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1978 DIGILAW 152 (KAR)

Moolannagappa v. State of Karnataka

1978-06-09

K.S.PUTTASWAMY

body1978
Judgement ORDER :- In accordance with the provisions of the Karnataka Excise Act of 1965 (Karnataka Act No. 21 of 1966) (hereinafter referred to as 'the 1966 Act') and the Karnataka Excise (Lease of the Right of Retail Vend of Liquors) Rules, 1969 (hereinafter referred to as 'the 1969 Rules'), the Excise Commissioner in Karnataka, Bangalore, by his Notification dated 30th March, 1978 (Exhibit A), (published in the Karnataka Gazette Extraordinary dated 12th April, 1978) among others, notified that the lease of the right of retail vend of toddy in the 11 Taluks of Bijapur District for the excise year 1978-79 i.e. from 1-7-1978 to 30-6-1979 (both days inclusive) will be disposed of in public auction by the Deputy Commissioner, Bijapur District, on 28-4-1978. In the public auction held on 28-4-1978, the petitioner qualified to bid offered the highest bid in respect of an the 11 taluks in all aggregating to Rs. 1,18,000/- per month as against the previous bid amount of Rs. 1,10,000/- per month for the said taluks for the current excise year viz., from 1-7-1977 to 30-6-1978. On an examination of the relevant factors, the rules and the terms and conditions of the sale Notification, the Deputy Commissioner, Bijapur, exercising the powers conferred on him by sub-r. (1) of R.15 of the 1969 Rules provisionally accepted the highest bid offered by the petitioner and called upon him to deposit one month's rent amounting to Rupees 1,18,000/- on the same day which was also complied by him. As the petitioner complied with the requirements of the rules and the terms and conditions of the sale Notification dated 30-3-1978 and as the sale price was higher than the sale price of the current year, the Deputy Commissioner while provisionally accepting the highest bid of the petitioner, recommended to the Government through the Excise Commissioner for its confirmation under sub-r. (2) of R.15 of the 1969 Rules. On an examination of the sale records, the Excise Commissioner being of the opinion that there was no loss of revenue as such but the confirmation of the bids would lead to smuggling of toddy from Bijapur District to Gulbarga District, recommended to the Government not to confirm the sales and re-auction the right of retail vend of toddy in the 11 taluks of Bijapur District. It is desirable to notice the recommendation of the Excise Commissioner to Government in his own words and the same reads thus :- "In respect of toddy, the bids offered in all the taluks are comparatively higher than the current year's rentals. There is an increase of Rs. 8,100/- per month over the current years' rentals. He has provisionally accepted all the bids offered in respect of eleven taluks of Bijapur District and recommended the bids for confirmation. Viewed only from the yardstick of rental of Bijapur District, the bids appear reasonable. However, in the neighbouring District of Gulbarga, the rentals from toddy shop leases are much higher. The rentals from toddy have increased from Rs. 5,00,600/- P.M. in 1977-78 to Rs. 7,98,100/-P.M. as bid for 1978-79. In contrast, for Bijapur District the rentals have increased only from Rupees 13,20,000/- per annum to Rs. 14,17,200/-. The increase of Rs. 97,200/- per annum percentagewise and in absolute terms is far less in Bijapur District than the similar figures for Gulbarga District. If therefore the bids for Bijapur District in respect of toddy are accepted, the danger is that Bijapur District will become a toddy spring Board for smuggling of toddy into Gulbarga District. This will affect the Administration severely. In the light of the auctions in Gulbarga District it becomes necessary to re-examine whether higher rentals can be secured by re-auction of toddy shop leases in Bijapur Dist. Therefore, I recommend re-auction of toddy shop leases in Bijapur District and consequently the recommendations of the Deputy Commissioner, Bijapur, seeking confirmation of the highest bids, have to be turned down." Accepting the above recommendation of the Excise Commissioner, the Government by its order dated 15-5-1978 (Exhibit 'B') has refused to confirm the highest bid offered by the petitioner for the purchase of the right of retail vend of toddy of 11 taluks of Bijapur District on the ground that the same was in the interest of the revenue. The order of the Government reads thus :- "GOVERNMENT OF KARNATAKA Karnataka Government Secretariat, Vidhan Soudha, Bangalore, Dated 15th May, 1978. The order of the Government reads thus :- "GOVERNMENT OF KARNATAKA Karnataka Government Secretariat, Vidhan Soudha, Bangalore, Dated 15th May, 1978. No. HD 84 EDC 78 ORDER Whereas in the auction held on 28-4-78 in respect of toddy shops of Bijapur District, the Deputy Commissioner, Bijapur District, has accepted provisionally the bid offered by Shri Moolangappa, Excise Contractor, Hosamani Extension, Shimoga, in respect of the toddy shops of the taluks of Bijapur District noted in the margin. Sl. No. Name of the Taluk Bid offered Rs. 1. Bijapur. 