JUDGMENT : ( 1. ) THIS writ petition was listed for admission on 3-8-1987. When it was taken up, learned counsel for the parties made a joint request that it may be heard finally at this very stage. We accordingly heard the writ petition in part on 3-8-1987. During the course of arguments, one of the submissions made by learned counsel for the petitioners was that the impugned orders imposing penalty, even though quasi-judicial orders, did not record reasons. In regard to this argument, learned Advocate General, however, pointed out with reference to the original record that reasoned orders had been passed and the impugned orders were really orders demanding the amount imposed as penalty and contained mere communication of the reasoned orders passed in this behalf. He prayed for and was granted 10 days time to file an additional return attaching thereto copies of the reasoned orders imposing penalty. The petitioners were granted two weeks time thereafter to file an additional rejoinder/affidavit. The necessary additional return and additional rejoinder/affidavit have been filed. ( 2. ) PETITIONER No. 2, M/s Mahakoshal Traders is a registered partnership firm of which petitioner No. 1 Ratanlal is one of the partners. Petitioner No. 2 has 19 other partners. Petitioner No. 2 is carrying on business of excise liquor contractor. At an auction held in this behalf for the year 1986-87, the petitioners were granted 8 licences in form No. C. S. 3 for 8 shops, whereas licences in regard to 6 shops were granted to M/s punjab Traders, M/s Maniram Rai and M/s Kailashchand and Co. who according to the petitioners, are sister concerns of petitioner No. 2. Subsequently, with the permission of the Excise Commissioner, these 6 shops were transferred to petitioner No. 2 and in this manner, petitioner No. 2 became the licensee of all the 14 shops. ( 3. ) THE licence so granted to petitioner No. 2, inter alia, contained a condition, being condition No. 2-C. It prescribed the minimum quantity for taking issue from the warehouse for sale. It further prescribed that on failure of the licensee to lift in any quarter of the year the quarterly minimum quantity specified therein, the Collector may impose a penalty at the rate not exceeding Rs. 20. 00 per proof litre, for every litre of spirit so falling short. It further prescribed that on failure of the licensee to lift in any quarter of the year the quarterly minimum quantity specified therein, the Collector may impose a penalty at the rate not exceeding Rs. 20. 00 per proof litre, for every litre of spirit so falling short. It contained a proviso to the effect that any amount realised by way of such penalty shall be refunded if the annual minimum quantity specified above is lifted in full by the end of the year. On the ground that the petitioners had failed to lift the minimum quantity specified in condition No. 2-C, notices were issued to the petitioner No. 2 to show cause as to why penalty may not be imposed in accordance with condition No. 2-C aforesaid. ( 4. ) THE writ petition was subsequently amended and from the amended petition, it is apparent that notices to show cause were issued in respect of 4 quarters. The petitioner was also served with orders of demand indicating the amount of penalty imposed in respect of each of the 4 quarters and requiring the petitioners to pay the said penalty within the period specified therein. It is these orders requiring the petitioners to pay the penalty which are sought to be quashed in the present writ petition. ( 5. ) IT has further been stated in the writ petition that in pursuance of the impugned orders, a sum of about Rs. 16 lacs has been recovered from the petitioners towards penalty during the months of April and May 1987. On its basis, a further prayer has been made for a direction to the respondents to refund the amount of penalty so realised from them. ( 6. ) AS already pointed out above, the orders of demand which were challenged in the present writ petition did not contain any reasons for imposition of penalty. Subsequently, however, in pursuance of the order of this Court dated 3-8-1987 referred to above, additional return has been filed attaching thereto copies of the reasoned orders imposing penalty. A perusal of these orders indicates that 4 orders were passed on. 24-l-1987 regarding first quarter. Likewise, 4 orders were passed on the same day regarding the second quarter. 4 orders, on the other hand, were passed on 24-4-1987 regarding the third quarter and one order was passed on 4-5-1987 regarding the 4th quarter. ( 7. A perusal of these orders indicates that 4 orders were passed on. 24-l-1987 regarding first quarter. Likewise, 4 orders were passed on the same day regarding the second quarter. 