Karnataka High Court
T Raghavendra vs State Of Karnataka on 4 February, 2013
Author: H N Nagamohan Das
Bench: H.N. Nagamohan Das
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 04th DAY OF FEBRUARY, 2013
BEFORE
THE HON'BLE MR. JUSTICE H.N. NAGAMOHAN DAS
WP Nos.11852-855 OF 2011 (Excise) c/w W.P.No.11760/2011(Excise),
W.P.No.11342/2011 (Excise)
WP Nos.11852-855 OF 2011
BETWEEN :
T. RAGHAVENDRA
S/O M THIMMEGOWDA
AGED 31 YEARS
NO.65, VANI VILAS ROAD
BASAVANAGUDI
BANGALORE-560004
... PETITIONER
(By Sri : M.R.NAIK, SR.ADV. FOR
M/S.HEGDE ASSOCIATES, ADVS.)
AND :
1.STATE OF KARNATAKA
REPRESENTED BY ITS PRINCIPAL SECRETARY
FINANCE AND EXCISE DEPARTMENT
VIDHANA SOUDHA
BANGALORE-560001
2.EXCISE COMMISSIONER
STATE OF KARNATAKA
2
VOKKALIGARA SANGHA BUILDING
SECOND FLOOR
KITTUR RANI CHENNAMMA CIRCLE
BANGALORE.
3.THE DEPUTY COMMISSIONER
MYSORE DISTRICT
MYSORE.
4.THE DEPUTY COMMISSIONER
CHAMARAJANGAR DISTRICT
CHAMARAJANAGAR. .. RESPONDENTS
(By Sri.T.K.VEDA MURTHY, GP)
THESE WRIT PETITIONS FILED UNDER ARTICLES 226 & 227 OF
CONSTITUTION OF INDIA PRAYING TO QUASH THE
ENDORSEMENT DATED 10.12.2010 OF THE SECOND
RESPONDENT AS PER ANNEXURE-S.
WP No. 11760 OF 2011
BETWEEN :
SRI KUMARASWAMY V
S/O VENKATA RAJU
AGED ABOUT 37 YEARS
FORMERLY AS EXCISE CONTRACTOR
NO. 43, 1st STAGE, 2ND CROSS ROAD,
OKALIPURAM, BANGALORE 560 021
... PETITIONER
(By Sri :M.R.NAIK, SR.ADVOCATE
FOR M/S.NAIK & NAIK LAW FIRM, ADVS.)
3
AND :
1.THE STATE OF KARNATAKA
REP BY ITS SECRETARY
FINANCE AND EXCISE DEPARTMENT
VIDHANA SOUDHA BANGALORE
2.THE EXCISE COMMISSIONER FOR THE STATE
VOKKALIGARA SANGHA BUILDING,
KITTUR RANI CHENNAMMA CIRCLE
BANGALORE
3.THE DEPUTY COMMISSIONER FOR EXCISE
TUMKUR DISTRICT
TUMKUR
... RESPONDENTS
(By Sri.T.K.VEDAMURTHY, GP)
THIS WRIT PETITION FILED UNDER ARTICLES 226 & 227 OF
CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED
ENDORSEMENT DATED 10.12.2010 ISSUED BY THE 2ND
RESPONDENT HEREIN, AS PER ANNEXURE-X AND ETC.
WP No.11342 OF 2011
BETWEEN :
SPR GROUP HOLDINGS PVT LTD
A COMPANY INCORPORATED UNDER THE
COMPANIES ACT,1956, NO.34/2, 5TH MAIN
GANDHINAGR, BANGALORE-560009.
REP BY THEIR MANAGING DIRECTOR
M. THIMMEGOWDA S/O LATE MUTTEGOWDA
AGED ABOUT 63 YEARS.
... PETITIONER
(By Sri. M.R.NAIK, SR.ADVOCATE FOR M/S LEX NEXUS)
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AND :
1.THE STATE OF KARNATAKA
REPRESENTED BY ITS SECRETARY
FINANCE AND EXCISE DEPARTMENT
VIDHANA SOUDHA
BANGALORE-5600001
2.THE EXCISE COMMISSIONER FOR THE
STATE, VOKKALIGARA SANGHA BUILDING
KITTUR RANI CHENNAMMA CIRCLE
BANGALORE
3.THE DEPUTY COMMISSIONER FOR EXCISE
RAMANAGARA DISTRCIT
RAMANAGARA
... RESPONDENTS
(By Sri.T.K.VEDAMURTHY, GP)
THIS WRIT PETITION FILED UNDER ARTICLES 226 & 227 OF
CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED
ENDORSEMENT DATED 10.12.2010 ISSUED BY THE 2ND
RESPONDENT HEREIN AS PER ANNEXURE-P AND ETC.
These petitions coming on for hearing, this day, the court made
the following;
ORDER
In these writ petitions the petitioners have prayed for a writ in the nature of certiorari to quash the endorsement dated 10.12.2010, to declare that computation of excise arrears as bad in 5 law and for a writ of mandamus to extend the benefit of Karasamadhana Scheme-III to the petitioners.
