JUDGMENT K.C. Agarwal, Actg. C.J. - This petition under Article 226 of the Constitution has been filed by Hakim Singh challenging the recovery of Rs. 97,000/- and odd outstanding against him as notified by the Excise Officer, District Agra. 2. For the year 1987-88, the petitioner was held to be the highest bidder in the auction held on 19th March, 1987 in respect of Bhang shop of Sikandra, his bid being Rs. 20,000/-, Similarly, in the auction held for bhang shops of Firozabad and Achhnera, the petitioner was the highest bidder, having offered Rs. 2,12,100/-. The petitioners' bids having been accepted, be commenced his business after making initial deposits at the aforesaid three shops with effect from April 1, 1987. 3. It is alleged in this petition that on account of impediments created by the police and other agents of the State of U.P. the petitioner could not run the shops according to the rules and had to close all the three shops in the month of April, 1987 itself. Ultimately, his licence was cancelled on 11th May, 1987, which was followed by a fresh auction held on 21st May, 1987 in respect of the three shops. These auctions were finalised with a third party. Thereupon, the proceedings for recovery of Rs. 97,951/- the short fall in between the price offered by the petitioner and those fetched in the reaction were initiated against the petitioner by sending a notice to him. The petitioner has challenged the recovery proceedings on the ground that as the auctions in his favour had not been approved by the Excise Commissioner, as was required by the Excise rules, no concluded contract between the parties was arrived at and as such it was not open to the Excise department to recover the short fall as arrears of land revenue. On these allegations, the petitioner has sought a certiorari quashing the notice dated 20th April, 1988. 4. Contesting the writ petition, the Excise Inspector, Circle-II, Agra has filed a counter-affidavit on behalf of respondents Nos. 1 and 2. In the counter affidavit, proceedings for the recovery of Rs. 97,951/- have been justified as arrears of licence fee in respect of bhang shops of Sikandra, Firozabad and Achhnera for the years 1987-88. 4. Contesting the writ petition, the Excise Inspector, Circle-II, Agra has filed a counter-affidavit on behalf of respondents Nos. 1 and 2. In the counter affidavit, proceedings for the recovery of Rs. 97,951/- have been justified as arrears of licence fee in respect of bhang shops of Sikandra, Firozabad and Achhnera for the years 1987-88. The contesting respondents have filed along with the counter affidavit a copy of the terms and conditions, on which the licence was granted to the petitioner, one of which is contained in paragraph 8 thereof, relevant portion of which is quoted below:-- Yadi Woh Mulya Jo Dusri Bar Ke Nilam Men Bola Jai Us Mulya Se Kam Hai, Jo Pahle Nilam Men Bola Gaya Tha To Jitna Antar Un Donon Mulya Men Hoga Utna Mulya Nilam Kreta Se Wasul Kiya Jayega. 5. Learned counsel for the petitioner urged that as the bid offered by the petitioner had not been accepted by the Excise Commissioner, which was mandatory, no contract came into existence and as such the recovery of the short fall could not be made under the Excise Act and the rules. The learned counsel further urged that under Section 39 of the Excise Act the amount realisable could be either the excise revenue or the amounts due to the Government on account of any contract relating to the excise revenue. In his submission, as no contract as contemplated by Section 39 of the Act had come into existence the petitioner could not be held responsible for the short fall. The short-fall recoverable could only be in respect of a contract, which is valid and binding. We find no substance in the submissions made by the learned counsel for the petitioner. 6. Section 41(1)(c) of the U.P. Excise Act, 1910, reads as under:-- The Excise Commissioner, subject to the previous sanction of the State Government, X X X X X (c) prescribing the scale of fees or manner of fixing the fees payable for any licence, permit or pass including any consideration for the grant of any exclusive or other privilege granted under Section 24 or Section 24A or for storing of any intoxicant. In pursuance of the provisions of clause (c) of Section 41(1) of the Act, the U.P. Excise. In pursuance of the provisions of clause (c) of Section 41(1) of the Act, the U.P. Excise. (First Amendment) Rules, 1984 were made, which were published in the U.P. Gazette on 5th May 1984, Rule 6 of the aforesaid amending rules lays down exhaustively the terms and conditions for sales under the auction system and consequences of not complying with the terms of the actionable. Sub-clause (10) of