*THE HON’BLE SRI JUSTICE C.V. NAGARJUNA REDDY +WRIT PETITION No.27280 of 2005 % Dated 26-11-2007 # B. Venkataramana. Petitioner VERSUS $ The Commissioner of Prohibition and Excise, Andhra Pradesh, Hyderabad & others. Respondents ! Counsel for the Petitioner: Mr. A. Jagannatha Rao. ^Counsel for the Respondents: Government Pleader for Prohibition and Excise <GIST: > HEAD NOTE: ? Cases referred 1. 2001 (6) ALT 240 (FB) 2. AIR 1954 SC 220 3. AIR 1957 SC 414 4. AIR 1958 SC 398 5. (1975) 1 SCC 737 6. (1995) 1 SCC 574 7. (1986) 4 SCC 566 8. (2006) 4 SCC 327 HON’BLE SRI JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION NO.27280 of 2005 Dated: 26 -11-2007 Between: B.Venkataramana ..... Pe AND The Commissioner of Prohibition and Excise, Andhra Pradesh, Hyderabad. And others. .....Respo Counsel for the petitioner : Sri A.Jagannatha Rao Counsel for the respondents : G.P. for Prohibition & Excise HON’BLE SRI JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION No.27280 of 2005 O R D E R: The petitioner, who was the licencee to sell Indian Liquor and Foreign Liquor (IL & FL) by shop in respect of Shop No.2, Ward No.2 of Madhira Village, Khammam district for the period from 1.7.2005 to 30.6.2006, filed the present writ petition for a writ of mandamus to declare the action of respondents in collecting licence fee for the period from 1.7.2005 to 30.11.2005 as illegal. He also sought for a consequential direction to refund the licence fee paid for the said period. The undisputed facts are stated as under: Respondent No.2 issued notification, published in Khammam District Gazette No.19 of 2005 dated 26.5.2005 calling for tenders for grant of lease of right to sell IL & FL by shop under Rule 5 of the Andhra Pradesh Excise (Lease of Right of Selling by Shop and Conditions of License) Rules 2005 (for short “the Rules”). The petitioner filed his tender for shop No.2, Ward No.2 of Madhira village and he became the highest bidder in the auction conducted on 2.6.2005, having offered a sum of Rs.7,00,999/- as annual lease fees. The petitioner remitted 1/3rd of the lease amount by 2.6.2005 as required under the tender conditions and furnished bank guarantee for Rs.4,67,000/- representing 2/3rd of the lease amount on 11.6.2005. Condition No.XXIII of the tender conditions stipulates that the successful auction purchaser after fulfilling the formalities under Rules 18,19, and 22 and before obtaining licence shall select suitable premises for sale of IL & FL inconformity with Rule 27 and obtain a licence in Form-A4 from the Prohibition and Excise Superintendent to commence business from 1.7.2005. The petitioner submitted his application to respondent No.3 on 2.6.2005 to approve premises bearing Door No.1-198 of Madhira village for locating his shop. As no approval was received by the petitioner before the date of commencement of the excise year, i.e., 1.7.2005, the petitioner approached respondent No.1 on 5.7.2005, but in vain. Therefore, he filed W.P.no.14987 of 2005 in this Court which came to be disposed of on 19.7.2005 with the direction that respondent No.1 shall consider representation dated 5.7.2005 filed by the petitioner for approving the premises bearing Door No.1-198 within a period of one month from the date of receipt of a copy of the order. However, four and half months after disposal of the writ petition, respondent No.3 granted licence on 2.12.2005 permitting the petitioner to open the shop at the same premises which was proposed by the petitioner in his application dated 2.6.2005. A counterpart agreement was entered into on 2.12.2005 and even before the grant of licence and execution of counterpart agreement, the second installment of licence fee was recovered by invoking the bank guarantee on 1.10.2005. The petitioner filed the present writ petition on 21.12.2005 and this Court while ordering notice passed an order in W.P.M.P.No.35045 of 2005 filed for restraining the respondents from invoking the bank guarantee, directing that furnishing of any bank guarantee towards payment of licence fee prior to the granting of licence will be subject to further orders. The Prohibition and Excise Inspector, Madhira filed counter affidavit and it is evident from the averments contained therein that the last installment of licence amount was collected from the petitioner on 31.12.2005. In the counter affidavit it is admitted that the petitioner was the successful bidder in respect of Shop No.2, Ward No.2 of Madhira Gram Panchayat for the lease period from 1.7.2005 to 30.6.2006 and the fact that the petitioner paid 1/3rd of the lease amount and furnished bank guarantee for the balance lease amounts is also admitted. The fact that the petitioner applied for grant of licence for running the shop in premises bearing Door No.1-198 of Madhira Gram Panchayat is also admitted. It is however averred in the counter