K. A. AZEEZ AND CO v. STATE OF MYSORE — 1973 DIGILAW 266 (KAR)

( 1 ) THE petitioner in this writ petition is a holder of licence issued under the provisions of the Mysore Excise (Denatured Spirit and Denatured spirituous Preparations) Rules 1967 (hereinafter referred to as the Rules ). The Deputy Commissioner (Excise), Bangalore District who is the licensing authority issued a notice to the petitioner dt. 6-4-73 produced in the case as Ex. 'b' requiring him to furnish, security within seven days from the date of receipt of the notice in the form of National Savings Certificate and pledge the some in favour of the Depucy Commissioner (Excise), bangalore District, for a sum calculated at the rate of Rs. 10 per litre of denatured spirit, for the due observance of the terms of licence granted to him. The said demand was made by the Deputy Commissioner (respondent 3) in view of the circular issued by the Excise Commissioner bearing no. EXE. IML. 429/72-73 dt 23-3-1973 produced in the case as Ex. 'a'. Though as rightly pointed out by Sri Chandrakantharaj Urs, learned government Advocate appearing for the respondents the order of the Deputy commissioner dt. 6-4-1973 does not refer to the circular of the Excise commissioner, there cannot be any doubt that the same was issued only in view of the direction given in the circular of the Excise Commissioner dt. 23-3-1973. The circular issued by the Excise Commissioner requires all the Deputy Commissioners (Excise) to take steps to secure the deposits as mentioned in the circular from all the licensees under their control by way of security for the due observance of the terms of the licence. So far as the denatured spirit license holders are concerned, the circular prescribes that the security should be taken at the rate of Rs. 10 for every litre of denatured spirit which the licensee is permitted to possess and deal with under the licence. ( 2 ) IN this writ petition, which was filed on 11-4-1973, the petitioner has sought the following three reliefs : (i) declare that Rule 17 (9) (ii) of the Mysore Excise (Denatured spirit and Spirituous Preparation) Rules 1967, as being ultra vires of the constitution of India and strike down the same. (ii) Further issue a writ or order forbearing the III Respondent from demanding any amounts as security deposit. (ii) Further issue a writ or order forbearing the III Respondent from demanding any amounts as security deposit. (iii) Issue a writ or order quashing the demand made by the III respondent as per Exhibit-B. ( 3 ) BUT during the pendency of this writ petition, another circular was issued by the Excise Commissioner bearing No. EXE. DST. II 30/73-74 dt. 4th June 1973. By the said circular, the Excise Commissioner modified his earlier circular dt. 23-3-1973 referred to above in so far as it pertains to the amount of security to be demanded from the denatured spirit licensees. The circular of the 4th June 1973 while maintaining the rate of Rs. 10 per litre, has restricted the maximum amount to Rs. 1000 in each case. Though the preamble to the circular dt. 4th June 1973 adverts to the object of the circular, it is clear that the earlier circular dt. 23-3-1973 remained in tact so far as all other masters are concerned. In the statement of objections filed on behalf of the respondents, a specific reference has been made to the new circular of the 4th of June 1973. It is in this background that Sri N. Santhosh Hegde, learned Counsel for the petitioner, submitted application I. A.-I for adding an additional prayer for quashing the circular of the Excise Commissioner dt. the 4th of June 1973 produced by the petitioner as Ex. 'd'. After hearing the learned Government Advocate, i have allowed the said application I. A. I- ( 4 ) IT may be mentioned at the outset that Sri N. Santhosh Hegde, learned Counsel for the petitioner, submitted that he is not pressing at this stage his prayer for declaring Rule 17 (9) (ii) of the Rules as being ultra vires the Constitution. It is also necessary to note that in the stater ment of objer lions filed on behalf of the respondents, it is stated that the demand made by the Deputy Commissioner for furnishing the security deposit is being withdrawn and that the same will not be enforced. It is however stated that a fresh demand would be made in the light of the now circular of the Excise Commissioner dt. 4-6-1973. As it is stated on behalf of the respondents that the impugned demand will not be enforced against the petitioner, it is unnecessary to consider the prayer of the petitioner in that behalf. It is however stated that a fresh demand would be made in the light of the now circular of the Excise Commissioner dt. 4-6-1973. As it is stated on behalf of the respondents that the impugned demand will not be enforced against the petitioner, it is unnecessary to consider the prayer of the petitioner in that behalf. Though differently worded, the relief as can be gathered from the pleadings as well as from the arguments of Sri Hegde, is for quashing the circulars of the Commissioner of Excise dt. 23-3-1973 (Ex. 