15,600 2. Indi 12,000 3. Sindgi 8,700 4. Bagalkot 11,600 5. Hungund 13,500 6. Badami 4,800 7. Muddebihal 8,800 8. B. Bagewadi 12,700 9. Mudhol 10,000 10. Bilgi 1,500 11. Jamkhandi 18,000 And whereas, the Deputy Commissioner, Bijapur District, has submitted to the State Government through the Excise Commissioner the records of the proceedings conducted by him for confirmation as required by sub-r. (1) of R.15 of the Karnataka Excise (Lease of the Right of Retail Vend of Liquors) Rules, 1969. And whereas, the State Government after consideration of the records submitted by the Deputy Commissioner, Bijapur District, and in the interest of revenue, it is decided to refuse to confirm the bid offered by Sri Moolanagappa in respect of the taluks noted in the margin. Now therefore, in exercise of the power conferred by sub-r. (2) of R.15 of the Karnataka Excise (Lease of Right of Retail Vend of Liquors) Rules, 1969 the Government of Karnataka hereby refuse to confirm the disposal of the right of retail vend of liquors by Sri Moolanagappa whose bid the Deputy Commissioner, Bijapur District, has provisionally accepted in the auction held on 28-4-78 in respect of Toddy in shops in Bijapur, Indi, Sindgi, Bagalkot, Hungund, Badami, Muddebihal, B. Bagewadi, Mudhol, Bilgi and Jamkhandi taluks of Bijapur District. By order and in the name of the Governor of Karnataka. Sd/- (M.P. Jayashankara Aradhya), Under Secretary to Government,Home Department." In this writ petition under Art.226 of the Constitution, the petitioner has challenged the validity of the order of the Government, (Exhibit B) and the resale Notification issued by the Excise Commissioner, (Exhibit C) and has sought for a writ of mandamus to respondent No. 1 to confirm the sale as recommended by the Deputy Commissioner, Bijapur District. 2. 2. On 23-5-1978 Venkatachala, J., as the vacation Judge issued rule nisi and stayed the re-sale fixed to be held on 25-5-1978 till 30-5-1978 and directed the writ petition be posted for final hearing on 30-5-1978. 3. Shri S.K. Venkataranga Iyengar, learned counsel for the petitioner, urged that when once the Deputy Commissioner provisionally accepts the highest bid and recommends for its confirmation, the Government was bound to confirm the sale, (2) that the impugned order is violative of Art.14 of the Constitution and (3) that the impugned order is actuated by mala fides and is therefore liable to be struck down. Shri R.N. Byra Reddy, learned Advocate-General appearing for the respondents, while refuting the contentions urged by Shri S.K. Venkataranga Iyengar, urged that the petitioner has no legal right to challenge the order and cannot maintain the writ petition under Art.226 of the Constitution and that in any event the action of the Government in refusing to confirm the sale is not justiciable under Art.226 of the Constitution and therefore the writ petition is liable to be dismissed in limine. In support of his contentions, the learned Advocate-General strongly relied on the ruling of this Court in S.T. Thimmappa and Sons v. State of Karnataka (1977 (2) Kant LJ 416) : (AIR 1978 Kant 17); and the rulings of the Supreme Court in the State of Orissa v. Harinarayan Jaiswal (AIR 1972 BC 1816); and in Har Shankar v. Dy. Excise and Taxation Commr. ( AIR 1975 SC 1121 ). As the contentions urged by the learned Advocate-General go to the root of the matter, I first propose to examine them before examining the contentions urged by Shri S.K. Venkataranga Iyengar. 4. Shri R.N. Byra Reddy, learned Advocate-General, contended that the action of the Government does not constitute an infraction of any of the sub-clauses of sub-Art.(1) of Art.226 of the Constitution and the petitioner has no legal right to maintain his writ petition before this Court. In support of his contention, Shri R.N. Byra Reddy, learned Advocate-General, strongly relied on the ruling of this Court in S.T. Thimmappa's case. In support of his contention, Shri R.N. Byra Reddy, learned Advocate-General, strongly relied on the ruling of this Court in S.T. Thimmappa's case. Shri S.K. Venkataranga Iyengar, learned counsel for the petitioner, urged that there has bean an infraction of the 1969 Rules and that the right of the petitioner to carry on the sale of vending toddy in the District is affected and therefore the petitioner has a legal right to maintain his writ petition before this Court. 