Bhavani Amma v. State — 1992 DIGILAW 457 (KER)

Judgment :- Varghese Kalliath, J. This Original Petition comes up for hearing before us on a reference by a learned single judge of this Court. His Lordship is of opinion that the Original Petition requires to be considered by a Division Bench, since certain questions of law arise in this Original Petition, the result of which will have far-reaching public importance. 2. Petitioners are the legal representatives of one Narayana Pillai, who was the successful bidder of 12 arrack shops in Kunnathur Range. The Assistant Excise Commissioner, Quilon conducted the auction on 27-3-1981. This was done in accordance with S.18A of the Abkari Act read with R.3(1) of the Kerala Abkari Shops (Disposal in auction) Rules, 1974 hereinafter referred to as the Act and the rules). The notification in the gazette for the conduct of the auction was on 7th March, 1981. It was in terms of R.4 of the Rules. Narayana Pillai was the highest bidder for the privilege of vending arrack in the 12 arrack shops in Kunnathur Range. The bid amount was Rs. 29,01,000/- It was for the year commencing from 1-4-1981 to 31-3-1982. 3. The auction purchaser deposited an amount of Rs.8,70,300/- representing 30% of the bid amount. He produced solvency certificate forRs.5,80,200/- representing 20% of the bid amount. A temporary agreement was executed. 4. The case of the petitioner is that though Narayana Filial was the highest bidder and he has satisfied all the preliminary requirements contemplated under the Rules, the Board of Revenue did not confirm the sale before the commencement of the period for which the privilege was auctioned. R.5(13) of the Rules provides that no sale shall be deemed final as against the Government unless confirmed by the Board of Revenue who shall be at liberty to accept or reject any bid for valid reason to be recorded in writing. Petitioners pointed out that every confirmation or rejection with reasons therefore of the sale shall be communicated to the auction purchaser in writing as soon as possible (see R.5(14) of the rules ). Petitioners pointed out that every confirmation or rejection with reasons therefore of the sale shall be communicated to the auction purchaser in writing as soon as possible (see R.5(14) of the rules ). Considering the date of auction, the amount involved and the number of shops, the Board of Revenue ought to have confirmed the auction before the commencement of the abkari year, R.5(15) of the Rules provides for execution of a permanent agreement i n Form No. 11 and thereafter to take out necessary licence before installation of the shop or shops. 5. Section ISA of the Act provides for the grant of exclusive or other privilege of manufacture, etc. on payment of rentals, S.18A(i) (ii) and (iii) of the Act makes it clear that it shall be lawful for the Government to grant to any person or persons on such conditions and for such period as the Government may deem fit the exclusive or other privilege of selling by retail any liquor within any local area on payment to the Government an amount as rental in consideration of the grant of such privilege. It is further provided that the amount of rental may be settled by auction, negotiation or by any other method as may be determined by the Government from time to time and may be collected to the exclusion of, or in addition, to the duty or tax leviable under Ss.17 and 18 of the Act. S.18A(2) of the Act provides that no grantee of any privilege under sub-section (1) shall exercise the same until he has received a licence in that behalf from the Commissioner. S.24 of the Act prescribes the forms and conditions of licence. S.25 of the Act enjoins a person to execute a counterpart agreement in conformity with the tenor of his licence and to give such security for the performance of his agreement as the (Commissioner) may require. S.26 of the Act provides for power to recall licenses. Since S.18A(2) of the Act provides that no grantee of any privilege to seel liquor, shall exercise that privilege until he has received a licence as contemplated by the Act, the Original Petitioner, the auction purchaser could have exercised the privilege he has purchased by sale of liquor only after obtaining the confirmation of the purchase by the Board of Revenue. 6. 6. According to the petitioner, confirmation of sale was not given in accordance with R.5(14) of the Rules. Thus the petitioner was prevented from executing a permanent agreement and no licence was given to the petitioner for exercising the privilege of vending arrack in the arrack shops he has auctioned. S.15 of the Act makes it clear that without a licence from the Commissioner, no person can sell liquor including arrack, even if he happens to be a purchaser in auction of the privilege to vend arrack. Petitioner has further stated that without confirmation of the. auction the authorities will not issue quota arrack and the bidder cannot start running the shops. Since there was delay in the matter of confirming the auction, it is stated that the petitioner approached the Excise Inspector, Karunagappally for obtaining quota arrack and allowing him to begin the vending of arrack on the basis that he is the highest bidder in the auction. He made such a request before the Assistant Excise Commissioner also. The authorities refused to give the petitioner quota arrack on the ground that it is not permissible, since the auction has not been confirmed. The definite case of the petitioner is that the confirmation ought to have been given prior to 1-4-1981. Since no confirmation was given, petitioner issued a notice dated e-4-1981 to respondents 1 to 3. In the notice petitioner stated that since the auction was not confirmed before the due date for starling the shops and supply of quota arrack also not given petitioner is not interested in running the arrack shops he has purchased in auction on 27-3-1981. In Ext. P1, petitioner demanded return of the amount he has deposited with interest at the rate of 12% together with a rate of Rs.1,00,000/- as damages within 60 days of the receipt of the notice. This was a notice issued through a lawyer. Even though the notice was issued on e-4-1981, petitioner submits that there was no response from the respondents and the auction was not confirmed till 7-5-1981. According to the Original Petitioner he was not informed the fact of confirmation of sale. 7. On 16-5-1981 petitioner issued another notice, Ext. P2 wherein he has stated that the Government has not confirmed the contract despite the fact that almost two months have elapsed after the auction. According to the Original Petitioner he was not informed the fact of confirmation of sale. 7. On 16-5-1981 petitioner issued another notice, Ext. P2 wherein he has stated that the Government has not confirmed the contract despite the fact that almost two months have elapsed after the auction. Of course, obviously he did not know about the alleged confirmation on 7-5-1981, since the information regarding the confirmation was given to him by the third respondent by serving the notice by affixture. In Ext. P2, petitioner has made it clear that he is not willing to be a licensee of the shops in question for the year 1981-82 as the Government has not performed their part of the contract. 8. The petitioner filed an Original Petition before this court as O.P.No. 2781/81 seeking a declaration that the respondents are not entitled to invoke and en force the penal provisions of the Rules consequent on the belated declaration that the petitioner is the auction purchaser of 12 arrack shops in Kunnathur Range. In the Original Petition, petitioner also sought for a direction to forbear the respondents from appropriating the amounts paid by the petitioner and to return the same with the solvency certificate. He also prayed for a declaration that R.e(26) of the Rules is ultravires. The said Original Petition was disposed of with a direction to the Government to dispose of the notices in accordance with law after giving due opportunity to the petitioner for being heard in the matter. 9. Government, after considering Exts. P1 and P2, rejected the contentions raised by the petitioner in Exts. P1 and P2. Copy of order isExt.P3. In Ext. P3, it is stated that Ext. P3 dated e-4-1981 was not received by the Government. According to the petitioner, it is incorrect. Now before us, Government has no case that Ext. P 1 was not received by it. Petitioner has stated that the circumstances revealed in the case would indicate that the Government, one of the contracting parties to a contract governed by the statutory rules was not acting in conformity with the legal rules a contracting party is statutorily bound to do and thereby the Government was disabled itself from realising any damages from the petitioner. Further it was submitted that the petitioner, in the circumstances, is entitled to refund of the amount he has already paid. Further it was submitted that the petitioner, in the circumstances, is entitled to refund of the amount he has already paid. Several contentions have been raised in the Original Petition. We will be adverting to those contentions at the appropriate time with the factual background. 