Trade Links Ltd., New Delhi and Anr. Etc. Etc. v. State of Uttar Pradesh and Anr. Etc. Etc.

Judgment

ORIGINAL JURISDICTION : Writ Petition Nos. 528-529, 1645, . 288, 293, ~62, 363, 374, 388, 404-406, SIO, _512-14, 644-46, 647, 663-65, 707, 710, 720 t~ 722, 745, 793, 1037 of 1979, 341-43, 344-47, 5257, 519, 5293, 3531-35, · 4322 of 1980, 4824, 4825, 5246, 3236, 2963, 3472-74, 3415-17, 3420, 1363-65, 1327-28, 1337-41, 4101-2, 5326, 4949-50 of 1981 and 311 of 1982. , . (Under Article 3 2 of the Constitution of India) G.L. Sanghi, Dr, L.M. Singhvi, S.N. Kacker, Yoge1hwar Prasad, Ashok Grover, /l.N. Koura, S.C. Budhwar, L.K. Pandey, Ravindra Narain, D., N. Mishra, P. Krishna Rao, K. R. Nagaraja, Miss Kamin/ Jaiswal and Mrs. Rani Chhabra for. the appearing Petitioners. L,N. Sinha,, Attorner General, S.C. Maheshwari, Additional 0 dvocate General, O.P. Malhotra, G: N. Dikshit, H.R. Bhardwaj, B.P. Maheshwari, Suresh Sethi, Miss Asha Rani Jain, and Pravir , Choudhary for'the appearing Respondents. The Judgment of the Court was delivered by TULZAPURKAR, J. There is no substance in this group of writ petitions filed under Art. 32 of the Constitution whereby the peti" tioners, who carry on business, inter alia, of the wholesale vend of , beer .and Indian Made Foreign Liquor at various places in th.e State ' of U.P. on the strength of licences granted to them in Form FL-2 under the U. P. Excise Act, 1910, have challenged the constitutional' validity of ss.

1(2), 3 and (5) of U.P. Excise (Amenclment) Ordinance No. 4 of 1979 as.also the constitutional validity of ss. 1(2), 3 and 5. of U.P. Excise (Amendment) Act No, 13 of 1979 (which replaced the said' Ordinance No. 4. of 1979) as being violative of their funda· ·mental rights under Arts. 14, 19 and 31 of the Constitution; the petitiofiers have also sought a declaration that s, 30(2), proviso to cl. (c) of s. 41 and Explanations- I and II to. cl. (c) of s. 41 of the U.P. Excise Act-1910 as amended by ss. '3 and 5 of the said Ordinance No. 4 of 1979 as well as by ss. 3· and 5 of the said Act No. 13 of 1979 and the provisions of sub-s. (2) .of s. I of the said Ordinance (No. 4 of 1979) as well as of the said Act (No. 13 of 1979) are . ultra vires the Constitution and have prayed for the issuance of an appropriate writ, order or direction restraining the respondents (the State of U.P., the Excise Commissioner and other officers) either directiy o't through their agents, servants or otherwise from giving effect to tlie 1111len\Jed provision, . .i.. 'fltAOE LINKS v. u.P. STATE (Tulzapurkar, J.)

It may be stated that 'the aforesaid challenge ·to the U.P. Ordinance No. 4 of 1979, the U.P. Act No. 13 of. 1979 and the concerned amended provisions of the U.P. Excise. Act, 1910 has been made solely with a view to avoid· the payment of the "•sse'ssed fee" which the respondents are seeking to recover from the peti· tioners in 11ddition to the "fixed fee" (auction money) as·and by way of consideration for the grant of licences in Form FL-2 for the wholesale vend of beer and Indian Made Foreign Liquor, .However,.as it became clear during the hearing that even without the amendments affected in the U.P. Excise Act, 191Q (being the Principal Act) by the said Ordinance No. 4 of 1979 and by the said Act No. 13 of i979 the "assessed fee" in addition to the "fixed fee" , (auction money) could be and was being recovered under the Principal Act of 1910 as amended by .the U.P, Amending (Re· enactment and Validation)

