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2014 DIGILAW 819 (PAT)

Ally Food v. State of Bihar

2014-07-28

ASHWANI KUMAR SINGH, R.M.DOSHIT

body2014
Judgment : The writ petitioners in the present group of Writ Petitions are the manufacturers of the country liquor who have been granted the exclusive privilege for manufacture of country liquor and supply in PET bottles for five years from 1 st April, 2014 to 31 st March, 2019. The petitioners have approached this Court to challenge the action of the State Government in demanding the amount of the differential rate due on 15th June, 2014 as per the terms and conditions of the tender. According to the writ petitioners, although they have been granted the exclusive privilege as envisaged by Section 22D of the Bihar Excise Act, 1915 the same has not become effective. The petitioners are, therefore, not liable to pay the differential amount demanded by the State Government. 2. According to the State Government, the grant of exclusive privilege is a matter of contract between the State Government and the parties. The State Government has the exclusive privilege to manufacture and sell liquor. The said privilege to manufacture and sell liquor has been parted with in favour of the grantees. The differential amount is the consideration the State Government receives for parting with the exclusive privilege. The demand made by the State Government is in accordance with the terms and conditions of the tender. The State Government is, therefore, within its authority to make the demand and that the grantees are liable to pay such amount as agreed by them. 3. It is not in dispute that the writ petitioners are the grantees of the exclusive privilege of manufacture and supply of the country liquor. It is also not in dispute that in consideration of such grant the petitioners are required to pay the differential amount between the base rate and the tender rate offered by the petitioners. It is also not in dispute that the terms and conditions of the tender specified the precise dates on which such amounts would become payable. Clause (vi) of Paragraph-3 of the tender notice specified the dates on which such differential amount will be paid by the grantees of the exclusive privilege. Under the said term, the first instalment became payable within seven days of the finalization of the tender. The next instalments become due on 15th June, 15th September, 15th December and 15th March of the financial year. Under the said term, the first instalment became payable within seven days of the finalization of the tender. The next instalments become due on 15th June, 15th September, 15th December and 15th March of the financial year. The said clause also provides for a penal action of cancellation of privilege in case of failure to pay the differential amount. Evidently the scheduled dates for payment of differential amount has direct relation to the date of commencement of manufacture and supply of liquor. 4. We are informed at the Bar that all writ petitioners have paid the first instalment of the differential amount falling due within seven days of finalization of the tender, although under protest. The matter at issue in the present group of Writ Petitions is the payment of the second instalment of differential amount that has fallen due on 15th June, 2014. 5. It appears that the writ petitioners made representation in respect of the instalment of differential amount falling due on 15th June, 2014. The said representation has been rejected by the State Government on 19th June, 2014. Therefore, these Writ Petitions. 6. All these Petitions raise a common issue in respect of the effective date of grant of privilege by the State Government. The Petitions are, therefore, decided and disposed of by this common judgment. 7. It is Section 22D of the Bihar Excise Act, 1915 which empowers the State Government to grant exclusive/special privilege for bottling or sacheting and wholesale supply of country liquor. Subsection (i) thereof enables the State Government for grant of exclusive privilege on terms and conditions as it may think fit. Sub-section (2) thereof provides “no Grantee of any privilege under sub-section (1) shall exercise the same unless he has received a licence in that behalf from the Board of Revenue/Excise Commissioner/Collector.” The fate of these Writ Petitions will depend upon the aforesaid sub-section (2), how we construe it. 8. Learned Counsels Mr. Harsh Singh and Mr. Jitendra Singh and learned advocates Mr. Gautam Kumar Kejriwal and Mr. Ajay Kumar Sinha have appeared for the writ petitioners. We have been taken through the Government Resolution dated 24th October, 2013; the tender notice dated 31 st January, 2014 and the amendment dated 29th May, 2014 of the aforesaid Resolution dated 24th October, 2013. Harsh Singh and Mr. Jitendra Singh and learned advocates Mr. Gautam Kumar Kejriwal and Mr. Ajay Kumar Sinha have appeared for the writ petitioners. We have been taken through the Government