Allahabad High Court
Smt. Surinder Kaur vs Collector/District Magistrate, ... on 16 October, 1998
Equivalent citations: 1999(1)AWC773
Author: D.P. Mohapatra
Bench: D.P. Mohapatra
JUDGMENT S.R. Singh, J.
1. Present petition and connected Writ Petition No. 20151 of 1998 enwomb challenge to recovery of excise dues amounting to Rs. 1,52,65,232 sought to be recovered from the petitioner as arrears of land revenue. Recovery certificates dated 26.5.97 which are phrased in identical words have been issued by the Collector, Fatehpur to Collector, Allahabad, for recovery of the afore stated amount with interest accruing on the amount at the rate of 18% with effect from 1.4.1994 from the petitioners, who were believed to be stationed at Allahabad and to be owning property consisting of movable and immovables at Allahabad. Since both the petitions stem from the same cause of action and are founded on common questions of law and fact, we knit them together for convenient disposal by a common Judgment.
2. The telescopic view of the necessary facts is that for the year 1993-94 a public auction was to be held on 30.3.1993 for grant of licence for retail vend of country liquor in the district of Fatehpur. The entire district was split up in three groups, namely, Sadar Group, Khaga Group and Bindki Group. The bid of Anil Singh, son of Girwar Singh resident of Kalpana Bhawan. Collector Ganj. Fatehpur, was accepted for Sadar Group of Shops. Likewise, the bids of Rajeev Bansal, son of Bechan Lal and Jageshwar Gupta, son of S. M. P. Gupta, both residents of Kalpana Bhawan, Collector Ganj, Fatehpur, were accepted for Khaga Group of Shops. In respect of Bindki Group of shops, the bid of Manoj Singh, son of Sri K. P. Singh resident of Kalpana Bhawan was accepted. Then followed the execution of agreement and grant of licences after the settlement of bids in favour of respective bidders. It would transpire that the aforesaid four persons deposited the amount as they were exacted to deposit at the time of the fall of hammer same of the initial installments were also deposited by them. Subsequently, the persons afore stated defaulted in payment of excise dues and a sum of Rs. 1,52,65,332 fell due to the credit of the aforesaid persons. The Collector, Fatehpur, It would appear, made some enquiry through Excise Officer which, it is alleged, divulged that the petitioner Smt. Surindra Kaur and one Jagjeet Singh, had actually run the business by proxy in the name of aforesaid tour persons. Accordingly, a show cause notice dated 7/8.4.1997 was issued to Smt. Surindra Kaur and Jagjeet Singh spelling out therein that they were the actual licensees and hence, liable to repay the excise dues amounting to Rs. 1.52.65.332 in respect of the contract for the year 1993-94. They were accordingly called upon to show cause within the period stipulated in the notice as to why the dues be not recovered as arrears of land revenue from their movable and immovable properties. On receipt of the notices each of the petitioners submitted reply to the show cause notice. The petitioner-Smt. Surindra Kaur in her reply submitted that she was neither the licensee nor a surety in respect of the contract for retail vend of country liquor in Fatehpur district for the year 1993-94 and as such, question of any outstanding excise dues against her did not and could not arise. Request was accordingly made to withdraw/ recall the show cause notice. A similar reply was submitted by the petitioner-Jagjeet Slngh to the show cause notice issued to him. The District Magistrate, Fatehpur by his order dated 26.5.1997 rejected the objections filed by the petitioners holding that on the basis of documents and evidence on record, it was evident that the petitioners had, in fact, financed and managed the country liquor shops of the year 1993-94 and persons aforestated in whose names the licenses were granted, were simply their 'Sahayak Karamchari and Naukar'. Consequent upon the rejection of the objection filed by the petitioners, impugned recovery certificates dated 26.5.1997 were issued by the Collector as aforestated.