4 orders, on the other hand, were passed on 24-4-1987 regarding the third quarter and one order was passed on 4-5-1987 regarding the 4th quarter. ( 7. ) IT has been urged by learned counsel for the petitioners that since the orders of demand which were served on the petitioners and which have been challenged in the writ petition, did not contain reasons, the said orders were no orders in the eye of law inasmuch as they were orders of a quasi-judicial nature and giving of reasons in quasi-judicial orders is a condition precedent. That an order imposing penalty is a quasi judicial order has not been seriously challenged and in our opinion rightly, by the learned Advocate General appearing for the respondents. It was, however, pointed out by him that the orders which were served on the petitioners, were not the orders imposing penalty, but were only communications of the said orders making demand of the amount of penalty imposed on the petitioners. According to him, the actual orders containing reasons for imposing penalty were the orders copies of which have been filed along with the additional return and since those orders did contain reasons, it could not be aid that they suffered from any infirmity on this count. ( 8. ) IN reply, it was urged by learned counsel for the petitioners that the orders attached along with the additional return, were not communicated to the petitioners earlier, but were communicated only on 6-8-1987, i. e. after passing of the order of this court on 3-8-1987 referred to above and consequently, could not have the effect of removing the lacuna which found place in the impugned orders containing demand of the amount of penalty imposed on the petitioners. ( 9. ( 9. ) IT has further been urged by learned counsel for the petitioners that the orders copies of which have been attached along with the additional return could not be taken into consideration inasmuch as in the return which was filed on behalf of the respondents as also in the additional return filed earlier, no mention whatsoever was made of these orders and the affidavit filed along with the return and the aforesaid additional return, indicated that the impugned orders imposing penalty, had been passed on 10-2-1987 which is the date indicated in the orders which have been challenged in the writ petition. In other words, the fact that the orders copies of which have been attached along with the additional return, were in existence prior to the filing of the return and the aforesaid additional return, has been disputed by learned counsel for the petitioners on the ground as indicated above that had these orders been in existence, the return and the additional return aforesaid would certainly have contained a reference to these orders. We find it difficult to agree with this submission. ( 10. ) A perusal of the impugned orders which have been attached along with the writ petition, shows that they contain an intrinsic evidence of the fact that the actual orders imposing penalty had been passed earlier and the impugned orders only constituted communication of the said orders and making demand of penalty already imposed. The impugned orders specifically state that penalty had been imposed in view of condition No. 2-C of the licence and the amount of penalty which had been imposed on the petitioners, was mentioned in these orders requiring them to pay the said amount within 7 days. These orders do not state that penalty was being imposed on the petitioners. This, in our opinion, constitutes intrinsic evidence that penalty had been imposed not by these orders but by some orders passed earlier to these orders. According to the learned Advocate General, these orders were those copies whereof have been filed along with the additional return in pursuance of the order of this Court dated 3-8-1987. These copies have been sworn to be true copies of the originals and we have no reason to doubt that the original orders, copies whereof have been filed along with the additional return, were passed on the dates specified therein. ( 11. These copies have been sworn to be true copies of the originals and we have no reason to doubt that the original orders, copies whereof have been filed along with the additional return, were passed on the dates specified therein. ( 11. ) IT was then urged by learned counsel for the petitioners that since orders, copies whereof have been attached along with the additional return, were not communicated to the petitioners before filing of the writ petition and before issuing the orders of demand which have been challenged in the writ petition, these orders were of no consequence. We find it difficult to agree with this submission also. Once it has been found that these impugned orders were in existence from before the date when orders of demand were issued to the petitioners, the best that can be said for the petitioners is that non-communication of these orders which contained the reasons, constituted serious infirmity. However, since copies of these orders have not only been filed along with the additional return in the present writ petition, but have also been served on the petitioner on 6-8-1987, i. e. before the writ petition could be finally disposed of and prayer has been made for quashing these orders also by amending the writ petition, we are of the opinion that non-communication of reasons for imposing penalty on the petitioners prior to 6-8-1987, ceases to be at the present moment, of any serious consequence. ( 12. ) IT was then urged by learned counsel for the petitioners that recording of the reasons in a quasi-judicial order is a condition precedent. So far