State of Haryana Vs. Jage Ram  INSC
119 (12 September 1983)
CHANDRACHUD, Y.V. ((CJ) CHANDRACHUD, Y.V.
((CJ) PATHAK, R.S.
MUKHARJI, SABYASACHI (J)
CITATION: 1983 AIR 1207 1983 SCR (3) 917 1983
SCC (4) 556 1983 SCALE (2)285
CITATOR INFO :
RF 1984 SC1326 (4,15) RF 1987 SC1109 (30,37)
Punjab Liquor Licence Rules, 1956-Rs. 36(3)
and 36(24)- Sale of liquor- Vends by re-auction or by private
negotiations-Whether vitiated by failure to give due publicity ?
The respondents in this batch of appeals had
obtained licences to sell liquor by offering highest bids at auctions held far
sale of liquor-vends. On their failure to make payments due under the terms of
auction, the State Government resold the liquor-vends in some cases, either by
re-auction or by private negotiations and called upon the respondents to pay
the difference between the amount which they were liable to pay and the amount
realised by the resale of the vends. In other cases, the respondents were
called upon to pay the amounts due under the terms of the original auction. The
respondents filed writ petitions contesting the State Government's power to
demand the various amounts which they had defaulted in paying and the High
Court allowed the petitions. In appeals filed by the State Government, this
Court held that since the rights in regard to manufacture and sale of
intoxicants were vested in the State as a privilege, it was open to the State
to part with those rights for consideration, and remanded the matter to the
High Court calling for its findings on whether in cases in which the
liquor-vends had been resold by re- auction it was necessary to give publicity
to the same; and, if so whether such publicity had in fact been given. The High
Court found that r. 36(3) of the Punjab Liquor Licence Rules, 1956, which was
applicable in these cases, required publicity to be given to an auction-sale
and this rule had been substantially complied with in all cases in which re-
auction had been held.
Dismissing the appeals in which liquor-vends
had been resold either by re-auction or by private negotiations and allowing
the appeals in which liquor vends had not been resold.
HELD: 1. When a rule requires 'publicity' to
be given to an auction sale, what is necessarily implied is that due steps must
be taken to give sufficiently advance intimation of the intended sale and its
material terms to the members of the public or, at least, to that section of
the public which normally engage in the kind of business which is the subject
matter of the auction-sale.
[924 B] In the instant case, no notice as
required by r. 36(3) was given to the public at all. Neither the time nor the
date of the re-auction, nor the location 918 or description of the vend which
was to be put to re- auction, nor the conditions of the re-auction were ever
published by the Excise authorities prior to the re-auction.
What was done by the concerned authorities
was to send telegrams to Excise officers of five districts with a request that
they should give publicity to the re-auction and those officers did not take
any steps to publicise the re-auction. Since the re-auctions were not held in
accordance with the rules, and since, especially, due publicity was not given
to the re-auctions, the respondents cannot be held liable to make good the
difference between the amount which was payable by them and the amount which
was fetched at the re-auction. [923 F-H, 924 A]
2. By r; 36(24) power has been conferred to
re-sell a vend by public auction or by private contract. But this latter power
has to be exercised with great care and circumspection. Public auction has to
be the normal mode of selling public property. It is open to public gaze and
eschews many temptations to which private contracts are subject. It is only
when a public auction is not feasible or has failed to attract bidders after
due publicity, that a private contract can be negotiated for disposing of
public property or rights in such property. [27 B-C] In cases in which
re-auctions though commenced as scheduled were withdrawn and licences were
granted by private negotiations on the spot even if there were valid reasons
were for revoking the decision to hold the re- auctions, the re-auctions should
have been postponed and due publicity given to the decision to grant licences
by private negotiations. The Excise authorities could not have abruptly decided
to jettison the original intention of holding a public auction and grant
licence by private negotiations on the spur of the moment. The decision smacks
of arbitrariness, is unfair and unreasonable and cannot be allowed to stand.
3. The question whether the State has the
power to charge the particular amounts to the licensees of liquor- vends is
concluded by judgments of this Court affirming such a power in the State
Government. Judgments of the High Court to the contrary in all those cases in
which no question of re-auction of liquor-vends arises must therefore be set
aside and to that extent the appeals filed by the State have to be allowed.
[925 F-G] Har Shankar v. Deputy Excise and Taxation Commissioner,  3
S.C.R. 254; State of Haryana v. Jage Ram,  3 S.C.R. 746; & State of
Punjab v. Ajudhia Nath,  3 S.C.R. 686; referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1507 of 1969 Appeal from the Judgment and order dated the 12th - March,
1968 of the Punjab and Haryana High Court in Civil Writ No. 1376 of 1967. .