10. Ext. P5 is the notice of sale of immovable property under the Revenue Recovery Act for the alleged loss suffered by the respondents on a resale of the shops in question. Petitioner has prayed for several reliefs including the relief of declaration that the first respondent/Government is not entitled to enforce the penal provision of the Rules as against the petitioner and also a direction to the respondents not to appropriate the advance paid by. the petitioner towards any amount alleged to be due from the petitioner concerning the auction in question. A specific prayer has been included in the petition for the return of the security deposit of Rs.8,70,300/- and the return of the solvency certificate for Rs.5,80,200/- Petitioner prayed that the revenue recovery certificate has to be quashed and all proceedings including the certificate Ext. PS have to be quashed. As prayer (f), petitioner wanted a declaration that Clause 5(10) of the Rules to the extent it restricts the auction purchaser declared by the officer conducting the sale from not withdrawing from the officer, viz., "No person declared to be the auction purchaser by the officer conducting the sale shall withdraw from offer and he shall at once execute a temporary agreement in Form No.1" is unconstitutional, ultravires and not binding on the petitioner. 11. Government has filed two counter affidavits. From the counter affidavits, it is made clear that the Government's action is fully justified in view of the Rules empowering the Government for a resale of the shops on account of the fact that the petitioner was unwilling to execute a permanent agreement in Form No. 11 appended to the Rules and thereby he has incurred the liabilities under R.5(15) of the Rules and the resale has been conducted at the risk of the petitioner. Government has suffered great loss and what is sought to be realised is the loss calculated as per the Rules. Government has suffered great loss and what is sought to be realised is the loss calculated as per the Rules. The case that there is some delay in confirming the auction, even if it is true, will not excuse the petitioner and will not absolve the liability of the petitioner from making good the loss sustained by the Government. It was further contended that the petitioner has no locus standi to challenge the constitutionality of part of R.5(10) of the Rules. Further it was contended that R.5(10) is constitutionally valid. Finally, the respondents contended that the Original Petition has no merit and is only to be dismissed. 12. Counsel submitted that the opening part of sub-rule (10) of R.5 of the Rules is unconstitutional and should be declared void Counsel for the petitioner raised these points: (a) Since there was no confirmation of sale after the date of auction till confirmation is reached to the petitioner, petitioners bid can be considered as only an offer and the petitioner is free to withdraw that offer. The theory that the sale is concluded as and when there is a declaration that the petitioner is the highest bidder is not valid as far as there is a clear rule that no sale shall be deemed final as against the Government unless confirmed by the Board of Revenue who shall be at liberty to accept or reject any bid for valid reason to be recorded in writing. (b) Counsel further submitted that considering the delay in confirmation since what has been purchased is a privilege for a particular period and what is offered by confirming the sale is something different from what has been put up for sale the petitioner is free to repudiate the contract and in fact he has repudiated the contract, and since his repudiation is a valid repudiation, no penalty or damages can be recovered from the petitioner. (c) Petitioner further contended that it is a clear case of non-rexistence of a contract of sale, though the sale was confirmed on 7-5-1981. (d) Even if no time limit is prescribed for confirming the sale after the action and declaring the petitioner as the highest bidder, State action must be just and fair in confirming the sale within a reasonable time even if the rule does not enjoin a particular period within which confirmation has to be given. (d) Even if no time limit is prescribed for confirming the sale after the action and declaring the petitioner as the highest bidder, State action must be just and fair in confirming the sale within a reasonable time even if the rule does not enjoin a particular period within which confirmation has to be given. With respect to an auction conducted by the Government, Government is not free to confirm it after the lapse of an unreasonable length of lime which will not satisfy the requirements that all governmental action should be fair and just. (e) Petitioner has got a case that the confirmation was not at all communicated to the petitioner. This is also. a vital defect. (f) Government by their own conduct, treated that the petitioner has committed breach of contract by issuing notice on 14-5-1981 and so the Government ought to have taken proceedings for resale. of the shops in question within a reasonable time and there is absolutely no reason for delaying the resale till 18-2-1982, the fag-end of the abkari year. (g) The resale has been conducted without proper publicity and without notice to the petitioner and so the resale was invalid and on the basis of the resale the damages cannot be calculated. 13. Before considering the question regarding the validity of part of R.5(10) of the Rules, we would like to address ourselves to the question of the conduct of the respondents in this transaction. In considering this aspect, we would like to consider it by dividing it into two segments. First we have to consider whether the conduct of the respondents is justified in the matter of confirmation of the sale. The second segment is, after accepting the breach of contract by the petitioner whether the Government has taken a just and fair action for the resale of the shops within reasonable time and with due notice and proper publicity for the sale. 14. Admittedly, the notice of auction was in respect of certain privilege to vend arrack in shops of a particular range for a particular period, viz. for the abkari year from 1-4-1981 to 31-3-1982 and the petitioner, no doubt, purchased it for a large amount of Rs.29,01,000/- for obtaining the privilege for that particular period. The auction was on 27-3-1981. 14. Admittedly, the notice of auction was in respect of certain privilege to vend arrack in shops of a particular range for a particular period, viz. for the abkari year from 1-4-1981 to 31-3-1982 and the petitioner, no doubt, purchased it for a large amount of Rs.29,01,000/- for obtaining the privilege for that particular period. The auction was on 27-3-1981. Without executing a permanent agreement, it is not possible for the auction purchaser to obtain a licence for exercising the privilege of vending the arrack in the shops in question. It is to be remembered that without licence, no arrack shall be sold. Further the arrack that has to be sold should be issued by the respondents and that will be done only airier executing a permanent agreement. A permanent agreement can be executed only after the confirmation of the sale. We are adverting to these facts to indicate the importance of the confirmation of sale and the importance of confirming the sale within a reasonable time. It has to be remembered that the provision is 'No sale shall be deemed final as against the Government unless confirmed by the Board of Revenue". Of course, the Board of Revenue has got liberty to accept or reject any bid for valid reasons to be recorded in writing. We will be adverting to the nature of the sale of auction in question with this particular Rule, viz. R.5(13) of the Rules. Since what is said is that the Government shall be at liberty to accept or reject any bid, it tacitly admits that before confirmation the bid of the petitioner will constitute only an offer otherwise there is no reason for using the words 'to accept. or reject'. At any rate, it is clear that there is no concluded contract, though the petitioner may be liable to keep the bid (offer) to be alive till confirmation is reached or till it is rejected. This Rule is followed by sub-rule (14) of R.5 of the Rules which says: "Every confirmation or rejection with reasons therefor of the sale shall be communicated to the auction purchaser in writing as soon as possible". The words "as soon as possible" in the context has got great significance. 15. As we said earlier, the sale is for one year. In this case, the auction was on 27-3-1981. The period is commenced from 1-4-1982. The words "as soon as possible" in the context has got great significance. 