Full Judgment Text
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CASE NO.:
Appeal (civil) 4673 of 1997
Appeal (civil) 5024 of 1999
Appeal (civil) 5828 of 1999
PETITIONER:
State of U.P.& Ors.
State of U.P.& Ors.
Daya Shankar Dixit
RESPONDENT:
Jagjeet Singh & Ors.
Vinod Kumar & Ors.
State of U.P. & Ors.
DATE OF JUDGMENT: 16/10/2003
BENCH:
CJI., Brijesh Kumar & Arun Kumar.
JUDGMENT:
JUDGMENT
BRIJESH KUMAR, J.
The common question involved in all the above noted three
appeals is as to whether the contractors running the liquor shops under
licence, issued by the State, in Uttar Pradesh are entitled to remission of
licence fee for the period during which the liquor shops were ordered to
be closed under Section 59 of the U.P.Excise Act, 1910 (for short ’the
Act’). The licensees in all the three cases, being the highest bidders for
the group of shops in question, their bids were accepted and thus they
were running the shops in the concerned areas. In the month of
December, 1992, the structure in Ayodhya was demolished. As a sequel
thereof disturbances and tension prevailed at several places in the State
and the shops involved in the first two appeals noted above, were ordered
to be closed during the period curfew was imposed in the areas
concerned. In so far it relates to the group of shops involved in the third
appeal, they were ordered to be closed during the period of imposition of
curfew due to communal disturbances between November, 1991 â\200\223
January, 1992, in Aligarh.
In the above noted Civil Appeal No.4673 of 1997, the High
Court by means of the impugned judgment, quashed the order, rejecting
the request of the respondent to allow remission and to pay compensation
and remanded the matter to the authorities to reconsider their applications
under paragraphs 179 and 190 of the Excise Manual and it was also
directed that the amount as may be found liable for remission shall be
paid to the licensees with interest @ 18% p.a. In the other appeal
no.5024 of 1997, the High Court, while quashing the order refusing to
give remission, directed the State and its authorities to adjust the licence
fee for the given period with interest @ 12% p.a. In the third appeal,
namely, civil appeal no.5828 of 1999, the court found that the contractor
was allowed remission partially, which is in the discretion of the
Government and as to in what proportion the remission is liable to be
allowed would not be a matter to be decided in writ proceedings and for
that purpose licensee may seek his remedy elsewhere.
The relevant facts for the purposes of this case, which admit
of no dispute, are that in the State of Uttar Pradesh grant of exclusive
privilege to manufacture or sale of liquor, at the relevant time was being
given under a licence by auction system. The highest bidder would be
issued licence to run the liquor shops. The auction would be held of one
shop or group of shops in a particular area. The licensees in the above
noted appeals had made bid for group of shops which were accepted by
the authorities and the licences were issued to them for sale of
liquor on the basis whereof they have been running the shops but
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the difficulty arose when curfew was imposed during certain periods due
to disturbances and communal tensions.
Before entering into the merits of the matter, it may be
appropriate to peruse some of the relevant provisions of the U.P.Excise
Act, 1910 and the U.P.Excise Manual.
Section 24 of the U.P.Excise Act provides for grant of
exclusive privilege of manufacture and sale of liquor and it reads as
under:
"24. Grant of exclusive privilege of manufacture,
etc.-
Subject to the provisions of Section 31, the Excise
Commissioner may grant to any person a license for
the exclusive privilege :
(1) of manufacturing or of supplying by wholesale,
or of both; or
(2) of selling by wholesale or by retail, or
(3) of manufacturing or of supplying by wholesale,
or of both, and of selling by retail.
any country liquor or intoxicating drug within
any local area."
Section 31 provides for issue of license subject to certain conditions and
restrictions. The provision reads as under :
"31. Form and conditions of licences, etc.- Every
licence, permit or pass granted under this Act shall be
granted â\200\223
(a) on payment of such fees (if any),
(b) subject to such restrictions and on such conditions,
(c) shall be in such form and contain such particulars,
as the (Excise Commissioner) may direct either
generally or in any particular instance in this
behalf, and
(d) shall be granted for such period as the [State
Government] may in like manner, direct."
