Case: Lakhanlal Etc Vs. State of Orissa and Ors. (with connected appeals)

These appeals by certificate or special leave are directed against judgments of the Orissa High Court dated May 15, 1970, February 3, 1971, April 16, 1971, May 7, 1971, September 6, 1971 and March 28, 1974. They arise out of several writ petitions. The facts which gave rise to the petitions changed from time to time largely because of amendments in the law, and that was the reason for the filing of separate writ petitions resulting in the impugned judgments of the High Court, but we have heard them together at the instance of the learned counsel for the parties and will dispose them of by a common judgment. The nature of the controversy in these cases is such that it will be enough to state the basic facts for the purpose of appreciating the arguments of counsel for theCollector of Mayurbhanj issued a notice on February 3, 1 970 by which he invited tenders for the grant of licences for establishing 70 outstill shops for 1970-71. Ajodhya Prasad Shah gave the highest bid for a group of seven shops, in one lot, for Rs. 34, 000/-per month. H is bid was accepted and his name was entered in the prescribed register, and the entry was signed by the successful bidder and the Collector. Ajodhya Prasad accordingly deposited Rs. 68, 000/- on account of two months "fees", in advance, as required by rule 103 of the Boards Excise Rules, 1965. Raghunandan Saha, who was the unsuccessful bidder, felt aggrieved and filed an appeal, but it was dismissed by t he Excise Commissioner on March 16, 1970. The Board of Revenue also refused to interfere. Ajodhya Prasad claimed that in the mean time he made arrangements for establishing his shops and incurred an expenditure of about Rs. 1, 50, 000/-. He therefore approached the authorities concerned for the issue of the licenses for running the shops from April 1, 1970. He approached , the Superintendent of Excise for depositing Rs. 34, 000/- for the month of April, but the Superintendent did not pass the deposit challan. Ajodhya Prasad thereupon filed a writ petition (O.I.C. No. 329 of 1970) in the High Court with the allegation that the Collector was not acting according to the law as the State Government had issued instructions to him not to. issue the licenses. Ajodhya Prasad prayed in his petition for the issue of directions for the issue of licenses and quashing the State Governments instructions to the contrary. Raghunandan Saha also filed a petition (O.J.C. No. 357 of 1970) on April 13, 1970. The Collector issued a notice for reauction on May 1, 1970 an d Ajodhya Prasad amended his petition for quashing the notice also.The State Government and the other respondents traversed the claim in Ajodhya Prasads writ petition and pleaded, inter alia, that the bids at the auction were not satisfactory and, in the interest of the State revenue, the State Government had passed the orders for not accepting Ajodhya Prasads bids. The High Court examined the questions whether Ajodhya Prasad was entitled to the issue of the licenses for the seven shops and whether the State Government had the authority to direct the withholding and reauctioning of the licenses, and held, inter alia, that the State Government had no power to interfere with the auction held by the Collector after it had "become final in appeal and revision", and could not direct a reauction. The High Court examined the nature of the realisation at the auction and held that it was a tax which was not contemplated by section 38 of the Bihar and Orissa Excise Act, 1915, herein- after referred to as the Act, and that rule 103(1) of the Boards Excise Rules in regard to the fees for the licenses was not authorised by the Act and was in excess of the rule-making power of the Board. The High Court also held that the "auction price for a license is not excise duty within the meaning of Entry 51 of List II of the Seventh Schedule to the Constitution" and it was not open to the Collector "to follow the process of auctioning for determining the license fee" which was really a tax in the garb of a fee. It held that the aforesaid rule 103 was incompetent and ultra vires the Act. On the question of grant of the "exclusive privilege" under section 22 of the Act, the High Court held that what was purported to be given under the sale notice was not the grant of .an exclusive privilege. In taking that view the High Court stated that notice had not been issued under section 22 (1) of the Act and the Collector had no authority to issue such a notice In that view of the matter, the High Court did not express any final opinion as to whether the licence was to be granted for an exclusive privilege to manufacture and sell liquor . The High Court accordingly quashed the direction of the State Government dated April 15, 1970 for reauctioning the license and declared that rule 103(1) of the Boards Excise Rules was ultra vires the Act. Appeal s Nos. 1892 and 1893 of 1971 are directed against that judgment of the High Court dated May 15, 1970, on certificates.The State Government issued the Bihar and Orissa Excise (Orissa Amendment) Ordinance of 1970 and the State Government issued a fresh order dated August 19, 1970 under the provisions of the amended section 29(2) of the Act for fresh settlement of the shops, and wrote to the Collector of Mayurbhanj to c all for tenders in accordance with that order. The Collector called for tenders within a week.Ajodhya Prasad thereupon filed another writ petition (O.J.C. No. 850 of 1970) for quashing the Collector s tender notices and for a direction to the authorities concerned to grant a license to him on the basis of the earlier auction.The Bihar and Orissa Excise (Orissa Amendment) Act, 1970 was passed on October 5, 1970 and the ordinance was repealed. That was followed by the Orissa Excise (Exclusive Privilege) Rules, 1970, which were made under section 89 of the Act.The respondents in Ajodhya Prasads writ petition No. 850 of 1970 pleaded that the amendments to the Act were valid and that the State Government had the right to grant an exclusive privilege for the purposes mentioned in section 22 of the Act. The money so realised was consideration for the exclusive privilege under section 22 and was neither an excise duty nor a tax nor a fee. It was also pleaded that the tender was in accordance with the rules as the authority to accept the tender was the StateHigh Court