15. As we said earlier, the sale is for one year. In this case, the auction was on 27-3-1981. The period is commenced from 1-4-1982. Any delay will reduce the period, thereby there will be change of the subject matter of the contract. That is why the Rule envisages that the confirmation has to be given as soon as possible. Further it has to be noted that only after knowing whether the purchase will be confirmed or not the petitioner can make arrangements for the conduct of the shops Normally it will take sometime. The Kerala Excise Manual which contains guidelines for conducting auction sales and re sales provides that auction should ordinarily start by the first week of February and be completed by the end of February leaving a clear margin of one month for the follow-up action, such as confirmation of sales, issue of confirmation of notice, collection of security etc. and completion of all formalities before 31st March, (emphasis added). Though this is not a binding rule, it indicates how auctions have to be conducted fairly and properly so that the auction purchaser will not be put to the difficulty of not getting adequate time to exercise his privilege for the entire abkari year. We advert to all these facts to consider whether the conduct of the Government in the matter of confirming the sale on 7-5-1981 is justified or not in the circumstances of the case. 16. There is no dispute that the confirmation of sale must come from the Revenue Board. We wanted to examine the proceedings of the Revenue Board in regard to confirmation of the sale. Government Pleader wanted time to place file regarding confirmation of the sale. This we wanted only to know whether there was any justifiable cause for the unreasonable time taken for the confirmation. In the counter affidavit, what is stated is that the auction was on 27-3-1981 and that the bid of the petitioner was accepted. The documents related to the sale were forwarded to the Board of Revenue for confirmation. This we wanted only to know whether there was any justifiable cause for the unreasonable time taken for the confirmation. In the counter affidavit, what is stated is that the auction was on 27-3-1981 and that the bid of the petitioner was accepted. The documents related to the sale were forwarded to the Board of Revenue for confirmation. Then it is stated that the confirmation of the sale of the arrack shops of Kunnathur Range was deferred by the Full Board on 30-3-1981, on the ground that the shops were clubbed together and given to one person in violation of Government orders directing that the shops should be disposed of on individual basis. This is an open statement that the auction itself was irregular in so far as it was conducted in violation of Government orders directing that the shops should be disposed of on individual basis. Nevertheless, it is seen that the matter was referred to the Government and that the Government has directed that since the auction has already been conducted, the shops. may be confirmed, if from the point of revenue and other considerations that there was no objection in confirming the sale. Further it is said that the Full Board confirmed the sale on 7-5-1981 only after taking into account all the facts in issue. In fact, we wanted to know the proceedings of the Board in regard to this matter. The Government Pleader was given sufficient opportunity after the hearing was begun to enable the production of the file. He confessed that he is not in a position to place the file before us. We have to say that in writ proceedings, this court has got the obligation to examine the file. Petitioner wants this court to call for the file and when once the notice is issued, normally the files have to be placed before the court. But as a practice the court insists the files to be placed before it only at the time when the case is being heard. This court is indulgent always to give time to the Government to enable the Government to place the files before this court. In this case, we have given more tharu two opportunities to search for the file to enable the Government to place it before us, but it was not done. We wanted the Government Pleader to show us the order of confirmation. In this case, we have given more tharu two opportunities to search for the file to enable the Government to place it before us, but it was not done. We wanted the Government Pleader to show us the order of confirmation. Government Pleader was not in a position to show that order. We wanted to see whether it was a considered order by the Board of Revenue. We wanted to know whether the Board has given any reason for the delay in its order or proceedings. That was also not available. The order of confirmation, according to the petitioner, has not been served on him. The Government Pleader submitted that the Assistant Excise Commissioner served a notice to the* petitioner slating that the sale has been confirmed, and that the petitioner has refused to receive that notice. We thought that the Assistant Excise Commissioner will have the communication from the Revenue Board confirming the sale. The file of the Assistant Excise Commissioner in regard to this case also does not contain such a communication the Government Pleader submitted so. We have to observe that there is absolutely no justification for the Government not to produce the file of the Board of Revenue regarding this matter when the court wanted to peruse the file. 17. It has to be remembered that all governmental action must be fair and just, even in matters where government is involved in commercial activities governed by statutory rules. Of course, Government Pleader submitted that the statutory rules do not fix any particular time for confirming the sale. But it has to be remembered that sub-rule (f 4) of R.5 of the Rules enjoins the authorities that the confirmation has to be communicated to the auction purchaser in writing as soon as possible. In a case where a privilege for one year is auctioned for an amount of Rs.29,01,000/- any delay even a day's delay is important for the auction purchaser. Counsel for the petitioner submitted that there are certain good reasons for the sale of arrack and the month of April is the best season for the sale of arrack. We cannot accept or reject the submission since parties did not join issue on this question. Counsel for the petitioner submitted that there are certain good reasons for the sale of arrack and the month of April is the best season for the sale of arrack. We cannot accept or reject the submission since parties did not join issue on this question. But we are of opinion that any delay in confirmation will cause great prejudice to the auction purchaser and if the delay is unreasonable, it cannot be said that the court is powerless to relieve the auction purchaser at least from penal consequences. In this case, we feel that the time taken for confirmation is excessive and unreasonable. 18. In the order Ext. P3, it is stated that the order of confirmation is No. XA118000/80 dated 14-5-1981. This order is not placed before us. We wanted the file of the Board of Revenue and when that was not available, weat least wanted to see the order that has been communicated to the Asst. Excise Commissioner. There is a little significance that from the file of Asst. Excise Commissioner it is seen that the Assistant Excise Commissioner has issued a notice to the petitioner dated 11-5-1981 wherein it is stated that the confirmation has been given for the sale on 7-5-1981 and he has received a communication to that effect. The communication is not seen in the file the Government Pleader also submitted so. The notice does not show when exactly the communication was received. Any how, in the notice, the Assistant Excise Commissioner has said that the petitioner has to execute a permanent agreement and should receive the licence for the second net of the shops. This notice contains the endorsement by the Excise Inspector. The endorsement is dated 13-5-1981. In the endorsement, the Excise Commissioner has said that the petitioner refused to accept the notice and so he served the notice by affixture by affixing it on an important part of the residential house of the petitioner. In the endorsement, there are two witnesses also. Petitioner has denied the fact that he has refused the notice. In the order Ext. P3, what is stated is that the fact of confirmation of sale was intimated to the petitioner by the Asst. Excise Commissioner on 11-5-1981, but he did not bother to accept the notice and execute the permanent agreement and lake out a licence. 19. Petitioner has denied the fact that he has refused the notice. In the order Ext. P3, what is stated is that the fact of confirmation of sale was intimated to the petitioner by the Asst. Excise Commissioner on 11-5-1981, but he did not bother to accept the notice and execute the permanent agreement and lake out a licence. 19. From what we have quoted, it seems that the notice was served on the petitioner on 11-5-1981 and he refused to receive it on 11-5-1981. From the endorse- mcni, it seems that the date of service of notice must be on 13-5-1981, since the witnesses have signed the endorsement on 13-5-1981. We cannot say anything about these discrepancies. In the counter affidavits, there is no explanation. 