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CASE NO.:

Appeal (civil) 7269 of 2003

PETITIONER:

SHIV KUMAR BHAGAT

RESPONDENT:

STATE OF BIHAR AND ORS.

DATE OF JUDGMENT: 12/09/2003

BENCH:

N. SANTOSH HEGDE & B.P. SINGH

JUDGMENT:

JUDGMENT

2003 Supp(3) SCR 654

The following Order of the Court was delivered : B.P. SINGH, J. : Special

Leave granted.

We have have heard counsel for the parties at length. In this appeal the

appellant has impugned the judgment and order of the High Court of

Judicature at Patna dated 13.8.2002 in CWJC No. 7075 of 2002. The High

Court while allowing the writ petition filed by respondent No. 5 herein

quashed the letter of the Collector dated 13.2.2002 recommending the grant

of one additional licence for wholesale vending of Indian Made Foreign

Liquor (hereinafter referred to as "IMFL") for the district of Begusarai on

the ground that the same was not made in accordance with Rule 45 of the

Bihar and Orissa Excise Rules (hereinafter referred to as the "Rules")

framed under Section 89 of the Bihar Excise Act, 1915 (hereinafter referred

to as "the Act). It held that since the recommendation made by the

Collector was not in accordance with the Rules, the recommendation could

not be acted upon and accepted by the Commissioner by his order dated

18.3.2002.

The facts of the case in so .far as they are relevant for the disposal of

this appeal are as follows :

The Collector of Begusarai sent a proposal to the Excise Commissioner for

sanction of one additional wholesale liquor licence in favour of the

appellant herein vide his proposal dated 22.1.2002. The said proposal of

the Collector was turned down by the Commissioner and returned to him since

in the opinion of the Commissioner the Collector was not justified in

making a recommendation for an additional licence for any particular

person. He directed that a proposal may be made for sanctioning an

additional wholesale licence looking to the demand and public need

justifying such additional wholesale licence. Thereafter, the Collector,

Begusarai made another recommendation dated 13.2.2002 for the sanction of

one additional wholesale licence for the sale of IMFL for the district of

Begusarai. In his letter addressed to the Excise Commissioner, he stated

that by grant of one additional wholesale licence there will be

augmentation of licence revenue in the district of Begusarai and the same

was also conducive to promote competition which could increase the

collection of revenue in view of the increase in the consumption of IMFL.

The respondent No. 5 herein was the only wholesale licence holder for IMFL

in the district of Begusarai. The husband of the aforesaid respondent was

granted such a licence in the year 1984 which licence stood transferred to

respondent No. 5 upon his death. The respondent No. 5 filed a petition

before the Excise Commissioner, which was registered as Excise Case No. 16

of 2002, against the proposal of the Collector for sanction of one

additional wholesale licence for IMFL. The Excise Commissioner by his order

dated 18.3.2002 rejected the objection of respondent No. 5 which is annexed

as annexure P-2. It appears from the said Order that he called for the

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comments of the Collector, Begusarai, as also the relevant administrative

file from the excise office and after hearing the parties came to the

conclusion that in the facts and circumstances of the case the grant of an

additional licence for wholesale trade in IMFL was justified, keeping in

view the provisions of Rule 45 of the Rules. He observed that under the

aforesaid Rules an additional licence may be granted considering the demand

of the area in question. It appears that before the Excise Commissioner

respondent No. 5 contended that since she had the sole wholesale licencee

for the district of Begusarai since 1984 and had been working with dilignce

and executing her work satisfactorily giving huge amount to the State by

way of excise revenue, there was no need to grant an additional wholesale

licence.

The Excise Commissioner after perusing the records produced before him by

the Collector, Begusarai and the comments of the Collector found that since

1984 there was only one wholesale licencee operating in the district. Since

then there had been considerable increase in the demand of IMFL. He also

noticed the report of the Collector about the monopoly which had been

created in this regard. Having regard to the fact that there was increase

in demand for IMFL consequent to the increase in the population and

economic potentiality, he found justification in the recommendation made by

the Collector for the grant of an additional wholesale licence for the

district of Begusarai. After taking into consideration all relevant

considerations the Excise Commissioner disposed of excise case before him

with, inter alia, the following directions :

"(i) In the district of Begusarai now there is only one wholesale license

and in addition to this one additional license is sanctioned.