5. Admittedly, the lease of right of retail vend of toddy is regulated by the 1966 Act and the 1969 Rules. It is the case of the petitioner that there has been an infraction of the 1969 Rules. As to whether there has been an infraction or not and to what relief the petitioner is entitled to is a different thing. But to say that the petitioner has no legal right and cannot maintain his writ petition is another thing. In my view, the contention of the learned Advocate-General that the petitioner has no legal right and cannot maintain his writ petition under Art.226 of the Constitution is without force. 6. In S.T. Thimmappa's case (AIR 1978 Kant 17), the petitioners whose right to vend liquors had expired but who were entitled to continue till fresh leases are granted by the authorities, challenged the validity of a retrospective rule and the action taken thereunder by the authorities. On those facts. This Court held that the petitioners had no existing legal right as on the day they approached this Court, to be agitated under Art.226 of the Constitution. In my opinion, S.T. Thimmappa's case is clearly distinguishable and has no bearing to hold that the petitioner has no legal right to maintain his writ petition before this Court. I, therefore, reject this contention of the learned counsel for the respondents. 7. Shri R.N. Byra Reddy, learned Advocate-General, next contended that the impugned order of the Government besides being within its power cannot be interfered with by this. Court under Art.226 of the Constitution. Elaborating his contention, Shri R.N. Byra Reddy pointed out that a citizen has no right to trade in liquors or intoxicating drinks and the decision of the Government as to whether a citizen should be permitted to vend in liquors or not is not justiciable. Court under Art.226 of the Constitution. Elaborating his contention, Shri R.N. Byra Reddy pointed out that a citizen has no right to trade in liquors or intoxicating drinks and the decision of the Government as to whether a citizen should be permitted to vend in liquors or not is not justiciable. In support of his contention, Shri R.N. Byra Reddy strongly relied on the ruling of the Supreme Court in Harinarayan Jaiswal's case ( AIR 1972 SC 1816 ) and Har Shankar's case ( AIR 1975 SC 1121 ). Shri S.K. Venkataranga Iyengar, learned counsel for the petitioner, strenuously contended that the right of retail vend of toddy in the State is regulated by the 1966 Act and the 1969 Rules and on their infraction the petitioner was entitled to relief under Art.226 of the Constitution. In support of his contention Shri S.K. Venkataranga Iyengar strongly relied on the rulings of the Supreme Court in K.N. Guruswamy v. State of Mysore ( AIR 1954 SC 592 ); D.F.O. South Kheri v. Ram Sanehi Singh ( AIR 1973 SC 205 ) and M/s. Radhakrishna Agarwal v. State of Bihar ( AIR 1977 SC 1496 ). 8. In my opinion, there is force in the contention of the learned counsel for the respondents. 9. In Harinarayan Jaiswal's case ( AIR 1972 SC 1816 ), the matter arose under the Bihar and Orissa Excise Act (2 of 1915). In that case, the exclusive privilege of selling country liquor was sold in public auction in which respondent No. 1 before the Supreme Court was the highest bidder whose bid was provisionally accepted by the Collector subject to confirmation by Government as in the present case. As in the present case, the Government refused to confirm the sale and disposed of the privilege by private negotiations. Aggrieved by such action of the Government, respondent No. 1 before the Supreme Court moved the High Court of Orissa in a writ petition under Art.226 of the Constitution which was allowed by that Court. On appeal, the Supreme Court while reversing the decision of the Orissa High Court has held thus (at P. 1822 of AIR SC) : "17. Even apart from the power conferred on the Government under Ss.22 and 29, we fail to see how the power retained by the Government under cl.(6) of its order dated Jan. 6, 1971 can be considered as unconstitutional. Even apart from the power conferred on the Government under Ss.22 and 29, we fail to see how the power retained by the Government under cl.(6) of its order dated Jan. 6, 1971 can be considered as unconstitutional. As held by this Court in Cooverjee Bharucha's case, 1954 SCR 873 : ( AIR 1954 SC 220 ), one of the important purposes of selling the exclusive right to sell liquor in wholesale or retail is to raise revenue. Excise revenue forms an important part of every State's revenue. The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. Hence quite naturally, the legislature has empowered the Government to see that there is no leakage in its revenue. It is for the Government to decide whether the price offered in an auction sale is adequate. While accepting or rejecting a bid, it is merely performing an executive function. The correctness of its conclusion