Act 5 of 1976 and the Rules framed thereunder, the aforesaid challenge was given up and no arguments in support thereof were at ~all advanced by' any of the counsel for the petitioners and the contentions centered round the question whether such "assessed fee"· in addition to the "fixed fee" (auction money) could be levied and recovered under the Principal Act of 1910 as amended by the.Act 5 of 1976. It was not disputed before us that the grant of exclusive privilege of manufacture, supply or sale by wholesale or by retail of liquor was always governed by the provisions· of the Principal Act of 1910 and the Rules framed thereunder and that licences for _wholesale vend of beer and Indian Made Foreign Liquor were granted in Form FL·2 which contained the \ernls and conditions on which sales by wholesale of the said commodities could be effected by the grantees thereof.

It appears that prior tq April i976 these fL-2 licences were not se!,lled under any auction system but were renewable from year to year and the licence fee was based on the . quantity of beer and Indian .Made Foreign Liquor ~ctually sold from the concerned shop and was assessed and charged at the rate of Rs. 5 per quart bottle on spirits and 60 p. per quart bottle ()[I beers. But from April 1976 auction system was introduced whereunder FL-2 licences were auctioned under the provisions· of para· graph 373 of the U.P. Excise Manual Vol. ·1 and "fixed free" being the highest bid (auction money) accepted at such auction came to ' . be c~arged for the grant of FL-2 licences and this system was introduced on the strength of the amendments that were made in theP~incipal Act of 1910 by ihe l\mendin~ (Re·enactment and . SUPREME COUR.T lt.EPO!t.TS 1 [1982} 3 S.C.lt. • · Validation) Act 5 of 1976.

Three or four amendments made by Act 5 of 1976 are material and we shall refer to 'these presently; _A new s. 24A dealing with the grant of exclusive or other privilege in respect of foreign liquor was introduced in the Principal Act, which reads as under : · "24-A. Grant of exclusive or other privilege in respect· of foreign liquor. (I) Subject to the provisions of_Section 31,the' Excise Copimissioner. may gr.ant to any person a licence or licences for the exclusive or other privilege: (a) of manufacturing or of supply by wholesale; or of both; or (b) of manufacturiag or of supplying by wholesale, or of both and selling by retail; or . (c) . of selling by wholesaJ~ (to· wholesale or ,retail ven- (!ors); or (d) of selling by retail af'~hops (for consumption 'off' the premises); any foreign liquor iQ any Joc11lity. .• ··.F (2)

The grant of licence or licences under clause (d) of sub.section (!} in relation to any locality shall be without prejudice to the grant of licences for the retail sale of foreign liquor in the same locality in hotels and restaurants for consumption in their premises. (3)- Where more licences than one .are proposed . to be granted under clause (d) of sub-section (I) in relation to any locality for the same period, advance intimrno'n of the proposal shall be given to the prospective applicants f.Q! every such licence. (4) Tqe provisions of Section 25, and proviso to Sectio.n 39 shall apply in relation to grant of· a Jicenc~ far an exclusive or other privilege (under this section as' they apply iii· respect of the grant of a licence for an exclusive privile~e uQder S~tio!I 24," TRADE LINKS '· U.P. STATE (Tulzapurkar J.) '1', Section 24-B which was also introduced by Act 5 of .1976 in the · Principal Act reads thus : "24-B. Removal of doubts-For the r,emoval of doubts, it is hereby declared- (a) that the State Government :has an exclusive right or privilege of manufacture and sale of country liquor and foreian liquor ;

(bl that the amount described as licence fee in clause· (c) of Section 41 is in its essence the rental or consideration for the grant of such right or privilege by the State Government ; (c) that the EXcise Commissioner as the head of the Excise Department of the State shall be deemed, while deter· mining or realising such fee, to act for and on behalf of the State Government." By the same Act section 30 of the Principal Act was amended and the amended s. 30 read thus : "30. (I) Instead of or in addition to any duty leviable under the Chapter the State Government or on its behalf the Excise Commissioner may accept. payment of a sum in consideration of the grant of licence for any exclusive or pther privilege under liection 24 or Section 24-A. (2) The sum payable under sub-section. (I) may 'be. determined either by auction or by calling tenders ·or otherwise.''.

