Case: Thakur Prasad Sao Etc Vs. Member, Board of Revenue and Others

2. A sale notice was published by the authorities concerned for the auction of licences to open country liquor shops in Singhbhum district with effect from April 1, 1966, including an outstill shop at Bhirbhania. Appellant Ayodhya Prasad gave the highest bid which was knock ed down in his favour, and he deposited two months licence fee in advance at the rate of Rs. 3, 650/per month. He applied on March 22, 1966 to the Kolhan Superintendent of Singhbhum to settle a piece of land for establishing an outstill shop at Bharbharia, but the application was rejected on September 27, 1966 because of the objection raised by some members of the District Consultative Committee. The villagers of Bharbharia also opposed the opening of the outstill shop. The shop could not therefore be established there. `The appellant how ever obtained a piece of land in village Chittimitti and applied on July 30, 1966 for permission to open the outstill shop there. This was allowed and the appellant claimed that he began to collect the necessary material but a mob forcibly removed the building and the distillation material. He filed a report with the Police about the incident. The approval for opening the outstill shop at Chittimitti was however withdrawn on October 6, 1966 and the appellant was asked to pay the monthly licence fee for the period April 1, 1966 to January, 1967. He denied his liability to pay the fee and claimed a refund of the money which had been deposited by him. His case was recommended by the Collector for remittance of the licence fee amounting to Rs. 43, 800/for the entire yearHe also made an application to the Commissioner of Excise for refund of the de posit of Rs. 7, 300/and for payment of compensation for loss of anticipated profits and dam ages, but the application was rejected. It appears that the appellant went on bidding at the bids for the subsequent three years, and laid similar claims for refund and damages, but to no avail. He then filed the bunch of writ petitions referred to above for quashing the demand notices, but they have been dismissed as aforesaid by the High Courts judgment dated January 2, 1975. Civil Appeal No. 825 relates to the bid forCivil Appeal No. 824 relates to the bid for 196768, while Civil Appeals Nos. 826 and 827 relate to the bids for0. These may be said to be group A appeals.Civil Appeals Nos. 819823 of 1975 relate to the applications of appellants Thakur Prasad Sao and others for reduction of the licence fees for outstill liquor shops at Gua, Noamandi, Kiriburu, Andheri, Goiekara, Patajai and Dangusposi forIn these cases the licensees were T. P. Sao or his relations or employees. They claimed that they incurred a loss of Rs. 55, 874.79 at Gua, of Rs. 26, 651.45 at Noamandi, of Rs. 39, 389.53 at Kiriburu of Rs. 35, 169.40 at Andheri, of Rs. 11, 649.87 at Goekera, of Rs. 11, 70 5.95 at Patajai and of Rs. 11, 657.21 at Dengusposi.3. The appellants claimed that there was rivalry and enmity with Bishwanath Prasad and his brother who made speculative bids at the auction, as a result of which the outstill shops were settled for uneconomic amounts. Their grievance was that the Deputy Commissioner did not discharge his duty of refusing to allow the manifestly speculative bids although the percentage of increase in the licence fees ranged between 24 to 130 per cent when for other shops the increase was below 12 percent. The appellants filed application under section 39 of the Bihar and Orissa Excise Act, 1915, hereinafter referred to as the Act, for reduction of the fees for the year, but they were rejected by he Board of Revenue. They then filed the aforesaid writ petitions in the High Court and have now filed the present appeals because the petitions have been dismissed by the High Courts impugned judgment dated March 15, 1975. These will be referred to as group B appeals.4. As has been stated, the remaining Civil Appeal No. 1105 of 1975 is also directed against the High Courts common judgment dated January 2, 1975. It relates to the grant of a licence t o the appellant for establishing outstill shops at Mahuadom, Barahi, Asnair, Aksi and Kabri, in Palamau district. The appellant applied for a direction for the refund of Rs. 2, 71, 340/which had already been realised from him, and for r estraining the realisation of a further sum of Rs. 1, 40, 680/on the ground that there was no quid pro quo for the fee, but without success. The High Court has taken the view that the amounts in question were not due on account of fees, but were pa yable for leases of the exclusive privileges which had been granted to the appellant in respect of the outstills.It is in these circumstances that these appeals have come up for consideration before us.5. As has been stated, the controversy in these appeals relates to the grant of licences for establishing outstill shops which are also known as "jalti bhattis". That system has been described in paragraph 253 of the Bihar and Orissa Excise Manual, Volume III, hereinafter refer red t o as the Manual, asthis system a certain number of stills for the manufacture