3. Sri S. S. Ray, learned senior advocate, appearing for the petitioners canvassed that licence under the Act is "personal" and obligation to pay all dues in respect of the licence is the personal obligation as undertaken by the licensee in the 'counter part agreement executed in Form G. 44A and, therefore, it is the licensee to whom the licence has been granted who is 'primarily liable' to pay the dues within the meaning of Section 39 of the U. P. Excise Act and the Summary procedure for recovery of excise dues as arrears of land revenue has been made applicable by Section 39 of only those who are 'primarily liable' to pay i.e., the person who by the terms of the licence are absolutely required to pay the dues. The learned counsel urged that it would be beyond the purview of Section 39 of the Act to recover any excise dues as arrears of land revenue from any one who is not 'primarily liable' at all ; and that the law of 'undisclosed principals' is extrinsic to the scheme of the Act and the rules framed there under. The learned counsel emphasized that it would open a pandora box of confusion, chaos and corruption if an enquiry is held permissible into the question that the person in whose name a licence has been granted is not the actual licensee but the "undisclosed principal' is the actual licensee. Sri Yatindra Singh, learned Additional Advocate General, appearing for the respondents submitted that the petitioners were the 'undisclosed principals' of the original licensees and therefore, liable in the same manner as they, i.e., the ostensible licensees who were simply name lenders. The state was therefore.
justified, urged the learned Additional Advocate General, in initiating recovery proceedings against the petitioners.
4. The vexed question of law that arises for consideration in primacy over other questions is as to whether the provisions of the U. P. Excise Act, 1912 (In short the 'Act') and the rules made there-under preclude an enquiry being made into the question whether a person other than the one in whose name the licence has been issued, is the 'actual licensee' liable to pay the excise revenue including all amounts payable to the Government under the contract by the person in whose name the licence was granted and who may hereinafter be referred to as 'ostensible licensee'.
5. "Excise revenue" as defined in Section 3 (I) of the "Act, means 'revenue derived or derivable from any duty, fee, tax, fine (other than fine imposed by a Court of law) or confiscation imposed or ordered under the provisions of this Act, or of any other law for the time being in force relating to "liquor" or "intoxicating drugs". The term 'liquor' means intoxicating liquor and includes spirits of wine, spirit, wine, tari padhwal, beer and all liquid consisting of or containing alcohol, also any substance which the State may by notification declare to be "liquor1 for the purposes of the Act and the term 'intoxicant' means any liquor or intoxicating drug as defined by the Act.
6. Section 21 of the Act inhibits sale of any intoxicant without a licence from the Collector or the Excise Commissioner where the licence is for sale in more than one district of Uttar Pradesh. Manufacture or sale of any country liquor or intoxicating drugs in any local area is the exclusive preserve /privilege of the State Government but Section 24 of the Act empowers the Excise Commissioner to grant any person a licence for the exclusive privilege of manufacturing or of supplying by wholesale or by retail or of selling by wholesale or by retail. Section 26 of the Act visualizes that subject to the conditions of his licence, the grantee of any exclusive privilege may let or assign the whole, or any portion of his privilege but no lessee or assignee of such privilege or portion of a privilege shall exercise any rights as such unless and until a licence has been granted to him by the Excise Commissioner on application made by the grantee. Section 31 provides that every licence, permit or pass granted shall be granted on payment of such 'fees, if any, subject to such restrictions and on such conditions, and shall be in such form and contain such particulars as the Excise Commissioner may direct either generally or in any particular instance in this behalf and shall be granted for such period as the State Government may in the like manner, direct. Section 33 visualises that any authority granting a licence under the Act,may require the grantee to execute a counter-part agreement in conformity with the tender of his licence and to give such security for the performance of such agreement or to make such deposits in lieu of security as the authority may think fit. Section 39 provides for recovery of excise revenue.
7. The Uttar Pradesh Excise Licences (Tender-cum-Auction) Rules, 1991 were framed by the Excise Commissioner in exercise of powers under clause (c) of Section 41 of the Act read with Section 21 of the U, P. General Clauses Act with a view of determining consideration for and the manner of the grant of licences for the exclusive privilege of retail sale of country liquor, foreign liquor and Bhang by tender-cum-auction system in super session of all previous rules published in this behalf. The said rules prescribe the form in which the licence for retail sale of country liquor may be granted. Form G 44A,is the form of "counterpart agreement' which is to be executed by the licensee who is required to be identified by the District Excise Officer. Section 39 of the Act visualises that all excise revenues including all amount due to the Government by any person on account of any contract relating to the excise revenue may be recovered from the person "primarily" liable to pay the same or from his surety (if any)" as arrears of land revenue. Section 39 is extracted below :
"39. Recovery of excise revenue.--All excise revenue including all amounts due to (the Government) by any person on account of any contract relating to the excise revenue, may be recovered from the person primarily liable to pay the same, or from his surely (if any), as arrears of land revenue or in the manner provided the recovery of demands by any law for the time being in force. In case of default made by an holder of a licence the Collector may take the grant, for which the licence has been given under management at the risk of the defaulter, or may declare the grant forfeited and resell it at the risk and loss of the defaulter. When a grant is under management under this section, the Collector may recover as excise revenue any moneys due to the defaulter by any lessee or assignee :
Provided that no licence for an exclusive privilege granted under Section 24 shall be forfeited or resold without the sanction of the authority granting the licence."