Resolution dated 24th October, 2013; the tender notice dated 31 st January, 2014 and the amendment dated 29th May, 2014 of the aforesaid Resolution dated 24th October, 2013. It has been strenuously urged that the terms and conditions of the tender notice, particularly the above referred clause (3)(vi) has become ineffective on account of the above referred amendment dated 29th May, 2014. Learned counsels have submitted that it was for the first time that the State Government introduced the supply of country liquor in PET (Polyethylene terephthalate) bottles. The grantees are required to set up a bottling plant before they go for manufacture of liquor. It was the duty of the State Government to award exclusive privilege well in advance so that the grantees could install the bottling plant before the effective date of the grant. As per the expert opinion, installation of bottling plant would require at least one year. However, the grantees, the writ petitioners in the present case, are prepared to install such plant by 30th September, 2014. To facilitate the grantees to install bottling plant, the above referred amendment dated 29th May, 2014 was brought about in the Resolution dated 24th October, 2013. Although the State Government had decided as early as in October, 2013 for supply of liquor in PET bottles; although the State Government was aware that the grantees would require time to install the bottling plant, the State Government did not issue tender notice until 31st January, 2014. The tender process was not completed until 28th February, 2014. The grant was awarded on 4th March, 2014. It was practically and humanly impossible for the grantees of the privilege to set up bottling plant by 31 st March, 2014, i.e. within less than one month of the date of the grant. Unless and until the grantee installs the bottling plant, it cannot manufacture and supply the liquor in PET bottles as required. In the circumstances, the grant has become ineffective till the bottling plant is set up and is commissioned. 9. The State Government has, having regard to the aforesaid practical difficulty, indeed extended the time for manufacture and supply of liquor in PET bottles till some future date. In the circumstances, the grant has become ineffective till the bottling plant is set up and is commissioned. 9. The State Government has, having regard to the aforesaid practical difficulty, indeed extended the time for manufacture and supply of liquor in PET bottles till some future date. The State Government has also, with a view to ensuring regular supply of country liquor, on 16th May, 2014 published tender for temporary licence for supply of country liquor in sachet from 1 st June, 2014 to 30th September, 2014. The said tender has been finalized, the grants have been made and the grantees are manufacturing and supplying the country liquor in sachet. For the said grant the State Government has received and is in receipt of the consideration in terms of the differential amount between the base rate and the tender rate. 10. Although the grant awarded to the writ petitioners has not become effective, the State Government has insisted on payment of instalments as per the terms and conditions of the tender. The action of the State Government is highhanded. The State Government is in receipt of consideration money from the temporary grants awarded under the tender notice dated 16th May, 2014, the State Government has also demanded such differential amount from the writ petitioners. In support of their submissions, the learned counsels have relied on the judgments of the Hon'ble Supreme Court in the matter of Nashirwar vs. State of Madhya Pradesh [ (1975)1 SCC 29 ], of Kerala Samasthana Chethu Thozhilali Union vs. State of Kerala [ (2006)4 SCC 327 ] and of Gupta Modern Breweries vs. State of Jammu & Kashmir [ (2007)6 SCC 317 ]. 11. In the submissions of the learned counsels for the writ petitioners, the action of the State Government is unfair and arbitrary and is contrary to Article 14 of the Constitution. 12. Learned Principal Additional Advocate General Mr. Lalit Kishore has appeared for the State Government. Mr. Lalit Kishore has submitted that the action of the State Government is in consonance with the terms and conditions of the tender. It is the matter of revenue of the State Government. The amount having been demanded under the terms and conditions of the tender; the writ petitioners having entered into the contract with open eyes, they cannot be allowed to challenge the legitimate action of the State Government. It is the matter of revenue of the State Government. The amount having been demanded under the terms and conditions of the tender; the writ petitioners having entered into the contract with open eyes, they cannot be allowed to challenge the legitimate action of the State Government. The matter being purely contractual, in exercise of power of judicial review under Article 226 of the Constitution, this Court will not entertain the dispute. In support of his submission, Mr. Lalit Kishore has relied upon the judgments of the Hon'ble Supreme Court in the matter of State of Orissa vs. Narain Prasad & Ors. [ (1996)5 SCC 740 ] and of State of Madhya Pradesh vs. Lalit Jaggi [ (2008)10 SCC 607 ]. Mr. Lalit Kishore has submitted that the grantees, the writ petitioners, are at fault in not applying for licence pursuant to the grant received by them and in not starting the manufacture of country liquor. The State revenue shall not suffer for the fault of the writ petitioners. 