20. The petitioner was served again a notice by the Asst. Excise Commissioner. This notice is seen dated 14-5-1981. By this notice, the Asst. Excise Commissioner has made it clear that since the petitioner has not executed the permanent agreement, action under R.5(15) has to be taken against him. This notice also is seen served by affixture. The action taken against the petitioner is under R.5(1e). Of course, rule 5(16) takes in sub-rules (10) and (15) of R.5. Sub-Rule (10) provides for taking penal action at the first stage. As soon as the person is declared as the highest bidder, sub-rule (10) provides for certain things to be done by the highest bidder and if he fails to do those requirements under sub-rule (10), the consequences are mentioned thus: "If he fails to do so, the earnest money paid by him under sub-rule (1) shall be forfeited to State Revenue and the next highest bidder may be provisionally declared as the auction purchaser as deem necessary or the shop or shops in question shall again be put to auction by the Officer conducting the sale either immediately or on a future date to be notified by him or otherwise disposed of at the discretion of the Board of Revenue. In the case of accepted tenders the demand draft enclosed along with the tenders will be credited towards the cash security. If he fails to execute the temporary agreement with the required security, the amount of demand draft tendered shall be forfeited to Government. In the case of accepted tenders the demand draft enclosed along with the tenders will be credited towards the cash security. If he fails to execute the temporary agreement with the required security, the amount of demand draft tendered shall be forfeited to Government. The reauction shall always be at the risk of the defaulter (first auction purchaser) who cannot lay claim to any gain accruing from the reauction but in the event of loss to Government by such reauction he shall, be required to make good the deficiency between the total amount payable by him for the whole period under the terms of the original sale and the total amount payable by the reauction purchaser. In the event of such loss to Government the loss with interest at 18 per cent or such other rate of interest as may be fixed by the Government from time to time thereon shall be recovered from the defaulter (first auction purchaser) in the same manner as if it were an arrear of land revenue. Disposal otherwise includes closure or departmental management. The defaulter shall be debarred from bidding again the same shop or shops as the case may be or any other abkari privilege during the contract period in question." 21. In this case from what we have quoted above, "it is obvious that the default is not on account of non-execution of the temporary agreement or non-compliance of the requirements as soon as the petitioner-auction purchaser is declared as the highest bidder. The case of the petitioner will come under sub-rule (15) of R.5. There it is said that the "auction purchaser shall also execute a permanent agreement in Form No. 11 appended to these rules and take out necessary licence before installation of the shop or shops. On the failure of the a action purchaser to make such deposit referred to in sub-rule (10) or lake out such licence or execute such agreement temporary or permanent or furnish such personal surety on additional cash security as aforesaid, the deposit already made by him towards security shall be forfeited to Government and the shop resold or otherwise disposed or 'by the Asst. Excise Commissioner subject to confirmation by the Board of Revenue, Disposal otherwise includes closure or departmental management the Assistant Excise Commissioner shall order the resale of the shops or otherwise dispose of the shop or shops at the risk of the original purchaser subject to confirmation by the Board of Revenue." 22. From what we have said it is clear that the action taken in this case is under sub-rule (15). We discuss separately the contention that there is no justification for taking action under sub-rule (15) of R.5. Under sub-rule (15) action is contemplated only if the petitioner is a defaulter on account of the fact that he has not executed a permanent agreement r has not taken the licence or has committed any other default. As we said earlier, execution of permanent agreement requires confirmation by the Board of Revenue. If there was no proper confirmation by the Board of Revenue or if the Government has failed in complying with that requirement as envisaged by the rule, we feel that it is possible for the petitioner to contend that he will not be liable under sub-rule (15) of R.5. We are of opinion that since sub-rule (14) of R.5 has made it obligatory that every confirmation or rejection with reasons therefor of the sale shall be communicated to the auction purchaser in writing as soon as possible, and if that is not done, at any rate, the petitioner cannot be made liable for any penalty because the default is on the part of the Government. 23. In considering the width and scope of sub-rule (14) of R.5, we feel that it is possible for us to import the principle that a statutory authority is not expected to act arbitrarily. His action is always liable to be scrutinised by the court to verify whether it is just and fair. In Royappa v. State of Tamil Nadu (AIR 1974 SC 555) and Maneka Gandhi v. Union of India, the Supreme Court said that Art.14 of the Constitution of India strikes at arbitrariness in state action and ensures fairness and equality of treatment. 24. In Royappa v. State of Tamil Nadu (AIR 1974 SC 555) and Maneka Gandhi v. Union of India, the Supreme Court said that Art.14 of the Constitution of India strikes at arbitrariness in state action and ensures fairness and equality of treatment. 24. In every sphere of activity, state action must not be arbitrary but must be based on some rational and relevant principles, it must not be guided by any extraneous or irrelevant considerations because that would be denial of equality .-The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Art.14 and it must characterise every state action, whether it be under authority of law of in exercise of executive power or exercise of a power under a delegated legislation. The Rules under which actions are taken in this case, it is to be remembered is a piece of delegated legislation. 25. Supreme Court had occasion to consider the expression'as soon as may be' in several decisions dealing with preventive detention cases. We are conscious of the fact that the interpretation of 'as soon as may be 'by the Supreme Court in preventive detention cases cannot be imported or cannot be taken as applicable in interpreting the words used in sub-rule (14) of R.5 'as soon as possible'. The words 'as soon as may be' are used in Art.22 of the Constitution which guarantees protection against arrest and detention in certain cases and so we feel that the interpretation of the Supreme Court for the words 'as soon as may be' should confine to those cases. But the Parliament by law defined the words 'as soon as may be' in Art.22(5) of the Constitution as meaning viz., a period of 5 days. Further it is to be noted that when the Supreme Court wanted to interpret the words 'as soon as may be' the general principle stated is: "The normal rule therefore is that the grounds of detention must be communicated to the detenu without avoidable delay. It is only in order to meet the practical exigencies of administrative affairs that the detaining authority is permitted to communicate the grounds of detention not later than five days ordinarily, and not later than 10 days if there are exceptional circumstances. It is only in order to meet the practical exigencies of administrative affairs that the detaining authority is permitted to communicate the grounds of detention not later than five days ordinarily, and not later than 10 days if there are exceptional circumstances. So, in short, when the term 'as soon as possible' issused in deciding the question of confirmation, it has to be understood that the decision as to confirmation has to be given taking all the relevant circumstances of the case and without avoidable delay-Since avoidable delay is an important constituent in determining the reasonableness of the time taken for giving the confirmation, we wanted to verify the Board's proceedings for our satisfaction. But we were not able to do it, since the files of the Board were not available to us. 26. In the counter it is stated that the petitioner can only claim the benefits of R.5(7), that is the liability regarding the privilege of sale shall commence from the date of confirmation of sale. The submission made by the Government Pleader as a defence to the delay in confirming the auction is that the delay may not adversely affect the auction purchaser in so far as the auction purchaser is entitled to gel pro rata reduction commensurate with the delay in confirming the auction subsequent to the commencement date of the Abkari year. The. Government Pleader has relied on sub-rule (7) of R.5 of the Rules. A reading of R.5 would indicate that rule is not applicable in this case. 27. Sub-rule (7) of R.5 deals with an entirely different situation. In a case where the officer conducting the sale feels that there has not been sufficient or fair competition, he has been given the power to adjourn the sale publicly to a specified hour on the following day, or some other convenient day to be notified by him. Further, in case of failure to procure satisfactory bids, the officer conducting the sale may dispose of the shops by private negotiation to parties undertaking to abide by all the conditions in the rule. In such cases written offers shall be obtained from the parties and temporary agreements executed by them. Further, in case of failure to procure satisfactory bids, the officer conducting the sale may dispose of the shops by private negotiation to parties undertaking to abide by all the conditions in the rule. In such cases written offers shall be obtained from the parties and temporary agreements executed by them. In such a case, it is definitely and specifically stated that their liability regarding the privilege of sale shall commence from the date of confirmation of sale to them, in the case of the petitioner who comes under sub-rule (10) and (15) such a provision is absent. Without such a provision, we cannot accept the submission made by the Government Pleader that even if there is delay in confirmation, the petitioner is not adversely affected, since he can claim prorata reduction in the sale price. The indication in certain rules is otherwise. 