8. Rules 337 (1) and 376 of the Rules provide that all licences are "personal" to the licensees in whose favour they are granted. The Rules 337 and 376 are quoted below :
"337.--(1) All licences are personal to the licensees in whose favour they are granted.
(2) (a) Whenever any application is received for transfer, sublease, or partnership in respect of an Excise licence, the Collector shall call for a report from the Assistant Excise Commissioner of the charge.
(b) On receipt of the report from the Assistant Excise Commissioner and further enquiry, if any the Collector shall refer suitable cases to the Excise Commissioner for approval.
(c) No transfer or sub-lease or partnership of Excise licence shall be allowed by the Collector without the prior approval of the Excise Commissioner.
(3) Partnership may also be permitted In the case of shops under the auction system but they should not be sanctioned as a matter of course. They should be allowed only in exceptional circumstances when it is clear that the shop cannot be well managed by the existing licences without a partner and that the partnership will not result in any loss of revenue. Not more than two partners can be allowed to hold the shop. No distinction should be drawn between the legal liabilities of the two partners who will be jointly and severally responsible.
(4) In the case of licences granted under the surcharge or fixed fee system no transfer or sublease of a licence shall be permitted, nor shall a licence be allowed to enter into private partnership in the business covered by the licence. If the licensee desires to withdraw from the business he shall be required to resign and the shop resettled in the manner prescribed by paragraphs 355 to 358.
(5) Partnership may, however, be permitted by shop settled under the graduated surcharge system as provided for in paragraph 360.
* * * * *
376. Licences and leases personal to holders. --All licences granted under the auction system are personal to the licensee in whose favour they are granted. In the event of a licensee's death the Collector may continue the-licence on the same terms to the approved representative of the deceased on the condition that any arrear due from the deceased licensee are recovered before the licence is so transferred."
9. Relying upon Section 39 of the Act and Rules 337 and 376 and other related provisions referred to above. Sri S. S. Ray, appearing for the petitioners submitted that the licence under the Act is "personal" and the obligation to pay all dues in respect of the licence Is a personal obligation of the licensee undertaken by him in the counterpart agreement executed in Form G 44A as required by Section 33 of the Act read with relevant rules. We are, however, of the view that all that the expression "personal" used in Rules 337 (1) and 376 of the Rules, denotes is that the exclusive privilege granted to a person is personal to the grantee who shall be personally liable for civil and criminal liabilities of a licensee under the Act and it will neither be hereditable nor transferable except to the extent It is so visualised by Rules 337 and 376 of the Rules. In the event of death of the licensee during the currency of the licence, the privilege will not be entailed on the heirs of the licensee or his representatives except where the Collector decides to "continue the licence on the same terms to the approved representatives of the deceased" as visualised by Rule 376 of the rules nor shall the heirs he made liable to meet the outstanding liabilities of the deceased licensee out of their own assets- The outstanding dues, if any may in no delphic terms, be recovered from the movable and immovable property of the deceased licensee even if such property falls in the hands of the heirs. Unlike a surety, the licensee, it may be observed, does not bind his heirs in the counterpart agreement. The surety of curse, binds not only himself but also his heirs, executors and administrators as per postulation of surety bonds in Form G'45A. Thus, is the connotation and Implication of the word 'personal' used in Rule 337 (1) and Rule 376 of the Rules. These provisions, in our considered view, do not assist in construing the expression "the person primarily liable to pay" occurring in Section 39 of the Act.
10. Expression 'primarily liable' has not been defined in the Act. In Law Lexicon by P. Ramanatha Aiyar, the expression 'primarily liable' has been defined as under :
'The person "primarily" liable on an instrument is the person who, by the terms of the instrument is absolutely required to pay the same."