Section 41 of the Princip.al Act which confers power on the Excise Commissioner to make Rules subject to the previous sanction of the State Government touching the matters or topics specified therein was amended by.Act 5 of 1976 by substituting cl. (c) thereby conferring poiTer on the Excise Commissioner to. frame Rules on the substituted matter or topic and the amended cl. (c) runs thus : "(C) Prescribing the scale of fees or manner of fixing .the fees payable for an~ Ji~qi;e, ~~!iiit o~ ~~~s \n~\11dinf 'H . SUPREME COUltT ·RE!'ORrs (1982) 3 S.C.R' any consideration for the grant of any exclnsive or other privilege ·granted under Section 24 or Section 24-A or for storing of any intoxicant." · In exercise of the power ~o conferred upon him under the amended cl. (c) of s. 41, the Excise Commissioner with the previous sanction of the State Government framed Rules ca lied the U.P. facise (Wholesale and Retail Vend of Foreign Liquor) (2nd Amendment)

Rules, 1976 by issuing the Notification No. 27/Licence-3 dated 14th April, 1976, which wci:e brought into force with effect from the date of publication. in the Gazette, namely, 14th April, 1976, by this Notification th~ existing Rules 639, 641 and 642 as appearing in Excise Mantia! Vol. I (1962 End.) were amended; Rule 639(2) as amended provides that "licences in form FL-2 shall be settled by public auction" while Rule 641 as amended provides that "the fee for a licence in Form ·FL-2 shall be the amot111t of money accepted at the auction of the licence as 'fixed fee' together with an 'assessed fee' charged on the basis of the scales. of surcharge fee prescribed in the next paragraph following" and Rule 642 as amended runs thus : "642. The scales of licence fee applicable to whole· sale licences for the vend of foreign liquor shall be as follows : (i) For a licence in Form FL.! ...... (ii)

Fot a licence in Form FL-2-The fixed fee obtained for the licence at the auction in addition ta the assessed fees according to the following scales : Spirits, Rs. 5.00per wines, liquors reputed. quart etc. of all bottle-on sale kinds. to licensed vendors. ,(b) Beer, Stout and Re. 0.60per other fermented reputed quart liquors. · bottle on sale to licensed vendors. Note: The fixed fee in respect of licence FL-2 : one fourth of the lic~nce fee:as obtained in the auction TRAl>h LINKS v, u.i>, STJO.TB (Tu/zapurkar J.) t61 shalt be payable in· adVance i01medfately oil tile 11CcepU1ilce of the bid and' the balance by such instalments as 01ay be specified iii the licence to be granted;'' By the very notification dated 14th of April, 1976 the Excis\l Conrmilleionet added one more condition ill the form of a Jftoviso to tbl! terms and co11ditiolis of FL-2 Lice11ce and the said addition mtde afttr condition No. I (c); rllns thus : · "Providtd that the asse!sment fee on the saies made O.·the lieence in the prescribed, manner at such scales of surcharge fee as may be prescribed by the Gbverl!ment and announced at the time of the auction, shall 'also be payable by thi: licencee." dbviouslyrelying upon the aforesaid amendments made iii tlfe, PtinCipalAct of 1910, by A.ct 5 of 1976 (some of which were ~vtn retrospective effect ftom the date of the 9ommencement or till!