affidavit that the said premises was falling in ward No.1 as per certificate dated 10.6.2005 issued by the Secretary, Madhira Gram Panchayat and that selection of the said premises is also not in conformity with the location/area notified in Khammam district gazette No.19/2005 dated 26.5.2005 besides not being in accordance with Rule-27 of the Rules. It is further averred that notice dated 5.7.2005 was issued to the petitioner to select the premises in Ward No.2, that as the petitioner failed to select such a premises, another notice was issued to him on 13.7.2005 and that instead of selecting a premises in Ward No.2, the petitioner filed representation dated 5.7.2005 to respondent No.1 to direct respondent No.3 to grant licence for premises bearing No.1-198 in accordance with certificate dated 29.6.2005 issued by the Secretary, Madhira Gram Panchayat. It was also admitted in the counter affidavit that this Court in W.P.No.14987 of 2005 directed respondent No.1 to consider the petitioner’s representation dated 5.7.2005. It is further stated that on the instructions issued by respondent No.1, the Deputy Commissioner of Prohibition and Excise, Warangal Division instructed the Prohibition and Excise Superintendent, Khammam to seek clarification from the District Panchayat Officer, Khammam on the contradictory certificates issued by the Secretary, Madhira Gram Panchayat, that the District Panchayat Officer, Khammam vide his proceedings dated 5.9.2005 appointed Divisional Panchayat Officer, Khammam to enquire into the matter and verify whether Door No.1-198 falls in Ward No.1 or Ward No.2, that the Divisional Panchayat Officer, Khammam in his enquiry report dated 26.9.2005 stated that Door No.1- 198 falls in Ward No.2 and that based on the said enquiry report, the District Panchayat Officer vide his proceedings dated 5.10.2005 which was addressed to respondent No.3 stated that Door No.1-198 falls in Ward No.2 as per the ward area. It is further averred that respondent No.3 through his letter dated 14.10.2005 brought the said report to the notice of the Deputy Commissioner of Prohibition and Excise, Warangal Division, who in turn requested respondent No.1 through his letter dated 17.10.2005 to issue necessary instructions and that respondent No.1 through his letter dated 15.11.2005 requested the District Collector, Khammam to sort out the issue and the District Collector, Khammam in turn instructed the Joint Collector, Khammam to convene a meeting of District Panchayat Officer, Khammam and Prohibition and Excise Superintendent, Khammam and decide the matter on merits. It is further revealed from the counter affidavit that a joint meeting was held by the Joint Collector on 21.11.2005 in which the District Panchayat Officer, Khammam stated that as per the Panchayat Raj Act and Rules Ward means territorial jurisdiction of elected ward member and therefore, premises bearing Door No.1-198 falls in Ward No.2 and that Secretary, Madhira Gram Panchayat issued an erroneous certificate that the said premises falls in Ward No.1. The District Collector, therefore instructed respondent No.3 to take necessary action and accordingly the latter granted licence to the petitioner to run the retail shop in premises bearing Door No.1-198. It is also mentioned in the counter affidavit that the petitioner signed counterpart agreement on 2.12.2005 agreeing to pay the entire lease amount with effect from 1.12.2005 and also gave an undertaking that he will not claim the refund of proportionate lease amount for the period from 1.7.2005 till the grant of licence. It is further stated that the petitioner is liable to pay the entire lease amount as per Rule19 of the Rules. In para-6 it is mentioned that tenderors have to select the premises under Rule 27 and that accordingly the tenderor has complied with the conditions and that licence was granted on 30.6.2005. (This averment on the face of it is wrong because it is the admitted position that licence was actually granted only on 2.12.2005). In the counter affidavit the respondents have taken the stand that as held by the Supreme Court, no person dealing in business of intoxicant can claim protection under Article 19 of the Constitution of India and that since the lease period is for 12 months and having entered into agreement undertaking to pay the licence fee for the entire lease period, the petitioner is not entitled to claim refund. It is also averred that the petitioner gave an undertaking to the effect that he will not claim refund of proportionate lease amount for the period from 1.7.2005. Sri A.Jagannadha Rao, learned counsel for the petitioner submitted that while the excise year was to commence from 1.7.2005, at the right earnest, the petitioner made his application for grant of licence after selecting a premises in Ward No.2 and that respondent No.3 evidently under