2. Petitioners are all former excise contractors. In the year 2000 petitioners became successful bidders in securing the excise contract to different taluks in the State of Karnataka. During the year 2001-2002, the Government of Karnataka issued a notification banning the extraction and sale of excise products like Neera and other intoxicants. In view of this Government notification the contracts had become frustrated and therefore the petitioners submitted to the Government that they are not able to carry on the business in terms of the contract and surrendered their licenses. But the Government rejected the request of petitioners. Thereafter the respondent Government cancelled/terminated the contracts in favour of the petitioners. Aggrieved by this termination, petitioners filed revision petitions before the Government requesting for waiver of the entire excise arrears and also not to forfeit the Earnest Money Deposit. The 6 Government under the impugned endorsement dated 10.12.2010 rejected the review petitions filed by the petitioners.
3. Thereafter the respondents computed the arrears of excise payable by the petitioners and issued notices to them to pay the arrears of excise and also losses caused on account of termination of contract. While computing the excise arrears and losses respondents have excluded the Earnest Money Deposit. On the other hand, the respondents have forfeited the Earnest Money Deposit for breach of contract. When the matter stood at that stage, the respondent Government came out with a scheme called Kara samadhana scheme - III dated 30.10.2010 specifying that in the event of petitioners are willing to pay the principal amount within a specified time then they are entitled for benefit of waiver of interest. Though the petitioners offered to pay the principal amount, respondents insisted for exclusion of forfeited Earnest Money Deposit. In the circumstances the petitioners are before this court with the above prayers.
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4. Heard arguments on both the side and perused the entire writ papers. On the basis of pleadings and arguments the following point will arise for my consideration in these writ petitions:
While computing the losses caused by the petitioners on account of breach of contract, whether the respondents are liable to give deductions to the forfeited Earnest Money Deposit paid by the petitioners?
6. It is not in dispute that in terms of contract petitioners paid Earnest Money Deposit to the respondents. It is not in dispute that termination of contract by the respondents had become final. It is also not in dispute that respondents have forfeited the Earnest Money Deposit paid by the petitioners. In identical circumstances, the learned single Judge of this court in Smt.Guruvamma vs. State of Karnataka 2007(3) AIR Kar R 99 held as under:
62. Be that as it may, when once the right itself would have been continued in the hands of the legal heir and if that right for 8 continuation there is further requirement to be followed up with certain compliance, on the legal heir having not complied with such requirements, the default necessarily occurs and at that point of time when the action was taken for the revocation of the rights even in terms of government order dated 2-7-1999, there was necessarily a default in terms of Rule 16 and Rule 18(2) is also attracted When once Sub-rule (1) of Rule 18 is attracted, inevitably the consequence of forfeiture and malting good the loss in terms of Sub-rule (2) of Rule 18 follows.
63. In so far as the quantum of loss is concerned, in terms of the computation as indicated in the record, it is computed at the same as per the demand and it is common case of the parties that this loss is exclusive or without the amount forfeited in favour of the state in terms of Sub-rule (1) of Rule 18 of the Lease Rules.
64. While the learned Counsel for the petitioner would contend that whether it is by way of forfeiture or otherwise, this is an amount which has enured to the benefit of the state and to that extent, when computing the loss if any that should be given credit to, submission of the learned Government Advocate is that the amount having already been forfeited, it is no more available for such computation nor is one adjustable in terms of Rule 18 and therefore the demand excluding this amount forfeited deposit is justified.
65. The amount demanded in terms of the demand at Annexure-2 is agreed to be the difference of actual revenue the state would have realized in terms of the highest offer of the husband of the petitioner and what is now realized for the period by the first fourteen days period being continued in favour of the existing contractor and the latter period in terms of the re-auction.
66. On a perusal of the records placed before the court, I am satisfied that for the purpose of re-auctioning, the respondents have followed the requisite procedure. The amount demanded is also in terms of the difference between what was realised and what could have been realized and this amount perhaps can be quantified as loss due to the breach of contract on the part of the highest bidder or on the part of the petitioner who has been roped in as the legal heir.9
67. Then the question that will remain is in the computation of actual loss to the state, whether the state is justified in not crediting the amount forfeited in terms of Sub-rule (1) of Rule 18 of the Lease Rules.