28. Rule e(25) provides that the rental due for the period from 1st April of the year to 31st March of the year following shall be payable in 10 equal monthly instalments. The instalments shall be payable on or before the 10th day of each English Calendar month beginning from 1st April. Further it is provided That in case of failure of payment, interest at the rate of 18 per cent or such other rate of interest as may be fixed by the Government from time to time per annum shall he charged from 11th. Further, in R.5(10) it is made clear that any default on the part of the highest bidder in executing even a temporary agreement and in case of re-auction, it will be at the risk of the defaulter (first auction purchaser) who cannot lay claim to any gain accruing from the reauction, but in the event of loss to Government by such reauction he shall be required to make good the deficiency between the total amount payable by him for the whole period under the terms of the original sale and the total amount payable by the reauction purchaser, (emphasis added). 29. So, in a case where the default comes under sub-rule (10), the auction purchaser is bound to pay the loss calculated on the basis of the deficiency between the first auction purchase and the reauction purchase price. 29. So, in a case where the default comes under sub-rule (10), the auction purchaser is bound to pay the loss calculated on the basis of the deficiency between the first auction purchase and the reauction purchase price. In sub-rule (16) of R.5 also, there is an indication that the auction purchaser has to make good the deficiency between the total amount payable for the whole period under the terms of the original sale and the total amount-payable by the resale purchaser. As regards the resale purchaser, his liability in case of default is fixed under sub-rule (16) of R.5, from the date of confirmation of the sale and such a provision is conspicuously absent in regard to the first auction purchaser. Further, it has to be noted that in sub-rule 25 of R.6, it is provided that no remission or abatement of the rental shall be claimable by the licensees on any account whatsoever. 30. Government Pleader submitted That the calculation made for finding out the loss is not on the basis of the total amount, but. only on pro rata basis. From Ext. P5 it is evident that what is claimed as the loss sustained by the Government is not on the basis of pro rata amount payable by the petitioner on the basis of the delayed confirmation. If it were on the basis of the pro rate delayed confirmation, it would be less than Rs.20 lakhs, but what is claimed is Rs.22,46,621/- and interest of Rs.3,29,338/-. So, the cast-pleaded by the Government that the confirmation can be given at any time since there-is no clear stipulation of lime for confirmation in the rules and the court cannot import the principles of reasonable time cannot accepted. Moreover, as we said earlier, when sub-rule (14) of R.5 enjoins the Slate to communicate confirmation as soon as possible it has got a definite purpose in the scheme of the rules and if it is not done it would amount to a serious breach, which may result in not forming an executable contract. Moreover, as we said earlier, when sub-rule (14) of R.5 enjoins the Slate to communicate confirmation as soon as possible it has got a definite purpose in the scheme of the rules and if it is not done it would amount to a serious breach, which may result in not forming an executable contract. Though it is stated in sub-rule (13) of R.5 that no sale shall be deemed final as against the Government, unless confirmed by the Board of Revenue is an indication that there shall be deemed to be a sale, as far as the petitioner is concerned, this has to be understood in the light of the sub-rule (10) of R.5, wherein it is staled that no person declared to be the auction purchaser by the officer conducting the sale shall withdraw from the offer (emphasis added). So sub-rule (10) makes it clear that what happened after the fall of the hammer is not a completed contract. If it is a completed contract, it is possible to say that the person shall not withdraw from the contract or the agreement. What is slated is that the highest bidder shall not be allowed to withdraw from the offer. In this context, we may refer to the decision reported in 1973 KLT 451 (RavunniNair v. State of Kerala). In the above decision, in considering the question whether in the absence of any confirmation of sale and the execution of an agreement in conformity with Art.299 of the Constitution of India, the auction purchaser is not liable to be proceeded against under the Revenue Recovery Act in respect of abkari arrears, Gopalan Nambiar, J. as he then was observed "even if no contract in writing is entered into in pursuance of the auction, as soon as the hammer fell, there was a concluded contract between the highest bidder and the State." 31. The power of recovery in the case of default is contemplated under R.5(10). As we have already pointed out, R.5(10) itself says that no person declared to be the auction purchaser by the officer conducting the sale shall withdraw from the offer and so, when the hammer falls declaring that A is the highest bidder, it only means that he is the highest bidder and he cannot withdraw from his offer and if he with draws from the offer, he will incur the liability under sub-rule (10). Certainly the consequence of becoming the highest bidder and the consequence of becoming a purchaser after obtaining the confirmation by the Board of Revenue may be identical or different, but it is difficult for us to accept that there is a completed contract even without a confirmation as contemplated under sub-rule (13) of R.5. Though there is no difficulty for us to say that the highest bidder has taken upon an obligation not to withdraw from the offer he has made and in case he withdraws from the offer he has made because he has agreed to bind himself by the rules, he will be liable for the penalty contemplated under R.5(10) and that penalty is recoverable under the Revenue Recovery Act read with S.28 of the Abkari Act. We think it is possible to understand the ratio of the decision in the light of what we have stated above. 32. The general principle of contract and Contract Act cannot be totally ignored in considering the rules. We have to remember that we are considering a piece of delegated legislation. A delegated legislation cannot claim same equality, insulation and immunity which is enjoyed by a statute passed by a competent legislature. The subordinate legislation is always liable to be questioned on all the grounds on which a plenary legislation could be questioned. In addition certainly the delegated legislation can be challenged on the ground that it does not conform to the statute under which it is made. It may further be faulted on the ground that it is contrary to some other statute. It is a cardinal principle that subordinate legislation must yield to plenary legislation. We may also say that subordinate legislation may also be questioned on the ground that it is unreasonable in the sense that it is manifestly arbitrary. This concept of invalidating a delegated legislation can be seen from the decisions of English Courts where judges would say "Parliament never intended authority to make such rules. They are unreasonable and ultra vires". The position of law has been clearly stated by Diplock L.L in Mixnam PropertiesLuL k Clirtsey U.D.C., (1964 I QB 214) thus: The various grounds upon which subordinate legislation has sometimes been said to be void.... They are unreasonable and ultra vires". The position of law has been clearly stated by Diplock L.L in Mixnam PropertiesLuL k Clirtsey U.D.C., (1964 I QB 214) thus: The various grounds upon which subordinate legislation has sometimes been said to be void.... can I think, today be properly regarded as being particular applications of the general rule that subordinate legislation, to be valid, must be shown to be within the powers conferred by the statute. Thus the kind of unreasonableness which invalidates a bye-law is the not antonym of reasonableness" in the sense of which that expression is used in the common law, but such manifest arbitrariness, injustice or partiality that a court would say: "Parliament never intended to give authority to make such rules: they are unreasonable and ultra vires.... If the courts can declare subordinate legislation to be invalid for "uncertainty', as distinct from unenforceable this must be because Parliament is to be presumed not to have intended to authorise the subordinate legislative authority to make changes in the existing law which are uncertain" 33. In AIR 1990 SC 334 (Supreme Court Employees Welfare Association v. Union of India), i t has been held that while ordinances cannot perhaps be questioned on any ground which is not relevant to the validity of legislation, it is not so in the case of rules made