as this submission is concerned, reliance has been placed by learned counsel for the petitioners on certain decisions of the Supreme Court. Since the proposition of law in this behalf is by now well settled that a quasi-judicial order must contain reasons, we do not find it necessary to refer to all the decisions in this behalf. We shall, however, refer to some of the cases in order to indicate the necessity of recording reasons and further to indicate as to what constitutes reasons for a finding. This we are doing inasmuch as we, for the reasons to be recorded shortly, propose to quash the impugned orders with a direction to the collector to pass fresh orders. ( 13. This we are doing inasmuch as we, for the reasons to be recorded shortly, propose to quash the impugned orders with a direction to the collector to pass fresh orders. ( 13. ) IN A. K. Kraipak and others vs. Union of India and others, AIR 1970 SC 150 , it was pointed out that the dividing line between an administrative power and a quasi-judicial power is quite thin and is being gradually obliterated. For determining whether a power is an administrative power or a quasi-judicial power, one has to look to the nature of the power conferred, the person of persons on whom it is conferred, the framework of the law conferring that power, the consequences ensuing from the exercise of that power and the manner in which -: sat power is expected to be exercised. In a welfare State like India which is regulated and controlled by the rule of law, it is inevitable that the jurisdiction of the administrative bodies is increasing at a rapid rate. The concept of rule of law would lose its vitality if the instrumentalities of the State are not charged with the duty of discharging their functions in a fair and just manner. The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously. The procedures which are considered inherent in the exercise of a judicial power, are merely those which facilitate, if not ensure, a just and fair decision. ( 14. ) IN Union of India vs. M. L. Capoor and others, AIR 1974 SC 87 , it was held in para 28 of the report as under : "reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable. " ( 15. They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable. " ( 15. ) IN M/s. Ajantha Industries and others vs. Central Board of Direct Taxes, New deli, and others, AIR 1976 SC 437 , it was held that the reason for recording of reasons in the order and making these reasons known to the assessee, is to enable an opportunity to tie assessee to approach the High Court under its writ jurisdiction under Art. 226 of the Constitution or even the Supreme Court under Art. 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations. ( 16. ) IN The Siemens Engineering and Manufacturing Co. of India Ltd. vs. The union of India and another, AIR 1976 SC 1785 , it was held as under : "if courts of law are to be replaced by administrative authorities and tribunals, as indeed, in some kinds of eases, with the proliferation of Administrative law, they may have to be so replaced, it is essential that administrative authorities and tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. Then alone administrative authorities and tribunals exercising quasi-judicial function will be able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law. " ( 17. ) RECORDING of reasons is also necessary to inform the person against whom an order is being passed as to why the explanation submitted by him, has not found favour with the authority concerned. " ( 17. ) RECORDING of reasons is also necessary to inform the person against whom an order is being passed as to why the explanation submitted by him, has not found favour with the authority concerned. It has been urged by learned counsel for the petitioners that even the orders, copies whereof have been attached with the additional return, indeed did not contain reasons so as to satisfy the test of recording of reasons as laid down, by the Supreme Court in the cases cited above. In our opinion, since the said orders deserve to be quashed on another ground, we do not consider it expedient to go into this question. ( 18. ) THE ground on which these orders, in our opinion deserve to be quashed, is that these orders are based mainly on a ground in regard to which no opportunity seems to have been given to the petitioners whatsoever to explain. In reply to the show cause notices served on them, the petitioners had submitted their explanation. Some of the grounds taken in the explanation found favour with the Collector and they were accepted and given effect to. The legal pleas raised in the explanations about the validity of condition 2-C were repelled by the Collector and in our opinion, rightly, in view of the decision of a Division Bench of this Court in Sharma and Co. Bilaspur vs. State of M. P. and others, 1981 M. P. L. J. 422, where condition No. 2-C in the form in which it stands today, fell for consideration and it was held that it was within the competence of the State Government to include such a condition in the licence. ( 19. ) ONE of the grounds raised a question of fact namely that the short-fall had occurred in various quarters