Case: State of Haryana and Others Vs. Lal Chand and Others

within a radius of three miles from the State border. Nor would this amount to a breach of the conditions on the part of the State Government of Haryana or furnish a ground absolving the respondents of their liability to pay the shortfall. The second contention that the respondents had withdrawn their bid and were therefore not liable for the loss of re-auction of liquor vend at Mandi Dabwali cannot be sustained. 13. In Har Shankers case, supra, this Court held that the writ jurisdiction of the High Courts under Art. 226 was not intended to facilitate avoidance of obligations voluntarily incurred. It was observed that one of the important purposes of selling the exclusive ar right to vend liquor in wholesale or retail is to raise revenue. The licence fee was a price for acquiring such privilege. One who makes a bid for the grant of such privilege 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. In dealing with the question, Chandrachud, J. said: ."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 held their venture succeeded, would have relied upon those very power s 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 even have a binding force." 14. To the same effect are the decisions of this Court in State of Haryana &Ors. v. Jage Ram &Ors. and the State of Punjab v. M/s Dial Chand &Gian Chand &Co. laying down that person s who offer their bids at an auction to vend country liquor with full knowledge of the terms and conditions attaching thereto, cannot be permitted to wriggle out of the contractual obligations arising out of the acceptance of their bids by a petition under Art. 226 of the Constitution. 15. Civil Appeal No. 155 (N) of 1971 At an auction for the licence of retail vend for Butana in the Rohtak district for the financial year 1968-69 held by the Deputy Excise &Taxation Commissioner on March 11, 1968 at the Collectorate, Rohtak, the respondents Messrs Ram Kishan Pritiam Singh &Co. Offered the highest bid of Rs. 1, 40, 000. The Deputy Excise &Taxation Commissioner accepted their bid at the conclusion on the auction. On the same day, the respondents deposited Rs. 5, 811 equivalent to one- twentieth of the licence fee representing the security amount and started operating the said licence w.e.f. April 1 1968. It appears that they drew their supplies by making applications to the a Excise &Taxation Officer, Rohtak for the issuance of challans for deposits of still-held duty in the treasury, and after crediting into the treasury a sum equivalent to the excise duty payable on the strength of permits issued by him. Admittedly, the respondents worked the contract throughout the period without making any payment of Rs. 1, 40, 000 towards the licence fee which was payable in 23 fortnightly installments. The respondents on being served with a notice of demand for payment of Rs. 13, 000 representing the first of such fortnightly installments filed a writ petition in the High Court and the High Court following its decision in Kanhiya Lals case, supra, struck down the notice of demand. It is accepted at the bar that the respondents have not paid anything towards the licence fee of Rs. 1, 40, 000 due and payable by them.Upon these facts, the Excise &Taxation Commissioner would have been justified in cancelling the licence in terms of r.36(23)(2) of the Rules which is in these terms:"A person to whom a country spirit shop is sold shall pay the annual licence fee in 23 equal installments, each installment being payable on the 10th and 26th of each month starting from the month of April. In the event of failure to pay the installment by the due date, his licence may be cancelled." 16. There was a fundamental breach of an essential condition by the respondents. In a commercial contract of this nature, for the performance of which a definite time has been fixed and the contract specifies the mode of payment i.e. specifies the dates on which The installments of the licence fee are to be paid, time is of the essence of the contract. R.36(23)(1) of the Rules specifically makes time of the essence. It therefore follows that payment to the installments on the due dates was a condition pre-requisite to the performance of the contract, and that the failure of the respondents to make such payments relieved the State Government of their obligations. The Excise &Taxation Commissioner would therefore have been justified if he had cancelled the licence under r. 36(23) and put the liquor vend to reauction for the remaining period of the financial year. Instead of taking this drastic step of cancellation of contract, the Deputy Excise &Taxation Commissioner served the respondents with the impugned notice of demand for payment of the first fortnightly installment of Rs. 13, 000. The respondents were bound to pay the defaulted installment on the due date but without complying with the notice of demand moved the High Court under Art. 226 of the Constitution challenging the demand on the ground that the licence fee partakes of the nature on an excise duty. As already stated, the High Court following its decision in Kanhiya Lals case struck down the notice of demand. The result has been that the respondents enjoyed the privilege of retail vend of country liquor, Butana for the entire period without payments of any licence fee. On merits, learned counsel appearing for the respondents had nothing to urge against the impugned notice of demand.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]There was a fundamental breach of an essential condition by the respondents. In a commercial contract of this nature, for the performance of which a definite time has been fixed and the contract specifies the mode of payment i.e. specifies the dates on which The installments of the licence fee are to be paid, time is of the essence of the contract. R.36(23)(1) of the Rules specifically makes time of the essence. It therefore follows that payment to the installments on the due dates was a condition pre-requisite to the performance of the contract, and that the failure of the respondents to make such payments relieved the State Government of their obligations. The Excise &Taxation Commissioner would therefore have been justified if he had cancelled the licence under r. 36(23) and put the liquor vend to reauction for the remaining period of the financial year. Instead of taking this drastic step of cancellation of contract, the Deputy Excise &Taxation Commissioner served the respondents with the impugned notice of demand for payment of the first fortnightly installment of Rs. 13, 000. The respondents were bound to pay the defaulted installment on the due date but without complying with the notice of demand moved the High Court under Art. 226 of the Constitution challenging the demand on the ground that the licence fee partakes of the nature on an excise duty. As already stated, the High Court following its decision in Kanhiya Lals case struck down the notice of demand. The result has been that the respondents enjoyed the privilege of retail vend of country liquor, Butana for the entire period without payments of any licence fee.