(ii) It is made clear that the additional licence is not sanctioned for any

individual person. The Collector will consider the principle of equality

before granting the licence and will follow the prescribed procedure.

(iii) For this he will make publication in the newspaper and will consider

the applications independently and with equality. I am making clear here

that in this procedure the Collector, Begusarai will not make any special

condition in favour of an individual and/ or at the same time he will not

consider the case of other applicants without previous biasness."

Prusuant to the order of the Excise Commissioner, the Collector issued a

general notice in the newspapers on 28.3.2002 inviting applications from

interested parties for the settlement of sanctioned wholesale licence for

the sale of IMEL for the district of Begusarai for the year 2002-2003. The

conditions for the settlement and the documents required to be submitted

along with the application have been detailed in the notice. Respondent No.

5 herein, the existing wholesale licencee preferred a revision before the

Board of Revenue being Board Revision Case No. 57 of 2002 challenging the

order of the Commissioner dated 18.3.2002 sanctioning an additional

wholesale licence for wholesale vending of IMFL. The said Revision Petition

was admitted, but the stay prayed for was refused. Respondent No. 5

purported to file a Title Suit on 29.3.2002 but the same was not entertaind

by the Court of Munsif, Begusarai for non-compliance with Section 80 of the

Code of Civil Procedure.

Respondent No. 5 then filed a writ petition before the High Court of

Judicature at Patna on 8.4.2002 being CWJC No. 4607 of 2002 challenging the

order of the Excise Commissioner aforesaid, but in view of the pendency of

the Revision before the Board of Revenue, the High Court disposed of the

writ petition with a direction to the Board of Revenue to dispose of the

Revision, and further directed that till disposal of the Revision no

further action may be taken parsuant to the order of the Excise

Commissioner dated 18.3.2002.

The Revision Petition came up before the Board of Revenue for consideration

and by order dated 21.6.2002, Ex. P-5, the learned Member, Board of Revenue

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dismissed the Revision Petition. Though it was contended on behalf of the

appellant herein that Rule 45 was not applicable to the case in hand, the

Board of Revenue dicided the Revision Petition on the assumption that Rule

45 applied to the facts of the case, and further held that the said Rule

was complied with. The Board of Revenue by a detailed order considered the

submissions urged before it by the appellant and the respondent No. 5

herein as also the Government pleader who appeared on behalf of State of

Bihar and its authorities. He also perused the comments of the Collector

which had been called for giving year-wise break-up of the consumption of

IMFL. He also considered the report of the Excise Superintendent, Begusarai

dated 10.6.2002. From the material placed before it, the Board of Revenue

found that while in the year 1985-1986 the demand of IMFL was only 12655.76

L.P.L., the same increased to 265643.32 L.P.L. in the year 2001-2002, and

till May, 2002 the consumption was as high as 35286.25 L.P.L. Based on

these figures the learned Government Pleader in view of the increased

demand for IMFL, submitted that there was justification to grant an

additional licence for the district of Begusarai. The report of the

Collector also disclosed that while there were 7 wholesale IMFL licencees

in the district of Patna, 5 in the district of Muzaffarpur, 3 in the

districts of Saran, Bhagalpur, Darbhanga and Pumea, 4 in East Champaran and

2 in the districts of West Champaran, Samastipur, Madhubani and Sitamarhi,

there was only one wholesale licencee in the district of Begusarai. The

Board was, therefore, satisfied that having regard to the tremendous

increase in the consumption of IMFL, there was justification for the grant

of one additional wholesale licence for the sale of IMFL for the district

of Begusarai. There was, therefore, no justification for interference with

the order of the Excise Commissioner. On these findings the Revision

Petition preferred by the respondent No. 5 was rejected.

Respondent No. 5 thereafter filed a writ petition before the High Court of

Judicature at Patna which was allowed by the High Court giving rise to the

instant appeal.