inasmuch as liquor was smuggled from States outside the state of M. P. on account of which the petitioners were not in a position to sell sufficient liquor resulting in the short-fall. This plea was repelled by the Collector on the ground that it was the duty of the licensee to inform the authorities as and when it came to know that liquor was being smuggled in the State of M. P. from outside. It was also pointed out by the Collector that whenever a complaint was made, steps were taken to stop smuggling of liquor. It was also pointed out by the Collector that whenever a complaint was made, steps were taken to stop smuggling of liquor. What, however, seems to have weighed with the Collector in greater measure was that the short-fall was as a result of high price of liquor fixed by the petitioners. In this connection, it may be pointed out that in the earlier years, the price at which liquor was to be sold by the contractor, used to be fixed by the Government. In the year in question, however, as is apparent from the copy of the licence which has been produced by the learned Advocate General, the fixation of price was left at the discretion of the licensee. The licence in the relevant column contains an endorsement saying : "vikray Bhav Swatantra Hain. " it means that the price at which the licensee was to sell liquor, was not fixed by the government, but was at the discretion of the licensee. ( 20. ) COPIES of the show cause notices have been attached with the writ petition. Their perusal indicates that they contain the only averment that since in the relevant quarter, there had been a short-fall, cause may be shown as to why penalty may not be imposed in view of condition No. 2-C of the licence. It was nowhere stated in the said show cause notices that penalty was sought to be imposed on the ground that the short-fall had occurred due to fixation of exorbitant price of liquor by the petitioners. ( 21. ) IT has been urged by learned counsel for the petitioners - and in our opinion rightly - that in the absence of such an indication in the show cause notices, the petitioners were prejudiced in submitting their explanation. In this connection, it has been pointed out that even though the orders containing reasons for imposing penalty are said to have been passed on 24-1-1987 for the first and second quarters, the notices served for the subsequent quarters thereafter did not indicate that penalty was being imposed on the ground that the short-fall was due to fixation of exorbitant price of liquor by the licensee. According to him, had the show cause notice given an indication in this behalf, the petitioners would have submitted an explanation to satisfy the collector that the short-fall had not occurred on account of fixation of any exorbitant price. ( 22. ) IN this connection, it would be useful to refer to certain observations made in the case of Shanna and Co. (supra) on which reliance indeed has been placed by learned counsel for both the parties. The learned Advocate General placed reliance on this case to indicate that condition 2-C, as included in the licence, was valid. On the other hand, learned counsel for the petitioners has placed reliance on this decision to indicate that imposition of penalty under condition 2-C was not a matter of course. While upholding the validity of condition 2-C, it was held : "it is settled that whenever a statute or statutory rule provides for imposition of penalty, it is not obligatory on the authority concerned to impose penalty in every case even though a minimum penalty be prescribed (See Hindustan steel Ltd. vs. State of Orissa, AIR 1970 SC 253 , and Universal Cables Ltd. vs. Union of India, 1977 M. P. L. J. 394 ). The power to impose penalty is a quasi-judicial power and the Collector must exercise this power after complying with the rales of natural justice, i. e. after noticing the licensee as to why penalty should not be imposed. After a notice is received, the licensee can show that he committed no breach of condition No. 2-C or that the breach was technical or trivial or that the circumstances were such which made it impossible for him to comply with the conditions. The licensee can also show that even if a case for imposition of penalty is made out, he should not be visited with a heavy penalty and that the circumstances are such that only a nominal penalty should be imposed. " ( 23. ) IT is settled law that the requirement of serving a notice to show cause is to enable the person on whom notice has been served to submit his explanation in regard to such facts or law on the basis of which action is contemplated to be taken against him. Emphasis has been placed by the learned Advocate General on the observations in the case of Sharma and Co. Emphasis has been placed by the learned Advocate General on the observations in the case of Sharma and Co. (supra) that it was for the licensee to show either that no case for imposition of penalty had been made out or that imposition of nominal penalty would meet the ends of justice. According to him, once the petitioners were required to show cause as to why penalty may not be imposed on them on the ground that there was shortfall in