Full Judgment Text
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PETITIONER:
RAJA MALLAIAH AND ANR.
Vs.
RESPONDENT:
ANIL KISHORE AND ORS.
DATE OF JUDGMENT25/04/1980
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
SEN, A.P. (J)
CITATION:
1980 AIR 1502 1980 SCR (3) 794
ACT:
Andhra Pradesh (Lease of Right to sell Liquor in
Retail) Rules, 1969-Rule 12 read with Rules 3 and 4 and
administrative instruction thereunder, scope of-Whether
regrouping of 78 shops as a single lot for auctioning at the
postponed auction without recording reasons therefor and
holding of such an auction within half an hour of the
decision regarding regroup is contrary to Rule 12.
HEADNOTE:
Under Rule 4 of the Andhra Pradesh Excise (Lease of
Right to sell Liquor in Retail) Rules, 1969, made in
exercise of the powers conferred upon the Government by
section 72 read with section 17, 29, 31 and 64 of the Andhra
Pradesh Excise Act, 1968, a notification dated August 20,
1979 was published in the District Gazette, Hyderabad, by
the Commissioner of Excise Andhra Pradesh, giving a notice
of a proposal to hold an auction from September 1, 1979 to
September 3, 1979, of the right to sell arrack, in retail in
respect of 78 arrack shops in the twin cities of Hyderabad
and Secunderabad during the Abkari year October 1, 1979 to
September 30, 1980. The notification mentioned that 22 out
of 78 shops would be auctioned in ten groups of two and
three shops, while the remaining 56 shops would be auctioned
individually. This was according to the pattern which
obtained for the year 1978-79 for which year the auction
fetched an aggregate monthly rental of Rs. 32,99,537-72 np.
On account of some representations made by Excise
Contractors in regard to some conditions regarding the
bottling of arrack, the auction was postponed to September
7, 1979. Auction was sought to be held on September 7, 1979
and September 12, 1979 but there were no bids. On September
21, 1979, the Collector (the auctioning authority) followed
a peculiar procedure. First he auctioned 34 arrack shops in
Hyderabad City individually and the bids fetched an
aggregate of Rs. 6,49,700 (monthly rental). Then he put the
34 shops to auction as a single lot but there was no bid.
Similarly he auctioned the 44 arrack shops of Secunderabad
city individually and they fetched an aggregate bid of Rs.
6,02,100 (monthly rental). He then put the 44 shops to
auction as a single lot, but there was no bid. Thereafter he
put the entire lot of 78 shops to auction as a single lot.
There was no bid. The auction was postponed to September 22,
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1979 and on that day the same peculiar procedure was
repeated. The highest bid for all the 78 shops in one lot
was Rs. 24,00,000/-, while there were two tenders for Rs.
15,11,111/11 ps and Rs. 25,55,555/55 ps. Therefore, the
tender for Rs. 25,55,555/55 ps. was accepted.
Seventeen persons who were lessees of the arrack shops
in the twin cities during the year 1978-79 filed two writ
petitions in the High Court of Andhra Pradesh questioning
the auction held on September 21, 1979 and September 22,
1979 on the ground that the Collector had no jurisdiction to
auction the 78 shops as one lot, thereby altering the entire
pattern of the auction as
795
notified earlier. It was pleaded that the action of the
Collector was contrary to rule 12 of the A.P. (Lease of
Right to sell Liquor in Retail) Rules, 1969 and the
administrative instructions issued by the Excise
Commissioner by which the Collector was bound. A learned
single Judge allowed the writ petitions and directed a re-
auction to be held within a period of fifteen days. The
present appellants and some others, as well as the State of
Andhra Pradesh preferred appeals under clause 15 of the
Letters Patent. The Division Bench dismissed them on the
ground that there was a contravention of Rule 12 of the
Rules as the auctioning authority failed to record reasons
for grouping the 78 shops in one lot.
Dismissing all the appeals by special leave, the Court
^
HELD : 1. The scheme of the Andhra Pradesh Excise Act
shows that the Commissioner is at the apex, as it were, of
the Excise Administrations of the State. He is the Chief
Controlling Authority for all matters connected with the
administration of the Excise Act and has the control of the
administration of the Excise Department. The Collector who
is invested with the power to perform various functions
under the Act is also subject to the control of the
Commissioner. Having regard to the scheme of the Act, it may
be presumed that such functions as are directly assigned to
the Commissioner under the Rules are considered by the
Legislative delegate to be important functions for the
purposes of the Act and if the Commissioner is authorised to
issue instructions, those instructions are meant to be
obeyed by the other authorities constituted under the Act.