One of conditions of the licence which provides for normal close days for
liquor shops is Condition No.27 of the licence which provides as under :
"The shop will remain closed on 1st day of every
month, Independence day, (15th August), Republic
day, (26th January) and Mahatma Gandhi birthday (2nd
October). If 1st day of any month is public holiday
then next day will be the day, when Shop will remain
closed. In addition to this, any three days during the
excise year, will be declared by the Licensing
authority on which the shops will remain closed. No
compensation will be given to the licensee for closure
of the shop on aforesaid days."
According to the above condition, no compensation was liable to be paid
for closure of shops as provided in the said condition. Section 59
provides for closure of the shops in certain exigencies and for the sake of
public peace. The same reads as under :
"59. Power to close shops for the sake of public
peace.- The District Magistrate by notice in writing to
the licensee may require that any shop in which any
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[Intoxicant] is sold shall be closed at such time or for
such period as he may think necessary for the
preservation of the public peace.
If a riot or unlawful assembly is apprehended or
occurs in the vicinity of any such shop a Magistrate of
any class or any police officer above the rank of
constable who is present may require such shop to be
kept closed for such period as he may think necessary:
Provided that where any such riot or unlawful
assembly occurs the licence shall, in the absence of
such Magistrate or police officer, close his shop
without any order."
It may be noted that the above provision does not provide either way, for
awarding remission of compensation for the period of closure of shops in
the circumstances given in Section 59 quoted above.
Section 41 empowers the Excise Commissioner to make
rules subject to previous sanction of the State Government. Such rules
known as U.P.Excise Licences (Tender-cum-Auction) Rules, 1991 were
framed in exercise of power under Section 41 of the Act. Rule 34
provides for no claim for delay in supply of intoxicant. It reads as under:
"34. No claim for delay in supply.- The licensee
shall have no claim for damages or for remission of
bid-money in the case of delayed supply of the
intoxicant."
Rule 34 was, however, amended on March 10, 1992 by the U.P.Excise
Licences (Tender-cum-Auction) (Amendment) Rules, 1992 and after
amendment it reads as under :
"No claim for delay in supply or for closure or not
opening of shop or curtailment in hours of sale:
(i) The licensee shall have no claim for damages or
for remission of bid-money in the case of
delayed supply of the intoxicant.
(ii) The licensee shall have no claim for remission
or refund of bid-money, in case a shop or some
shops, auctioned in a group remain closed or
could not be opened for any reason. Similarly
the licensee shall have no claim for remission of
refund of bid-money in case of curtailment, at
any time in the hours of sale."
The provision relating to administration of the Excise Department is
provided for under Chapter II of the Act. Section 10 provides as under :
"10. Administration of Excise Department in
districts.- (1) The administration of the Excise
Department in any district shall, unless the [State
Government] otherwise directs, be under the charge of
the Collector of that district.
(2) Power of State Government .- The [State
Government] may by notification applicable to the
whole of [Uttar Pradesh] or to any district or local area
comprised therein â\200\223
(a) To appoint Excise Commissioner : [appoint an
officer hereinafter referred to as the Excise
Commissioner, who shall, subject to the orders of the
[State Government] have the control of the
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administration of the Excise Department].
Xxx xxx xxx"
The Excise Commissioner having the control of the administration of the
Excise Department in the State issues certain directions from time to time
which are normally compiled and known collectively as Excise Manual.
Paragraphs 179 and 190 of the Excise Manual would be relevant for the
purposes of a remission of payment of compensation. They read as under:
"179. Remission in special cases.- Proposals for
remissions other than of irrecoverable balances must
be reported to the Excise Commissioner who, if he
supports them, will forward them for the orders of the
State Government.
190. Miscellaneous directions.- The following
miscellaneous directions regarding the classification
and payment of charges are noted for observance :
(1) Payment on account of compensation for closing
shop under Section 59 of the Act or for closing
country spirit shops settled under the auction
system during the passage of troops includes (a)
the refund of an amount originally credited to
Excise and (b) 10 per cent calculated on the
amount of licence fees for the period during which
the shop was closed, on account of loss of profits.