the pressure exerted by Sri Vasireddy Ravindranath, who was the successful bidder for Ward No.1 delayed grant of licence in favour of the petitioner for Ward No.2 on the purported certificate issued by the Secretary, Madhira Gram Panchayat. He further submitted that the very fact that the premises chosen by the petitioner was eventually approved by respondent almost six months after he applied for licence shows that the entire fault lay with the respondents in granting licence and that therefore, the petitioner cannot be saddled with the liability towards licence fees for the period during which he was not permitted to run the business. Opposing the contentions of the learned counsel for the petitioner, the learned Government Pleader for Prohibition and Excise stated that in view of the two contradictory certificates issued by the Secretary, Madhira Gram Panchayat delay occurred in the grant of licence and that the said delay not being deliberate, the petitioner is not entitled to remission of licence fee. Having regard to the pleadings as reinforced by the respective contentions of the learned counsel for the parties, the points that arise for consideration in the writ petition are as follows: 1. Who among the petitioner and the respondents are responsible for the delayed grant of licence? 2. If the answer to point No.1 is in favour of the petitioner, whether he is entitled to refund of the proportionate licence fee/lease amount for the period from 1.7.2005 to 30.11.2005? Before dealing with the points framed above, it may be necessary to notice some of the relevant provisions of the Andhra Pradesh Excise Act 1968 (for short “the Act”). Section 2(9) defines excisable article as any alcoholic liquor for human consumption; or any intoxicating drug. Sub-section (1) of Section 15 inter alia prohibits sale or buying of excisable articles except under the authority and in accordance with the terms and conditions of a licence granted in this behalf. Sub-section (2) of Section 15 authorises Prohibition and Excise Superintendent to grant the licence if the sale or buying is within a district. Under Section 17, the State Government is empowered to grant for a fixed period to any person at any place a lease or licence or both for the exclusive privilege of selling by wholesale or retail any liquor or any intoxicant. Under Section 20, the District Magistrate may by notice in writing to the licencee require that any shop in which any intoxicant sold shall be closed for such time or for such period as he may think necessary for preservation of public peace. Under sub-section (3) of Section 20 the licencee on account of such closure shall not be entitled to any compensation except to the refund of such licence fee paid by him in respect of shop as is proportionate to the period in which the shop is required to be kept closed. Under Section 23, the Commissioner or any other competent officer may accept payment of a sum in consideration of grant of lease or licence or both for the exclusive privilege in respect of liquor or any other intoxicant under Section 17, instead of or in addition to any excise duty or fee leviable under Sections 21 and 22. Under Section 29, the licencing authority is empowered to require the licencee to execute a counterpart agreement in conformity with the tenor of his licence. Under Section 31(1) the licencing authority is empowered to cancel or suspend the licence for various reasons enumerated in clauses (a) to (e) which include non- payment of duty and breach by the holder of licence of any of the terms and conditions thereof, etc. Section 31(3) provides that on cancellation of licence the licencee shall not be entitled to compensation for cancellation or refund of any fee paid or deposit made in respect thereof. Section 32(1) empowers the licencing authority to withdraw the licence for any cause other than that specified in Section 31. Sub-section (2) of Section 32 mandates that on such withdrawal, the licencee is entitled to refund of licence fee proportionate for the un-expired portion of the term of the licence and the deposit made by the licencee. Under Section 33, a licencee is entitled to surrender his licence on the expiration of one month’s notice, but he is not entitled to refund of fee proportionate to unexpired portion of the licence fee. Section 72 empowers the Government to make rules for the purposes which inter alia include regulation of wholesale or retail sale or buying of any intoxicant under licences. The State Government in excise of the powers conferred under Section 72 read with Section 17(2) and 29 of the Act framed the Rules. Rule 2(l) of the Rule define lease amount as the amount payable in respect of shop as part of sum in consideration of the grant of lease payable under Section 23 read with Section 17 of the Act. Rule 2(m) defines the lease period