[803 A-C]
Under Rule 3 it is the Commissioner that is invested
with the power to fix the number of shops to be established
in an area, their location and the minimum guaranteed
quantity that should be sold in each shop. These matters are
required to be determined by the Commissioner before the
auction notice is published under R. 4 so that the details
may be incorporated in the auction notice. The auction
notice has to specify, among other particulars, the shop or
group of shops in respect of which the lease to sell liquor
is proposed to be granted by public auction. The advance
notice is obviously meant to enable the intending bidder and
tenderers to make the necessary preparations including vital
arrangements regarding finance, since the successful bidder
has to deposit one month’s rental and two percent of the
annual rental forthwith on acceptance of the bid or tender
and an additional two months rental within fifteen days from
the date of auction. [803 D-F]
The fixation of number of shops, the location of the
shops and their grouping is considered so important a matter
that the power in regard to it is vested in the apex
authority, the Commissioner. If some changes have to be
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made, as a measure of emergency such changes also can only
be made in accordance with the administrative instructions
issued on the subject by the Commissioner. Even so, the
emergency exercise can only be undertake if reasons are
recorded in writing. The freedom of the auctioning authority
to regroup and rearrange shops is thus deliberately
circumscribed. It is not for the auctioning authority to
make ad-hoc experiments on the spot if he decides to regroup
the shops. If he desires to regroup the shops, he has (1) to
act in accordance with the administrative instructions
issued on the subject by the Commissioner, and (2) to record
in writing the reasons for the change. [803 G-H, 804 A]
796
It is true that the Collector, as per the
administrative instructions issued on June 10, 1975, sought
instructions from the Commissioner on September 20, 1979
over the phone and the Commissioner did give certain
instructions on September 21, 1979. All that was said in the
instructions dated September 21, 1979 was that regrouping
might be done to get maximum revenue. It did not mean that
the instructions previously in force were to be ignored or
thrown overboard or that complete freedom was given to the
auctioning authorities to act at their discretion. All that
it meant was that regrouping might be done, if necessary, to
get maximum revenue, but such regrouping was naturally to be
in accordance with the instructions already given from time
to time. In the earlier instruction dated June 10, 1975, the
Commissioner pointed out that the shops and groups approved
by the Board of Revenue (Commissioner of Excise) and
notified for auction should be auctioned without disturbing
the approved pattern. Bigger groups could be split into
smaller groups and auctioned if the highest rental offered
was lower than the current rental for the bigger group. It
was strictly stipulated that approved groups should not be
enlarged under any circumstances and where groups were re-
formed reasons should be recorded in detail. The emphasis
throughout was on the splitting of bigger groups into
smaller groups but was never in the opposite direction i.e.
forming bigger groups in the place of smaller groups. The
instructions were definitely against creation of monopoly.
The instructions dated August 3, 1979 also emphasised this
aspect and expressly mentioned that monopoly should be
broken as that would fetch better Revenue. The specific
instructions given on September 20, 1979, i.e. on the eve of
the adjourned auction were that two to four groups might be
formed in the case of the arrack shops of the twin cities.
[806 F-H, 807 A-C]
In the instant case, the regrouping of all 78 shops
into a single group was clearly opposed to the instructions
issued by the Commissioner of Excise particularly the
specific instruction issued on September 20, 1979 with
respect to the very shops in the twin cities of Hyderabad
and Secunderabad. It was opposed to the earlier general
instruction that ‘approved groups should not be enlarged
under any circumstances’ and monopoly should be avoided. The
accident that the regrouping fetched a higher bid is not
sufficient justification of the departure from the
administrative instructions which aim at breaking a monopoly
in regard to lease of excise shops. The result could well
have been otherwise and the bids lower. [807D-E]
The question whether a provision is mandatory or
directory is not to be resolved merely by reference to the
emphatic or gentle language employed in the provision, nor
even by the presence or absence of an express stipulation
regarding the consequences of a breach of the provision.
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These are circumstances of importance which naturally have
to be considered. But one must give greater consideration to
the statutory design and the importance of the provision in
the context of that design. Generally one may say a
provision which insists upon recording of reasons before an
action is taken must prima facie be considered to be
mandatory, as it is aimed at preventing arbitrariness. Where
the rights of citizens are involved there can be no question
that such a provision should be regarded as mandatory. Where
the provision involves the public interest also the
provision must be regarded as mandatory. Examined in that
light the Andhra Pradesh Excise Act is an Act intended to
raise and secure revenue to the State, without at the same
time sacrificing the public interest involved which requires
the regulation of
797
trade in intoxicants. The administration of the Act is,
therefore, vested primarily and centrally in the
Commissioner of Excise who is expected to take a decision on
all vital matters. The fixation of the number of shops,
their location and grouping are considered by the
legislative delegate to be matters of such vital importance
in Excise administration that the power in regard to these
matters is vested in the Excise Commissioner. In that
setting, the object of the rule is clearly seen to be to
secure strict compliance with the arrangement already made
by the Commissioner of Excise, the highest authority, and to
permit no departure from the arrangement save in exceptional
cases, on the clearest of grounds. What is involved is the
protection of revenue and what is to be prevented is ad hoc
improvisation which jeopardises the revenue. That a
particular improvisation yielded better results may be the
exception which proves the rule. The public interest is thus
seen to be served in two ways by the recording of reasons,
first by protecting the public revenue and next by making
public authorities not to function arbitrarily and also not
appear to function arbitrarily. [807 G-H, 808 A-E]
It is true that the Government is the exclusive owner
of all rights and privileges in regard to intoxicants and no
citizen has any right in regard to them. Here, the question
is whether the Government having invited members of the
public to participate in a public auction on certain terms
and conditions, it is open to the officer entrusted with the
task of conducting the auction to vary the terms and
conditions publicly announced earlier, without assigning any
reasons when the statutory rules require the recording of
reasons. Departure from the rules and failure to record the
reasons is impermissible merely because no citizen has any
right in the sale of intoxicants. The situation changes as
soon as statutory provision and rules are made and the
public is invited to participate in the auctions to be held
as provided by rules. Therefore, the requirement regarding
recording of reasons contained in Rule 12 of the Andhra
Pradesh Excise (Lease of Right to Sell Liquor in Retail)
Rules, 1969 is mandatory. [808 E-H, 809 A]
To record the reasons contemporaneously, that is to
say, soon after the auction was held is not proper. The
object of the insistence upon the recording of reasons is to
eliminate arbitrariness. Reasons, if given, substitute
objectivity for subjectivity. When reasons are set down in
writing greater thought goes into it and greater objectivity
is attained. Where the action to be taken involves a
departure from what has already been decided by the apex
authority and the public interest is involved, the reasons
required to be recorded must be recorded before and not
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after the action is taken. [809 A-C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3427-
3432 of 1979.