'a') and the circular dt. 4-6-1973 (Ex. 'd1) in so far as they pertain to denatured spirit licence holders. ( 5 ) THE first contention of Sri Hegde, learned Counsel for the petitioner is that the impugned circulars are liable to be quashed as the same have been issued by the Commissioner of Excise in conflict with Rule 17, (9) (ii) of the Rules. Rule 17 (9) (ii) of the Rules reads as follows :" A licensee shall, before the license is granted or at any time during its currency, if so required by the authority deposit with the deputy Commissioner in cash or in Government promissory notes such sum as may be prescribed by the licensing authority as security for the due observance of the conditions of the license. In case of non-observance of the terms of the license the security so deposited may be forfeited to Government and the license cancelled. The forfeiture of the deposit and the cancellation of the license shall not be held to prevent the licensee from being proceeded against in a Court of law under the provisions of the Act or the rules made thereunder or under any other law for the time being in force. " ( 6 ) THIS rule was framed in exercise of the powers conferred upon the State Government by S. 27 read with S. 71 of the Mysore Excise Act, 1965 (hereinafter referred to as the Act ). S. 27 of the Act provides :" Subject to such rules as may be prescribed, any authority granting licence under this Act may require the licensee- (a) to give security for the observance of the terms of his licence; and (b) to execute a counterpart agreement in conformity with the tenor of his licence. S. 27 of the Act provides :" Subject to such rules as may be prescribed, any authority granting licence under this Act may require the licensee- (a) to give security for the observance of the terms of his licence; and (b) to execute a counterpart agreement in conformity with the tenor of his licence. " ( 7 ) IT is clear from the provisions of S. 27 of the Act that security can be demanded for the due observance of the terms of the licence. It is in order to achieve this object that Rule 17 (9) (ii) of the Rules has been framed by the State Government. It may be mentioned at this stage that it is not one of the terms and conditions of the licence granted to the petitioner that he should furnish security to the licensing authority. ( 8 ) THE security contemplated by the two impugned circulars is only under Rule 17 (9) (ii) of the Rules. The said rule empowers the Deputy commissioner (Excise) to require the licensee to furnish security for the due observance of the conditions of the licence, either before the licence is granted or at any time during its currency. The authority that is entitled under the rule to require the licensee to furnish security is the licensing authority, who in the present case, is the Deputy Commissioner. The rule expressly empowers the licensing authority to determine what amount of security should be demanded from a particular licensee. In other words, the rule gives absolute discretion to the licensing authority to decide as to whether security at all should be demanded from any particular licensee and if he is of the opinion that the licensee should be required to furnish security, he has the discretion to determine the amount of security to be demanded from a particular licensee. The discretion vested in the licensing authority has no doubt to be exercised reasonably having regard to the object of insisting upon furnishing the security, namely, for the due observance of the terms of the licence. Hence the licensing authority is required to take into consideration all relevant factors before exercising the discretion vested in it under Rule 17 (9) (ii) of the Rules. The concluding portion of the impugned circular dt. Hence the licensing authority is required to take into consideration all relevant factors before exercising the discretion vested in it under Rule 17 (9) (ii) of the Rules. The concluding portion of the impugned circular dt. 23-3-1973 reads as follows : " The Deputy Commissioners (Excise) are requested to take immediate steps to secure the deposit as above from all the licensees under their control. " in the earlier part of the circular, the rate at. which the security should be demanded is specified. The above circular has been modified by fixing the upper limit at Rs. 1000 by the second circular dt. 4-6-1973. The resultant position is that subject to a maximum of Rs. 1000, the licensing authorities are directed to take steps to secure deposit at the rate of Rs. 10 