Bombay High Court
The Collector Of Bombay And Others vs Meena Narayan Idnani on 1 August, 1994
Equivalent citations: AIR1995BOM363, 1995(3)BOMCR42, (1995)97BOMLR766, 1995(1)MHLJ238, AIR 1995 BOMBAY 363, (1995) 1 MAH LJ 238, (1996) 1 MAHLR 113, (1995) 3 BOM CR 42
ORDER Pendse, J.
1. The Collector of Bombay and the Commissioner of State Excise have preferred this appeal to challenge legality of judgment dated February 23, 1993 delivered by learned single Judge in Writ Petition No. 391 of 1993 and which judgment is . The facts which gave rise to passing of this judgment are required to be set out to appreciate the complaint of the appellants.
The respondent along with her husband was carrying on business in the name and style of M/s. J. Vikram Sales (India) at Shop No. 4, Laxmi Ratan Bldg., L. H. Road, Matunga Road (West), Mahim, Bombay-400016. The business of the firm was sale of Indian made foreign liquor. The Government of Maharashtra has framed rules known as the Bombay Foreign Liquor Rules 1953 and Rule 4, inter alia, provides that any person desiring to import and sell foreign liquor by wholesale shall apply to the Collector in Form F.L./A-IA. Rule 5 prescribes that the Collector may make inquiries for verification of the details stated in the application and grant the licence in Form F.L.I. on payment of fee. The licence granted under Rule 5 shall not be beyond March 31 next following the date of the commencement of the licence. Rule 21 provides that no person shall be recognised as partner of the trade and import licence for the purpose of licence unless the partnership has been declared to the Collector before the licence is granted and the names of the partners entered into jointly in the licence. It is not in dispute that the licence in Form F.L.I. was initially granted in the joint names of the respondent and her husband in year 1975 and the respondent and her husband carried their business in partnership.
2. The husband of the respondent expired some time in year 1987 and thereupon the respondent approached the appellants requesting that the children were minors and their names should be entered along with the respondent in the licence. The respondent was informed by letter dated July 7, 1987 that the names of the minor children cannot be added as partners and the licence could be only transferred in the name of the respondent as a sole proprietor. The respondent was informed that the partnership between the respondent and her husband had come to an end on the death of the respondent's husband.
The respondent was desirous of deleting the name of her late husband and continuing the business of sale of liquor in her own name. The request for deletion of the name of the respondent's husband was granted on the respondent making payment of Rs. 10/-. The licence was renewed on April 1, 1989 in the sole name of the respondent.
3. On August 30, 1989 the appellants addressed letter to the respondent that the State Government has issued instructions and the respondent will have to pay full fees for the deletion of the name of the deceased partner. The respondent was called upon to pay a sum of Rs. 30,000/- to the State Government within 15 days. On behalf of the Government, Commissioner of State Excise, Maharashtra State, Bombay had issued circular on November 18, 1992, inter alia, claiming that the Accountant General, Maharashtra State has raised objection in recovery of fees under Rule 6 of the Bombay Prohibition (Privilege Fees) Rules 1954. The circular recites that the Accountant General has pointed out that when there are two partners in the business and one of them expires or withdraws, the entity of the firm is changed from partnership to proprietary and in such case provisions of Rule 5 would apply, i.e., fee equal to the licence fee shall be recovered. It is necessary at this juncture to make reference to the Bombay Prohibition (Privilege Fees) Rules 1954. The rules are framed in exercise of powers conferred by S, 143 of the Bombay Prohibition Act, 1949 and Rules, inter alia, provides that the fee payable by any licensee for the privilege of having transferred of his licence from one name to another shall be the same as the fee chargeable for the grant of renewal or continuance of the licence. Rule 6 deals with fees for admission in or withdrawal from the business of the partnership.
The demand made by the appellants for payment of Rs. 30,000/- for deletion of the name of the respondent's husband and issuing licence in the name of respondent as sole proprietor was challenged by the respondent by filing appeal before the Commissioner of State Excise. The appeal ended in dismissal by order dated November 8, 1989. The appellate authority held that after the death of husband of the respondent, the partnership came to an end and transfer of licence in the sole name of the respondent as a proprietary concern amounts to transfer and full fee is required to be paid.
4. The respondent challenged the order by filing Writ Petition No. 391 of 1993 : () under Art. 226 of the Constitution before learned single Judge sitting on the original side of this Court. The learned Judge by impugned judgment held that the application filed for deletion of the name of the deceased licence-holder can never amount to application for transfer of licence and Rule 5 has no application. The learned Judge observed that the demand made by the appellants is against rule of law and the conduct of the appellants in recovering large amounts from innocent citizens is blameworthy. The learned Judge observed that the decision dated September 26, 1988 recorded by the Commissioner of Excise and Prohibition in an appeal filed by M/s. Ruby Wines was correct. The Commissioner had held in that matter that when the partner expires and a change is sought, then the licence is not transferred from one name to another. The decision of the learned single Judge is under challenge.