From the Judgment and Order dated 22-11-1979 of the
Andhra Pradesh High Court in Writ Appeal Nos. 367, 368, 397
and 398/79 respectively.
V. M. Tarkunde, P. N. Ramalingam and A.T.M. Sampath for
the Appellants in CA Nos. 3429-3432/79.
K. K. Venugopal and B. Parthsarathy for the Appellants
in CA Nos. 3427-3428/79 and for the State in CA Nos. 3429-
3432/79.
798
S. N. Kacker, P. R. Mridul, R. Satish, V. K. Pandita
and E. C. Aggarwal for the Respondents 1, 3, 4 and 7 in CA
Nos. 3427-3432/79.
The Judgment of the Court was delivered by
CHINNAPPA REDDY, J.-Apparently there is big money in
the liquor business. When, at the close of the hearing on
Friday 18th April, 1980, we asked M/s. Kacker and Mridul
whether their clients were prepared to deposit or furnish
security in a sum of Rs. 35 lakhs in order to guarantee that
the bids at a re-auction, if so ordered, would so start that
their aggregate would be not less than Rs. 35 lakhs, they
agreed with alacrity. We asked the question as we wanted to
satisfy ourselves about their bonafides. On a request made
on April 21, 1980, we have given them a week’s time to give
security to the satisfaction of the Commissioner of Excise,
Hyderabad.
On August 20, 1979, a notification was published in the
District Gazette, Hyderabad, by the Commissioner of Excise,
Andhra Pradesh, giving notice of a proposal to hold an
auction, from September 1, 1979 to September 3, 1979, of the
right to sell arrack in retail in respect of 78 arrack shops
in the twin cities of Hyderabad and Secunderabad during the
Abkari year, October 1, 1979 to September 30, 1980. The
notification was published under Rule 4 of the Andhra
Pradesh Excise (Lease of Right to Sell Liquor in Retail)
Rules, 1969, made in exercise of the powers conferred upon
the Government by s. 72 read with ss. 17, 29, 31 and 64 of
the Andhra Pradesh Excise Act, 1968. The notification
mentioned that 22 out of the 78 shops would be auctioned in
ten groups of two and three shops, while the remaining 56
shops would be auctioned individually. This was according to
the pattern which obtained for the year 1978-79 for which
year the auction fetched, an aggregate monthly rental of Rs.
32,99,537.72 ps. On account of some representations made by
excise contractors in regard to some conditions regarding
the bottling of arrack, the auction was postponed to
September 7, 1979. The first auction was held on September
7, 1979, when no bids were received for the arrack shops. A
second auction was held on September 12, 1979 and again
there were no bids. On September 19, 1979, no auction could
be held as all the bidders walked out. On September 21,
1979, the Collector (the auctioning authority) followed a
peculiar procedure. First he auctioned 34 arrack shops in
Hyderabad city individually and the bids fetched an
aggregate of Rs. 6,49,700 (monthly rental). Then he put the
34 shops to auction as a single lot but there was no bid.
Similarly he auctioned the 44 arrack shops of Secunderabad
city individually and they fetched an aggregate bid of Rs.
6,02,100 (monthly rental). He then put the
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799
44 shops to auction as a single lot but there was no bid.
Thereafter he put the entire lot of 78 arrack shops to
auction as a single lot. There was no bid. There was a
tender but the tender had to be rejected as the tenderer was
not present in the auction hall even after an announcement
was made on the microphone and the auctioning authority
waited for a considerable time. The auction was then
postponed to September 22, 1979 and on that day, the same
peculiar procedure was repeated. The 34 shops of Hyderabad
city when auctioned individually fetched bids aggregating to
Rs. 6,75,000. There were also tenders. The aggregate of the
highest bid or tender for the different shops came to Rs.
