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Madhya Pradesh High Court · body

2002 DIGILAW 243 (MP)

Pratipal Singh v. State of M. P.

2002-03-04

R.B.DIXIT, S.S.JHA

body2002
JUDGMENT Jha, J. -- 1. This letters patent appeal has been filed against the dismissal of Writ Petition No. 809/1987. 2. Brief facts of the case are that appellant was granted licence in Form FL-3 for liquor contract for the period between 1.4.1986 to 31.3.1983. Appellant's bid was the highest for Indergarh shop for Indian made foreign liquor "for a sum of Rs. 3,51,000/-. Appellant could not run the shop successfully and was not in a position to deposit the monthly instalment of licence-fee every month. Appellant was declared defaulter and his licence was cancelled. The shop was then re-auctioned on 28.11.1987. In the re-auction, highest bid of Kanhaiyalal of Rs. 2,01,000/- was accepted. Said Kanhaiyalal deposited Rs. 23,000/- and failed to deposit remaining 1/6th amount of the bid by 17.3.1987. On failure to deposit the amount, shop was again auctioned on 2.5.1987 and in the auction, the shop was knocked down in favour of Ayub Khan for a sum of Rs. 60,000/- for unexpired period of licence. 3. Appellant-petitioner has challenged the order of recovery by respondents for the loss caused to the State Government between the auction of Rs. 3,51,000/- and third auction in favour of Ayub Khan for Rs. 60,000/-. 4. It is contended by the counsel for appellant that after• second auction in favour of Kanhaiyalal, where bid was finalised at Rs. 2,01,000/-, appellant will be liable to pay the loss caused to the State Government between his contract and the bid of Kanhaiyalal; no recovery could be made from the appellant between the date of auction price bid by Ayub Khan for Rs. 60,000/- and the appellant's bid for Rs. 3,51,000/-. Counsel for the appellant submitted that once the auction is knocked down in favour of Kanhaiyalal, then the contract between Kanhaiyalal and the State Government is complete and on failure to fulfil the contract by Kanhaiyalal, Kanhaiyalal alone will be liable to pay the damages for the loss caused to the Government between the bid of Kanhaiyalal, and Ayub Khan. 5. Counsel for the appellant has placed reliance on the Full Bench decision of this Court in the case of Ram Ratan Gupta v. State of M.P. and others ( 1974 JLJ 186 ). 5. Counsel for the appellant has placed reliance on the Full Bench decision of this Court in the case of Ram Ratan Gupta v. State of M.P. and others ( 1974 JLJ 186 ). and invited attention to para 31 of the judgment, wherein it is held that when final bids were accepted by the Collector, as such after acceptance of final bids, petitioner's liability arose when his bid was accepted. Deposit of 1/6th amount of bid is not the condition precedent. Once the bid is accepted, then the deposited amount is liable to be forteited. Deposit is not a condition precedent, but is a condition which follows the acceptance of the bid. It is held that condition for deposit is not an ingredient part of a contractor's liability coming into existence. The liability arises upon the contrator's bid being accepted by the authority empowered in that behalf and on failure of the party after signing the bid to appear and avoiding to discharge his responsibility arising out of the auction sale, the authority shall have jurisdiction for re-auctioing the licence and the authority has legal authority to recover the amount of loss from the party. In para 37 of the judgment, while codnsidering the scope of Article 299 of the Constitution, it is held that the provisions of Article 299 for entering into contract by the authority subordinate to the Governor can exercise all statutory powers conforming to the requirement of Article 299 of the Constitution. Thus, the majority view in the aforesaid judgment was that the contract was complete when bid was accepted. Counsel for petitioner therefore, submitted that since the contract was complete between Kanhaiyalal and the Government, appellant cannot be made liable to pay the damages on failure of Kanhaiyalal to perform his contract. 6. Counsel for appellant then submitted fhat third auction was held at the risk of Kanhaiyalal. He invited attention to Annexure P-7 annexed with the writ petition and submitted that District Excise Officer has issued notice to Kanhaiyalal that since his highest bid was accepted by the Auction Officer and he had failed to deposit 1/6th amount of Rs. 35,000/-, he was informed that if he fails to deposit the said amount by 17.3.1987 then the shop will be re-auctioned at his risk on 18.3.1987. Then auction took place on 18.3.1987 for a period between 2.5.1987 to 31.3.1988. 35,000/-, he was informed that if he fails to deposit the said amount by 17.3.1987 then the shop will be re-auctioned at his risk on 18.3.1987. Then auction took place on 18.3.1987 for a period between 2.5.1987 to 31.3.1988. Vide Annexure P-9 annexed with the writ petition, it is mentioned that the shop is re-auctioned on failure to fulfil the conditions of auction by Kanhaiyalal. 7. Kanhaiyalal had also filed a writ petition (M.P. No. 503/1987) wherein he had challenged cancellation of his bid on failure to deposit 1/6th amount of the auction money. It was contended that before cancellation of the bid, he ought to have served with a notice and the shop should not be re-auctioned. That petition was found to be without any merit and was dismissed vide Annexure P-10 annexed with the writ petition. 