by virtue of power granted under the Constitution which are, as stated above, liable to be declared void for any of the reasons for which instruments made by virtue of delegation by Acts or Parliament can be declared void. It is further held that Rules made under the Constitution or a statute, must be intra vires the parent law under which power has been delegated. They must also be in harmony with the provisions of the Constitution and other laws. I f they do not tend in some degree to the accomplishment of the objects for which power has been delegated to the authority, courts will declare them to be unreasonable and, therefore, void. They must also be in harmony with the provisions of the Constitution and other laws. I f they do not tend in some degree to the accomplishment of the objects for which power has been delegated to the authority, courts will declare them to be unreasonable and, therefore, void. In the same decision, the court father observed: "Rules are liable to be declared invalid if they are manifestly unjust or oppressive or outrageous or directed to an unauthorised end or violative of the general principles of the law of the land or so vague that it cannot be predicted with certainly as to what is prohibited by them or so unreasonable that they cannot be attributed to the power delegated to otherwise disclose bad faith". What Lord Diplock has quoted is seen quoted as early as in 1898. Lordd Russel of Kilowen, CJ. in Knise v. Johnson, (1898)2 OB 91 observed thus: "If for instance, they were found to be partial or unequal in their operation as between different classes; if they involved such oppressive or gratuitous interference with the rights of those subject to them as could find no justification in the minds of reasonable men, the Court might well say, v Parliament never intended to give authority to make such rules; they arc unreasonable and ultra vires". 34. Counsel submitted that the penalty provisions of the Rule arc against the general principles of contract and clear provisions of the Central Act, vi/,. the Contract Act. We feel that without going into those questions, we can decide this case. We also feel that it is always better to decide the case without faulting a piece of delegated legislation. 35. It is well set lied that a person who bids in an auction, thereby does not conclude a contract, but merely states an offer and like all other offers it is subject to the ordinary incidents of law, viz. that until it is accepted, it is open to the offerer to withdraw it: the time for withdrawal can however, be always determined by a separate and binding contract for consideration. In auction sales, the acceptance of a bid may be of three kinds: (1) conditional acceptance (2) provisional acceptance and (3) absolute acceptance where the auctioneer has full powers to confirm the sale and the sale is complete as soon as the hammer falls, See AIR 1968 Pat. In auction sales, the acceptance of a bid may be of three kinds: (1) conditional acceptance (2) provisional acceptance and (3) absolute acceptance where the auctioneer has full powers to confirm the sale and the sale is complete as soon as the hammer falls, See AIR 1968 Pat. 433 (Abdul Rahim v. Union of India). 36. In the above decision, referring to a Supreme Court decision reported in AIR 1958 SC 289 (Mis. Bombay Salt & Chemical Industries v. L.J. Johnson) the Division Bench said thus: "Their Lordships, accordingly, proceeded to decide the question whether there was a completed sale of the salt pans in question and in this connection reference was made to the provisions of S.20 of the Act which dealt with the power to sell. Relying on S.20,it was urged on behalf of the appellants that the sale could be by auction and that such a sale was complete as soon as respondents 4 and 5 were declared the highest bidders at the auction and thereupon the property stood transferred to them. This argument was repelled, and it was held inter alia that the fact that the bid has to be approved by the Settlement Commissioner shows that till such approval which the Commissioner is not bound to give, the auction-purchaser has no right at all." Further, in the Supreme Court decision, itself, which has been quoted in AIR 1968 Pat. 433, it is observed thus: "The correct position is that on the approval of the bid by the Settlement Commissioner a binding contract for the sale of the property to the auction-purchaser comes into existence." Quoting the above observation, Their Lordships of the Patna High Court observed that "this clearly implies that with the fall of the hammer there was only a provisional acceptance of the offer of the plaintiff and that a completed contract came into existence only when the offer of the plaintiff in the shape of his bid met the approval of the Settlement Commissioner or of the officer appointed in that behalf. 37. We are discussing these aspects of the matter only for a limited purpose to indicate the importance of giving confirmation as soon as possible. The rule contemplates that confirmation has to be given within a reasonable time. 37. We are discussing these aspects of the matter only for a limited purpose to indicate the importance of giving confirmation as soon as possible. The rule contemplates that confirmation has to be given within a reasonable time. If it is not done, under the contract and in the light of sub-rule (10) of R.5, it is possible for the petitioner to say that what is conditional is not being done because of the lapse of time and he has acquired a right to repudiate the contract. This forms only one aspect of the matter. Since we are considering the question under the writ jurisdiction, we feel that we are bound to say that on a reading of the rule relevant to confirmation of sale, the governmental action in giving the confirmation of a sale, which took place on 27-3-1981 has been communicated only on 11-5-1981 is not a just and fair action. It is an arbitrary action. More so, for this court was prevented from examining the file to ascertain the reason for the delay. We need not quote decisions on the point that any power must be assumed with certain conditions of duly. The manner in which such exercise of power should be made ensuring fairness, avoiding arbitrariness and mala fides and creating credibility in the decision arrived at by exercise of the power. All these are essential to ensure that power is fairly exercised and there is fair play in governmental action. Vide - Delhi Transport Corporation v. D.T.C.Mazdoor Congress (1991 Supp. (1) SCC 600). 38. We may quote one passage from the dissenting opinion of Mathew, J. In the decision reported in AIR 1969 Ker. 81 Punnen Thomas v. State which has found affirmative recognition by the Supreme Court later. "The essence of the first idea is that the government is still the government when it is dispense in the bounties, gratuities, or privileges, that we want the government to be fair no matter what its activities may be, and that often the best way to assure governmental fairness is by relying upon judicial enforcement of the usual concepts of fairness. Therefore, the basic constitutional limitations having to do with fairness often apply even though the privileges as such are not: entitled to legal protection". "The Government is not and should not be as free as an individual in selecting the recipients for its largesse. Therefore, the basic constitutional limitations having to do with fairness often apply even though the privileges as such are not: entitled to legal protection". "The Government is not and should not be as free as an individual in selecting the recipients for its largesse. Whatever its activity, the Government is still the government and will 'be subject to restraints, inherent in its position in a democratic society. A democratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal". 39. We have got a Government wedded to rule of law. The concept of rule of law has got different dimensions and it creates different postulates. Dicey gives a particular meaning in his book 'The Law of the Constitution'. Hayek gives a definition in his Road to Serfdom and Constitution of Liberty. Harry Jone's expositions in his "The Rule of Law and the Welfare State" give yet another idea of rule of law. Mathew, J. in his article on "The Welfare State Rule of Law and Natural Justice" in Democracy Equality and Freedom, Upendra Baxi Ed. Eastern Book Co., Lucknow (1978) P.28, said "substantial agreement in juristic thought that the great purpose of the rule of law notion is the protection of the individual against arbitrary exercise of power, wherever it is found", Krishna Iyer, J. in Mam Ram v. Union of India (AIR 1980 SC 2147) observed: "It is indeed unthinkable that in a democracy governed by the rule of law the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Every action of the Executive Government must be informed with reason and should be free from arbitrariness. That is the very essence of the rule of law and its bare minimal requirement. And to the application of this principle, it makes no difference whether the exercise of the power involves affection of some right or denial of some privilege". 40. Every action of the Executive Government must be informed with reason and should be free from arbitrariness. That is the very essence of the rule of law and its bare minimal requirement. And to the application of this principle, it makes no difference whether the exercise of the power involves affection of some right or denial of some privilege". 