7,78,060/55 ps. The 44 shops in Secunderabad city were then
auctioned individually. The aggregate of the bids came to
Rs. 8,30,000. There were tenders also. The aggregate of the
highest bid or tender for the different shops came to Rs.
10,82,885 .27. Thereafter 34 shops of Hyderabad city were
auctioned as one lot and there was a bid for Rs. 8,00,000
and a tender for Rs. 10,55,229. Similarly the 44 shops in
Secunderabad city were auctioned as one lot and the maximum
bid was Rs. 13,50,000 while two tenders were received, the
highest of which was Rs. 14,11,111. The Collector then
auctioned all the 78 shops as one lot. The highest bid was
Rs. 24,00,000 while there were two tenders for Rs.
15,11,111/11 and Rs. 25,55,555/55. The tender for Rs.
25,55,555/55 for all 78 shops was accepted.
17 persons who were lessees of the arrack shops in the
twin cities during the year 1978-79 filed two Writ Petitions
in the High Court of Andhra Pradesh questioning the auction
held on September 21, 1979, and September 22, 1979 on the
ground that the Collector had no jurisdiction to auction the
78 shops as one lot, thereby altering the entire pattern of
the auction as notified earlier. It was pleaded that the
action of the Collector was contrary to R. 12 of the Andhra
Pradesh (Lease of Right to Sell Liquor in Retail) Rules,
1969, and the administrative instructions issued by the
Excise Commissioner by which the Collector was bound.
Amareswari, J., who heard the Writ Petitions in the
first instance, in a careful and well-considered judgment
held : 1. The action of the auctioning authority grouping
all the 78 shops into one group was opposed to the
administrative instructions issued by the Excise
Commissioner and hence contrary to R. 12; (2) the action of
the auctioning authority was contrary to the rule also
because the auctioning authority failed to record reasons,
as he was required to do under the rule before he could
regroup the shops; and, (3) the petitioners were not given
sufficient time to make preparations to bid at the auction
of 78 shops as a single lot since half an hour’s time only
was given to them.
800
On those findings Amareswari J., allowed the Writ Petitions
and directed a reauction to be held within a period of 15
days.
The present appellants and some others, as well as the
State of Andhra Pradesh preferred appeals under Clause 15 of
the Letters Patent. The Appellate Bench consisting of
Kuppuswamy and P. A. Chaudhary, JJ., did not agree with
Amareswari J’s view that the auction was contrary to R. 12
read with the administrative instructions or that the
petitioners in the Writ Petition were not given sufficient
time to make preparations for participating in the auction
of the 78 shops as a single lot. They, however, upheld the
judgment of Amareswari J., on the ground that there was a
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contravention of R.12 of the Rules as the auctioning
authority failed to record reasons for grouping the 78 shops
into one lot.
It was argued by Shri V. M. Tarkunde, learned counsel
for the successful bidder-appellants and Shri K. K.
Venugopal, learned counsel for the State of Andhra Pradesh
that the rule requiring recording of reasons was not
mandatory and, in any case, recording of reasons was not a
condition precedent. The rule was sufficiently complied by
reasons being recorded immediately after the auction. Shri
Kacker and Shri Mridul, learned counsel for the respondents,
urged that the rule was mandatory and that recording of
reasons was a condition precedent to regrouping of shops.
They also contended the view expressed by Amareswari J., on
the other two questions was the better view.
A brief reference to some of the provisions of the
Andhra Pradesh Excise Act and the Andhra Pradesh Excise
(Lease of Right to Sell Liquor in Retail) Rules, 1969, is
necessary here. S .3 of the Act provides for the appointment
of the Commissioner of Excise for the State who is to be the
Chief Controlling authority in all matters connected with
the administration of the Act. He is to have the control of
the administration of the Excise Department. S. 4 provides
that the Collector shall exercise the powers and perform the
functions assigned to him under the Act, subject to the
general control of the Commissioner. Chapter IV of the Act
deals with the manufacture, possession, and sale of liquor.
S. 17 in particular empowers the Government to grant leases
for the supply, manufacture or sale of any intoxicant.
Chapter VI deals with licences and permits. Chapter IX deals
with ‘Appeals and Revisions’. S. 63 provides that any person
aggrieved by an order passed by any Officer other than the
Commissioner or Collector may appeal to the Deputy
Commissioner and any person aggrieved by an order passed by
the Deputy Commissioner or Collector may
801
appeal to the Commissioner. S. 72 empowers the Government to
make rules for carrying out all or any of the purposes of
the Act.
In exercise of the powers vested in the Government
under s. 72 of the Act, the Government has made the Andhra
Pradesh Excise (Lease of Right to Sell Liquor in Retail)
Rules. R. 2(vi) defines "Excise Year" as a period of 12
months commencing from 1st October of a year and ending with
the 30th September of the succeeding year. R. 2 (viii)
defines "Highest Bidder" as the person who offers the
highest price by bid or tender. R. 2(ix) defines "Rental" as
rent payable in respect of a shop or group of shops in
consideration of the grant of lease for the sale of liquor.
