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PETITIONER:

RAJENDRA SINGH

Vs.

RESPONDENT:

THE STATE OF MADHYA PRADESH& OTHERS.

DATE OF JUDGMENT: 08/08/1996

BENCH:

JEEVAN REDDY, B.P. (J)

BENCH:

JEEVAN REDDY, B.P. (J)

SEN, S.C. (J)

CITATION:

JT 1996 (7) 216 1996 SCALE (5)793

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

B.P.JEEVAN REDDY.J.

Leave granted.

These appeals are preferred against the judgment of a

Division Bench of the Madhya Pradesh. High Court allowing

the Letters Patent Appeal preferred by the State of Madhya

Pradesh against the judgment of a learned Single Judge who

had allowed the writ petition filed by the appellant. While

we agree fully with the reasoning and conclusion of the

Division Bench, we think it necessary at the same time to

emphasise a few aspects relevant in the case of such

contracts. First, the relevant facts briefly.

For the excise year 1994-95, the appellant was the

highest bidder for certain number of liquor shops. His bid

in a sum of Rs.11,67,00,000/- was accepted, payable in

monthly instalments of Rs.97,25,000/- each. After making the

necessary deposits and after complying with other

conditions, licences were granted to him and he commenced

the business with effect from 1.4.1995. He failed to pay the

monthly rental (licence fee) for the months of July and

August, 1994. Thereupon a notice dated 9.8.94 (exhibit R-3)

was issued by the authorities intimating him that he was in

arrears of the licence fee for the months of July and August

and that if he does not pay the same, the shops would be

reauctioned. The appellant was asked to be present

personally on 23.8.1994 for showing cause. Though the

appellant received the said notice, he did not appear before

the specified authority. He thus filed to avail of the

opportunity of personal hearing afforded to him. (Though the

appellant disputed this fact, the Division Bench has

accepted the respondent's contention and has found as a fact

that the appellant did fail to appear on the date of

hearing. We accept the said finding.) On 2.9.94, a

notification was issued - communicated to a large number of

excise officers and other departments and a copy of which

was also sent to the appellant stating that if the appellant

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did not clear the arrears on or before 12.9.94, the shops

would be sold by reauction to be held at 2.00 p.m. on

12.9.94. The said notification is marked exhibit R-12. It

was also published in the daily newspaper, Nav Bharat Tixes,

The notification mentioned the precise amount of arrears due

from the appellant and stated that on the reauction being

held, the existing licence in favour of the appellant shall

stand cancelled. Since the appellant failed to pay,

reauction was held on 12.9.94, whereafter, a demand was made

upon the appellant for loss of revenue resulting from

reauction, as provided by sub-section (4)(b) of Section 31

of the Madhya Pradesh Excise Act. We may set out sub-section

(4) of Section 31 this stage:

"(4) Where a licence is cancelled

or suspended under Clause (a),

clause (b), clause (c) or clause

(e) of sub-section (1),

(a) the fee payable for the

balance of the period for

which such licence would have

been current but for such

cancellation or suspension,

may be recovered from the ex-

licensee as excise-revenue;

(b) the Collector may take the

grant under management or

resell it at the risk and loss

of the ex-licensee, but any

profit realised by such

management or resale which is

not in excess of the amount

recovered under clause (a) for

such period shall be paid to

the ex-licensee."

The appellant questioned the said demand by way of a

writ petition in the Madhya Pradesh High Court. He submitted

that he was not given due opportunity before cancelling the

licence as required by sub-section (1-A) of Section 31, that

there was no order of cancellation of licence as such and

that there was no proper publicity for the reauction

conducted. He submitted that on account of lack of due

publicity, only one bidder was present at the reauction and

that the shops were sold at a low price. The learned Single

Judge was impressed by the said contentions and allowed the

writ petition. On appeal, however, the Division Bench

rejected all of them. Before we set out the reasoning of the

Division Bench, it would be appropriate to set out sub-

section (1-A) of Section 31. It reads:

"(1-A) Before making an order

cancelling ok suspending a licence,

permit or pass under sub-section

(1), the authority aforesaid shall

record in writing the reasons for

the proposed action, furnish to the

holder thereof a brief statement of

the same and afford him a

reasonable opportunity of being

heard."

The Division Bench held that as held by that Court in

an earlier decision, "the court cannot take a hypertechnical

view of the provisions and must understand the same in a

reasonable manner. Substantial compliance with the

requirements of the provisions would meet the ends of

justice. Where a specific order of cancellation of licence

is not passed but if the requirements are substantially

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complied with, the court under Article 226 of the

Constitution would not ordinarily interfere." The Division

Bench referred to the notice exhibit R-3 and found as a fact

that it was received by the appellant. The Bench also found

that the notification (R-12) was duly communicated to all

the Excise Officers, other departments, and to the appellant

besides being published in the newspaper, Nav Bharat Times.