Rule 6 says:-- (10) The licence fees shall be payable in such equal instalment as are specific in the licence. In case the payment of due installment is not made by 20th day of the month the same shall be recovered from the security deposit of the licensee. The licensee will have to make good the shortfall in the security deposits within ten days of the receipt of notice of such recovery. Any failure to make good the shortfall will render the licence liable to re-auction at the risk of the licencee and any shortfall shall be recoverable from his remaining security and the balance, if any, shall be recovered from him as arrears of land revenue. If a licensee is in arrears of licence fee he shall not be issued intoxicant for sale for which he holds licence. Clause (11) of Rule 6, in so far it is relevant for our purpose, lays down:-- All monetary losses resulting from re-auction of alternative arrangements or from the licence remaining unsold for want of bidders shall be recoverable from the original auction purchaser as arrears of land revenue. It is under this power that the shortfall is being realised from the petitioner as arrears of land revenue. 7. Sri Dinesh Kackkar, learned counsel for the petitioner placed reliance on Dhunmun Ram alias Badri Prasad v. State of U.P. and others 1979 U.P.T.C. 1033 for his submission that the shortfall was not recoverable as arrears of land revenue. In this case, after the auction had concluded in favour of the petitioner, he gave notice of withdrawal of his bid, as a result of which the shops were re-auctioned. The price at the re-auction was lower than the price offered by the petitioner. Thereupon the Excise Authorities took proceedings for recovery of the shortfall as arrears of land revenue. In this case, after the auction had concluded in favour of the petitioner, he gave notice of withdrawal of his bid, as a result of which the shops were re-auctioned. The price at the re-auction was lower than the price offered by the petitioner. Thereupon the Excise Authorities took proceedings for recovery of the shortfall as arrears of land revenue. The High Court held that the recovery was in the nature of damages and the same could not be recovered as arrears of land revenue under Section 39 of the Act. The relevant portion of this decision is quoted below:-- Section 39 of the Excise Act does not any where provide that in such circumstances the damages can be recovered as an arrear of land revenue. The last clause provides for recovery of excise revenue due to the default by any lessee or assignee, in cases where the grant has been taken over by the Collector under his own management, as an excise revenue, namely, as arrears of land ) Rules, 1976, provides for payment of a sum equal to one fourth of the annual licence fee for foreign liquor shops immediately at the conclusion of the sale and the balance by such installments as are specified in the licence to revenue. Further, Rule 373(6) as amended by the U.P. Excise (Second Amendment be granted. It then goes on to say that if default be made in the payment of advance installment, the shop will be re sold, and if the price finally offered at the resale be less than the bid at the first sale the difference will be recovered from the defaulter through a civil suit. Such short fall occasioned owing to the default in payment the advance installment is obviously not excise revenue. This also shows that the shortfall occasioned by default in not paying the installment of the annual licence fee because of repudiation is not excise revenue recoverable as arrears of land revenue. Thus assuming that there was a concluded contract between the parties, and further assuming that the provisional licence granted to the petitioners could not validly be terminated by them at their own will, yet the damages accruing from the breach of contract could not validly be recovered as arrears of land revenue. They could be recovered through a civil suit. Thus assuming that there was a concluded contract between the parties, and further assuming that the provisional licence granted to the petitioners could not validly be terminated by them at their own will, yet the damages accruing from the breach of contract could not validly be recovered as arrears of land revenue. They could be recovered through a civil suit. Following the aforesaid decision, another Division Bench of this Court in Digvijay Singh v. District Magistrate, Hamirpur and others C.M.W. No. 60 of 1976 decided on 2.4.1980 took the same view. In this case, the re-auction took place on account of the failure of the petitioner to deposit the licence fee. The bench held that under Section 39 of the Act the Excise authorities were not entitled to recover the balance as arrears of land revenue. In Ram Swarup and others v. The District Magistrate Collector, Hamirpur and others C.M.W. No. 60 of 1976 decided on 12.8.1980, another Division Bench of this court on Dhunmun Ram case (supra) took the same view. Learned counsel also placed reliance on the State of U.P. v. Kishori Lal Minocha A.I.R. 1980 SC 680. 