R. 3(1) prescribes that every lease of right to sell liquor
in retail shall be granted by auction ordinarily for a
period or one excise year. The Commissioner is, however,
empowered to grant a lease in any other manner, with the
prior approval of the Government if he considers it
necessary to do so. R.3(2) is important and it is as follows
:
"3(2) The Commissioner shall be, before the
publication of auction notice under rule 4, competent
to fix the number of shops to be established in an
area, their location, the total number of excise trees
to be earmarked to each shop, the assignment of trees
for tapping, and the minimum guaranteed quantity that
should be sold in the case of the arrack shops in every
excise year".
R. 4 is also important. It is as follows :
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"4. Auction Notice:-(1) Whenever it is proposed to
grant the lease for sale of liquor in retail in respect
of a shop or a group of shops, a notice of the proposed
auction containing the particulars mentioned in sub
rule (2) shall be published, atleast ten days in
advance of the date of auction, by the Collector of the
district in the Andhra Pradesh Gazette or in the
District Gazette or in such other manner as the
Collector may deem fit :
(Provided that the time limit of 10 days shall not
be applicable in the case of postponed auctions).
(2) The auction notice shall contain the
following particulars, namely-
(i) the name or locality of a shop or group
of shops which sell liquor in the area;
(ii) the place of auction with time and date;
(iii)the last date, time and place for
receipt of tenders;
802
(iv) the conditions governing the auction;
(v) the period of lease; and
(vi) any other matter which may be considered
by the auctioning authority necessary
for the information of bidders and
tenderers".
R. 10 empowers the Collector or any other Gazetted Officer
not below the rank of a Deputy Collector authorised by the
Collector in that behalf to conduct the auction. There are
some provisos with which we are not concerned. R. 12 is
vital for the purposes of these appeals and it is as follows
:
"12. Auction of Shops:-(1) The right to sell
liquor may ordinarily be auctioned shopwise or
groupwise according to the list of shops approved by
the Commissioner of Excise under Rule 3. The auctioning
authority may for reasons to be recorded in writing,
either regroup any shop or split any group of shops and
re-arrange them in accordance with the administrative
instructions issued on the subject by the Commissioner
at the commencement of the auction or at any time
before the sale is knocked down.
(2) The Commissioner may withdraw any shop from
the auction before the auction is commenced.
(3) The auctioning authority may, for sufficient
cause, postpone the date of auction of a shop or group
of shops."
R. 13 regulates the manner of submission of tenders and
bids. A tender is to be opened only if the auctioning
authority decides that the highest bid offered for a shop or
group of shops is satisfactory. The tender may then be
considered alongwith the highest bid offered. If the
auctioning authority considers that the bid is not
satisfactory and decides to postpone the auction the tender
is to be opened at the postponed auction after the bidding
is over. It shall be at the discretion of the auctioning
authority to accept or reject any tender or bid but he shall
record his reasons therefor. R. 16 stipulates that the
auction purchaser shall pay two per cent of the annual
rental as earnest money together with one month’s rental on
the day of the auction immediately after the acceptance of
the tender or bid as the case may be. The earnest money and
one month’s rental are to be in addition to the further
deposit, required to be made by R. 18, of two months’ rental
in cash or any fixed deposit certificates within fifteen
days from the date of auction. R. 17 enables the
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Commissioner suo moto or on an application made by an
aggrieved party within seven days from the date of
acceptance of bid or tender, for reasons to be recorded by
him in writing, and after giving an opportunity to the
803
party concerned, to cancel the auction of any shop or group
of shops and order a reauction.
The scheme of the Act shows that the Commissioner of
Excise is at the apex, as it were, of the Excise
Administration of the State. He is the Chief Controlling
Authority for all matters connected with the administration
of the Excise Act and has the control of the administration
of the Excise Department. The Collector who is invested with
the power to perform various functions under the Act is also
subject to the control of the Commissioner. Having regard to
the scheme of the Act, we may presume that such functions as
are directly assigned to the Commissioner under the Rules
are considered by the legislative delegate to be important
functions for the purposes of the Act and if the
Commissioner is authorised to issue instructions, those
instructions are meant to be obeyed by the other authorities
constituted under the Act.
Now under R. 3 it is the Commissioner that is invested
with the power to fix the number of shops to be established
in an area, their location and the minimum guaranteed
quantity that should be sold in each shop. These matters are
required to be determined by the Commissioner before the
auction notice is published under R. 4 so that the details
may be incorporated in the auction notice. The auction
notice has to specify, among other particulars, the shop or
group of shops in respect of which the lease to sell liquor
is proposed to be granted by public auction. The auction
notice with all these particulars has to be published in the
Andhra Pradesh Gazette or in the District Gazette atleast
ten days in advance of the date of the auction. The advance
notice is obviously meant to enable the intending bidders
and tenderers to make the necessary preparations including
vital arrangements regarding finance, since the successful
bidder has to deposit one month’s rental and two percent of
the annual rental forthwith on acceptance of the bid or
tender and an additional two months’ rental within fifteen
days from the date of auction.