P~iticlpal Act and othets from 16th August 1972) and the said amended Rules 639, 641 and 642 and the insertion of t])e new conliitiob in the' FL-2 Licence (all of which qame into1_force from 14th· April, 197~, the respondents inttocllJced the auction system for the g~bt of licences in Ft>rm FL-2. for wholesale 'Vend of beer and Indian Made Foreign Liquor and .started levying and recovering the "a!9essed fee" ill addition to the .. fixed fee" (auction money) ffo1b th~ grantees ofihe licehces. Question raised is whether such le•Y.and tecovtry are legal ·and valid ? Before we deal with the question it ~ill be desirable to set out the; Ja~ts giving rile .t~. it . .that !ie itt .a. narrow compass and it ~ill -..... ___ suffice 1f t])e facts obta1111ng m ·Writ Petit1on No. 528 Of 1979, be1b~ t)'pically representative of the group, are stated. The petitioners iii. that petition are liquor dealers and· carry on business inter a/ia of wholesale vevd .;if beer and'

Indian Made Foreign Liquor and for that purpose have wholesale d~pots in various districts in the State of U.P. For the financial years !'976-77 and 1977-78 they acquited by, auctien blds wholesale vending rights iri respect of Indilln Mad~ Foreigo Liquor at Agtil1 Meerut, Varanasi, Kanpur; Bareilly and Dehradun; for the financial year 197g,79 they similarly acquired whble1111Je vending rights in Indian Made Foreign Liquor at Agra, Meerut and. Varanaai and for t])e financial year 1979-80 thi!y acquired by auction similar rights at Agra, Meerut, Ghaziabad (1982] 3 s.C.ll. and Pilibhit. lo other words being the highest bidder at these places for these years licences for the wholesale vend of Indian Made Foreign Liquor in Form FL-2 . were granted to them.' At the time of acceptance of their bids at these auctions the petitioners deposited the entire auction money called the "fixed fee" in respect of each of the said years with the resp.ondents.

The petitioners' case is that thereafter the respondents are seeking to levy and recover from them the "assessed fee" at the rate of Rs. 5 per quart bottle on spirits and 60 p. per quart bottle on beers actually sold during each of the financial years by their concerned shops or depots in addition the "fixed fee". Such levy and recovery of _the "assessed feee" by the respondents is challenged · on two or three grounds.indicated hereunder. In the first place Counsel for the petitioners have contended that under s. 30(2) of the Principal Act of 1910 prior to its amendment by u:P. Ordinance No. 4 of 1979 and U.P. Act 13 of 1979 it was open·to the respondents to adopt either one or the other method of granting FL-2 licences and determine the licence fee payable by the grantee accordingly, that is to say the respondents could grant the · ·licence "either by auction or by calling tenders" and once a particular mode was adopted it was incum1>ent upon them to apply . the same for the purpose of determining the sum payable by the grantie; in other . words the contention has been that it was not open to them to adopt a combination of two or· more methods and claim "assessed fee" in addition to "fixed fee"

8J!d therefore the instant attempt on the part of the respondents to levy' and recover the "assessed fee" in addition to "fixed fee" would be illegal and without authority of law. According to the petitioners ·a combination of two or more methods became available to the respondents only under sec. 30(2) as amended by U.P. ordinance No. 4 of 1979 and by U.P. Act 13 of 1979. Secondly, the.--"' petitioners have averred that at-the time of the ~aid auctions hel~ for each of the said .financial years the bidders \vere not informed that any "assessed fee" had been fixed by the State Government which would be payable by the successful bidder and therefore the persons who gave their bids including the petitioners whose highest bids were accepted were led to believe that no fee over and above the. auction money would be charged and that the successful bidder would be granted FL-2 licence merely on payment o~ the auction money.