Civil Appeal Nos. 1202-20 of 1970 919 From the Judgment and Order dated the
23rd day of July, 1967 of the Punjab and Haryana High Court in Civil Writ
Petition Nos. 2934 & 2955 of 1968 and L.P.A. Nos. 597- 599/68, Civil Writ
Nos. 242-45/69, 423, 471, 477, 783-785, 787-89 & 792 of 1969.
AND Civil Appeals Nos. 1564-67 of 1970
Appeals from the Judgment and Order dated the 20th November, 1969 of the Punjab
and Haryana High Court in L.P.A. Nos. 57-59-69.
AND Civil Appeals Nos. 743-94 of 1974.
From the Judgment and Order dated the 23rd
July, 1969 of the Punjab and Haryana High Court in Civil Writ Nos. 343, 334,
353, 354, 365, 379, 381, 384, 385, 421, 422, 424, 456 481, 493, 518, 519, 520,
529 of 1969, 2933, 2948, 2949, 2956, 2975-78, 3021, 3111, 3188 of 68, 254, 264,
307, 308, 715, 706, 674, 662, 661, 604, 596, 588, 554, 737, 786, 791, 798, 828,
836, 945, 839 of 1969.
R.N. Poddar for the Appellants in CA. 1507.
I.S. Goel and R.N. Poddar for the Appellants
M.S. Gujral and R.N. Poddar for the
Appellants in CA.
K.G. Bhagat, Additional Soliciter General and
Poddar for the Appellants in CAs. 1564-67/70.
T.S. Munjral and H.K. Puri for Respondent in
P.R. Mridul, V.S. Desai, S. Rangarajan in
CAs. 1204 to 1206, CA. 1564-66 and in CA. 743, 762 & 770.
T.S. Munjral, K.C. Dua and Poonam Malhotra
for the Respondents in CAs 1204-06, 1564-67, 743, 762, 764, 765-770.
R.C. Bhatia and P.C. Kapoor for Respondents
1202-03, 1207-20, 744-761, 768, 766-769 &
920 The Judgment of the Court was delivered
by CHANDRACHUD, CJ. These appeals have a long history.
Liquor vends were put to auction by the
Excise Department of the Government of Haryana whereupon, the highest bidders
were given the necessary licences to sell liquor. Some of the licensees
committed default in the payment of amounts due from them under the terms of
the auction. Thereupon, the vends were reauctioned except for three vends
which, though published for reauction, were given by private negotiations.
The original licensees, who were called upon
to pay the difference between the amount which they were liable to pay and the
amount realised by resale of the vends, filed writ petitions in the High Court
of Punjab and Haryana contending that the State Government had no power to
demand the various amounts which they had allegedly defaulted in paying. The
High Court accepted that contention, holding that the State Government had no
authority to demand the amounts for failure to pay which, the vends were put to
resale. As a necessary consequence of that finding, the fresh grants made by
reauction or private treaty were held invalid. The result of this was that the
writ-petitioners stood relieved of their obligation to make good the shortfall.
This is the broad history of these appeals.
We will take up Civil Appeal No. 1507 of 1969
for consideration first. The facts of that case and the events lending to the
present proceedings are mentioned in a judgment of this Court reported in State
of Haryana v. Jage Ram(1). In this case, an auction was held on March 27, 1967
for the grant of a retail vend known as Biswan Meel, Sonepat, for the year
1967-68. The respondents Jage Ram and others offered the highest bid in that
auction. Under Condition 14 (iii) of the auction, respondents became liable to
pay an amount calculated at the rate of Rs. 17.60 per litre, which came to Rs.
10,92,960.00. They paid a security deposit for the due performance of the terms
of the auction but they committed default in payment of instalments which fell
due on April 10 and April 25, 1967. On May 17, 1967 the Excise authorities
cancelled the licence of the respondents and informed them that the vend will
be resold on May 23, 1967 at the risk of the respondents. In pursuance of the
order dated May, 17, the Biswan Meel vend was reauctioned on May 23, the
highest bid offered being in the sum of Rs.
2,46,000.00. On July 11, respondents were
called upon by a notice to pay a sum of 921 Rs. 7, 41,577.40, being the
difference between the amount which they were liable to pay under the terms of
the original auction and the amount fetched in the re-auction.
Thereupon, respondents filed a writ petition
in the High Court challenging the legality of that notice. The High Court
allowed the writ petition, quashed the order cancelling the respondents'
licence as also the notice calling upon them to make good the shortfall of seven
lakh rupees and odd. The High Court gave to the State of Punjab a certificate
to appeal to this Court.