(2) The latter charge only should be debited to
Contract Contingencies. The former will be
treated as a refund and adjusted against the
separate grant for refund and drawbacks.
(3) Compensation may be paid by the Collector on his
own authority."
The learned counsel for the licensees has drawn our attention
to Rule 34 as amended vide notification dated March, 1998 to indicate
that prior to the said amendment, there was no such provision by which
remission may not be allowable even though all the shops of the group
are closed in entirety. The rule 34, as amended in 1998, is quoted below:
"No claim for delay in supply or for closure or for
closure or not opening of shop or curtailment in
hours of sale:
(i) The licensee shall have no claim for damages or
for remission of bid-money in the case of
delayed supply of the intoxicant.
(ii) The licensee shall have no claim for remission
or refund of bid money, in case of an auction
shop or some or all shops, auctioned in a group
remain closed or could not be opened for any
reason. Similarly the licensee shall have no
claim for remission of refund of bid-money in
case of curtailment, at any time in the hours of
sale."
We may, however, presently consider the case according to the rules as
existing in 1991-92. The effect of amendment of 1998 may be seen later.
The claim of the licensees for remission of the license fee
rests upon the plea that under Section 59 of the Act there is no provision
either way to allow or prohibit such remission on account of closure
ordered under the aforesaid provisions. The other plank on which the
licensees base their case is Clause (ii) of Rule 34 as amended in 1992
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where it particularly provided that a licensee shall have no claim for
remission in case a shop or some shops, auctioned in a group remain
closed or could not be opened for any reason. It further provided that no
remission would be admissible in case of curtailment in hours of sale.
The interpretation of the above noted sub-rule (ii), according to the
licensee is that a remission would not be permissible if a shop or some of
the shops out of the total number of shops of the group remain closed.
The reason being that if some of the shops out of the whole pool, remain
open the licensee would not be totally deprived of the earnings and may
also stand compensated for closure of other shops of the group of shops.
It would thus be permissible only in case of all shops of the group being
closed in the entirety. Reliance has been placed on certain decisions of
the Allahabad High Court on the point to which we shall make a
reference a little later. Yet another basis for claim of remission is
paragraph 179 of the Excise Manual which provides for remission in
special cases in respect of which a report is submitted to the Excise
Commissioner who, in case agrees with the proposal, would forward it to
the government for orders, whereas paragraph 190 provides for payment
on account of compensation for shops being closed under Section 59 of
the Act during the passage of troops.
The question for grant of remission in respect of closure of
shops during the month of December, 1992 came to be considered before
the Allahabad High Court in a batch of writ petitions decided on March
30, 1993 which has been referred to in the impugned judgment as Harpal
Singh’s case (Harpal Singh & Ors. etc. vs. State of U.P. & Ors.) or
decision as rendered in the case of Ratnagar Mishra, both of whom were
petitioners in separate writ petitions before the High Court in the same
bunch of petitions. The matter was decided by a common judgment.
The Court accepted the contention of the petitioners in those writ
petitions that Rule 34 (ii) as amended in 1992 would apply in cases of
auction of shops in a group. It has been held that clause (ii) of Rule 34
refers to partial closure of shops auctioned in a group, in respect whereof
no claim for remission would be permissible but it does not provide
otherwise. That is to say clause (ii) of Rule 34 would be no bar for grant
of remission or compensation under paragraphs 179 and 190 where
closure of the shops auctioned in a group is total and in entirety. Where
no shop out of the group of shops remains open, in that event, clause (ii)
of Rule 34 would not be applicable. To support the above interpretation
the Division Bench observed that Rule 34 clause (ii) refers to only partial
closure either in terms of number of shops or in terms of hours of sale.