From the scheme of the Act and the rules it appears
that the fixation of the number of shops, the location of
the shops and their grouping is considered so important a
matter that the power in regard to it is vested in the apex
authority, the Commissioner. If some changes have to be
made, as a measure of emergency such changes also can only
be made in accordance with the administrative instructions
issued on the subject by the Commissioner. Even so, the
emergency exercise can only be undertaken if reasons are
recorded in writing. The freedom of the auctioning authority
to regroup and rearrange shops is thus deliberately
circumscribed. It is not for the auctioning authority to
make
804
adhoc experiments on the spot if he decides to regroup the
shops. If he desires to regroup the shops, he has (1) to act
in accordance with the administrative instructions issued on
the subject by the Commissioner, and (2) to record in
writing the reasons for the change. The case of the
respondents is that both these conditions were not fulfilled
by the auctioning authority in the present case.
We may now refer to the administrative instructions
issued by the Commissioner from time to time in connection
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with the grouping and regrouping of arrack shops. The
earliest of the instructions was issued on June 10, 1975 and
it is common ground that it is still in force. It will be
useful to extract these instructions in their entirety.
The instructions were as follows :
"Collectors are being advised every year of the
policy of Government regarding formation of groups of
toddy and arrack shops. Accordingly, Collectors are
submitting proposals for approval of the Commissioner.
After scrutiny of their proposals, approval is being
communicated to them for notification and auction
accordingly.
But it has been noticed that at times some changes in
the grouping of shops, are being made by the Collectors
without assigning reasons, on the eve of auction,
apparently, in exercise of the powers given in Rule 12 of
Andhra Pradesh Excise (Lease of Right to Sell Liquor in
Retail) Rules 1969. This procedure is not in keeping with
the instructions.
In many cases this exercise of power has only led to
formation of bigger groups, thereby encouraging monopolistic
tendencies, loss in revenue and defeat of the policy aims of
the Government. Such an exercise of powers under Rule 12 of
Andhra Pradesh Excise (Lease of Right to Sell Liquor in
Retail) Rules, 1969 with the object of obtaining higher
rentals, has also received severe criticism on the floor of
the Legislative Assembly.
The following instructions are therefore, renewed once
again for strict compliance :
(1) The shops and groups approved by the Board of
Revenue and notified for auction should be
auctioned without disturbing the approved pattern.
(2) The rentals offered or tenders received should be
compared with the current rentals. If the
auctioning authority is satisfied that there is no
collusion among bidders for the slightly and lower
bid than that of last year the bid
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ultimately received is regarded as the best
available one, the auction should be finalised
recording the reasons.
(3) In case the highest rental offered is considerably
lower than the current rental and the auctioning
authority has reasons to believe that extraneous
factors are influencing the bids he may exercise
the discretion vested in him under Rule 12 and
split any group of shops or rearrange them into
smaller groups and auction them.
It may be noted for strict compliance that
approved groups should not be enlarged under any
circumstances. Where approved groups are re-formed
otherwise, the reasons for such action must be
recorded in detail and the facts of the case
reported to the Commissioner within 10 days from
the date of auction.
(4) Inspite of splitting the notified groups and re-
arranging them as discussed at (3) above the bids
offered for them are lower than the current
rentals they may be disposed of on the best
available bid. Auctions should not be postponed
beyond September of the year in which auctions are
held.
Sd/- Anil De
Commissioner of Excise".
On August 3, 1979 the Excise policy for the Excise year
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1979-80 was announced and the grouping policy was enunciated
in these terms :
"Grouping of toddy and arrack shops :
The grouping policy for toddy and arrack shops
followed for the Excise Year 1978-79 shall continue for
the ensuring Excise Year 1979-80 with the following
modifications.
The arrack shops which have been monopolised by
certain persons, if they are fetching low rentals and
are contiguous, may be grouped together provided the
shops are located within a radius of 8 kms. The
auctioning authority after recording reasons may split
a group, re-arrange groups or regroup any shops at the
time of auction under Rule 12 of the Auction Rules with
a view to breaking monopoly and to achieving more
revenue or for other administrative reasons. Under no
circumstances should the groups be split or regrouped
or re-arranged and auctioned if there is any likelihood
of loss of rentals hitherto
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secured. No shops given to existing Tappers Cooperative
Society and under Trees for Tapper Scheme shall be
clubbed with the Group shops even if they are within 8
Kms. radius".
On September 20, 1979, the District Collector appears to
have sought, on the telephone, specific instructions with
regard to the auction of arrack shops in the twin cities.