8. It is, therefore, contended by the appellant that difference of amount of loss caused to the State between the bid of Kanhaiyalal and that of Ayub Khan cannot be recovered from the petitioner as arrears of land revenue. 9. Shri K.B. Chaturvedi, Government Advocate for the State invited attention of the Court to S. 31 of Madhya Pradesh Excise Act, 1915 and submitted that the State Government has power to cancel or suspend the licence. He invited attention to sub-section (4) of section 31 and submitted that where licence is cancelled or suspended, the fee payable for the balance of the period for which such licence would have been current but for such cancellation or suspension, may be recovered from the ex-licensee as excise revenue. He submitted that appellant is licensee, therefore, recovery has rightly been made from the appellant. 10. Counsel for respondents then submitted that appellant alone is liable to pay the damages and invited attention to the judgment of the Supreme Court in the case of Raje/Uira Singh v. State of M.P. and others ( 1996 JLJ 758 ). The Supreme •Court, while considering the scope of Article 226 of the Constitution, has held that Article 226 is not intended to facilitate avoidance of obligations voluntarily incurred. At the same time, it was observed that licensees are not precluded from seeking to enforce the statutory provisions governing the contract. Facts of this case were entirely different. The Supreme •Court, while considering the scope of Article 226 of the Constitution, has held that Article 226 is not intended to facilitate avoidance of obligations voluntarily incurred. At the same time, it was observed that licensees are not precluded from seeking to enforce the statutory provisions governing the contract. Facts of this case were entirely different. Petitioner in this case has challenged cancellation of licence on the ground that opportunity to show cause against cancellation of excise contract and re-aliction was not given to him. Single Bench has allowed the petition but the Division Bench has held that the Court cannot take hyper-technical view of the provisions and must understand the same in a reasonable manner. Substantial compliance with the requirements of the provisions would meet the ends of justice. Where a specific order of cancellation of licence is not passed but if the requirements are substantially complied with, the Court under Article 226 of the Constitution would not ordinarily if lterfere. 11. However, before us, cancellation of licence is not under challenge; what is challenged is whether recovery can be made from the appellant for the loss caused to the State Government after second bid. Question is to be determined whether recovery can be made from the appellant for the loss caused to the State Government between first bid and that of bid in favour of Ayub Khan ignoring the bid of Kanhaiyalal, or the recovery from the appellant can be limited to the loss occu",.ed between licence fee of the appellant and for remaining period of bid of Kanhaiyalal ? - 12. In the case of R.R. Gupta (supra), it is specifically held that after highest bid is knocked down, contract between the highest bidder and the State is complete and it does not lie in the mouth of the bidder to say that the loss occurred after subsequent contract cannot be- recovered from him. In the said facts of the case, Kanhaiyalal will be the ex-licensee after bid of Ayub Khan was accepted. The words' 'ex-licensee" used in section 31(4)(a) of the M.P. Excise Act will be for the previous auction bidder. Thus, when the bid of Kanhaiyalal was accepted then loss occurred to the State between the bid of Kanhaiyalaland the amount deposited by the appellant shall be recoverable from the appellant. Appellant will be ex-licensee in the said case. The words' 'ex-licensee" used in section 31(4)(a) of the M.P. Excise Act will be for the previous auction bidder. Thus, when the bid of Kanhaiyalal was accepted then loss occurred to the State between the bid of Kanhaiyalaland the amount deposited by the appellant shall be recoverable from the appellant. Appellant will be ex-licensee in the said case. However, on failure of Kanhaiyalal to fulfil the conditions of auction and in the event of re-auction, Kanhaiyalal will be deemed to be ex-licensee and the loss caused to the State between the bids of Kanhaiyalal and Ayub Khan shall be recoverable as arrears of land revenue from Kanhaiyalal. 13. In the said facts of the case order of recovery from the appellant is modified and the respondents are entitled to recover the loss caused to the State. Under section 31(4) of the M.P. Excise Act, fee payable for the balance of the period for which such licence would have been current, but for such cancellation, amount shall be recovered from the appellant as excise revenue. However, no recovery from the appel1ant can be made between the bids of Kanhaiyalal and that of Ayub Khan. 14. In the result, appeal succeeds and is allowed. The order of the Single Bench is set aside and it is ordered that the recovery from the appellant-petitioner as arrears of land revenue be made after calculating the exact amount of loss caused to the State and the amount be recovered from the appellant on accepting the bid of Kanhaiyalal, i.e., loss between the bid of appellant and Kanhaiyalal, in accordance with law, as discussed above. There shall be no order as to costs.