The High Court has also distinguished the decision of another Bench of
the High Court in the case of Hanuman Prasad Jaiswal Vs. State of
U.P.(Civil Misc. Writ Petition No.2902 of 1981, decided on January 25,
1981) (1983 U.P.T.C.-362). It was held in that case that closure of a shop
for the rest of the period of the license amounted to cancellation of the
license under Section 35(3) of the Excise Act and it was not a case of
temporary closure as envisaged under Section 59 of the Act. Yet another
decision which has been referred to is rendered by another Division
Bench of the High Court in Civil Misc. Writ Petition No.375 of 1981, Om
Prakash Sharma & Anr. Vs. The Excise Commissioner, U.P.Allahabad &
Anr., decided on 4th July, 1991. The Bench presided over by Hon’ble
Mr.Jusitce B.P.Jeevan Reddy (Chief Justice - as he then was) held that
remission/compensation was liable to be paid since the government had
itself failed to supply the bhang for sale of which license was granted to
the petitioner in that case on annual license fee @ Rs.10,800/- per month.
The petitioner had deposited two months’ license fee in advance but the
authorities failed to make supply of bhang to the petitioner. The Court
observed : "In the present case we are of the opinion that the Government
having itself failed to supply bhang for more than one month to the
petitioner and for this reason, his license remained practically suspended
for the said period, there is no justification for the Government to recover
licence fee for the aforesaid period." A reference of the Division Bench
decision in the case of Hanuman Prasad Jaiswal (supra) was also made. It
was observed that the petitioner could not sell bhang by procuring it
otherwise from any other source except as made available from the
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bonded warehouses. It was observed that the petitioners cannot be asked
to pay the licence fee for the period because the Government itself
created a situation where petitioners were not able to run their shops. We
have noticed that in the case of Hanuman Prasad Jaiswal also the closure
of the shop for the rest of the licenced period was at the instance of the
Government which was held to be virtual cancellation of the licence. The
above noted two decisions do not help the petitioner. The closure of the
shops under Section 59 of the Act would not be a situation created by
itself. During the relevant period tension had prevailed at many places
and the communal riots had also erupted necessitating imposition of
curfew resulting in closure of shops.
Yet another decision of the High Court as referred to on the
point is dated 12th July, 1993 rendered in Civil Misc. Writ Petition
No.1200 of 1993, Om Prakash Vs. State of U.P. & Ors. The Bench was
presided over by one of us (Mr.Justice V.N.Khare, as he then was).
Remission was claimed for closure of the shop due to imposition of
curfew from December 8 to 14th December, 1992. An application moved
by the petitioner in that case was rejected by the Collector, Azamgarh.
Relying upon the decision in the case of Harpal Singh and Ratnagar
Mishra (supra) it was contended before the Bench that an application for
remission would be maintainable and the view taken otherwise was
incorrect. The Bench noted that the order passed by the Collector, Excise
was an appealable order before the Commissioner. But an apprehension
was expressed by the petitioner in filing the appeal before the
Commissioner that the Commissioner himself had issued a direction that
application for remission was not maintainable, therefore, it would be an
illusory remedy. The Bench observed that the apprehension was not well
founded since in the case of Ratnagar Mishra it was held that application
for remission would lie where a group of shops, has been closed in
entirety. Therefore, the Court declined to interfere with the order and
provided that the petitioner could file an appeal before the Excise
Commissioner who shall entertain the same and decide it on merits, in
accordance with the law. The writ petition was thus dismissed on the
ground of alternative remedy.
In the background set out above, the effect of Rule 34 clause
(ii) as amended in 1992, is to be seen as to whether the embargo to lay a
claim of remission is confined to cases where it has been an auction of
group of shops or it extends to closure of shops for whatever reason
auctioned singly or in group and closed partially or entirely.
We may examine the provisions under the law as quoted
above in relation to closure of shops and remission/compensation in lieu
thereof. Section 59 empowers the District Magistrate to close any liquor
shop at such time or for such period which he may consider necessary for
preservation of peace. In cases where some riot or unlawful assembly is
apprehended in vicinity of such a shop a Magistrate or any police officer
above the rank of constable, who is present may order for closure of the
shop. The proviso to Section 59 casts a duty on the licensee to close the
shop without any order by any authority, where a riot or unlawful
assembly occurs at the place where the shop is situated. Apart from
providing for closure of the shop to maintain peace, Section 59 does not
provide for anything either way for awarding compensation or remission
on account of such a closure. We then find that licence is issued under
Section 24 of the Act subject to the provisions of Section 31. Section 31
under "clause (b)" provides that the licence would be subject to such
restrictions and on such conditions as the Excise Commissioner may
direct generally or in particular. Condition No.27 of the licence, quoted
above, prescribes the days on which the shop would remain closed, i.e.
first of every month, the Independence Day, the Republic Day, on
birthday of Mahatma Gandhi and apart from such days on any three days
during the excise year which would be declared by the licencing authority
to be the close days. Then in negative form it provides that no
compensation will be given for closure of shop on the aforesaid days.