lifting the minimum quantity of liquor and they were informed that penalty was sought to be imposed under condition 2-C, the burden lay on the petitioners to place before the Collector all such material on the basis of which they wanted to submit that either no case for penalty was made out or that nominal penalty would meet the ends of justice. In this connection he pointed out that the reason indicated by the petitioners in their reply to the show cause notices for the short-fall, namely that there was smuggling of liquor from outside having been found to be not substantiated by the petitioners, it was open to the Collector to impose penalty which he did. ( 24. ) IN connection with this submission, it may be pointed out that as has been held in the case of Sharma and Co. (supra), whenever a statute or statutory rule provides for imposition of penalty, it is not obligatory on the authority concerned to impose penalty in every case and that a licensee can say that he committed no breach of condition No. 2-C or that the breach was technical or trivial or that the circumstances were such which made it impossible for him to comply with the conditions and that in any event, he should not be visited with heavy penalty. These observations clearly indicate that the mere fact that there has been a short-fall would, per se, not be sufficient to impose penalty under condition No. 2-C. When it has been held in the case of Sharma and Co. These observations clearly indicate that the mere fact that there has been a short-fall would, per se, not be sufficient to impose penalty under condition No. 2-C. When it has been held in the case of Sharma and Co. (supra) that it is open to the licensee to say not only that there was no breach of condition No. 2-C, but also that even if there was a breach, there were circumstances which made it impossible for him to comply with the condition, it goes without saying that penalty is to be imposed under condition No. 2-C only if the assessee has not succeeded in establishing any of the facts referred to in the case of Sharma and Co. (supra ). ( 25. ) THE word penalty clearly indicates that the person on whom penalty is to be imposed, is sought to be penalised. A person can be penalised only for some act or omission for which he can be blamed which attracts the provision of imposition of penalty. In other words, penalty can be imposed or a person can be penalised only if he is found to be blameworthy on account of some act or omission on his part. On the other hand, if he is able to establish that he was not blameworthy and the short-fall was due to some reason for which he could not be blamed or that the breach was technical or trivial as contemplated in the case of Sharma and Co. (supra), it would be a case where either no penalty or only a nominal penalty could be imposed, as the case may be. In order to come to the conclusion as to whether the licensee in a particular case has or has not succeeded in establishing that he was not blameworthy, all relevant facts and circumstances of that case would have to be taken into consideration before recording a finding that a penalty deserved to be imposed on him and also for determining the quantum of penalty to be imposed. Consequently, before imposing penalty on the view that the explanation given in the reply to the show cause notice by the licensee was not satisfactory, the Collector would have to record a finding giving reasons therefor that the short-fall was due to some blameworthy act or omission on the part of the licensee. Consequently, before imposing penalty on the view that the explanation given in the reply to the show cause notice by the licensee was not satisfactory, the Collector would have to record a finding giving reasons therefor that the short-fall was due to some blameworthy act or omission on the part of the licensee. Further, if in some case the Collector proposes to place reliance on any particular material, it would be necessary for him to give an indicatin of that material in the show cause notice so that the licensee may be in a position to explain its conduct in regard to the said additional material. In the absence of such an indication, it would not be possible for the licensee to visualise as to what is operating in the mind of the Collector for imposing penalty. In such a case, giving of a show cause notice without disclosing such material would ultimately turn out to be a mere formality inasmuch as it would not meet the requirement of law, namely, that the person on whom the notice is served, should be given a real opportunity of putting forward his case in regard to such facts and circumstances on the basis of which penalty is sought to be imposed and which are in the mind of the Collector. ( 26. ) IN the instant case, as seen above, the fact that the short-fall was on account of fixation of exorbitant price of liquor by the licensee, was not stated in the notices to show cause. Consequently we find substance in the submission made by learned counsel for the petitioners that prejudice was caused to the petitioners in meeting this point and that had there been any indication in the notices to show cause that penalty was to be