Before the High Court the appellant herein contended that the sole purpose

of objecting to the grant of an additional licence by respondent No. 5 was

to maintain her monopoly. In view of the increased demand over the years,

there was justification for grant of an additional wholesale licence for

the district of Begusarai and that more than one wholesale licence had been

granted in the adjacent and surrounding districts. The respondent No. 5 in

her writ petition also challenged the grant of a wholesale licence in

favour of appellant herein, since the Collector in the meantime had granted

a wholesale licence in favour of the appellant herein on 29.6.2002 after

dismissal of the Revision Petition by the Member, Board of Revenue. The

High Court found that though the authorities in granting the licence to the

appellant had acted fairly and had followed the procedure therefor, and the

charge of unfairness etc. made against the Authorities was not justified,

the grant utimately made in favour of the appellant was illegal inasmuch as

the Collector had not complied with the requirement of Rule 45 of the Rules

while making a recommendation to the Excise Commissioner for the grant of

an additional wholesale licence. Consequently, such a recommendation could

not be accepted by the Excise Commissioner.

The short question which arises for our consideration in this appeal is

whether the sanction of one additional wholesale licence for wholesale

trade in IMFL for the district of Begusarai by the Commissioner on the

basis of the recommendation made by the Collector is bad for non-compliance

with Rule 45 of the Rules. Counsel for the appellant submitted before us

that the High Court fell into an error in holding that Rule 45 was not

complied with. The facts of this case would disclose that before the

Commissioner of Excise sanctioned one additional wholesale licence, he had

satisfied himself one the basis of the comments of the Collector and the

material placed before him that the requirement of Rule 45 were fully

complied with. Since, the recommendation of the Collector required the

approval of the Commissioner for gaining finality, before a final order was

passed by the Commissioner all the relevant material had been placed before

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him which he took into consideration and on being satisfied that the

recommendation was justified, he sanctioned one additional wholesale

licence for trade in IMFL for the district of Begusarai. He further

submitted that in view of the provisions of Section 41 of the Act, even if,

there was any technical defect, or ommission in the proceedings taken prior

to the grant of the wholesale licence, such technical defect or

irregularity or omission did not invalidate the licence.

It is necessary at the stage to notice some of the relevant provisions of

the Act. Sub-section (1) of Section 5 of the Act provides that the Board of

Revenue may by Notification declare with respect either to the whole of the

State or to any specified local area, what quantity of any intoxicant

shall, for the purpose of the Act be the limit of a retail sale. Sub-

section (2) provides that the sale of any intoxicant in any quantity in

excess of the quantity declared in respect thereof under sub-section (1)

shall be deemed to be a wholesale.

Chapter 6 of the Act deals with Licences, Permits and Passes. Sections 34

and 35 of the Act are relevant which provide as folows :

"34. Grant of licences by Collector and submission of list, objections and

opinions in Excise Commissioner. - (1) After the date prescribed for the

receipt of objections and opinions submitted under Section 33, the

Collector shall consider the same, and shall, if necessary, revive the said

list, and shall decide for what places licences for the retail sale of

spirit shall be granted, and may, in his discretion, grant licences

accordingly.

(2) The Collector shall then forthwith submit the said list, as so revised,

and the said objections and opinions, and his own opinion to the Excise

Commissioner.

35. Finality of decision of Excise Commissioner. - The Excise Commissioner

shall consider the list, objections and opinions so sent to him, and may

modify or annul any order passed or licence granted by the Collector and,

notwithstanding anything contained in Section 8, his order shall be final."

Section 41 of the Act reads as under :

"41. Technical defects, irregularities and omissions. - (1) No licence

granted under this Act shall be deemed to be invalid by reason merely of

any technical defect, irregularity or omission in the licence or in any

proceedings taken prior to the grant thereof.

(2) The decision of the Excise Commissioner as to what is a technical

defect, irregularity or imission shall be final.

It is also necessary to notice some of the Rules which are relevant namely

Rules 44, 45 and 46 which are as follows :

"44. Licences for the wholesale or retail vend of excisable articles may be

granted for one year, from the 1st April to the 31st March, subject to the

following provisions :

(1) Licences for the retail vend of country spirit, foreign liquor and

spiced country spirit may be granted for any number of years up to three

years, beginning on the 1st April, in cases where the Excise Commissioner

considers this advisable.