5. Shri Sawant, learned counsel appearing on behalf of the appellants, submitted that the view taken by the learned single Judge that the death of one of the partner, where the partnership consists of two partners, does not change the character of the licence-holder is incorrect and unsustainable in law. Shri Sawant urged that Rule 21 to which reference is made hereinabove, demands that no person should be recognised as partner for the purpose of licence unless the partnership is declared to the Collector before the licence is granted and the rule makes it clear that on dissolution of the partnership because of death of one of the partner out of the two, the surviving partner cannot continue the business in the capacity as a partner of the dissolved firm. The learned counsel further urged that the rules prescribed for regulation of business are clear and that once the character of a person as a partner ceases, then it is futile to suggest that the business carried on by the sole proprietor will not amount to transfer of right of a licensee. Smt. Thadani, learned counsel appearing on behalf of the respondent, on the other hand urged that the licence granted is of a personal character and the licence is granted to two partners and when one of the partner dies, the surviving partner is entitled to enjoy the fruits of the licence find the deletion of the name of the deceased partner does not amount to transfer. Smt. Thadani also submitted that the grant of licence is till March 31 of the ensuing year and the fact that the appellants permitted the respondent to continue the business even after the death of her husband is indicative of the fact that the appellants did not understand that by deletion of the name of the partner, the licence stands transferred. Smt. Thadani also submitted that charging of fees of Rs. 30,000/- is arbitrary and has no relation to the services rendered.
In view of the rival contention, the first question which requires determination is whether the death of one of the partner out of the two results into dissolution of the firm and whether the surviving partner can carry on the business as sole proprietor without seeking transfer of licence. In our judgment, the answer to the question is obvious. As mentioned hereinabove, Rule 21 demands that when the licence is sought by more than one person who are carrying on business in partnership, then the partnership is required to be declared to the Collector before the licence is granted and the names of the partners are entered jointly in the licence. It is obvious that the licence is secured by the respondent and her husband in the capacity as partners of the firm and not in their individual capacity. On the death of one of the partners out of the two, the partnership automatically stands dissolved and it is not open for the surviving partner to carry on business in the character of a partner of a dissolved firm. It is always open for surviving partner to carry on business as a sole proprietor but the capacity as the sole proprietor is different and distinct from the capacity of partner in dissolved firm. In case the sole proprietor desires to hold licence by deletion of the name of the deceased partner, then such request amounts to transfer of the licence. It is not in dispute that the present policy of the State Government is not to issue fresh licences and for transfer of licence as prescribed by Rule 5, the fees chargeable shall be the same as for grant of renewal or continuance of the licence. Rule 6 of the Bombay Prohibition (Privilege Fees) Rules 1954 also lays down the same principle. The contention of Smt. Thadani, that the appellants permitted the respondent to carry on business till the end of March 31 should be construed as accepting the claim that there is no transfer of the licence, cannot be accepted. The rules permit the Collector to allow the surviving partner to continue the business till the end of the year, obviously with a view to prevent immediate closure of the business. The enabling provision is to minimise the hardship due to death and the facility granted by the Collector cannot be construed as accepting the claim that on the death of one of the partner out of two, the licence is not required to be transferred. In our judgment, the objection raised by the Government Auditor was absolutely correct and in accordance with law and the learned single Judge, with respect, was in error in assuming that the appellants were recovering large amounts from innocent citizens. The learned single Judge was also in error in observing that view taken by the Commissioner of Excise and Prohibition by order dated September 26, 1988 in appeal preferred by M/s. Ruby Wines was correct. The observation of the Commissioner that in case the partner expires, the change required to be effected is natural one and the licence is not transferred from one name to another by deleting the name of the deceased partner is entirely incorrect and unsustainable in law. The learned single Judge was in error in holding that the observations of the Commissioner were accurate.
6. The next submission of Smt. Thadani is that the appellants are charging the fees under Rule 5, which is equivalent to the fee for grant of licence and which is Rs. 30,000/- per year and that fee is excessive and unreasonable and has no nexus to the services rendered. The contention that the amount of Rs. 30,000/- is charged towards fees is not accurate. The concept of fee or tax does not come into play in view of provisions of S. 49 of the Bombay Prohibition Act, 1949. The section reads as follows :--
"Notwithstanding anything contained in this Act, the State Government shall have the exclusive right or privilege of importing, exporting, transporting, manufacturing, bottling, selling, buying, possessing or using any intoxicant, hemp or toddy, and whenever under this Act or any rules or orders made thereunder, any fees arc levied and collected for any licence, permit, pass, authorisation or other permission given to any person for any such purpose, such fees shall be deemed to include the rent or consideration for the grant of such right or privilege to that person by or on behalf of the State Government."
The plain reading of the section makes it clear that the State Government has exclusive tight or privilege of selling the liquor and the fees charged is to he considered inclusive of rent or consideration for transfer or grant of such a right or privilege. It is therefore obvious that the Government enters into a contract with the holder of the licence for carrying out the trade or privilege which exclusively vests in the State Government and while conferring the right or the privilege, the amount charged is not for any services rendered and consequently the concept of requirement to render service for charging fees does not arise, The question is no longer res integra in view of decision of the Supreme Court reported in AIR 1994 SC 813, State of Uttar Pradesh v. Sheopat Rai. The Supreme Court while considering the identical provision of Uttar Pradesh Excise Act observed that the licence fee or the fixed fee cannot be termed as fee or tax. In our judgment, the contention that levy of amount of Rs. 30,000/- is arbitrary cannot be accepted and the impugned order is therefore required to be set aside.
7. Accordingly, appeal is allowed and judgment dated February 23, 1993 delivered by learned single Judge in Writ Petition No. 391 of 1993 : () is set aside and the petition stands dismissed. In the circumstances of the case, there will be no order as to costs.
8. Appeal allowed.