is not open to judicial review. We fail to see how the plea of contravention of Art.19(1)(g) or Art.14 can arise 110 these cases. The Government's power to sell the exclusive privileges set out in S.22 was not denied. It has also not disputed that these privileges could be sold by public auction. Public auctions are held to get the best possible price. Once these aspects are recognised, there appears to be no basis for contending that the owner of the privileges in question who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate. There is no concluded contract till the bid is accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids -See Union of India v. Bhimsen Walaiti Ram (1970) 2 SCR 594 : ( AIR 1971 SC 2295 ). By merely giving bids, the bidders had not acquired any vested rights. The fact that the Government was the seller does not change the legal position once its exclusive right to deal with those privileges is conceded. If the Government is the exclusive owner of those privileges, reliance on Art.19(1)(g) or Art.14 becomes irrelevant. By merely giving bids, the bidders had not acquired any vested rights. The fact that the Government was the seller does not change the legal position once its exclusive right to deal with those privileges is conceded. If the Government is the exclusive owner of those privileges, reliance on Art.19(1)(g) or Art.14 becomes irrelevant. Citizens cannot have any fundamental right to trade or carryon business in the properties or rights belonging to the Government nor can there be any infringement of Art.14 if the Government tries to get the best available price for its valuable rights. The High Court was wholly wrong in thinking that purpose of Ss.22 and 29 of the Act was not to raise revenue. Raising revenue as held by this Court in Cooverjee Bharucha's case, 1954 SCR 873 : ( AIR 1954 SC 220 ) (supra) was one of the important purposes of such provisions. The fact that the price fetched by the sale of country liquor is an excise revenue does not change the nature of the right. The sale in question is but a mode of raising revenue. Assuming that the question of arbitrary or unguided power can arise in a case of this nature it should not be forgotten that the power to accept or reject the highest bid is given to the highest authority in the State i.e., the Government which is expected to safeguard the finances of the State. Such a power cannot be considered as an arbitrary power. If that power is exercised for any collateral purposes, the exercise of the power will be struck down. It may also be remembered that herein we are not dealing with a delegated power but with a power conferred by the legislature." In Har Shankar's case ( AIR 1975 SC 1121 ) also decided by a Constitution Bench, the Supreme Court has affirmed the principles enunciated in Harinarayan Jaiswal's case ( AIR 1972 SC 1816 ). On the ratio of the decision of the Supreme Court in Harinarayan Jaiswal's case approved in Har Shankar's case, I hold that it is not permissible for this Court to examine the validity of the impugned order and give any relief to the petitioner. I, therefore, uphold the contention of the learned counsel for the respondents and hold that the order of the Government is not open to judicial review by this Court. 10. I, therefore, uphold the contention of the learned counsel for the respondents and hold that the order of the Government is not open to judicial review by this Court. 10. In my opinion K.N. Guruswamy's case ( AIR 1954 SC 592 ) which arose under the earlier Excise Act that was in force in the erstwhile State of Mysore is distinguishable. In K.N. Guruswamy's case the action of the authority in accepting the higher bid of a person who did not participate in the public auction in secrecy was taken exception to by the Supreme Court. In my opinion that is not. the position in the present case. In Ram Sanehi Singh's case ( AIR 1973 SC 205 ) and Radha Krishna Agarwal's case ( AIR 1977 SC 1496 ), the Supreme Court was dealing with a contract regulated by the Forest Act and was not dealing with a case arising under an Excise Act and therefore the ratio of that case has no bearing to a case that arises under an Excise Act. In Radha Krishna Agarwal's case, the Supreme Court was dealing with a lease to collect and exploit sal seeds from forest area which was not regulated by any statute but in any event was not regulated by an Excise Act. I am therefore of the opinion that the principles enunciated by the Supreme Court in K.N. Guruswamy's case, Ram Sanehi Singh's case and Radhakrishna Agarwal's case do not bear on the point. 