(2) If any licence be granted during the course of the financial year, it

shall be granted only up to the 31st March, next following.

(3) Season licences for the sale of either fresh or fermented tariff may be

granted for periods fixed by the Collector.

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(4) Temporary licences may be granted to provide for the supply of

excisable articles on temporary and special occasions e.g., fairs,

regimental camps of exercises, etc., and shall be limited to the period

during which such temporary or special occasions last.

(5) Wholesale licences for the supply and sale of excisable articles may be

granted for any numbers of years not exceeding five, as the Board may

decide in each case.

45. The number of licences which may be granted for any local area shall

be regulated by the needs of the people of that area, and no licence for

the sale of any excisable article in any local area shall be granted unless

it is required either to meet an ascertained demand for such article or to

counteract supplythrough illicit sources.

46. The general principles below stated shall be borne in mind, and shall

be applied by Collectors, so far as possible, in fixing the number of

licences to be granted for the retail sale of liquor for consumption on the

premises of the vendor :

Liquor shops should not be so sparsely distributed as to give to each a

practical monopoly over a considerable area, or at least such a monopoly

should only be allowed when prices can be effectively fixed. At the same

time two or more shops should not be equally convenient to a considerable

number of persons. In other words, liquor shops need not be so limited in

number as to make it practically impossible for a resident in a particular

area to get his liquor except from one particular shop; but it should only

be possible for him to get his liquor from two different shops at the cost

of considerable inconvenience, and he ought to have as little freedom of

choice in the matter as possible."

Sub-section (1) of Section 5 of the Act. "5. Definition of retail and

wholesale. -

(1) The Board may, by notification, declare, with respect either to the

whole of State or to any specified local area, and as regards purchasers

generally or any specified class of purchasers, and either generally or for

any specified occasion, what quantity of any intoxicant shall for the

purposes of this Act, be the limit of a retail sale."

It appears from Chapter VI of the Act that the provisions therein contained

deal with grant of licence for the retail sale of spirit etc. The

provisions of Chapter VI do not deal specifically with the grant of licence

for wholesale vending in IMFL. However, Rule 44 refers to licences for the

wholesale or retail vend of excisable articles and sub-rule (5) provides

that wholesale licences for the supply and sale of excisable article may be

granted for any number of years not exceeding five as the Board may decide

in each case. Rule 45 refers to the number of licences which may be granted

for any local area but there is no reference of wholesale licences.

Similarly, Rule 46 lays down the general principles for fixing the number

of licences to be granted for the retail sale of liquor for consumption on

the premises of the vendor. However, it appears that the statutory

authorities under the Act as well as the Board of Revenue have proceeded on

the assumption that the provisions of Chapter VI of the Act and those of

Rules 44, 45 and 46 apply as much to the grant of licence for retail sale

as for the grant of wholesale licence. We find that there is no specific

provision in the Act providing a procedure for the grant of wholesale

licence to vend IMFL. Apparently, for the grant of wholesale licence to

vend liquor, the same Rules are followed as are prescribed for the grant of

licence for retail sale. We also, therefore, proceed on the same

assumption.

Section 34 of the Act which we have quoted earlier obliges the Collector to

consider the objections and opinions submitted under Rule 33. After

considering the same he may revive the existing list and decide for what

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places licences for the retail sale of spirit shall be granted and may, in

his discretion grant licences accordingly. However, sub-section (2) obliges

him to submit forthwith the said list along with objections and his own

opinion to the Excise Commissioner. The Excise Commissioner is required by

Section 35 to consider the matters placed before him by the Collector under

Sub-section (2) of Section 34. He may, thereafter, modify or annul any

order passed or licence granted by the Collector. The order of the

Commissioner as declared by Section 35 shall be final. Reading two

provisions together, it is apparent that after considering the objections

and opinions submitted, the Collector is required to finalize the list with

regard to the grant of licences and he may in discretion grant licences

accordingly. However, his decision is not final and the matter is required

to be further considered by the Commissioner of Excise. For this purpose,

the Collector is obliged to place before the Excise Commissioner the

objections and opinions received by him together with his own opinion.