40. In International Airport Authority case (1979) 3 SCC 489, the Supreme Court had occasion to say that the Government in dealing with the public, whether by way of giving jobs or entering into contracts of otherwise, should not be prompted to act arbitrarily and enter into relationship with any person it likes at its sweet will, but its action must be in conformity with some principles which meets the lest of reason and relevance". 41. Along with the question of delayed confirmation we feel that we have to consider another allied aspect. The consequence of delayed confirmation makes a great variation in the subject matter of the contract. We do not want to illustrate it because we have already said the salient aspects of it. The bid was for the privilege for vending arrack for a a particular period, namely, between 1-4-1981 and 30-3-1982. By the confirmation which reached only on 1-5-1981, the first terminus is changed to 11-5-1981. This is a serious variation in the subject-matter of the contract. This gives aright of he contractor to repudiate the contract and when once the contract is repudiated rightly the party gets a right not only for the refund of the amount but also for damages. (Sec 1981 (4) SCC 289 (Syed Israr Masood v. State of M.P.) 42. In 1981 (4) SCC 289, the Supreme Court was considering a contract, which came into existence by auction. It is also a contract between a private party and the Government. The Supreme Court has given importance to the fact that the auction sale was on the basis of the details regarding the quantity of the timber that will be available for extraction in the concerned coupes and the quantity etc. of tree growth actually found to be available on the site. The Supreme Court has given importance to the fact that the auction sale was on the basis of the details regarding the quantity of the timber that will be available for extraction in the concerned coupes and the quantity etc. of tree growth actually found to be available on the site. The Supreme Court found that on facts, the quantity of forest produce was subsequently found to be incorrect and so, it will not preclude the contracting party from repudiating the contract on its being found that there was substantial variance between the particulars furnished at the time of the auction regarding the quantity and quality of timber that will be available for extraction in the concerned coupes and the quantity etc. of tree growth actually found to be available on the site. The Supreme Court observed that "this has substantially altered the very foundation of the contract and hence it was perfectly open to the plaintiff to repudiate the contract and claim a refund of the amount deposited by him as part payment of the purchase price." 43. Unreasonable delay in confirming the auction has a great deleterious effect on-the whole fabric of the contract, because that constituent of time element in the contract in question is a decisive factor in determining the value of the subject mailer of the contract. In such a case, a variance of the period goes to the very foundation of the contract and the party who is responsible for the variation can be accused of committing a breach o f this fund a mental obligation under the contract which gives a right to the other contracting party to repudiate the contract. We have already found that the confirmation was unduly delayed. The result is a substantial variation in the subject-matter' of the contract. In the result, the petitioner acquires a legitimate entitlement to repudiate the contract and on a legal repudiation, certainly the petitioner has got the right to claim damages. When he had the right to claim damages, obviously he has got the right to claim refund of all the amounts already paid as part of the purchase price of the privilege. 44. Now, we shall consider the question of the fixation of damages by the respondents. Obviously the respondents have fixed the damages payable by the petitioner under sub-rule (16) of R.5. 44. Now, we shall consider the question of the fixation of damages by the respondents. Obviously the respondents have fixed the damages payable by the petitioner under sub-rule (16) of R.5. Sub-rule (16) provides that a resale or disposal of the shop effected under sub-rules (10) and (15) shall always be at the risk of original auction purchaser. The liability against the original auction purchaser and the resale purchaser shall be calculated respectively up to and from the date of confirmation of the resale. We have found that the case of petitioner will come under R.5(15). R.5(15) itself provides that the Assistant Excise Commissioner shall order resale of the shop or shops or otherwise dispose of the shop or shops at the risk of the original purchaser subject to confirmation by the Board of Revenue. It has to be noted that the respondents got the right to dispose of the shop by resale or otherwise on 14-5-1981. Admittedly the resale was on 18-2-1982. As per sub-rule (16) the differential amount is the loss. We have already adverted to the fact for calculating the differential amount, the total bid has to -be taken irrespective of the fact when exactly the sale has been confirmed. There is absolutely no justifiable reason stated for the long delay for the resale. The delay has to be reckoned between 14-5-1981 to 18-2-1982. At a lime the resale was effected, the abkari year was crawling to its fag-end. There was hardly less than 2 months left in the abkari year when the resale was conducted. Government Pleader submitted that the rule does not provide for any particular lime for conducting the resale. Further, he submitted that the Department has got the power otherwise to dispose of the shops than by resale and that disposal otherwise than by resale includes closure or departmental management. But, it has to be noted that in the counter affidavit there is no case that for the period from 14-5-1981 to 18-2-1982 (here was a closure of the shops under sub-rule (16) of R.5. Further, it has to be nolcd that disposal otherwise than by resale which includes closure or departmental management requires confirmation by the Board of Revenue, though the power is given to the Assistant Commissioner. Further, it has to be nolcd that disposal otherwise than by resale which includes closure or departmental management requires confirmation by the Board of Revenue, though the power is given to the Assistant Commissioner. As we said earlier, there is no case pleaded in the counter affidavit that there was a closure for the period from 14-5-1981 to 18-2-1982. Further, there is no averment and no material placed before us that there was a closure which was confirmed by the Board. It has to be remembered that on 14-5-1981 in fact there was a cancellation of the contract and thereafter, the respondents Is had the right to deal with the shops as they deem it proper. As-we said earlier, all governmental action should be founded on fairness and it requires a satisfactory justification which will stand the scrutiny of a court. Assuming that there was closure,' nothing is stated for the justification of such a course. So also, nothing is staled for the inordinate delay in conducting the resale. The scheme of the provisions would indicate that in the mailer of resale also, the authorities should be careful not to cause any avoidable delay. When damages are claimed, the action of the department in conducting the resale is significant and important obviously for the reason that the damages are fixed on the basis of the difference between the original auction purchase price and (he reauction purchase price. 45. In AIR 1987 Ker. 57, Mis. Bismi Abdullah & Sons v. Regional Manager, F.C.I. Trivandrum, a Division Bench of this court in a case between a contracting party and the Food Corporation of India in "interpreting a clause for resale on default of the contracting party observed that "one of the fundamental principles of law of damages is that the person entitled to claim damages must do all that is within his power to miligage the damage. In case where there is no right to the difference in price on resale available to the seller as per the contract, he can claim only the difference between the contract price and the market price on the date of the breach. Where the seller has got such a right the resale must nevertheless be conducted within a reasonable time from the date of breach. Where the seller has got such a right the resale must nevertheless be conducted within a reasonable time from the date of breach. The damages must have relation to the market price on the dale of breach whether or not the contract empowers the vendor to resell and claim the differences. In other words, the resale can only be taken as a step to enable the party to establish the market price on the date of the breach. Viewed in this manner the resale must be within a reasonable time from the date of breach so that there may not be such variance in market price between the date of resale and the dale of breach." The court found that the resale in that case after 41/2 months of the breach of the contract is unreasonable and so, only nominal damages can be awarded on account of the breach committed by one of the contracting parties. 