13. The founding fathers of this great nation never wanted the people of this country to be addicted to the liquor. Having known the ill-effects of consuming intoxicating substances on health of a person-physical and mental, and the ultimate effect on the society, the Constitution, under Article 47 under the “Directive Principles of the State Policy”, did direct the State Governments to bring about prohibition of the consumption of intoxicating drinks and all drugs which are injurious to health. Rather than endeavouring to bring about prohibition of consumption of liquor (intoxicating drinks) the State Government encourages the manufacture and sale of liquor so as to earn maximum revenue for the State. The State Government parts with its exclusive privilege of absolute control over production of liquor and sale for consideration. It is the said element of consideration which has led to the present litigation. 14. In the matter of Nashirwar & Others (supra), the Hon'ble Supreme Court has recognized the authority of the State Government. The Hon'ble Court has held that “the State has the exclusive right or privilege of manufacturing and selling liquor. The State grants such right or privilege in the shape of a licence or a lease. The State has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease”. 15. The State grants such right or privilege in the shape of a licence or a lease. The State has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease”. 15. In the matter of Kerala Samsthana Chethu Thozhilali Union (supra), while considering the constitutional validity of the offending rules the Hon'ble Supreme Court once again recognized the power of the State Government to make law relating to the import, export, manufacture, sale and possession of intoxicating liquors. However, the Hon'ble Court held that while framing the Rules for the purposes of the Act, the legislative policy cannot be abridged. Article 14 of the Constitution would be attracted even in the matter of trade in liquor. The State cannot act arbitrarily or at its sweet will. 16. In the matter of Gupta Modern Breweries (supra), the Hon'ble Court held that in absence of statutory authorization, the rule empowering the State Government to levy a charge was ultra vires. 17. In the matter of State of Orissa VS. Narain Prasad & Ors. (supra), the Hon'ble Court did not countenance the challenge to the terms and conditions of the grant of privilege made by the liquor manufacturers. The Hon'ble Court held that the licensee having entered into the contractual obligation was bound by the terms of the contract. 18. Similar is the view of the Hon'ble Supreme Court in the matter of State of M.P. VS. Lalit Jaggi (supra). 19. We shall first consider the provisions contained in Section 22-D of the 1915 Act. Sub-section (1) thereof indeed enables the State Government to part with its privilege to manufacture and supply of country liquor in favour of any person or persons on such terms and conditions as it may think fit. Sub-section (2) thereof enjoins the grantee to apply for a licence. Unless he has received licence from the Board of Revenue or Commissioner of Excise or the Collector, such grantee is debarred from manufacture and sale of country liquor under the grant awarded to him. 20. Sub-section (2) thereof enjoins the grantee to apply for a licence. Unless he has received licence from the Board of Revenue or Commissioner of Excise or the Collector, such grantee is debarred from manufacture and sale of country liquor under the grant awarded to him. 20. In the present case, as we have recorded hereinabove, the grant for manufacture and supply of country liquors in PET bottles was not awarded until 4th March, 2014, although the State Government was aware that it was practically impossible for any grantee to set up or install the bottling plant within less than a month. Not that the State Government was not alive to the impracticability of the exclusive privilege granted effective from 1 st April, 2014. Keeping in view the impractical situation, the State Government under its Resolution dated 29th May, 2014, amended the earlier requirement of commencement for manufacture and supply of liquor from 1st April, 2014. Under the above referred Resolution dated 24th October, 2013, the State Government had set out the terms and conditions' for manufacture and supply of• country liquor and beer in PET bottles. Clause 9(e) thereof provided that manufacture and