68. The phrase 'loss sustained by the state government' as it occurs in Sub-rule (2) of Rule 18 of the Lease Rules is not exactly defined under any provisions of the Act or the Lease Rules. While it is true that the deposit made by the bidder who has not complied with the requirement of Rules 16 and 17 is liable to be forfeited to the state government for such non-compliance when once the government under its discretion cancels the right in favour of the highest bidder and amount becomes the property of the state, at the same time, it is an amount which has nevertheless reached the coffers of the state and has augmented the revenue of the state. The computation of the loss sustained to the state is in the context of a particular transaction and also because the state is not in a position to realize the highest bid amount that had been accepted by the state, as the rent payable for parting with its privilege of vending liquor in the area. While one can understand and appreciate the provisions for making good the loss in terms of Sub-
rule (2) of Rule 18 of the Lease Rules as the person who has offered the highest bid eliminates the other competitors and gets exclusive right for himself in respect of the particular lease rights and therefore the state government can legitimately expect or look upto the person to make good the payment which he had offered, the amount if is to be computed in terms of the loss can never exceed this amount and can be arrived at only after taking into consideration of all such receipts that the state gets in the context of the particular transaction and as a consequence of the acts relating to the transaction. Breach of contract occurs only in the context of a particular transaction, which also further results in forfeiture of the deposit amount and that amount though may become the property of the state on forfeiture, it is nevertheless an amount available to the state and therefore cannot be ignored or excluded while computing the actual loss to the state that has occurred if the re-auction has resulted in the receipt of a lesser revenue to the state. I am of the clear view that while computing the loss for the purpose of Sub-rule (2) of Rule 18 of the Lease Rules, the state will have to necessarily take into account the amount that it has received by way of forfeiture under Sub-rule (1) of Rule 18 of the Lease Rules and such other amount which it has 10 received pursuant to the re-auction. The computation of loss cannot be by excluding the amount which has been received by the state by way of forfeiture of the amount of the bidder or in any other manner.
69. Though in this regard the learned Additional Government Advocate has placed reliance on the decision of the Supreme Court in the case of Saveen Kumar Shetty [2002 AIR - Kant HCR 927(Supra)] , the decision is an authority only for the purpose of holding that when once there is a repudiation or revocation of the contract for breach of contract on the part of the bidder, the confiscation of the amount is inevitable; that it is no more in the discretion of the state to confiscate or not to confiscate the amount and therefore want of opportunity to the bidder or otherwise is of no consequence on the order of confiscation.
70. On this point, Sri Madhusudhan R. Naik, learned Senior Counsel appearing for the petitioner relies on Rule 15(1-C) of the General Conditions Rules, which reads as under:
15. Payment of Rent etc. (1) xxx (1-C) If the rent for any month is not paid on or before the date specified in Sub-rule (1) or before the expiry of the time granted under Sub-rule (1-A) or under Sub-rule (1-B), the lease shall be determined and the licence shall be cancelled and the right to vend liquor shall be disposed afresh in such manner as the state government may direct and such disposal shall be at the risk of the defaulter who shall be liable for al losses that may be sustained by the state government and the Deputy Commissioners may forfeit the deposits of the defaulter either in full or in part with the approval of the excise commissioner.
and submits that while under Sub-rule (1) of Rule 18 of the Lease Rules even for the authority there is no discretion to the government in terms of Rule 15(1-C), necessarily comes into picture and therefore the computation of loss cannot be automatic or without any opportunity etc.
71. It may not be very necessary for the purpose of this case to go further into this aspect, as the decision relied upon by the learned Government Advocate is only an authority for the purpose of according or not according an opportunity before forfeiture when 11 once the government has exercised its discretion for cancelling the contract In so far as the computation of loss under Sub-rule (2) of Rule 18 of the Lease Rules is concerned, while it has to be on actuals and while the question as to whether there should an opportunity or not may become academic in this case, as admittedly as even in terms of the records, opportunity given is not availed by the petitioner, as she declined to receive the registered letters, which were written by the department, but significance here is on the actual quantification of the loss rather than the procedure to be followed in the matter of computation of loss. The controversy here is that what constitutes the actual loss and not what procedure the authority followed and what opportunity was given in the present case.
7. I am in respectful agreement with the view taken by learned single Judge in Smt. Guruvamma's case. Therefore while recovering losses from the petitioners on account of termination of contract the respondents are liable to give deduction to forfeited Earnest Money Deposit. Respondents are entitled to recover the balance of losses if any, from the petitioners after giving deduction to the earnest money deposit.
8. Petitioners contend that they have paid certain amounts and as such they are entitled for the benefit of Karasamadhana Scheme-III. On the other hand, learned Government Pleader 12 contends that in terms of the scheme petitioners have not made payments and therefore they are not entitled for the benefit of the scheme. In view of this controversy I do not propose to go into this aspect of the matter. By virtue of the interim orders granted by this court petitioners have made some payments. It is brought to my notice that petitioners have made applications before the respondent authorities in this regard. If that is so the respondents to consider the same in accordance with law.
9. Sri Madhusudhan R.Naik, learned senior counsel arguing for all the petitioners in these petitions submit that petitioners are not pressing prayer no.1 in so far as endorsement dated 10.12.2010 rejecting the review petitions filed by the petitioners for waiver of the entire excise arrears and also forfeiture of earnest money deposit. The submission of learned senior counsel is placed on record. Accordingly, the following:
ORDER Writ petitions are partly allowed.13
The writ petitions in so far as it relates to prayer to quash the endorsement dated 10.02.2010 is hereby dismissed.
It is declared that the respondents shall give deductions to the forfeited earnest money deposit paid by the petitioners while recovering the losses from the petitioners on account of termination of contract. Respondents to consider the applications filed by the petitioners for extension of benefit of Kara Samadhana Scheme-III in accordance with law.
Sd/-
JUDGE.
DKB