46. Of course, this was a case decided only on the terms of the contract and applying the provisions of the Contract Act, particularly S.73. There may be some difference when the contract is governed by statutory rules. Government Pleader made a very earnest attempt to say that respondents are not bound to mitigage the damages by effecting a resale with expedition. It was contended that they are not even bound to make a resale. We have already adverted to the fact a delegated piece of legislation (the rules) should not be inconsistent with any statutory law (Vide AIR 1990 SC 334) and this court is bound to give the rule an interpretation which would harmonies the rule and the statutory law on the subject. Viewed in this sense, we arc of opinion that the respondents are bound to effect the resale within reasonable time and obviously this case, they have not do so. 47. Petitioners have got a case that the resale has been effected without giving notice to them and without due publicity. Further, to (he auction purchaser nor to anyone connected with him was given notice of the auction conducted by the Department on 18-2-1982. Petitioner came to know about the resale only when the respondents filed the counter affidavit in May, 1983. So, the irregularities in the mailer of resale were pointed out by the petitioners only in the rejoinder. Further, to (he auction purchaser nor to anyone connected with him was given notice of the auction conducted by the Department on 18-2-1982. Petitioner came to know about the resale only when the respondents filed the counter affidavit in May, 1983. So, the irregularities in the mailer of resale were pointed out by the petitioners only in the rejoinder. Before us there is no material to show that there was due publicity for the second sale. 48. In a case coming under the Punjab Excise Act and Punjab Liquor Licence Rules, the Supreme Court had occasion to consider a similar question. There also the court was considering the question as to whether due publicity was given to the reauction as required by the rules. A case of lack of due publicity was pleaded in that case. The Supreme Court remanded the case to the High Court in order to enable it to record its finding on two questions: (1) whether it was necessary according to the Rules which were in force at the relevant time to give adequate publicity to the reauction and (ii) if so whether such publicity was in fact given to the reauction. It was further observed that if the officers of the State have further defaulted in the matter of due publicity to the reauction the consequence would be that the respondents may not be liable to pay the difference between the original amounts and the amounts realised in the reauction. Vide AIR 1980 SC 2018. 49. In Kerala Excise Manual Vol.11 it is provided that in the matter of resale the local officer should give wide publicity and try to get as many bidders as possible. It is clearly stated that it is of utmost importance that the notice about resale is served on the original purchaser at whose risk the resale is conducted or if he is not alive on his legal heirs. Further it is provided that all the conditions and procedures prescribed in the original sale are applicable for resale also. 50. In this case no notice was given to the petitioner or the legal heirs of the petitioner about the resale. Though the provisions contained in the Excise Manual are only guidelines, we feel that unless there is no good reason the officers, cannot deviate from the guidelines particularly when the deviation causes prejudice to the other contracting party. 51. 50. In this case no notice was given to the petitioner or the legal heirs of the petitioner about the resale. Though the provisions contained in the Excise Manual are only guidelines, we feel that unless there is no good reason the officers, cannot deviate from the guidelines particularly when the deviation causes prejudice to the other contracting party. 51. In AIR 1987 SG 1802 (Union of India v.Cynamide India Ltd.) Chinnappa Reddy, J. observed in a case of price fixation, a legislative activity thus: "It was neither the function nor the forte of the court. We concern ourselves neither with the policy nor with the rates. But we do not totally deny ourselves the jurisdiction to enquire into the question, inappropriate proceedings, whether relevant considerations have gone in and irrelevant considerations kept out of the determination of the price". In E.P.Royappa v. State of Tamil Nadu, (AIR 1974 SC 555) the Supreme Court observed thus:- "equality and arbitrariness are sworn enemies: one belongs to the rule of law in a republic while theother, to the whim and caprice of an absolute monarch " In S.I. Syndicate Ltd. v. Union of India (AIR 19756 SC 460), the Supreme Court J& observed thus: "Reasonableness, for purposes of judging whether there was an "excess of power' or "arbitrary' exercise of it, is really the demonstration of a reasonable nexus between the matters which are taken into account in exercising a power and the purposes of exercise of that power." 52. Considering the unexplained delay and the circumstances emerged in the case in regard to the resale, we have to say that the power of resale has been exercised in an unreasonable and arbitrary manner. We may repeat that any arbitrary exercise of power by a public authority whether under a statute or subordinate legislation, is liable to be condemned as violative of Art.14 of the Constitution. It is so stated in AIR 1974 SC 555. 53. On a discussion of the whole facts relating to the resale, we are of opinion particularly, in view of the long delay in conducting the resale, the action of the respondents lacks fairness in action and it is against the principles of la w of contract and Contract Act. It is so stated in AIR 1974 SC 555. 53. On a discussion of the whole facts relating to the resale, we are of opinion particularly, in view of the long delay in conducting the resale, the action of the respondents lacks fairness in action and it is against the principles of la w of contract and Contract Act. In the circumstances, the respondents cannot take shelter under the omnibus defence that the rules or the statutory provisions do not specify a particular period within which the resale has to be conducted. We hold that the resale has not been conducted validly and on the principles stated in the decision reported in AIR 1980 SC 2018 and that the petitioner is not liable to pay the difference between the first auction purchase price and the price obtained in resale. 54. Now we have found that the respondents have committed a breach of contract by not following the rules and by their arbitrary action insofar as they have taken unreasonable time for confirming the sale. We have also found that since delay has occasioned in confirming the sale, there was fundamental variation in the contract and the petitioners have obtained a right to repudiate the contract. Further, we have found that the resale conducted by the respondents does not stand the test of fairness in action by a governmental authority and the resale is invalid to the extent that it should not be a foundation for determining the quantum of damages. In view of the above findings we hold that the petitioners are not liable to pay any damages and that the petitioners are entitled to refund of the amount paid by the petitioners. 55. We may also advert to an argument of the learned Government Pleader that in no case the petitioners are entitled to the refund of the deposit amount, viz. Rs.8,70,300/- This argument was advanced relying on sub-rule (16) of R.5. Government Pleader submitted that the said rule provides that "if the forfeited deposit is greater than the loss by resale the whole of such deposit shall be credited to the Government". We are of opinion that this is an oppressive provision in sub-rule (16) of R.5 and may not island the test of reasonableness and fairness. Government Pleader submitted that the said rule provides that "if the forfeited deposit is greater than the loss by resale the whole of such deposit shall be credited to the Government". We are of opinion that this is an oppressive provision in sub-rule (16) of R.5 and may not island the test of reasonableness and fairness. Further, we are of opinion that this provision can be pressed into service only if the auction purchaser is a defaulter insofar as he has committed breach of the contract or any of the rules. In this case, since we are holding that the respondents have committed breach of the contract, the provision cannot be pressed into service. 56. In view of the above findings, we do not think that there is any necessity to consider the question of constitutional validity of first part of sub-rule (10) of R.5. Further, we are of opinion that it will be difficult for us to apply the principle of scvcrabilily and to sever that part of the rule which is alleged to be unconstitutional. If we declare that the first part of R.5(10) is unconstitutional, the remaining part cannot survive. In the result, we allow the O.P. and declare that the petitioners are not liable to pay any amount as penalty to the respondents and that the respondents are liable to refund the security deposit of Rs.8,70,300/- and solvency certificate for Rs. 5,80,20/- In the circumstances of the case, we do not order costs.