8. The aforesaid decisions are of no help to the petitioner. When those decisions were given, the U.P. Excise (First Amendment) Rules, 1984 had not been framed and enforced. The position has since changed. Now clause (11) of Rule 6 of the aforesaid rules sets the controversy at rest. It provides that all monetary losses resulting from re-auction shall be recoverable as arrears of land revenue. A precedent is authority for the controversy that it decides. In the cases relied upon the petitioners' counsel, the provisions of the amending rules of 1984 were not invoked and the court had no occasion to interpret the same. 9. So far as the argument relating to confirmation of the bid of the petitioner by the Excise Commissioner is concerned, we may refer to clause (7) of Rule 6 of the amending Rules of 1984, which lays down that:-- (7) Every person bidding will be held to his bid whether it be highest or not and all such bids shall remain valid till the final decision of the Excise Commissioner or for a period of sixty days whichever is earlier. The aforesaid provision in the rule thus solves the controversy relating to the agreement having not been confirmed by the Excise Commissioner against the petitioner. Admittedly, the petitioner started acting in pursuance of the auction. The contention that in the absence of sanction or approval by the Excise Commissioner, it was in effective does not held good. Behind all forms of contract lies the basic idea of assent. A contracting party is bound by the term it has agreed to be bound. An agreement is not a mental state, but an act, which is a matter of inference from the conduct of parties. In Cheshire & Fifoot's law of contract, 10th Edition, page 38, it has been observed:-- The inclination of judges, whenever possible and especially in commercial transaction, to find the existence of a contract is further evident in their readiness to assume that the acceptance of an offer may have a retrospective effect. It may then serve to clothe with legal force the conduct of the parties who have acted on the faith of this assumption. Few such cases, indeed, are to be found in the reports. But there seems no reason to doubt that in law as in common sense an acceptance may thus legitimate the past. The question was discussed by Magaw J. in Srollope and Colls Ltd. v. Atomic Power Constructions Ltd. (1962) 3 All E.R. 1035. In our view, the parties in the present case had been conducting their transactions with one another on the assumption that a contract would ultimately be entered into on the lines known to them. Clause (11) of Rule 6 of the amending Rules 1984 has been made to achieve the purpose given in the enabling Act. In view of clause (7) Rule 6, the auction purchaser and the Excise Department would have the relationship of promissor and promise and would be bound by the rights and obligations accruing under the contract irrespective of the fact that the auction had not been approved by the Excise Commissioner. The terms and conditions of the auction sale must be held to be binding on the parties from the very outset, though the same were subsequently to be replaced by a more formal contract after the approval of the Excise Commissioner. The terms and conditions of the auction sale must be held to be binding on the parties from the very outset, though the same were subsequently to be replaced by a more formal contract after the approval of the Excise Commissioner. In the instant case, as noticed earlier, the parties did not make the operation of their contract conditional upon the execution of a formal document. From the conduct of the petitioner that he started acting in pursuance of the auction, it is clear that the petitioner undertook the obligations flowing from the agreement immediately. Now it cannot be said on his behalf that the terms of auction are not binding on the petitioner. 10. In Devendra Pratap Singh and another v. State of U.P. and another C.M.W. No. 843 of 1989 decided on 17.4.1989 a Division bench of this Court has held that recovery of the shortfall as arrears of land revenue was justified on the basis of the rules, which have been relied upon by the State Government before us. Having carefully considered the matter, we find that the shortfall is clearly liable to be recovered as arrears of land revenue. 11. In the result, the petition fails and is dismissed with costs.