These matters have then to be considered by the Commissioner and it is

within his competence to modify or annul any order passed or licence

granted by the Collector. The decision of the Commissioner is made final.

So far as the Rules are concerned, Rule 45 provides that the number of

licences which may be granted for any local area shall be regulated by the

needs of the people of that area. No licence for the sale of any excisable

article in any local area shall be granted unless it is required either to

meet an ascertained demand for such article or to counteract supply through

illicit sources. These two considerations are to some extent co-related

inasmuch as supply through illicit sources may increase if supply through

the authorised sources is not sufficient to meet the demand. Thus, the

primary consideration appears to be that a licence may be granted, if the

needs of the people of that area, so demand. In sum and substance, both the

Collector as well as the Commissioner while granting licence for the retail

sale or wholesale vend of IMFL must keep in mind the needs of the people of

the area concerned. If the supply of IMFL through the existing licencee is

not adequate to meet the demand, they may be justified in granting an

additional licence or licences. The true test, therefore, is whether the

additional licence has been granted having regard to the needs of the

people of that area with a view to counteract supply through illicit

sources. The use of the words "to meet an ascertained demand for such

article" only means that the authorities must make an assessment as to

whether the demand for the excisable article in question has increased and

whether supply of such excisable article, in the instant case IMFL,can be

met with the existing licencees. The ascertainment of demand is not

required to be made with mathematical precision. It is sufficient if the

authorities have applied their mind to the extent of need of the people and

the adequacy of the arrangement to meet such need through existing

licencees. For this purpose, no doubt, they must take into account the

increased consumption of the excisable article concerned in any local area.

As we have noticed earlier, the Collector in his recommendation for the

grant of additional wholesale licence no doubt referred to the augmentation

of licence revenue and the need to provide competition in view of increase

in consumption of liquor. In his recommendation he had not detailed the

material on the basis of which he had come to the conclusion that an

additional licence is required to meet the needs of the people of the area.

But it is quite evident that when called upon to submit his comments, he

had disclosed the material on the basis of which he had recommended the

grant of an additional licence. The Excise Commissioner had also called for

the comments of the Excise Superintendent and the relevant file for his

consideration. Similarly, before the Board of Revenue as well, the

Collector had placed all the relevant material to satisfy him that the

recommendation made by him for grant of additional licence was on the basis

of relevant considerations under Rule 45 of the Rules. The comments of the

Collector and the material placed by him before the Commissioner and other

material placed before the Commissioner were duly considered by him before

granting his approval to the recommendations made by the Collector. The

factual position as to the tremendous increase in consumption of IMFL was

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before him and it appeared thereform that since 1984, there had been a

steep increase in the consumption of IMFL and yet there was only one

wholesale licencee for vending of IMFL in the entire district. It also

appeared from the material placed before him that in other comparable and

neighbouring districts there were at least two and in some as many as seven

wholesale licencees. Under these circumstances and on such material as were

placed before the Commissioner, if he came to the conclusion that the grant

of an additional licence was justified, we cannot find fault with his

decision. In the decision making process he has taken into consideration

only relevant considerations and, therefore, the conclusion reached by him

cannot be faulted. The High Court found that Rule 45 had not been complied

with in as much as in the recommendation made by the Collector, he had not

mentioned that an additional licence should be granted since there was a

steep rise in the demand for IMFL, or that it was so necessary to

counteract supply through illicit sources. The letter simply referred to

the increase in State revenue by way of licence fee and promotion of

competition in view of the increased demand for IMFL. The High Court was of

the view that the letter of recommendation made by the Collector should in

itself be complete and must show that all considerations relevant under

Rule 45 have been taken into account while making a recommendation. Since,

the letter of the Collector making the recommendation did not contain these

particulars, he could not be permitted to supplement his recommendation by

the comments submitted by him before the Commissioner of Excise.

In our view, the High Court was not justified in reaching this conclusion.