The appeal came up for hearing before a
three-Judge Bench which by its aforesaid Judgment dated April 21, 1980 held
that the writ jurisdiction of the High Court under Article 226 cannot be used
for avoiding contractual obligations. On merits, it was held by this Court
following a Constitution Bench decision in Har Shanker v. The Deputy Excise and
Taxation Commissioner, (1) that since rights in regard to the manufacture and
sale of intoxicants are vested in the State, it is open to the State to part
with these rights, which are in the nature of a privilege, for consideration.
The Court further held that the amounts which the State Government had charged to
the respondents were neither in the nature of a tax nor in the nature of an
excise duty but were in the nature of a price which the State Government was
entitled to charge as consideration for parting with its privilege in favour of
After setting aside the judgment of the High
Court and upholding the demand made by the State Government upon the
respondents, the question naturally arose whether the respondents could be held
liable for the shortfall between the bid offered by them and the amount
realised in the reauction. It was urged by the respondents that the re-auction
which was held on May 23, 1967 was not in accordance with the relevant Rules
and therefore, they could not be called upon to pay the difference between the
amount which they were originally liable to pay and the amount which was
fetched in the reauction of the vend. To be more specific, it was contended on
behalf of the respondents that no notice of the intended resale was given as
required by Rule 36 (3) of the Punjab Liquor Licence Rules, 1956, that no
notice was published or affixed at any conspicous public place notifying the
proposed resale, nor indeed was the resale announced by the beat of drums.
According to the respondents, one 922 Lal Chand went to the office of the Excise
and Taxation Officer, Rohtak, and managed to have his bid accepted in the
resale of the vend. Respondents further urged that through the resale of the
vend was to be effective for a period of about 10 months out of the 12 months
for which the vend was originally auctioned, there was a large shortfall of
over Rs. 7 lakhs on account of the fact that due publicity was not given to the
By the aforesaid judgment dated April 21,
1980 this Court remanded the matter to the High Court and called for its
findings on two questions: (1) Whether it was necessary according to the Rules
which were in force at the relevant time to give publicity to the reauction,
and (2) if so, whether such publicity was in fact given to the reauction.
The High Court has transmitted its findings
to this Court, which are against the respondents. The High Court has held by
its order dated September 29, 1980 that the Rules relied upon by the
respondents by which publicity is required to be given to the resale are
directory and not mandatory and that these rules were substantially complied
with. These findings are assailed by the respondents who, by reason of the
findings of the High Court, are virtually in the position of appellants now.
The finding of the High Court that the rules
were substantially complied with is based on an affidavit filed by Shri N.S.
Bedi, Deputy Excise and Taxation Commissioner, Sonepat, in which he has stated
that 'all possible steps were taken in connection with the publicity done for
the reauction of the vend'. The affidavit says that telegrams were issued on
May 19, 1967 by the Excise and Taxation Officer, Rohtak to the Excise and
Taxation Officers of Hissar, Karnal, Gurgaon, Mohindergarh, Ambala and Jind
informing them that the reauction will be held on May 23, 1967 at 10.00 a.m.
and asking them to give due publicity to the reauction. The affidavit further
says that letters were also written on May 20, 1967 to the 'important licensees
of the State' informing them of the date and time of the reauction and
requesting them to attend it. The affidavit asserts that 40 bids were recorded
in the reauction and the 40th bid, being the highest, was accepted.
It seems to us impossible to accept the
findings of the High Court. We will not enter into the controversy whether the
rules 923 governing reauction of vends, of which respondents allege breach, are
directory or mandatory in character. Even assuming for the purpose of argument
that they are directory, we are unable to hold that they have been
substantially complied with. Rule 36 (24) of the Punjab Liquor Licence Rules,
1956 as amended by the Notification dated March 31, 1967 says that when a
licence is cancelled, it may be resold by public auction or by private contract
in accordance with the procedure laid down in the other clauses of Rule 36.