of country spirit are allowed within a certain area. The holder of an outstill licence pays a certain sum per men sem for manufacturing country spirit in his outstill and selling it by retail on his premises. No attempt is made to regulate the strengths or the prices at which spirit is manufactured or It has been stated in paragraphs 254 and 255 of the Manual t hat no . definite area is fixed within which each outstill has the "monopoly of supply of country spirit", but their number is regulated according to rules, and five miles is taken roughly as the minimum distance of one outstill from another.It has been argued on behalf of the appellants, that what was granted to them was not the exclusive privilege of manufacturing and selling country liquor in retail, in the areas for which the licences were granted, and that the High Court erred in holding that such an exclusive privilege had been granted under section 22 of the Act. It has been urged that the licences in question fell within the purview of section 30 of the

Court's reasoning:
7. We have described the essential features of the out still system, and there can be no doubt that the holder of a licence under the system acquires the right to manufacture country spirit in his outstill and sell it by retail "in his premises" without any restriction on the strength or pr ice at which the spirit is manufactured or sold. Moreover he has the monopoly of manufacturing and supplying country liquor within his area. The right is therefore clearly an exclusive privilege within the meaning of section 22(1) (d) of the Act and it is futile to contend that the licences in question were merely licences for the retail sale o f spirit for consumption on the vendors premises within the meaning of section 30 of the Act. The High Court was therefore quite correct in taking that view.It may be mentioned that the appellants have not produced their licences in support of the contention that exclusive privilege of the nature referred to above was not granted to them even though the licences w ere for establishing outstills in the area covered by them. It is however not disputed that the licences were granted in Form 30 (Volume II, Part I, Bihar and Orissa, Excise Manual) on the condition that the appellants would pay to the government, in advance. the monthly fee mentioned therein. It is nobodys case that the licences were cancelled or suspended under section 42 of the Act for any of the reasons mentioned in the section, or that the licences were withdrawn under section 43 so as to entitle the appellants to remission of the fee payable in respect of them or to payment of compensation in addition to such remission, or to refund of the fee paid in advance. It is also not the case of the appellants that t hey surrendered their licences within the meaning of(1) of section 44 so as to justify the remittance of the fee payable by them, or paid by them in advance. In fact it has clearly been provided in(2) of section 44 that t he provisions of subsection (1) shall not apply in the case of a licence for the sale of any country liquor in the exercise of an exclusive privilege granted under section 22. It is true that in its judgment under appeal (in Civil Appeals Nos.of 1975) the High Court has observed that the petitioner before it was at liberty to surrender the license, but it appears that in taking that view it did not notice(2) of section 44 even though it had held that what was granted was an exclusive privilege under section 22. The licences of the appellants therefore remained in force for the periods for which they were granted and, by virtue of the express provisions of section 45, they could have no claim to compensation.In such a situation, counsel for the appellants have placed considerable reliance on paragraph 121 of the Manual and have argued that the High Court erred in taking the view that the instructions contained in it had no statutory force and its benefit was not available to the appellants. Reliance in this connection has been placed on Sukhdev Singh and others v. Bhagatram Sardar Singh Raghuvanshi and another([1975] 3 S.C.R 619.), Laljee Dubey and others v. Union of India and others([1974] 2 S.C.R. 249.) Union of India v. K. P. Joseph and others([1973] 2 S.C.R. 75.).It would thus appear that thedeals with the "deposits" made immediately on account of advance fees, the consequences of the failures to make such payment and the return of those "deposits" to the person to whom the licence may subsequently be refused because (1) the Magistrate declines to grant him a certificate or because he is unable to obtain suitable premises in spite of his bona fide endeavors or (ii) for any other adequate reason. But it was not the case of the appellants that the licences were "subsequently refused" to them for any reason whatsoever. So even if it were assumed, for the sake of argument, that the instructions contained in paragraph 121 were binding on the authorities concerned, that would not matter for purposes of the present controversy as it does not relate to refund of the deposits referred to in paragraph 121. In this vie w of the matter, it