The Act and the Rules do not provide any particular from in which

recommendation has to be made by the Collector for the grant of additional

wholesale licence to vend IMFL.The Act and the Rules only provide the

procedure to be followed and the matters to be taken into consideration

while granting an additional licence. The Act also makes it clear that the

final decision has to be taken by the Commissioner and the recommendation

of the Collector is subject to the final decision of the Commissioner of

Excise. Any decision taken by the Collector, and any licence granted by

him, is expressly made subject to the final decision of the Commissioner of

Excise. In view of such legal provisions, for successfully challenging the

grant of additional licence by the Commissioner of Excise and the

recommendation of the Collector, it must be shown that the Collector and,

or, the Commissioner while granting the additional licence had not acted on

the basis of relevant considerations. It matters little whether the

recommendation made by the Collector incorporated the matterial on the

basis of which he had made a recommendation for the grant of an additional

licence. He was only making a recommendation and not taking a decision. In

any event, while considering the recommendation made by the Collector, the

Commissioner called for the relevant record and the comments of the

Collector, and all the relevant material was actually placed before the

Commissioner for his consideration. On the basis of such relevant material

he took a final decision to approve the grant of additional licence. Thus,

the recommendation of the Collector, which in any event was only a

recommendation and not a final decision, was approved by the Commissioner

who was authorized to take a final decision, only after application of mind

to all relevant considerations by the decision making authority. We are of

the opinion that the requirements of the provisions of the Act and Rule 45

have been complied with. We must, therefore, reject the submission urged

before us by counsel for respondent No. 5 that the grant of additional

licence was bad for non-compliance with Rule 45 of the Rules.

Counsel for respondent No. 5 then submitted that the matter has become

infructuous since the licence granted to the appellant was only valid till

31st March, 2003. Th period of the licence having run out, there was

nothing left to be decided in this Appeal, which also has become

infructuous. This submission is also misconceived. So far as the grant of

wholesale licence to vend IMFL is concerned, under the Rules the same may

be granted for any number of years not exceeding five years, as the Board

may decide in each case. It is not as if each year a fresh notice is issued

for the grant of wholesale licence. In fact, respondent No. 5, as admitted

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by her, holds a wholesale licence since the year 1984, and the same is

being renewed from time to time. In these circumstances, there is no

justification for the argument that the period for which the licence was

issued to the appellant has run out and the appeal has become infructuous.

He then submitted that a fresh ascertainment may be made since the earlier

ascertainment was not objective as it was based solely on the report of the

Collector, and no materials have been placed before the Commissioner by the

Excise Officers. We find no merit in this submission. As we have noticed

earlier in this judgment, though not mentioned in his letter of

recommendation, the Collector had made an ascertainment of the needs of the

people of the area in question and had come to the conclusion that there

had been a tremendous increase in the consumption of IMFL which justified

the grant of an additional licence for the wholesale vend of IMFL. The

year-wise figures relating to increase in consumption of IMFL for the area

concerned were ascertained by him and the same was placed before the

Commissioner for his consideration. The criticism, therefore, that the

ascertainment was not based on an objective consideration is not justified.

Moreover, the Commissioner had called for the relevant administrative file

from the Excise Office and he had also perused the same. After perusing the

records of the Collector, Begusarai, the comments sent by him, and the

administrative file of the Excise Office, he came to the conclusion, having

regard to the considerations enumerated in Rule 45 of the Rules, that there

was need for granting an additional wholesale licence. Obviously, the

Commissioner found that the Collector had placed before him all the

relevant material on the basis of which he was justified in making the

recommendation.

Even assuming that there was some technical defect by reason of some

omission on the part of the Collector, inasmuch as he did not mention all

the relevant facts in the letter of recommendation itself, the same cannot

invalidate the licence granted by the Excise Commissioner. The omission to

mention all the relevant material, which in fact existed, in the letter of

recommendation itself, was at best a technical defect or omission and did

not vitiate his recommendation in view of the provisions of Section 41 of

the Act.

In the result, this appeal is allowed, the judgment and order of the High

Court is set aside. The writ petition filed by the respondent No. 5 is

dismissed. There will be no order as to costs.