After referring to the contents of exhibit R-12, the Bench

held that the said notification was both an order of

cancellation of the appellant's licence as well as notice of

reauction. It also found that there was adequate publicity

of the said notification and the fact that only one bidder

appeared at the reauction was no ground for holding that

there was no proper publicity. It gave reasons why bidder

generally do not attend reauctions. The Division Bench also

found as a fact that the appellant failed to appear on the

date of hearing specified in notice (R-3). In the light of

the said findings, the Division Bench held, and in our

opinion rightly, that the learned Single Judge way in error

in allowing the writ petition. We fully approve the

reasoning of the Division Bench.

It has been held by a Constitution Bench of this Court

in Har Shankar & Other etc. etc. v. Deputy Excise and

Taxation Commissioner and Others etc. [A.I.R. 1975 S.C.

1121] that "(T)he writ jurisdiction of High Court under

Article 226 of the Constitution is not intended to

facilitate avoidance of obligations voluntarily incurred."

At the same time, it was observed that the licences are not

precluded from seeking to enforce the statutory provisions

governing the contract. lt must, however, be remembered that

we are dealing with parties to a contract, which is a

business transaction, no doubt governed by statutory

provisions. While examining complaints of violation of

statutory rules and conditions, it must be remembered that

violation of each and every provision does not furnish a

ground or the Court to interfere. The provision may be a

directory one or a mandatory one. In the case of directory

provisions, substantial compliance would be enough. Unless

it is established that violation of a directory provision

has resulted in loss and/or prejudice to the party, no

interference is warranted. Even in the case of violation of

a mandatory provision, interference does not fellow as a

matter of course. A mandatory provision conceived in the

interest of a party can be waived by that party, whereas a

mandatory provision conceived in the interest of public

cannot be waived by him. In other wards, wherever a

complaint of violation of a mandatory provision is made, the

Court should enquire- in whose interest is the provision

conceived. If it is not conceived in the interest of public,

question of waiver and/or acquiescence may arise - subject,

of course, to the pleadings of the parties. This aspect has

been dealt with elaborately by this Court in State

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*Reference may also be made to the decision of this Court in

Assistant Excise Commissioner V. Issac Peter [1994 (4)S.C.C.

104].

Bank of Patiala v. S.K. Sharma [1996 (3) S.C.C 364] and in

Krishanlal v. State of Jammu and Kashmir [1994 (4)

S.C.C. 422] on the basis of a large number of decision on

the subject. Though the said decisions were rendered with

reference to the statutory Rules and statutory provisions

(besides the principles of natural justice) governing the

disciplinary enquiries involving government servants and

employees of statutory corporation, the principles

adumbrated therein are of general application. It is

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necessary to keep these considerations in mind while

deciding whether any interference is called for by the Court

whether under Article 226 or in a suit. The function of the

Court is not a mechanical on. It is always a considered

course of action.

There is yet another fact. The contract provides for

payment of monthly rental on or before a, particular date.

If the amount of monthly rental not paid before the due

date, the licence is liable to be cancelled as provided by

sub-section (1) of Section 31. It is true that before

cancelling the licence, an opportunity of hearing should be

given as provided by sub-section (1-A). While the

opportunity to be given should be reasonable, the

reasonableness or otherwise of the opportunity given must be

judged keeping in view the time-frame available. It is a

case of a contract stipulating monthly payments. If there is

a default in paying a month's rental, notice proposing

cancellation may follow. The time given to the licencee to

show cause would naturally be a short one for the reason

that soon thereafter the next month's rental (licence fee)

falls due and if that is not paid, another show cause notice

may have to follow. (It must be remembered that in this

case, the default was for two consecutive months, July and

August. The authorities evidently did not act in haste. Even

after one month's default, they waited hoping that he should

pay. But when he defaulted for the next month also, they

issued the notice proposing cancellation.) What we wish to

emphasise is that the opportunity contemplated by sub-

section (1-A) cannot be operated in a leisurely manner. A

realistic view has to be taken while determining whether the

opportunity given was reasonable or not. The object of all

excise laws is two-fold viz., to raise revenue and to

regulate the trade in liquors which is a noxious substance.

There is no fundamental right to trade in liquor (Khoday

Distilleries Ltd. v. State of Karnataka 1995 (1) S.C.C.

574). The only right of the licencee is to seek to enforce

the terms of contract (which is statutory in nature) and the

statutory provisions governing the contract. The

considerations aforementioned should be kept in mind while

examining complaints of violation of statutory Rules,

conditions add terms of contract as well as complaints of

jack of reasonable opportunity.

Lastly, it is urged the before forfeiting the advance

amount or the security deposit, a fresh opportunity of

hearing ought to have been provided. From a perusal of the

judgment under appeal, however, we do not find that any such

contention was urged before it. For this reason, we decline

to entertain this plea, which may involve investigation of

factual aspects.

The appeals accordingly fail and are dismissed with

costs. Advocate's fee Rs.5,000/-.