The instructions received were noted in the note-file and
they are as follows : "Received certain instructions from
the Commissioner of Excise for regrouping of entire twin
city arrack shops into two to four groups. As per the above
instructions groups may be formed". On September 21, 1979
the Commissioner of Excise addressed a communication,
apparently to all the Collectors in the State, to the
following effect :
"The Government in the reference first cited have
informed that the auctions of arrack and toddy shops
should be completed by 27th instant positively as 29th
and 30th happen to be Public holidays. The Government
have further directed that the remaining shops should
be disposed off at the best available bids.
Regarding auction of shops, where bottling is
proposed to be introduced, where contractors are not
offering reasonable bids inspite of Government having
given them maximum concessions the auctioning
authorities may regroup the shops, if necessary, to get
best available bids".
Now, it will be seen that in the instructions dated
June 10, 1975, the Commissioner of Excise expressly drew
attention to the circumstance that changes in the grouping
of shops were being made by the Collectors without assigning
reasons and that such a procedure was not in keeping with
the instructions given. He pointed out that the shops and
groups approved by the Board of Revenue (Commissioner of
Excise) and notified for auction should be auctioned without
disturbing the approved pattern. Bigger groups could be
split into smaller groups and auctioned if the highest
rental offered was lower than the current rental for the
bigger group. It was strictly stipulated that approved
groups should not be enlarged under any circumstances and
where groups were re-formed reasons should be recorded in
detail. The emphasis throughout was on the splitting of
bigger groups into smaller groups but was never in the
opposite direction i.e. forming bigger groups in the place
of smaller groups. The instructions were definitely against
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creation of monopoly. The instructions dated August 3, 1979
also emphasised this aspect and expressly mentioned that
monopoly should be broken as that would fetch better
Revenue.
807
The specific instructions given on September 20, 1979, i.e.
on the eve of the adjourned auction were that two to four
groups might be formed in the case of the arrack shops of
the twin cities. Some argument was advanced to the effect
that the instructions dated September 21, 1979 altered the
position and that liberty was given to the auctioning
authorities to regroup the shops in any manner they liked to
get maximum revenue. The instructions do not warrant any
such conclusion. All that was said in the instructions dated
September 21, 1979 was that regrouping might be done to get
maximum revenue. It did not mean that the instructions
previously in force were to be ignored or thrown overboard
or that complete freedom was given to the auctioning
authorities to act at their discretion. All that it meant
was that regrouping might be done, if necessary, to get
maximum revenue, but such regrouping was naturally to be in
accordance with the instructions already given from time to
time.
In the instant case the regrouping of all 78 shops into
a single group was clearly opposed to the instructions
issued by the Commissioner of Excise particularly the
specific instruction issued on September 20, 1979 with
respect to the very shops in the twin cities of Hyderabad
and Secunderabad. It was opposed to the earlier general
instruction that "approved groups should not be enlarged
under any circumstances" and monopoly should be avoided. The
accident that the regrouping fetched a higher bid is not
sufficient justification of the departure from the
administrative instructions which aim at breaking a monopoly
in regard to lease of excise shops. The result could well
have been otherwise and the bids lower.
Shri Tarkunde and Shri Venugopal argued that the object
of the requirement that reasons should be recorded under R.
12 was to enable the Commissioner of Excise to exercise
appropriate supervisory powers over the auctioning
authority. It was not intended to vest any right in the
contractors participating in the auction and so, if reasons
were not given the contractors could not complain. They
urged that the Government is the exclusive owner of all
rights and privileges in regard to intoxicants and no
citizen had any justiciable right in them. Viewed in that
light, they submitted, the rule had been sufficiently
complied with as reasons were recorded first on the 21st and
again after the auction on the 22nd September, 1979.
We are unable to agree with the submission that the
requirement regarding the recording of reason is directory.