is not necessary for us to examine here the larger question whether the instructions contained in the Manual were made under any provision of the law and created any rights in favour of persons whose bids were accepted at public auctions of the shops.It will be recalled that it was an incident of the outstill system that the holder of an outstill licence was allowed to manufacture country spirit within a "certain area" and he paid a certain sum of money per mensem for manufacturing country spirit in his outstill and "selling it by retail on his premises". It was therefore permissible for appellant Ayodhya Prasad to locate the shop at Bharbharia or at some other suitable place within his area, with the permission of the Collector. The notice which had been issued for the public auction is on the record and condition No. 5 thereof expressly states that the department would not be responsible for providing the place for the location of the outstill. Moreover it was expressly stated that the outstill at Bharbharia would be settled purely as a temporary measure on condition that an undisputed site was made available for it. There is therefore nothing wrong with the view taken by the High Court that the responsibility for finding a suitable site was of the appellant, and there is no justification for the argument that nothing was payable by him because he could not locate the shop in spite of his best efforts. It may be that the Deputy Commissioner recommended his case for remission, but that I would not matter when the appellant was liable to pay the money under the law governing hisargument is however futile for we have given our reasons for holding that what was granted to the appellants was the exclusive privilege of manufacturing and selling country liquor within the meaning of section 22(1) (d) of the Act, and it has been expressly provided in section 29 that it would be permissible for the State Government to accept payment of a sum in "consideration" of the exclusive privilege under section 22. The decisions of this Court in Nashirwars case and Har Shankars case have set any controversy in 41 this respect at rest, so that it is well settled that as the State has the exclusive right and privilege of manufacturing and selling liquor, it has the power to hold a public auction for the grant of such a right or privilege and to accept the payment of a sum therefore. It was therefore permissible for the State to frame rules for the grant of licences on payment of fees fixed by auction, for that was only a mode or medium for ascertaining the best price for the grant of the exclusive privilege of manufacturing and sellingis however no such reference to any rule in regard to instructions Nos. 130 and 93. But quite apart from the question whether these instructions were legally enforceable, we have examined the question whether they could justify the argument that the appellants were entitled to reduction of the amounts of the fees payable by them.It should not be very difficult for an officer in a contract supply area to realise the stage at which bidding becomes purely speculative. He knows the issues of spirit during the previous year and the cost to the vendor including duty, carriage, establishment charges and the like, and should thus be able to estimate the figure beyond which a prudent man would not bid. If after warning the bidder, that this point has been reached, the latter still wishes to take the risk no case for remission can arise. The case is, however, different where exceptional reasons which would not at the time be. foreseen, operate adversely to the interest of the licensee but at the same time it is not the duty of Government to safe guard licensees from the effects of their own imprudence or ignorance."It would appear that there is nothing in the note to justify the argument that it gave rise to a right in favour of the appellants to obtain a reduction of the fees. As has been pointed out, that was clearly a matter within the discretion of the Board of Revenue under section 39, and the wordings of the note appended to paragraph 130 could not overreach that provision of the law. Moreover, the question whether the circumstances mentioned in the note were at all in existence in the case of the appeals under consideration, was a question of fact which could not be tried in these proceedings. The decision in Rohtas Industries Ltd. v. S. D. Agarwal and another ([1968] 3 S.C.R. 108.) to which our attention has been invited on behalf of the appellants, can be of no avail to them.14. As has been stated, the writ petition which has given rise to Civil Appeal No. 1105 of 1975 raised the question whether the refund of fees claimed by the appellant was permissible on the ground that there was no quid pro quo for the same. The High Court has rightly rejected that contention for the reason that the amounts in question were payable for the licences which had been granted for the exclusive privilege in question and, as has been shown, that argument is no longer available to the appellant in view of this Courts decisions in Nashirwars case (supra) and Har Shankars case (supra).