Case: P. Bhooma Reddy Vs. State Of Mysore &amp; Ors

On May 10, 1968 the excise Commissioner of Mysore published a notice stating that the exclusive privilege would be sold by tender-cum-auction by the Divisional Commissioner, Gulbarga, on May 28 and inviting tenders by May 27. On May 27, the appellant made a tender offering Rs. 999999/- towards the monthly rent of the shops and deposited the requisite earnest money amounting to Rs, 1,85,168/- as required by Rule 7 (f).Respondent No. 4, K. V. Niranjan made a tender offering Rs. 969999/- towards the monthly rental. The appellant was the only bidder present at the auction on May 28. His offer being the highest was accepted by the Divisional Commissioner, Gulberga, under Rule 17 (1). The appellant deposited another sum of Rs. 814831/which together with the earnest money made up one months rent as required by Rule 17 (5). On June 4, the Divisional Commissioner, Gulbarga, confirmed the sale under Rule 17 (1).2. On June 6, the Deputy Commissioner, Gulbarga, issued a notice asking the appellant to make deposits according to Rule 19 immediately and to obtain licences from the concerned tahsil officers after completing other formalities. Under Rule 19 (2) the appellant was required to deposit another one months rent within 15 days from the date of the sale. By June 15, the appellant deposited in all Rs. 39,99,996/- amounting to 4 months rent. By a letter (Ex. B-1) the appellant informed the Excise Commissioner that he had deposited 4 months rent as required by circular No. EXE. 1.1575 issued by the Excise Commissioner on December 12, 1967 and asked for permission to obtain licences from the Deputy Commissioners of Raichur and Gulbarga. On June 18/19 he applied to the Divisional Commissioner, Gulberga, for the issue of licences. On June 19, the Divisional Commissioner, issued a notice to the appellant stating that as he had not submitted a solvency certificate of his property or the property of his sureties he was required to deposit the balance to make up six months rent as required by R. 19 (3) (i) and to furnish security for six months rental or sureties as required by R. 19 (3) (ii) and (iii) by June 25, and that in default action would be taken under R. 20 (2). A notice to the same effect was given orally on June 19, when he met the Divisional Commissioner at Bellary. On June 22, he presented a petition under S. 62 to the State Government asking for the issue of licences, as he had complied with the conditions of the circular. In view of the subsequent writ petition the State Government did not pass any orders on this petition. The notice dated June 19 was received by the appellant on June 23. On June 25, he wrote to the Divisional Commissioner stating that he had complied with the conditions of the rules read with the circular and was entitled to the licences, that he had reason to believe that necessary orders would be passed by the State Government on his petition under Section 62 and that if necessary, the terms for compliance with the requirements of Rule 19 be extended by two months. On the same date the Divisional Commissioner, rejected the application for extension of time, and issued a notice to the appellant asking him to show cause before June 26, why in view of the non-compliance with the notices dated June 6 and 19, the sale should not be cancelled and the deposits already made should not be forfeited to the Government. The notice was served on his advocate on June 25, at 7.40 p. m. On June 26, the appellant submitted a petition to the Divisional Commissioner stating that he had complied with the terms of Rule 19 and the circular, that abrupt cancellation of the sale would result in irreparable injury and that in any event the time to deposit the balance two months rental be extended for a reasonable time. By an order dated June 26, (Ex. J), the Divisional Commissioner rejected the application for extension of time and cancelled the sale stating that (1) the appellant did not "at once" apply in writing for licences in accordance with Rule 19 (1); (2) though he deposited two months rent as required by Rule 19 (2), he did not file a statement of his immovable properties in accordance with Rule 19 (1); and should therefore be considered as a person of doubtful solvency; (3) he was, therefore, required to deposit another 2 months rent under Rule 19 (3)(i) and to furnish securities for six months rental or surety under Rule 19 (3) (ii) and (iii); (4) he failed to comply with Rule 19 in spite of notices dated June 6 and June 19; (5) the circular issued by the Excise Commissioner was opposed to Rule 19 and could not be acted upon; (6) that even under the circular he was required to give two