per litre of denatured spirit which the licensees are entitled to possess and deal with in accordance with the licence granted to them. The clear effect of both the impugned circulars so far as denatured spirit licensees are concerned, is that there is no option left to the licensing authority but to insist upon security being furnished in accordance with the rate specified in the impugned circulars. The discretion vested with the licensing authority under Rule 17 (9) (ii) of the Rules either to demand or not to demand security as well as in the matter of fixing the quantum of security is taken away by the impugned circulars and the licensing authority is required to insist upon security being furnished whether or not the licensing authority is of the opinion that the circumstances justify the demanding of security from a particular licensee and whether or not what the licensing authority considers as the proper amount of security to be demanded in each case. When Rule 17 (9) (ii) of the Rules vests the absolute discretion in the matter with the licensing authority, the Excise Commissioner by the two impugned circulars has sought to deprive the licensing authority of the aforesaid discretion. The action of the Excise Commissioner was sought to be supported by Sri M. P. Chandrakantharaj Urs, learned government Advocate, relying upon S. 3 (2) of the Act, which reads as follows : " The Excise Commissioner shall exercise all the powers of Deputy commissioner in respect of the administration of this Act and shall have control of the adminisration of the Excise Department. " ( 9 ) IT was submitted by Sri Chandrakantharaj Urs that as the Excise commissioner has the power of control of the administration of the Excise department, he was well within his pov/ers in issuing the two impugned circulars for carrying out the purpose and object of the Act. The power, conferred upon the Excise Commissioner by S. 3 (2) of the Act, of controlling the administration of the Excise Department has necessarily to be exercised consistent with the provisions of the Act and the Rules made thereunder and not in conflict with the same. If Rule 17 (9) (ii) of the rules confers power of demanding security from the licensees on the licensing authority and gives it the discretion of deciding whether security should be demanded from a particular licensee as also the discretion to decide the quantum of security, the Excise Commr. cannot in exercise of the power of control conferred on him by S. 3 (2) of the Act, issue circulars which will take away the right and discretion conferred on the licensing authority by Rule 17 (9) (ii) of the Rules. As the circulars impugned in this case are clearly in conflict with the provisions of Rule 17 (9) (ii) of the Rules, they cannot be sustained on the ground that they have been issued in exercise of the powers conferred on the Excise Commissioner by section 3 (2) of the Act. ( 10 ) FOR the view I have taken, sustenance can be derived from the decision of the Supreme Court in Commissioner of Police v. Gordhandas bhanji, AIR 1952 SC 16 , on which reliance was placed by the learned Counsel for the petitioner. That was a case in which the Commissioner of Police, Bombay, was empowered to grant licence under S. 22 of the City of Bombay Police act On an application made to him, the Commissoner of Police granted the licence. But later he suspended the licence on the instructions issued by the State Government. On the direction of the State Government, the commissioner of Police informed the grantee that permission granted by him earlier is cancelled in view of the direction of the State Government. But later he suspended the licence on the instructions issued by the State Government. On the direction of the State Government, the commissioner of Police informed the grantee that permission granted by him earlier is cancelled in view of the direction of the State Government. When the action of the Commissioner of Police taken on the basis of the directions of the State Government was challenged, the Supreme Court held that as under the Rules framed under S. 22 of the City of Bombay police Act read with Rule 250 of the Rules, the only person vested with the authority to grant or reluse the licence for the erection of a building to be used for purposes of public amusement was the Commissioner of police, that power could be exercised only by him and not by the State government. The principle laid down by the Supreme Court in the aforesaid decision equally governs the present case. ( 11 ) FOR the reasons stated above, this writ petition is allowed and the impugned circulars issued by the Excise Commissioner dt. 23-3-1973 (Ex. 'a') and 4-6-1973 (Ex. 'd') in ro far as they pertain to denatured spirit licence holders, are hereby quashed. No costs. --- *** --- .