryana v. Jage Ram reported in 1980 (3) SCC 599 and State of Punjab v. Dial Chand Gian Chand & Co. reported in 1983 (2) SCC 503, the Apex Court held