supply of liquor in PET bottles under the said policy would commence from 1st April, 2014. The terms and conditions in the tender notice were in consonance with the policy laid down in the Resolution dated 24th October, 2013. However, keeping in view the impractical situation created by late tender, the State Government in its wisdom amended the aforesaid clause 9(e) so as the date of manufacture and supply of liquor may be decided on some future date. Clause 9(e) of the Resolution dated 24th October, 2013 read as under:- ^^9- izkf/kd`r lfefr ds d`R; fuEuor gksaxs%& ¼bZ½ bl uhfr ds varxZr fuekZ.k ,oa forj.k dk dk;Z fnukad 1-4-2014 ls izkjaHk fd;k tk;sxk] iajrq blds fy;s fufonk vkfn dh izfdz;k blds iwoZ dh tk ldsxhA 21. The aforesaid clause 9(e) substituted under Resolution dated 29th May, 2014 reads as under:- ^^9¼bZ½ bl uhfr ds vUrxZr fuekZ.k ,oa forj.k dk dk;Z izkjaHk djus dk fu.kZ; foHkkx }kjk fy;k tk;sxk ijUrq blds fy, fufonk vkfn dh izfdz;k blds iwoZ dh tk ldsxhA ;g nksuksa la’kks/ku ewy uhfr ds ykxw gksus dh frfFk ls ykxw ekus tk;saxsA** 22. The aforesaid clause 9(e) substituted under Resolution dated 29th May, 2014 reads as under:- ^^9¼bZ½ bl uhfr ds vUrxZr fuekZ.k ,oa forj.k dk dk;Z izkjaHk djus dk fu.kZ; foHkkx }kjk fy;k tk;sxk ijUrq blds fy, fufonk vkfn dh izfdz;k blds iwoZ dh tk ldsxhA ;g nksuksa la’kks/ku ewy uhfr ds ykxw gksus dh frfFk ls ykxw ekus tk;saxsA** 22. Thus, the date of manufacture and supply of country liquor in PET bottles is not yet decided; nor has the manufacture and supply been commenced. 23. In our opinion, therefore, until the Government determines the date of manufacture and supply of liquor under the prevalent policy, the grant of exclusive privilege made on 3rd March, 2014 would not become effective. Unless the grant becomes effective, the grantees cannot be compelled to pay the differential amount for manufacture and supply of liquor which has not yet commenced. 24. In the circumstances, the State Government ought to modify the dates on which the instalments for payment of differential amount would become due. Obviously, the State Government has failed to re-schedule the payment of differential amount in line with the extension of the effective date of grant giving rise to the stalemate. Now the State Government insists that it is entitled to demand the said amount as per the schedule contained in the tender notice. 25. We are alive to the fact that the matter arises from a contract. The grantees-writ petitioners did accept the contract with all its terms and conditions. Nevertheless, we believe that the State Government cannot be allowed to act like a Shylock, not ready to give up its pound of flesh. The condition that required commencement of manufacture and supply of liquor with effect from 1st April, 2014 is frustrated. 26. As to the Government revenue, we must observe that it is not that the Government revenue would suffer on account of re-scheduling the payment of the differential amount. It is not in dispute that the supply of liquor has not been affected adversely. It is evident that the State Government has ensured regular supply of liquor by grant of temporary licence for supply of liquor in sachet under the tender notice dated 16th May, 2014. It is not in dispute that the supply of liquor has not been affected adversely. It is evident that the State Government has ensured regular supply of liquor by grant of temporary licence for supply of liquor in sachet under the tender notice dated 16th May, 2014. It is also not in dispute that for the said privilege the concerned licensees are required to pay the differential amount between the base rate and the tender, rate as per the terms and conditions. In other words, the State Government is already in receipt of its revenue from the temporary licensees for the period up to 30th September, 2014. The State Government also demands the similar payments of differential amount from the writ petitioners, the grantees, for supply of liquor in PET bottles although they are, to the knowledge of the State Government, not able to commence manufacture and supply from 1 st April, 2014. In our opinion, the action of the State Government is indeed highhanded, arbitrary and unfair. Such action cannot be sustained by the court of law. 27. For the aforesaid reasons, these Writ Petitions are allowed. The impugned decision of the State Government dated 19th June, 2014 is quashed and set aside. The State Government is directed to reschedule the payment of differential amount payable under clause 3(vi) of the tender notice dated 3rd February, 2014 and to bring it in consonance with clause 9(e) as stands amended by the Government Resolution dated 29th May 2014, keeping with the date of manufacture and supply of liquor as may be decided by it. Until the payment is re-scheduled as directed, the State Government will not make coercive recovery of the instalment that has fallen due on 15th June, 2014. 27. Registry will send copy of this order to the respondent nos. 1 and 3.