examined Ajodhya Prasads writ petition (No. 850 of 1970 in its Judgment dated February 3, 1971. It held that the order of the State Government dated August 19, 1970 for inviting tenders was invalid as the authorities for fixing the procedure under the amended section 29(2)(b) had not been specified, the Government had "appropriated for itself absolute and naked and arbitrary power to accept any tender or reject any tender for any reason whatsoever or without any rhyme or reason" and the order left it to the uncontrolled discretion of the authority concerned to determine the adequacy of the amount offered in the tender. As regards the claim for the issue of a license under section 6, the High Court held that as the petitioner was the highest bidder on February 20, 1970 and his name was entered in the bid register and the entry was signed, the petitioner was entitled to the grant of the exclusive privilege under section 22 by virtue of section 6(a) of the Amending Ordinance irrespective of the validity of rule 103 (1) of the Boards Excise Rules. The High Court accordingly held that section 6(a) of the Amending Ordinance was valid and the grant of seven shops to the petitioner, for the manufacture and retail sale of country liquor was therefore validated "as the grant of an exclusive privilege under section 22 of the Act" and he was entitled to license under sub-section (2) of that section.. The Order of the State Government dated August 19 , 1970 and the Collectors tender notice were quashed and the Collector was directed to issue the license for the seven shops to him.Siba Prasad Saha who filed the writ petition (No. 786 of 1970) in August 1970, after the first judgment of the High Court dated May 15, 1970 for refund of the license fee and for non-payment of any fee in the future, as he was a licensee for several liquor shops, amended it in the light of the subsequent developments. The High Court took the view in its judgment dated April 16, 1971 that sections 2 to 5 of the Amending Ordinance, or the Amending Act (17 of 1970) were not made retrospective. It took note of this Courts decision in Krishna Kumar Narula etc. v. The State of Jammu and Kashmir and others([1967] 3 S.C.R. 50.) that a citizen had the fundamental right to carry on business in liquor and all that the State could do. was to impose reasonable restriction thereon. It also held that in so far as section 29(2) of the Act provided that the sum payable under sub-section (1) thereof shall be determined "otherwise" than by calling tenders or by auction, it was unconstitutional That portion , of sub-section (2)(a) was therefore struck off. The High Court held further that what was realised by the State was not a fee or tax, as the primary purpose of the Act was to. restrict the manufacture and sale of country liquor. It accordingly held as follows,are, therefore, satisfied that the provision in Section 22 of the Act for grant to any person of the exclusive privilege of manufacture and sale of country liquor for a sum, the method of determination of which is provided in Section 29, are provisions which are calculated to restrict and control trade in liquor although incidentally revenue is earned for the State thereby and that Entry in List II of t he Seventh Schedule confers power on the State Legislature to enact such a regulatory measure and consequently the State Legislature has legislative competence to enact Sections 22 andHigh Court accordingly held that section 22 and section 29 without the expression "or otherwise" in clause (a) of sub-section 2 were valid and constitutional. The High Court then examined the effect of section 6 of the Amending Act of 1970, and held that as retrospective effect was not given to sections 2 to 5 of that Act, the validity of the money realised by the State had to be judged with reference to the unamended provisions, and held as follows,therefore, follows that by reason of the fact that Sections 2 to 5 of the Amending Act were not made retrospective in operation, the effect of Section 6 is that thereby t he Legislature had directed the State to disregard the decision given by this Court in Ajodhya Prasads case (I.L.R. 1971 Curt. 51 ) that the amount realised by the auction is illegal. This virtually amounts to judicial exercise of power by the legislature a power which the Legislature does not possess. We, therefore hold that Sections 2 to 5 of the Amending Act having not been made retrospective, Section 6 is ultra vires the powers of theHigh Court however held that although the license fee collected by the State was illegal, the petitioner had already enjoyed the benefit under the license and had voluntarily participated in the auction, and was not entitled to an order for its refund. A similar view was taken in the judgment dated April 16, 1971 in O.J.C. No. 242 of 1967 and the judgment dated May 7, 1971 in O.J.C. NOS. 1185-1190, 1223, 1224 and 1226 of 1970. Those judgments have given rise to civil appeals Nos. 2071, 1855- 1863 and 351-359 Of 1972 (cross-appeals). O.J. Cs. Nos. 859 and 863 of 1970 were disposed of by separate judgments dated September 6, 1971 which followed the earlier judgment dated April 16, 1971 in Siba Prasad Sahas case and that has given rise to appeals Nos. 1235 and 1236 of 1972.The Bihar and Orissa Excise (Orissa Second Amendment) Act, 1971 (10 of 1971) was passed to set right the defects in the law. Stated briefly that Act made the amendments to sections 2, 7, 29, 37 and 90 retrospective and validated the earlierwrit petition (O. J.C. No. 589 of 1972) was filed to challenge the vires of section 22 and 29 of the Act. The main judgment in the matter was delivered in O.J.C. No. 1036 of 1971, on January 3, 1974. In that judgment the High Court examined the challenge to the vires of sections 22 and 29 of the Act and the claim for refund of the money already paid with reference to the amendments to the Act. It followed the earlier decision in Siba Prasad Sahas case of April 16, 1971 (I. L.R.1971 Cuttack 777) and dismissed the writ petitions and that/ms led to the filing of civil appeals Nos. 1235 and 1236 ofwill tires appear that these appeals are inter-connected and that is why we have thought it desirable to examine them in a common,has been stated, Civil Appeals Nos. 1892 and 1893 of 1971 arise out of O.J.Cs. Nos. 392 and 357 of 1970 which have been decided by the judgment of the High Court dated May 15, 1970.