11. In the view I have taken on the contention urged by the learned Advocate-General, it is not really necessary for me to deal with the contentions urged by Shri S.K. Venkataranga Iyengar. But as my order is subject to appeal, I propose to briefly indicate my views on those contentions also. 12. Shri S.K. Venkataranga Iyengar, learned counsel for the petitioner, contended that when once the petitioner had fulfilled the terms of the auction sales and the 1969 Rules regulating the auction sales and when the sale conducting officer viz., the Dy. Commissioner had accepted this sale, the Government was bound to confirm the sale. Shri S.K. Venkataranga Iyengar urged that sub-r. (2) of R.15 of the 1969 Rules has to be construed as not conferring any discretion or power on the Government. Commissioner had accepted this sale, the Government was bound to confirm the sale. Shri S.K. Venkataranga Iyengar urged that sub-r. (2) of R.15 of the 1969 Rules has to be construed as not conferring any discretion or power on the Government. In order to appreciate this contention of Shri S.K. Veinkataranga Iyengar, it is useful to read R.15 of the 1969 Rules which reads thus :- "15. Confirmation :- (1) Whenever the Deputy Commissioner or the Divisional Commissioner has accepted provisionally a tender, offer or bid he shall forthwith submit to the State Government through the Excise Commissioner the records of the proceedings conducted by him for confirmation. (2) The State Government shall, on a consideration of the records under sub-rule (1), and the interest of revenue, pass an order confirming the disposal of the right to retail vend of liquor or refusing to confirm it. The order shall forthwith be communicated to the person concerned." Under sub-r (1) of R.15 of the 1969 Rules, the sale conducting officer only provisionally accepts the sale which is subject to confirmation by the Government under sub-r. (2) of the same Rule. It is only on confirmation, a lease has to be executed (vide R.16 of the 1969 Rules). So long as the sale is not confirmed, the sale is not complete and the highest bidder does not acquire an in defensible right in respect of such an excise sale. Sub-rule (2) of R.15 of the 1969 Rules in clear and unambiguous terms confers the power of confirmation as also the power of refusal to confirm. It is settled law that power to confirm comprehends in itself the power oil refusal to confirm. In that view, I am of the opinion that the contention of Shri S.K. Venkataranga Iyengar that the Government has no power to withhold confirmation is unsound, and is liable to be rejected. 13. Shri S.K. Venkataranga Iyengar next contended that the action of the Government in refusing to confirm too highest bid offered by the petitioner is violative of Art.14 of the Constitution. 13. Shri S.K. Venkataranga Iyengar next contended that the action of the Government in refusing to confirm too highest bid offered by the petitioner is violative of Art.14 of the Constitution. Shri S.K. Venkataranga Iyengar pointed out that in various other cases where the increase in rentals fetched was only marginal as in the case of retail vend of toddy of the 11 taluks of Bijapur District, Government has confirmed the sale, but in the case of the petitioner it has chosen for a hostile and invidious treatment. I have already noticed that in Harinarayan Jaiswal's case ( AIR 1972 SC 1816 ), the Supreme Court has pointed out that the action of the Government in refusing to confirm under an Excise Act is not open to judicial review. When that is so, I fail to see as to how I can examine the claim of the petitioner that the action of the Government is violative of Art.14 of the Constitution even assuming that all the facts necessary to sustain a plea under Art.14 of the Constitution is established. I, therefore, reject this contention of Shri S.K. Yenkataranga Iyengar. 14. Shri S.K. Venkataranga Iyengar, learned counsel for the petitioner, lastly contended that the action of the Government in refusing to confirm this sale is actuated by mala fides. All that is stated by the petitioner in justification of the plea of mala fides is that the action of the Government is due to the handi work of rival traders. In my opinion, the allegations of the petitioner in justification of the plea of mala fides are extremely vague, general and are lacking in particulars, on which score itself his plea is liable to be rejected. Even otherwise in the Statement of Objections filed, the Government has denied the allegations of mala fides. From the papers produced also I am satisfied that there is no merit in the contention of the petitioner that the action of the Government is actuated by mala fides. I, therefore, hold that there is no merit in this contention of the petitioner. 15. For the reasons stated above, I hold that there is no merit in this writ petition and the rule is liable to be discharged. 16. Rule discharged. 17. In the circumstances of the case, I direct the parties to bear their own costs.