The rest, it leaves to inference. There is no provision in same terms for no
compensation for closure on such days other than indicated in Condition
No.27 of the licence. We may then consider Rule 34 of the U.P.Excise
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(Tender-cum-Auction) Rules, 1991 (as amended in 1992) which also
deals with the subject of remission and compensation. Clause (i) deals
with cases of delayed supply of the intoxicant in which case no
remission/damages of bid money is allowable. Clause (ii) however, as
indicated earlier, says that there would be no claim in case of a shop or
some shops auctioned in a group is closed for any reason nor in case of
curtailment at any time in the hours of sale. It is to be noted that Rule 34
does not contain any blanket bar against any claim of damages or
remission on account of closure. The heading of Rule 34 no doubt
mentions about no claim for delay in supply or closure or not opening of
shop but its contents in clauses (i) and (ii) do not provide plainly that no
remission or damages would be payable for closure or non-opening of a
shop. The manner in which clause (ii) is worded, it appears that it
governs the shops auctioned in a group. It restricts the scope of claim of
remission or damages in case a shop or some shops auctioned in a group,
remain closed for any reason. A group of shops is one whole and in case
such group of shops is only effected partially no remission or refund of
bid money can be claimed. The Division Bench in the case of Harpal
Singh has observed that clause (ii) of Rule 34 (as amended in 1992) deals
with partial closure as would be evident from the later part of the sub-rule
which provides that there would be no claim for curtailment of any time
in the hours of sale i.e. there would be no remission in case of
curtailment of time of a shop but the position in respect of total closure of
a shop in place of mere curtailment of time has been left unprovided for.
We may say there is no provision either way and the prohibition is only in
respect of partial closure in a day. Similarly, the first part of the sub-rule
(ii) talks about the auction of shops in group. Out of the group of the
shops if some shops are closed or a shop is closed there would be no
claim for any remission. It leaves a situation where all shops of a group
are closed. Therefore, the language used for negating the claim in respect
of partial closure in relation to time or a group of shops leads to the
conclusion that cases of total closure would not be covered by Rule 34.
We may hasten to say that no such inference can be drawn that in case of
total closure of a group of shops or for whole time in a day, would
necessarily entitle a licensee for remission or damages. All that can be
said is that it is not impermissible. It may or may not be allowed, is liable
to be decided on its own merits. But it would not be possible to say that
no such application for remission/damages would be maintainable as in
the case of curtailment of time of a shop or closure of one or some of the
shops in a group of shops. The interpretation as made by the Bench in the
case of Harpal Singh cannot be faulted with.
Rule 34 is obviously referable to Section 41 of the Act which
empowers the Excise Commissioner to make rules with previous sanction
of the State Government regulating the manufacture, supply, storage or
sale of any intoxicant.
Then we come to the positive provisions relating to
remissions and in that connection para 179 of the Excise Manual may be
referred to, which provides for remission in special cases it may be
reported to the Excise Commissioner who in turn, if considers
appropriate, will forward for orders to the State Government. Similarly,
para 190 of the Excise Manual provides for compensation on account of
closing of a shop during the passage of troops. Such directions as
contained in paras 179 and 190 issued by the Excise Commissioner are
referable to Section 10 of the Act quoted above, wherein he is entrusted
with control and administration of Excise Department. The position thus
which emerges is that in some special cases a remission is permissible, if
the Excise Commissioner finds some merit in the claim, he shall then
forward it for orders to the State Government. Rules of course do not
provide any such positive provision but only provides for cases in which
remission cannot be claimed, namely, where it relates to curtailment of
hours of the shop or partial closure of shops auctioned in a group.