as the actual lease period in the lease year or part thereof; Rule 2(n) defines lease year as the period of 12 months commencing from 1st July of the year and ending with 30th June of the succeeding year and Rule 2(p) defines licenced premises as the premises where IL & FL is permitted to be sold by the leaseholder. Rule 3 provides that lease of right to sell IL & FL shall ordinarily be granted by inviting sealed tenders from the public after due notification. Under Rule 5, where lease for sale of IL & FL by shop is proposed to be granted, a notice of the proposed auction shall be issued and the auction notice shall inter alia contain serial number and the name of the area/locality where the shop will be established. Under Rule 17, the successful auction purchaser shall obtain licence in Form A4 after fulfilling the required formalities and subject to rules in respect of the premises where a shop will be located. Under Rule 22, after tendering the deposit and advance amount as required under Rule 18, the lessor and the auction purchaser shall enter into a counterpart agreement in conformity with the tenor of the lease in Form A4 on the stamp paper of the requisite value as per the provisions of the Indian Stamp Act 1899 before taking out a licence for the sale of IL & FL and such counterpart agreement shall come into force with effect from 1st July of the year to which the auction relates in respect of the leases auctioned on or before 30th June and in case where the auction took place on or after the 1st July, the counterpart agreement shall come into force from the date of auction. Rule 23 envisages that lease for the sale of IL & FL granted to the auction purchaser shall not take effect until he obtains a licence from the Prohibition and Excise Superintendent and it shall be the responsibility of the auction purchaser to execute the counterpart agreement referred to in Rule 22 and also complete other formalities contemplated under Rules 17, 18, and 19 within the time specified and obtain the licence in respect thereof. The Rule further envisages that if the acution purchaser fails to do so, the lease shall stand cancelled. Under Rule 25, every lease shall ordinarily be valid for one year commencing from 1st July and ending with 30th June of the succeeding year. Under the first proviso to the said Rule, the lease granted after the 1st July shall be valid upto to the end of 30th June of the succeeding year and under the second proviso a lease granted for a part of the lease year shall be valid for such period as may be specified by the auctioning authority. Under Rule 27, the successful tenderer, subject to the approval of the Prohibition and Excise Superintendent shall select suitable premises for sale of IL & FL within the municipal Corporation, municipality, village/town/city or area/locality as the case may be as notified in the District gazette, subject to the restrictions stipulated in clauses (a) to (d) thereof. Rule 59 prescribes that leaseholder shall not be entitled to remission of lease amount or compensation on account of closure of licenced premises when the same is ordered to be closed under Section 20 of the Act. Point No.1: On being directed, the learned Government Pleader produced the file and a careful perusal of the record reveals as under: Page-1 of the file contains the acceptance of the petitioner’s tender in respect of shop mentioned at Sl.No.39 of the Khammam district gazette dated 26.5.2005. The next document in the file is representation dated 14.6.2005 made by Sri Vasireddy Ravindranath addressed to respondent No.3 wherein he mentioned that there was severe competition for shop notified for Ward No.1 at Sl.No.38 in the gazette and he offered the highest bid amount of Rs.16,15,678/- mainly because of its locational advantage. He mentioned in the said representation that the successful bidder for Ward No.2 (obviously referable to the petitioner) is seriously trying through lower departmental staff to locate his shop in Ward No.1 by relying on election ward. He therefore requested to keep the same in mind and see that no injustice is done to him. On the reverse of the said representation, a certificate in vernacular language issued in the name of Secretary, Madhira Gram Panchayat and addressed to Sri Vasireddy Ravindranath was found wherein it is inter alia mentioned that several colonies with Door Nos.1-1 to 1-960 fall under Ward No.1. The next document found in the file is a similar representation dated 29.6.2005 wherein the said Vasireddy Ravindranath referred to the petitioner’s name and stated that Door No.1-198 is shown by the petitioner as located in Ward No.2, and that if he is permitted to locate his shop at the said premises, he will suffer heavy financial loss. The file contains another certificate dated 29.6.2005 issued in the name of Secretary, Madhira