Clause (3) of Rule 36 runs thus :
"36(3)-The Collector will give timely
notice of the date and place of the auction:
(a) the condition to which the auction will
(b) the number and situation of the shops to
be licensed for the sale of (country liquor);
(c) the prices, if any, fixed for the retail
vend of country spirit or;
(d) the occasions, if any, on which the shops
will be closed; and (e) any other information which may be of use to intending
bidders." No notice as required by this sub-rule was given to the public
at all. Neither the time nor the date of the reauction, nor the location or
description of the vend which was to be put to reauction, nor the conditions of
the reauction were ever published by the Excise authorities prior to the
reauction. What was done by the concerned authorities was to send telegrams to
Excise Officers of five districts with a request that they should give
publicity to the reauction. The officers of those five districts seem to have
sat cool over those telegrams because there is no evidence showing that they
took any steps for publishing the reauction. A curious feature of this case is
that the Excise authorities claim to have sent letters to five private
licensees informing them that the reauction was fixed for the 23rd of May 1967
at 10.00 a.m. These letters are at Annexure R-8 and are dated May 20, 1967.
20th May fell on a Saturday and the reauction was fixed for 23rd May which was
the following Tuesday.
924 In the normal course, these letters would
have been received by the addressees on Monday, that is, a day or less prior to
the date of the reauction which was to be held the next morning at 10 O'clock.
In these circumstances, it is difficult to hold that any publicity as such was
given to the reauction. When a rule requires 'publicity' to be given to an
auction-sale, what is necessarily implied is that due steps must be taken to
give sufficiently advance intimation of the intended sale and its material
terms to the members of the public or, at least, to that section of the public
which normally engages in the kind of business which is the subject-matter of
the auction-sale. Even the five special invitees would have found it difficult
to come prepared to take part in resale which was held on 23rd May. They were
not invited to a wedding feast. They were invited to attend the resale of a
liquor vend and it is well-known that a certain amount has to be paid by the
successful bidder on the fall of the hammer. We are also unable to appreciate
that the Excise authorities of the Government of Haryana should have picked and
chosen some five particular persons as recipients of the notice of reauction.
How their names transpired and what is their particular status, respectability
and standing in the liquor trade, are matters on which no light is thrown.
There is no material before us on which to doubt the integrity of the
authorities who were connected with the reauction. But their conduct must be
The bid-sheet shows that only six persons
offered bids in the reauction and none of the five invitees was amongst those
six. It appears that a small, closely-knit group participted in the reauction,
successfully keeping out others who might have of offered adequate bids in the reauction,
were they to have notice thereof. Indeed, the amount which was fetched in the
reauction itself furnishes prima facie evidence that all was not well with the
reauction. The respondents had given their original bid in the sum of Rs.
10,92,960.00 which covered a period of one year from April 1, 1967 to March 31,
1968. The reauction was held on May 23, 1967 for a licence which was to be
effective for the little over 10 months. It is surprising that the reauction
should have fetched a bid of as small an amount as Rs. 2,46,000.
Since the reauction was not held in
accordance with the rules, either in their letter or in their spirit, and
since, especially, due publicity was not given to the reauction, it is
impossible to uphold reauction and mulet the respondents in the resultant
shortfall. We 925 are of the opinion that rule 36(3) of the Rules was not even
substantially complied with. It is reasonable to assume that since due
publicity was not given to the reauction, adequate bids were not received, resulting
in prejudice to the respondents.
Accordingly, we set aside the finding of the
High Court that the relevant rules governing reauction of vends were complied
with substantially. Since the reauction did not conform to the rules and the
respondents were prejudice thereby, they cannot be held liable to make good the
difference between the amount which was payable by them and the amount which
was fetched at the reauction.
The result is that the appeal filed by the
State of Haryana is dismissed, though for different reasons, and the
respondents absolved from their liability to pay the amount which is demanded
of them by the notice dated May 7, 1967 issued by the Collector and Deputy
Excise and Taxation Commissioner, Haryana.
That disposes of Civil Appeal No. 1507 of
We will now take up for consideration two
other groups of appeals, viz, Civil Appeals 1202 to 1220 of 1970 and Civil
Appeals 743 to 794 of 1974. No question of reauction arises in these groups of
appeals except in Civil Appeals Nos. 1204, 1205 and 1206 of 1970. We shall deal
with those three appeals separately a little later. The question which arises
in the remaining appeals in these two groups, as regards the power of the State
Government to charge the particular amount to the licensees is concluded by the
judgments of this Court in Har Shunkar v. The Deputy Excise and Taxation
Commissioner, State of Haryana v. Jage Ram (supra) and State of Punjab v.
Ajudhia Nath(1). It was held in those decisions that the State Government has
the power to charge the particular amounts to the licensees. The judgments of
the High Court denying to the State Government that power must therefore be set
aside and to that extent the appeals filed by the State of Haryana allowed.