Counsel for the petitioners have therefore contended that the respondents' attempt to levy and recover the "assessed fee" over tllADB LINltS 1'. U.P. STATE (tu/zapurkar, J.) and above the "fixed fee" (auction money) is unwarranted and illegal in as much as the respondents cannot enhance the petitioners' · coniractual liability which was limited to the payment .o·f the alctio'!c money. Yet another contention raised by Counsel for the petitioners has been that as per the newly inserted condition in FL-2 licence the "assessed fee" was required to be "prescribed by Government an4 announced at the time of auction" but in the instant case such "assessed fee'' has been preacribed by the Excise Commissioner and . not by the State Government and was not announced at the time of the auction and for· this reason also the same ~onld not be recoverable: As will be shown presently none of these contentions bas an}' merit and each one is liable to be rejected.

As regards the first contention a plaiii reading of s. 30(2) prior to its amendment by U.P. Ordinance No. 4 of 1979 and by U.P. Act No. 13 of 1979 will show that there is no substance in it. The .said provision ran thus : "2. The sum payable under sub-sec. (I) may by determined either by auction or by calling tenders or otherwise." 'In other words, the consideration for the grant of FL-2 licence could be determined either by auction or by calling tenders' or otherwise. The phras.~ "or otherwise" was sufficiently wide and conferred on its plain grammatical construction power on. the State Government or the Excise Commissioner to grant the licence either by auction or by tenders or partly by auction and partly by tenders or even by adopting yet other methods than by auction or by inviting tenders.

In other words, the phrase "or otherwise" enabled the State Govern· ment or the Excise Commissioner to adopt a combination of one or more methods for granting the· FL-2 licence and determine the licence fee accordingly. Having regard to the phrase "or otherwise" ~ occurring in the provision it is impossible to accept the contention 'that only one method to t~e exclusion of the others could be adopted by the respondents for granting the licence or that one type of fee appropriate to that method could alone be charged. It is true \hat sub-sec. (2) of s. 30 as amended by U.P. Ordinance No. 4 of 1979 or by U.P. Act No. 13 of 1979 runs thus: "2. The sum payable under suJt..sec. (I) may either be fixed by auction or inviting tenders or otherwise or be assessed on the basis of the sales made or quota lifted sbl'!IEMI! cOURT REi>ollts !1982) ~ s.c.tt. under the licence. or partly fixed and partly assessed in the aforesaid manner."

But in our view it is manifestly clear that the aforesaid amended provision is clatificatory of the legal position which obtained under sec., 30(2) that was operative prior to the said amendment. lo ·this view· of the matter the first contention has to be rejected. The second contention has been that since at the time of . holding the concerned auctions the bidders were not informed that any. "assessed fee" had been prescribed by the State Government whiAh would be payable by the successful bidder and since bids were offered on the representation that the successful bidder would be granted FL-2 licence merely on payment of the "fixed fee" (auction money) the respondents' attempt to levy and recover the. "assessed fee'' over an.d abo\.e the "faed fee" would be unwarranted and illegal because the respondents cannot enhance the contractual liability of the succes&ful bidder which was limited to payment of the auction money. There are two answers to this contention.

In the first place it was not disputed before us that to the knowledge of all the bidders these auctions for tho grant of FL-2 licences were · held under the provisions of the Principal Act of 1910 as amended by Act 5 of 1976 and the Rules framed. thereunder which were 'then in force. We have already referred to the provisions of the amended Rules 639(2), 641· and 642 which were published in. the Gazette and broagbt into force with effect from 14th of April, 1976 and admit' tedlyall auctions for the financial year 1976,77 were held subl;equent to that date. Under the amended Rule 641 it was clearly provided that th'e fee for the . FL-2 licence shall be the amount' of money accepted at the auction of the licence as "fixed fee" together with the "assessed fee" charged on the basis of the scales of Surcharge·· fee prescribed in the next 'following Rule and the amended Rule 642 prescribed the scales . at which the "assessed fee" would be so charged.'