Gram Panchayat certifying that Door No.1-198 falls in Ward No.1. This certificate is also shown to have been addressed to Sri Vasireddy Ravindranath. Respondent No.3 addressed letter dated 2.7.2005 to respondent No.1 wherein it is mentioned that four shops were notified for Madhira town in respect of four wards, namely, Ward Nos.1, 2, 9 and 12, that licences were already granted for shops 1, 3 and 4 which were notified “as per the revenue wards” furnished by the Secretary, Madhira Gram Panchayat, that the petitioner selected a premises falling in Ward No.1 as per the particulars furnished by the Secretary of Madhira Gram Panchayat, that the petitioner is insisting to grant the licence at the premises falling in Ward No.1 by stating that the same falls in Ward No.2 as per the election wards and that since they have already issued three licences based on the revenue wards furnished by the Secretary of Madhira Gram Panchyayat, the petitioner’s request has been declined with a suggestion to select premises falling in Ward No.2 as per the revenue wards furnished by the Secretary of Madhira Gram Panchayat. Respondent No.3 concluded in the said letter that the request of the petitioner for grant of licence in the shop proposed by him does not deserve any consideration. The file contains certificate dated 29.6.2005 issued in the name of the Secretary, Madhira Gram Panchayat which is addressed to Circle Inspector of Excise, Madhira and it is stated therein that the Gram Panchayat of Madhira is divided into 18 wards for administrative purposes and into 12 wards for revenue purpose and that as per the voters’ list Ward No.1 comprises house Nos.1-1 to 1-176 and Ward No.2 comprises house Nos.1-177 to 1-345 (the premises selected by the petitioner bears door No.1-198 which falls in Ward No.2 as per this certificate). Acting on the letter dated 4.7.2005 addressed by the Station House Officer, Madhira, respondent No.3 gave notice dated 5.7.2005 to the petitioner that even after lapse of one month from the date of auction, the petitioner failed to select a premises and establish shop in Ward No.2 of Madhira village and he therefore, directed the petitioner to select the premises in Ward No.2 and submit proposal for grant of licence forthwith failing which action will be taken as per the Rules. On 8.7.2005, respondent No.3 addressed letter to the District Panchayat Officer, Khammam. A perusal of the subject and reference contained in the said letter shows that the District Collector through his endorsement ordered enquiry into the certificates issued by the Secretary, Madhira Gram Panchayat and with reference to the same respondent No.3 requested the District Panchayat Officer, Khammam to enquire into the matter relating to issue of certificates indicating revenue wards once and election wards later leading to the litigation over establishment of shop in Ward No.2 of Madhira Gram Panchayat. A few days later, i.e., on 13.7.2005, respondent No.3 issued another notice calling upon the petitioner to explain the reasons why 1/3rd licence fee paid in cash and 2/3rd licence fee given in the shape of bank guarantee should not be forfeited to the Government treasury within seven days from the date of receipt of the notice, that failing which it will be construed that the petitioner has no explanation in his defence to offer and that his selection for shop No.2 will be cancelled and the shop will be re-notified afresh duly forfeiting deposits. This notice evidently forced the petitioner to approach this Court by filing W.P.No.14987 of 2005 which, as already noted, was disposed of on 19.7.2005. As respondent No.3 was left with no other option, he again addressed letter dated 22.7.2005 wherein he referred to the two conflicting certificates issued by the Secretary, Madhira Gram Panchayat. It is however, interesting to extract the sentence added by respondent No.3 in handwriting which reads “we have mentioned the wards in gov.notification to indicate a particular territorial demarcation of each licence”. While requesting the District Panchayat Officer, Khammam to initiate action against the Secretary, Madhira Gram Panchayat for giving contradictory certificates, he requested him to furnish the criterion usually adopted for creation of wards in a gram panchayat so as to apprise the position to the Commissioner of Prohibition and Excise, Andhra Pradesh, Hyderabad. Respondent No.3 addressed letter dated 5.8.2005 to the Deputy Commissioner of Prohibition and Excise, Warangal Division wherein while informing the latter that by the issue of second certificate the Panchayat Secretary gave scope for litigation, he reiterated his stand that the petitioner’s application for permission to establish shop at Door No.1-198 was not considered and he was directed to establish the premises in Ward No.2. In response to the said letter,