The appeals which now remain for
consideration are Civil Appeals 1204 to 1206 of 1970 and Civil Appeals 1564 to
1567 of 1970. In these cases also, as in all other cases which are being
disposed of by this judgment, the power of the State Government to 926 levy the
particular charge must be upheld in view of the aforesaid three judgments. The
judgment of the High Court in these cases shall therefore have to be set aside
to the extent to which the High Court had denied that power to the State
Government. But the further question which arises in these appeals is whether
the respondents can be called upon to pay the difference between the amounts
which they were liable to pay under the terms of the original auction in their
favour and the amounts which were fetched in the resale of the vends. The facts
of these groups of cases are even more peculiar than the facts of Civil Appeal
No. 1507 of 1969 with which we have dealt at the outset of this judgment. In
these cases, it was originally intended to reauction the vends in respect of
which the respondents had committed default and some publicity, not due or
adequate by any standard, was given to the re-auction. The re-auctions
commenced as scheduled but the Excise authorities changed their mind in
midstream and decided, without any rhyme or reason, to withdraw the reauctions
and to grant fresh licences by private negotiations on the spot.
We agree fully with the very careful judgment
of Justice Bal Raj Tuli that due publicity was not given to the reauction. It
is stated in the affidavit filed on behalf of the State Government in the High
Court that, directions were given to the Excise and Taxation Officer, Gurgaon
by a circular letter that he should give wide publicity to the re-auction due
to be held on July 24, 1968. The circular letter was not placed on the record,
nor was the High Court a apprised as to how the Excise and Taxation Officers of
the Governments of Haryana and Punjab gave publicity in their respective
districts to the proposed reauctions. It is significant that the respondents
wrote letters to the Excise and Taxation Officer, Gurgaon on July 20, 1968
complaining that due publicity was not being given to the reauctions and that
the Rules required such publicity to be given. In spite of this, no steps were
taken to comply with the requirement of the rules, even though the cost of
publicity would have been required to be borne by the respondents themselves.
It was urged that Hindi handbills were
distributed in Delhi advertising the auction. Even those handbills do not
contain the requisite information which is required to be published under rule
36(3). Tuli, J. was therefore right in not treating the handbills as
constituting due publicity to the reauctions.
927 If the reauctions cannot be upheld since
due publicity was not given to them, the grant of licences by private
negotiations during the course of reauctions would also have to be set aside.
Assuming that there were valid reasons for revoking the decision to hold the
reauctions, like the paucity of adequate bids at the reauctions, the reauctions
should have been postponed and due publicity given to the decision to grant
licences by private negotiations. By rule 36(24), power has been conferred to
resell vend by public auction or by private contract. But this latter power has
to be exercised with great care and circumspection. Public auction has to be
the normal mode of selling public property. It is open to public gaze and
eschews many temptations to which private contracts are subject. It is only
when at public auction is not feasible or has failed to attract bidders after
due publicity, that a private contract can be negotiated for disposing of
public property or rights in such property. Not only is no reason forthcoming
why the intention to hold a public auction was abandoned after the auction had
commenced but the proceedings were not adjourned even for a few days in order
to publicise the intention to resell the vends by private contract. The Excise
authorities could not have abruptly decided to jettison the original intention
of holding a public auction and grant licences by private negotiations on the
spur of the moment, that very day and at that very hour. The decision smacks of
arbitrariness, is unfair and unreasonable, and cannot be allowed to stand.
For these reasons, respondents in Civil
Appeals 1204 to 1206 of 1970 and Civil Appeals 1564 to 1567 of 1970, are not
liable to pay the difference between the amounts which they were liable to pay
under the original auctions and the amounts which they were liable to pay under
the original auctions and the amounts which were fetched by the re-grant of
licences by private contracts.
The aforesaid discussion will show that the
appeals filed by the State of Haryana succeed to the extent that the State
Government has the power to levy the charge which it demanded of the
respondents. The finding of the High Court that the State Government has no
such power is incorrect and must be set aside. The findings called for by us
from the High Court on the question whether due publicity was given to the
reauctions are set aside. We hold that due and adequate publicity was not given
to the reauctions. We also hold that the regrant of licences by private
negotiations is not in conformity with the Rules and must be struck down in the
circumstances of the case. As a result of the infirmities from which the
reauctions and the re-grant of licences by private 928 contract suffer,
respondents in whose cases fresh licences were granted either in reauctions or
by private contract will not be liable to make good the shortfall. The
reauctions were necessitated on account of the default committed by the
respondents, but the reason of the shortfall is the laxity and arbitrariness
with which the resale of the vends was held or fresh licences granted by
private contract. There will be no order as to costs in any of these appeals.
H.L.C. Dismissing the appeals in which liquor
vends was resold and allowing And appeals in which liquor vends was not resold.