months collateral security in addition to 4 months cash deposit if he was a person of doubtful solvency; and (7) that the sale conducting officer has no power to extend the time or compliance with the formalities.3. On June 28, the appellant filed Writ Petition No. 1889 of 1968 against the State of Mysore and others in the High Court of Mysore for quashing the order dated June 26, (Ex. J) and for the grant of licences to him to vend liquors in the combined groups of shops in Raichur and Gulberga Districts and for other reliefs. The appellant submitted that (1) he had complied with the rules read with the circular; (2) he did not file any statement of his immovable properties under Rule 19 (i) as he had immovable properties in Andhra Pradesh; (3) as there was no inquiry nor finding by any tahsildar that he was of doubtful solvency Rule 19 (3) was not attracted; (4) the Divisional Commissioner, Gulberga, was not competent to ask for deposits and security under Rule 19 (3), nor was he competent to pass an order cancelling the sale and (5) Rule 19 (3) was violative of Articles 14 and 19 of the Constitution.4. On June 28, the High Court admitted the writ petition and directed the State Government to stay further proceedings and to issue licences to the appellant. Subsequently the High Court confirmed the stay order on condition that the appellant would deposit another two months rent. The appellant deposited about Rs. 20,00,000/- in accordance with the order. On June 30, the Divisional Commissioner granted licences to him. On July 1, he commenced his business in all the l168 shops. Thereafter he duly deposited about Rs. 30,00,000/- on account of rent for the months of July, August and September. The State Government, the Excise Commissioner and the Divisional Commissioner filed separate affidavits disputing the appellants contentions.The rival tendered, K. V. Niranjan was added as respondent No. 4 in W. P. No. 1889 of 1968 on his own application under an order of the High Court dated July 7. K. V. Niranjan filed an affidavit stating that the appellant was a benamidar for other persons and the acceptance of his tender was forbidden by Rule 12. K. V. Niranjan also filed W. P. No. 2088 of 1968 for quashing the orders of the Divisional Commissioner dated May 28, and June 4, whereby the appellants tender was accepted and for a mandamus directing the acceptance of his next highest tender under Rule 17 (4).5. The two writ petitions were heard together and were dismissed by the High Court by a common judgment delivered on September 17. The High Court held that (1) the appellant did not comply with the mandatory requirements of Rule 19; (2) Rule 19 (3) was not ultra vires the rule-making power under Section 71 nor violative of Articles 14 and 19, and the appellant was estopped from challenging it; (3) the circular of the Excise Commissioner could not modify Rule 19; the appellant could not rely on the circular as he came to know of it long after the sale, nor had he complied with its terms by depositing the entire four months rent before June 12; (4) the appellant was a benamidar for other person or persons and in view of Rule 12 was incompetent to bid and (5) the order dated June 26 (Ex. J) was valid . On these findings the High Court dismissed W. P. No. 1889 of 1968. With regard to W. P. No. 2085 of 1968 the High Court said that as the sale to the appellant had been cancelled by Ex. J, it was not necessary to set aside the order accepting and confirming his bid. The High Court held that under Rule 17 (4) it was not obligatory on the officer conducting the sale to accept the next highest offer of respondent No. 4. The High Court, however, said"in the circumstances of the case, it is necessary to observe that the authorities concerned will consider the advisability of accepting the bid of the fourth respondent, subject to his complying with all the requirements of the Act and the Rules."With these observations the High Court dismissed W. P. No. 2085 of 1968.6. By a telegram dated September 18, the Excise Commissioner instructed the Divisional Commissioner, Gulberga to direct the tahsildars of Raichur and Gulberga, to issue licences to respondent No. 4 on his complying with certain conditions. On the same date licences were issued to respondent No. 4. On September 19, the High Court dismissed an application for stay of operation of its order dated September 17, and on the same day granted to the appellant a certificate under Article 133 (1) (b) of the Constitution. On September 25, the appellant filed a stay application in this Court. On September 27, the Court passed an order restraining the respondents from forfeiting the deposits made by the appellant.