Reasoning:
We do not think that what the High Court held to be an "acceptance of the bid" at the "auction", even after the announcement of an express condition attached to it that the knocking down of the bid would not really be an acceptance of it by the Government, could be an acceptance of the bid at all. In the peculiar facts and circumstances of the auction, the bids were, apparently, nothing more than offers in response to invitation to make tenders, and such auctions were the mode of ascertaining the highest offers. The basic conditions for the emergence of rights through offers or conditions made and accepted, and acted upon, by paying any specified or agree d price as consideration, were thus wanting in this case. In fact the express and advertised terms of the auction made it clear that the money tendered was to be deemed to be deposited tentatively, pending the acceptance of the bid. So what we have before us are neither offers nor acceptance by the Government. There were only offers by the bidders to purchase the rights, subject expressly to their acceptance or rejectio n by the State Government. The essentials of any agreement and the mutuality of obligations were thus absent altogether.Moreover it was not an ordinary auction where binding agreement could be deemed to be concluded at the fall of the hammer, creating mutually enforceable obligations. Those were only so called auctions, adopted as means for ascertaining the highest offers for the exclusive privileges which the Govern ment alone could grant for carrying on a trade or business. considered noxious, under the law and which, because of its special character, could be regulated in any way, or even prohibited altogether, by the Govern- ment. This special character of the trade or business would appear from the power of the State Government to grant the exclusive privilege to. carry on trade in the manufacture and sale offollow other clauses with which we are not concerned. Moreover section 17 of that Act has validated all grants mad e by way of licenses for manufacture and retail sale of country liquor in respect of any place on or after the 7th day of August, 1965, on which date the Boards Excise Rules (including rule 103) admittedly came into force. In this view of the matter, it is not necessary for us to examine the other arguments of Mr. Agarwal Which have been adopted by Mr. Bhagat regarding the invalidity of rule 103. It is not necessary to deal s eparately with the judgment of the High Court dated April 16, 1971 in O.J.C. No. 242 of 1967, which has given rise to civil appeal No. 2071 of 1972, or with its decision dated May 7, 1971 in O.J.Cs. No. 1185-1190, 1223, . 1224 and 1226 of 1970 (which has given rise to civil appeals Nos. 1855-1863 of 1972 and cross-appeals Nos. 351-359 of 1972) because they are based on the aforesaid decision dated April 16, 1971 in O.J.C. No. 786 of 1970. So also, it is not necessary to deal separately with the decision dated September 6, 1971 in O.J.C.No. 859 of 1970 and 863 of 1970 which have given rise to civil appeals Nos. 1235 and 1236 of 1972, for the same reason .This takes us to the judgment of the High Court dated March 28, 1974 in O.J.C.No.589 of 1972 which has given rise to civil appeal No. 1802 of 1974. That decision is based on the decision dated January 3, 1974 in O. J.C.No. 1036 of 1971. The petitioner in that case was a licensee for the retail sale of country liquor in Mayurbhanj district. He challenged the vires of sections 22 and 29 of the Act and claimed that the monthly consideration for the license was not due from him and that he was entitled to a refund of the money already paid by him. The High Court followed that decision and dismissed the writ petition. In doing so it relied on its decision dated April 16, 1971 in Siba Prasad Saha v. State of Orissa and other (I.L.R. 1971 Cuttack 777) and the decision of this Court in Jaiswals case (supra) and dismissed the petition. We have al ready dealt with the points which arise for consideration in this case while examining the earlier cases and we see nothing wrong with the impugned judgment of the High Court by which the writ petition has been dismissed.