Section 59 itself does not provide for any such claim for the closure but
the licence issued under Section 24 contains a condition referable to
Section 31 of the Act again confers no right to claim for closure of shop
on the days as specified in Condition No.27 plus three more days. For the
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rest of the days or period it leaves open the matter without any provision
therefor. This being the position under the provisions of the Act, the
rules and the Excise Manual, there is scope for the argument that Rule 34
does not exclude the possibility of any claim for remission or damages on
account of closure of a shop totally which situation is not dealt with under
Rule 34 as amended in 1992. However, it is introduced by amendment of
Rule 34 in 1998, as quoted earlier.
The above noted amended provision of 1998 squarely
provides for closure of a shop auctioned or some or all shops auctioned in
a group. It may be noted that the language of clause (ii) of Rule 34
which used to be "in case a shop or some shops auctioned in a group" has
been changed to "in case of an auction shop or some or all shops
auctioned in a group". That is to say auction of shops has been put in
two categories where it is an auction of one shop and the other shops
auctioned in a group. It is further clarified in the amended sub-rule that
remission would not be claimed where an auctioned shop or some or all
auctioned shops in a group remain closed. It is submitted that in absence
of the provision as now exists after amendment in 1998 it could not be
said that no compensation could be claimed for the period prior to 1998
amendment. By amendment of Rule 34 in 1998 certainly the position has
somewhat changed, but in relation to the period with which we are
concerned in this case, the Amended Rule 34 (ii) (1998) would not be
attracted. Learned counsel for the licensees submit, that subsequent
amendment clarifies the position that earlier the position was different
from what is sought to be brought about by means of the amended
provision.
We may recapitulate the position as it regards the cases
decided by the High Court of Allahabad pertaining to the above
provisions which have been referred to in the earlier part of this
judgment. All those decisions relate to period prior to 1998 i.e. before
the amendment of Rule 34(ii). In the case of Hanuman Prasad Jaiswal
remission/damages was allowed since on facts it was found that it was a
case which amounted to cancellation of licence for the rest of the period.
Hence, such a closure was beyond the purview of Section 59. The case
of Om Prakash Sharma was also on a different footing but the
remission/damages was not refused; rather allowed since it was found
that the government itself was at fault in not making supply of bhang
from the bonded warehouse and did not make it available for sale to the
licensee for a period of two months. In principle it was accepted that
remission/ damages could be claimed if due to fault of the government
the shop could not be opened for the purpose of sale for which the licence
was granted. In the case of Harpal Singh and Ratnagar Mishra, it has
been held that such an application for remission would be maintainable
where it is a case of total closure in entirety and distinction was drawn
between a partial and a total closure. In the case of Om Prakash, it was
observed that in view of decision in the case of Ratnagar Mishra an
application would lie for remission. In yet another case Om Prakash
Gupta Vs. State of Uttar Pradesh, Civil Misc. Writ Petition No.408 of
1996, dated 4th December, 1996, decided by a learned Single Judge of
the Allahabad High Court, it pertained to the year 1988 before coming
into force of 1992 Rules. It was held that an application for remission
would be maintainable and the same was allowed for closure of shops for
5 days.
The position which finally emerges out is that an application
for remission/damages for closure of shops in entirety auctioned in a
group as is the case in the appeals in hand would be maintainable. But it
is for the authorities concerned to consider the merit of the claim for
remission/damages and pass any appropriate order looking to the facts
and circumstances of the case in accordance with law. It would be the
position as it relates to cases prior to the amendment of Rule 34 in 1998.
In the result, we partly allow the appeals (C.A.No.4673 of
1997 and C.A.No.5024 of 1999) filed by the State and set aside the
directions as given by the High Court for remission and damages to the
respondents with interest etc. The other part of the order, however, is
maintained and it is directed that the applications of the respondents for
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remission/damages may be considered and appropriate orders may be
passed by the authorities in accordance with the law, expeditiously say
within a period of three months from the date of communication of this
judgment.
So far Civil Appeal No.5828 of 1999 is concerned, it is
dismissed and the order passed by the High Court is maintained. There
will, however, be no order as to costs.