Court's reasoning:
8. In our opinion, the provision of Rule 19 sub-rule (1) requiring the successful bidder to furnish a statement of his properties to the Tahsildar and the provisions of Rule 19 sub-rules (3) and (4) do not apply where the shops in respect of which the right of retail vend is sold are situated in more than one tahsil. The opening part of Rule 19 sub-rule (1) requires the purchaser to furnish to "the tahsildar" the location of the shops and the boundaries of the shop sites.The expression "the Tahsildar" is not defined but it is reasonable to think that the details regarding the shops should be furnished to the Tahsildar within whose tahsil the shops are situated. If the shops are situated in more than one tahsil the details can be furnished to several Tahsildars. But it is not possible to give effect to the last part of sub-rule (1) and the provisions of sub-rules (3) and (4) in cases where the shops are situated in more than one tahsil.The statement of immovable properties under the last part of sub-rule (1) can be furnished to only one Tahsildar so that he can peruse the same and on such perusal or on independent inquiry ascertain under sub-rule (3) whether or not the purchaser is of doubtful solvency and satisfy himself under sub-rule (4) whether or not the value of the immovable properties tendered as security is adequate. Sub-rules (3) and (4) do not contemplate findings by more than one Tahsildar nor do they provide any machinery for resolving the conflict of opinion, if any, between two or more Tahsildars. In our opinion, the last part of sub-rule (1) and the provisions of sub-rules (3) and (4) do not apply where the shops are situated in two or more tahsils.The right of retail vend sold to the appellant is in respect of shops situated in 19 tahsils in the districts of Raichur and Gulberga. Consequently, those provisions were not attracted to this sale and the appellant was not required to comply with those provisions.9. The Divisional Commissioner, Gulberga, could not record a finding under Rule 19 sub-rule (3) that the purchaser was of doubtful solvency. Even a Tahsildar could not record such a finding without making an independent inquiry where no statement regarding immovable properties was furnished under sub-rule (1). No independent inquiry under sub-rule (3) was made by any Tahsildar. For this reason also the appellant cannot be regarded as a person of doubtful solvency and he was therefore not required to comply with the provisions of sub-rule (3). The appellant has so far deposited about Rs. 90,00,000/- and it is impossible to believe that he is a person of doubtful solvency.10. The remaining charge is that the appellant did not "at once" apply for licences.Rule 20 (2) provides for the forfeiture of the deposits on failure to comply with the provisions of Rule 19. Under the Mysore Excise Licences (General Conditions) Rules, 1967 a licensee is required to commence his business on July 1. The purpose of the Act and the Rules is achieved if the application for licence is made within sufficient time so as to enable the issue of licences before July 1. Having regard to the object of the Act and the Rules the expression "at once" in Rule 19 sub-rule (1) means within a reasonable time before July 1.It could not have been intended that the deposits would be forfeited where the purchaser applies for licence within a reasonable time. The appellant sufficiently complied with Rule 19 sub-rule (1) by applying under Ex. B, to the Excise Commissioner for permission to obtain licences and by applying to the Divisional Commissioner on June 18 for the issue of licences.In view of this conclusion it is not necessary to consider whether Rule 19 sub-rule (3) offends Articles 14 and 19 of the Constitution and we express no opinion on the question. We cannot agree with the proposition that the appellant is estopped from challenging the constitutionality and vires of the sub-rule. It is true that Rule 24 provides that the purchaser shall be bound by all the rules. But if Rule 19 sub-rule (3) offends Articles 14 and 19 it is non est and there can be no question of the appellant being bound by a rule which does not exist. Though we express no opinion on the vires of the sub-rule, we must observe that Rule 19 is clumsily drafted, its import is not clear, its tight time schedule works hardship and its procedure is cumbersome. The Government should immediately consider the question of redrafting Rule 19. It may be noted that Mr. Narasaraju conceded that Rule 19 is not beyond the rule-making powers of the State Government.Having regard to the fact that the appellant had already deposited about Rs. 40 lakhs the Divisional Commissioner, Gulbarga, acted rather precipitately and harshly in cancelling the sale. For the reasons already given, the order of cancellation (Ex. J) is invalid. The order must be set aside and a writ of mandamus must issue for the grant of licences to the appellant.17. Some complication arises out of the fact that the licences have been granted to respondent No. 4 after the disposal of the writ petitions by the High Court. Licences cannot be given to both the appellant and respondent No. 4 for retail vend of liquors in respect of the same groups of shops. In order to give effect to our order or the issue of licences in favour of the appellant it is necessary to give the further direction that the licences issued to respondent No. 4 should be cancelled. We can give this direction as respondent No. 4 is a party to this appeal.18. While holding that Rule 17 sub-rule (4) did not compel the officer conducting the sale to accept the next highest offer of respondent No. 4 the High Court observed that the authorities concerned should consider the advisability of accepting his bid. This observation is not in accordance with law and has given rise to unnecessary complications.Rule 17 (4) provides thatif the officer conducting the sale rejects the highest bid or offer, he may either accept the next highest bid or offer or re-sell the shop."The sub-rule cannot be invoked if the officer conducting the sale has accepted the highest offer. In the present case, the officer accepted the appellants highest offer and later confirmed it. The confirmation is still effective under Rule 17 (1). If for some reason the confirmation is subsequently revised or set aside, the officer cannot act under Rule 17 (4). In such a case there must be a fresh disposal of the right of retail vend of liquor in accordance with the Rules.It follows that the bid of respondent No. 4 could not be accepted under Rule 17 (4) after the disposal of the writ petitions on September 19.19. It is rather surprising that the government acted so hastily and issued licences to respondent No. 4 on or about September 18. It is not quite clear how licences in respect of l168 shops could be issued on a single day. The effect of this precipitate action on the part of the government was that the appellant could not on the next day obtain a stay of the operation of the High Courts order. There is ground for suspecting that the government was favouring respondent No. 4.