The question whether a provision is mandatory or directory
is not to be resolved merely by reference to the emphatic or
gentle language employed in the provision, nor even by the
presence or absence of an express stipulation regarding
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the consequences of a breach of the provision. These are
circumstances of importance which naturally have to be
considered. But one must give greater consideration to the
statutory design and the importance of the provision in the
context of that design. Generally one may say a provision
which insists upon recording of reasons before an action is
taken must prima facie be considered to be mandatory, as it
is aimed at preventing arbitrariness. Where the rights of
citizens are involved there can be no question that such a
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provision should be regarded as mandatory. Where the
provision involves the public interest also the provision
must be regarded as mandatory. Examined in that light the
Andhra Pradesh Excise Act is an Act intended to raise and
secure revenue to the State, without at the same time
sacrificing the public interest involved which requires the
regulation of trade in intoxicants. The administration of
the Act is, therefore, vested primarily and centrally in the
Commissioner of Excise who is expected to take a decision on
all vital matters. The fixation of the number of shops,
their location, and grouping are considered by the
legislative delegate to be matters of such vital importance
in Excise administration that the power in regard to these
matters is vested in the Excise Commissioner. In that
setting, the object of the rule is clearly seen to be to
secure strict compliance with the arrangement already made
by the Commissioner of Excise, the highest authority, and to
permit no departure from the arrangement save in exceptional
cases, on the clearest of grounds. What is involved is the
protection of revenue and what is to be prevented is adhoc
improvisation which jeopardises the revenue. That a
particular improvisation yielded better results may be the
exception which proves the rule. The public interest is thus
seen to be served in two ways by the recording of reasons,
first by protecting the public revenue and next by making
public authorities not to function arbitrarily and also not
appear to function arbitrarily. It is true that the
Government is the exclusive owner of all rights and
privileges in regard to intoxicants and no citizen has any
right in regard to them. That is not in question here. The
question is whether the Government having invited members of
the public to participate in a public auction on certain
terms and conditions, it is open to the officer entrusted
with the task of conducting the auction to vary the terms
and conditions publicly announced earlier, without assigning
any reasons when the statutory rules require the recording
of reasons. We do not see how a departure from the rules and
failure to record the reasons is permissible merely because
no citizen has any right in the sale of intoxicants. The
situation changes as soon as statutory provision and rules
are made and the public is invited to participate in the
auctions to be held as provided by rules. We do not doubt
that the requirement regarding recording of reasons
contained in R. 12 of the Andhra Pradesh Excise
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(Lease of Right to Sell Liquor in Retail) Rules, 1969, is
mandatory. It was argued that even if the recording of
reasons was mandatory it was not a condition precedent. It
was said that the reasons could be recorded
contemporaneously, that is to say, soon after the auction
was held. We have grave doubt about the propriety of such a
procedure. The object of the insistence upon the recording
of reasons is to eliminate arbitrariness. Reasons, if given,
substitute objectivity for subjectivity. It is common
experience that when reasons are set down in writing greater
thought goes into it and greater objectivity is attained.
Where the action to be taken involves a departure from what
has already been decided by the apex authority and the
public interest is involved, we cannot but hold that the
reasons required to be recorded must be recorded before and
not after the action is taken. The language of the rule also
supports this conclusion.
Let us examine if any reasons have been recorded at
all. The note file has been produced before us. On September
20, 1979, the note file refers to a telephone message to the
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effect that the Commissioner was appraised of the situation
and that he had instructed that the twin city arrack shops
should be grouped into two to four groups. There is then a
note that viable groups may be formed as per the guidelines
given by the Commissioner. On September 21, 1979 the note
file begins with the statement that ‘viable groups are
formed as per the guidelines given by the Commissioner of
Excise’. There is then a narration of events that took place
that day, written by the Excise Superintendent, signed by
him and countersigned by the Collector. The note refers to
the fact that the arrack shops were first put to auction
individually, then in two and then in a single lot. The
aggregate of the bids is noted. It is then mentioned that
the auction is adjourned to September 22, 1979. There is
nothing to indicate why a departure was made from the
grouping that was announced in the original notice of
auction. The note made on September 22, 1979 was admittedly
written (it is typed) after the auction on September 22,
1979. This note also merely narrates what took place. It is
mentioned that the shops were put to auction first
individually, then in two groups, and finally as one group.
The last paragraph of the note is as follows :
"As the prospects to achieve reasonable bids on
small ten groups and (56) individual shops and also on
2 groups called Hyderabad and Secunderabad were not
foreseen then all the (78) shops were grouped in one
group and called as Twin Cities group. The bids amount
offered was Rs. 24,00,000/- and the 2 tenders received
offered Rs. 15,11,111/11 and of Rs. 25,55,555/55. The
highest tender of Rs. 25,55,555/55 is considered as the
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best available bid and the auction of the Twin Cities
Group consisting (78) shops is finalised by me in
favour of Sri Rajamallaiah and others on 22-9-1978".
Thus it is seen that no reasons at all were mentioned on
September 21, 1979 and even on September 22, 1979, such
reason as had been given was ex-post facto and was not in
accordance with the administrative instructions issued by
the Commissioner of Excise. The general instructions given
earlier on June 10, 1975 and August 3, 1979 that ‘approved
groups should not be enlarged under any circumstances’ was
flouted. The instruction given on September 20, 1979, with
express reference to the arrack shops of the twin cities
though mentioned in the note file both on September 20, 1979
and September 21, 1979 that the shops may be grouped into
two to four groups’ was ignored on September 22, 1979.
We also notice that the allegation of the respondents
that they were given but half an hour’s time on September
22, 1979, to prepare for the auction of the shops as a
single group was not controverted. Having regard to the fact
that the rules required large deposits to be made it is
impossible to hold that half an hour’s time could be
considered sufficient by any stretch of imagination.
We have already recorded the undertaking given by the
respondents that they would give security of Rs. 35 lakhs
within one week from April 21, 1980 and that they would
start the bids at the re-auction in such a way that the
aggregate of the bids would not be less than Rs. 35 lakhs.
For the aforesaid reasons we confirm the decision of
the Andhra Pradesh High Court and dismiss all the appeals
with costs. The re-auction will be held within three weeks
from today and until the new auction purchasers take over
the present appellant will continue to run the shops.
S.R. Appeals dismissed.
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