imposed on this ground, the petitioners would have placed such material before the collector as was found necessary by them to meet the said point. ( 27. ( 27. ) IN our opinion, the impugned orders of imposition of penalty, copies whereof have been attached along with the additional return and the orders containing demand of the amount of penalty imposed on the petitioners deserve to be quashed with a direction to the Collector to decide afresh the question as to whether penalty deserved to be imposed on the petitioners in respect of the 4 quarters referred to above and if so, what would be the amount of penalty which would meet the ends of justice. Since now the orders, copies whereof have been attached along with the additional return and which are said to contain the reasons have already been served on the petitioners and one of the reasons mentioned in the said orders is that the short-fall was on account of fixation of exorbitant price of liquor by the licensee, it would not be necessary for the collector to serve any further notice on the petitioners in this regard. ( 28. ) LEARNED counsel for the petitioners has made a candid statement that now since the petitioners are aware that penalty is sought to be imposed on the ground that the licensee fixed exorbitant price of liquor which according to the Collector constituted the basis for the short-fall, they shall submit the reply to this ground also before final orders are passed by the Collector in pursuance of this order. Since the collector is being directed to decide the matter afresh, we wish to make it clear that it would be open to the Collector to rely apart from the aforesaid material on any additional material also, but in that event, the additional material which is sought to be relied on, must be brought to the notice of the petitioners by serving upon them a notice in this behalf. Such a notice, if sought to be served on the petitioners, may be served on them by the Collector within two weeks from today. If no notice is served within this period as aforesaid, the petitioners can proceed on the basis that reliance on any further material is not sought to be placed by the Collector. Such a notice, if sought to be served on the petitioners, may be served on them by the Collector within two weeks from today. If no notice is served within this period as aforesaid, the petitioners can proceed on the basis that reliance on any further material is not sought to be placed by the Collector. The petitioners shall submit their explanation to the grounds mentioned in the fresh notice, if any, as also to the ground indicated above of which they have already taken notice, namely, that the short-fall was due to the fixation of exorbitant price of liquor by the petitioners, before the Collector within a month from today. ( 29. ) BEFORE parting with the case, we also consider it necessary to refer to the submission made by learned counsel for the petitioners that since the impugned orders are being quashed, the Collector may be directed to refund the amount of penalty already realised by him in the months of April and May 1987 and that the petitioners were prepared to furnish bank guarantee for the said amount to ensure recovery of any penalty that may be imposed by the Collector in the fresh order that may be passed by him in pursuance of this order. In our opinion, since we are requiring the Collector to decide the matter afresh within two months from today, ends of justice would be met if a direction is issued that in the event of no penalty being imposed or lesser amount of penalty being imposed as the case may be, such amount as may be refundable on account of fresh order that may be passed by the Collector, shall be refunded to the petitioners within a month of the passing of the fresh order together with interest calculated at the rate of 12% per annum from the date of recovery on such amount of penalty as is to be refunded, till the date of payment. ( 30. ( 30. ) IN the result, this writ petition succeeds and is allowed and the impugned orders dated 24-1-1987, 24-4-1987 and 4-3-1987, copies whereof have been filed by the respondents along with the additional return as also notices of demand dated 10-2-1987 for the first two quarters, notice of demand dated 25-4-1987 for the third quarter and notice of demand dated 6-5-1987 for the 4th quarter are quashed and the Collector (Excise) Gwalior, respondent No. 3, is directed to decide the matter afresh in regard to each of the four quarters referred to above within two months from today in the light of the observations made above. He is further directed, in the event of no penalty being imposed or a lesser penalty being imposed, to refund such amount as becomes refundable on account of his order, together with interest on that amount calculated at 12% per annum from the date of recovery to the date of payment within one month of the passing of the fresh order by him. In the circumstances of the case, however, there shall be no order as to costs. Security amount, if deposited, be refunded to the petitioners. Certified copy of this order may be supplied to counsel for the parties on payment of usual charges. Petition allowed.