In 'other words, the bidders who gave their bids must be deemed to have knowledge of the provisions of the aforesaid Rules subject to which the auctions were held and therefore it is difficult to accept the contention that tb'C bidders including the successftil bidder whose highest bid was accepted offered their bids believing that only "fixed.fee" would be charged. Secondly, the averment of the petitioners that at the time of these auctions the bidders were ~ot intormed .that any "assessed fee" bad been .fixed or prescribed which woul!l he payable by the successful bidder is' not quite correct. 'It bas been admitted by the petitioners that. at the time of these 'l'llADB LINKS v. U.P; STATE (Tu/zapurkar J.) 767 · a.uctions the new condition that was inserted by· the Excise Com· missioner in the FL-2 lice~ce by bis Notification dl!tcd 14th April, 1976 was read out and thi~ newly inserted condition runs thus :

"Provided that the assessment fee on the sales ·made on the licence in the prescribed manner al such scales of surcbarse fee as may be prescribed by the Governm'ent and announced at the timec of 01e auction, shall also. be payable by licensee~· . If admittedly the aforesaid condition inserted in FL-2 :licence was read out at the time of the auction then it is clear that the fact that · "assessed fee" on the. sales. made on the licence was also , payable by theJicensee was announced at the time of the auction. The only grievance made by the petitioners bas been that the prescribed scales of surcharge fee (under Rule 642) were not announced but that is neither here nor there, for, if once. it was.announced at the time of the auction tha( "assessed foe" on sales effected on the licence at the prescribed scales shall also be· payable by the licensee. then · obviously the bidders were put on enquiry to find out what scales of surcharge fee had been prescribed . under , the relevant: Rule.

In other words the bidders present at these auctions had full knowledge that "assessed fee" at prescribed rates will also . be ·charged and it was with'full knowledge of this position that they ga,ve their bids. If that be so, there is no question of the respondents' attempting to enhance the contractual liability of the successful bidder. It will Ile interesting to mention in ibis context ·that the respondents have stated in their counter-affidavirthat not only did the bidders know that "assessed fee" would be .charged over and above the "fixed fde" (auction money) but many of the successful bidders to whom FL-2 licences were granted have actually passed on the "as&essed fee" at the prescribed rates to and recovered the same from the retailers to whom they have effected sales of be~r and Indian Made Foreign Liquor. At least in the case of those petitioners before us who have done so the aforesaid plea put forward on their behalf cannot be regarded as honest.

The second col)tention therefore fails and is rejected. The last contention is merely required to be stated to be rejected. In support of that contention reliance was placed on . the newly inserted condition in FL-2 licence which states that the assessed fee "at such scales of·surcharge fe1 as may be prescribed by the Government" shall also be payable by the licensee while I SUPREME COUllT Rl!POllTS iI982) 3 s.c.ll. actually the scales of surcharge. fe~ have been prescribed by the Excise Commissioner by framing the amended Rule 642 in exercise of the powers conferred upon him by cl, (c) of 41 qf the P,iincipal Act. Counsel urged that scales of sntcharge fee ought to have been prescribed by th.e Government. In. this connection we might refer to sec. 24B(c) whieh expressly declares that "the Excise Commissioner as the head of the Excise Department of ·the State shall be deemed, while determining or realising such fee, to act for and on behalf of the State Government".

It is thus clear. that the Excise Commissioner has been statutorily declared to be the agent of the State Government and "while determining such fee" by framing the amended Rule 642 he acted for and on behalf of the State Government. In other words, scales of "assessed fee" under Rule 642 must be deemed to have been prescribed by the State Government. As regards the alleged non announcement at the time of the auctions we have already d~alt with that aspect of the matter while dealing with .and disposing of the second contention. No other point was raised. It is therefore clear that the levy .and recovery of the "assessed fee" over and above the "fixed fee" by the respondents for .granting FL-2 licences to all the petitioners_ would'belegal and valid under. the U.P. Excise Principal Act of 1910 as amended by Act 5 of 1976 and the amended Rules framed thereunder and all the petitions are liable to be dismissed.

We accordingly dismiss all the ·writ petitions with costs and quantify. the costs payable by each of the._ petitioners separately at Rs. 5000. S.R. Petitions ·dismissed.