11. The Counter part agreement in From G 44A uses the expression 'I hereby affirm that I shall be responsible to abide by the terms and conditions of the licence and I shall pay promptly and in time the monthly installments of bid money and amounts towards penalty imposed if any and other dues if accrued in respect of my shop/group of shops'. If we are to go by the above definition of the expression "primarily liable" and the language used in the counterpart agreement, it can be said that according to the Instrument, i.e., the counter-part agreement, the liability to pay excise revenue is of the person who undertakes obligations to pay the same by executing the counterpart agreement. We are, however, of the considered view that if, and where, the status of the person executing the 'counter-part agreement' is that of an agent in relation to his principal, the latter would be as much liable to pay the excise dues arising out of excise contract as the former. It cannot be repudiated that the licence under the Act can be issued to an unregistered private company or firm in the names of the individuals representing the corporate body. The only requirement posted is that if the licence Is granted to an unregistered private company or firm, it shall be issued, to individual/individuals representing the corporate body as visualised by Rule 334 of the Rules which is excerpted below :
"334. No licence shall be issued in the name of a company or firm unless such company or firm is a registered joint stock company. Where a licence has been granted to an unregistered private company or firm the licence should be issued in the names of the individuals as representing the corporate body and not in the name of the corporate body itself."
12. 'therefore, where it is established that the licence has been granted in favour of an unregistered company or firm but fraud, misrepresentation, or concealment conspired to mislead the licensing authority into issuing the licence not in the names of the individuals representing the body corporate but in the names of their agents or servants, the principals may be visited with the liability to pay the excise dues born of the contract although the same is ostensibly entered between the agents and servants of the actual licensee and the Collector. The grant of exclusive privilege under the Act is essentially a matter of contract and, therefore, the law of the land and the principles governing the contract will come into play except in so far as they are expressly or impliedly excluded. We are therefore, persuaded to the firm view that the principles governing the contract including the law of agency, in the fact situation of a given case will be attracted in the matter regarding grant of exclusive privilege under the Act. It will, of course, be a question of fact to determine in each case whether the ostensible licensee is, in fact, the agent of an undisclosed principal. It will, however, be apt and proper to deal with the method of creation of agency. Paragraph 715 of the Halsbury Laws of England. 4th Edition, Vol, 1, aptly portrays the method of creation of agency as under :
'715. Method of creation.--The relation of agency is created by the express or implied agreement of principal and agent, or by ratification by the principal of the agent's acts done on his behalf. Express agency is created where the principal or some person authorised by him, expressly appoints the agent either by deed, by writing under hand or orally. Implied agency arises from the conduct or situation of the parties, or by operation of Jaw, for example from necessary."
12. Section 182 of the Indian Contract Act. 1872 defines 'agent' and 'Principal' as under :
"182, An 'agent' is a person employed to do any act for another or to represent another in dealings with third person. The person for whom such act is done, or who is so represented is called the 'principal'".
13. In Khub Chand v. Chittor Mal AIR 1931 All 372, a Division Bench of this 'Court held the view that agency need not be created by written document and can be inferred from the circumstances and conduct of the parties. The same view finds its echo in Ahmad Moiuddin u. Yahiya Alum, AJR 1950 Hyd in the following words :
"Agency need not necessarily have been established by the written document. It may be Inferred from circumstances. In order to constitute agency by implication, there must be proof of the one having acted for the other in transactions and having dealt with the estate."
14. Sri S. S. Ray, however, submitted that where a power is given to do certain thing in a certain way, the thing must be done in that way or not at all. The proposition of law advanced by the learned counsel admits of no dubiety and is rather taken as a settled principle of law. See Talyor v. Taylor, 1877 I Ch D 426 ; Nazir Ahmad v. King Emperor, AIR 1936 PC 253. Crates on Statute .Law, 6th Edition P. 263 states the same principle In the following language :
"If the requirements of a statute which prescribe the manner in which something Is to be done are expressed in negative language, that is to say, If the statute enacts that it shall be done in such a manner or in no other manner. It has been laid down that those requirements are in all cases absolute, and that neglect to attend to them will Invalidate the whole proceedings."
15. In A. K. Roy v. State of Punjab, AIR 1986 SC 2160, the Supreme Court was called upon to construe the provisions of Section 20(1) of the Prevention of Food Adulteration Act, 1954, which Inhibited institution of any prosecution for an offence under the Act not being an offence under" Section 14 or Section 14A, "except by or with the written consent of the Central Government or the State Government or the person authorised in this behalf by general or special order by the Central Government or the State Government" The Supreme Court held as under :
"Where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other modes of performance are necessarily forbidden. The Intention of the Legislature in enacting Section 20(1) was to confer a power on the authorities specified therein which power had public exercise in the manner provided and not otherwise."
16. In our considered view, the application of the law of agency is not shut out in the matter of grant of privilege under the Act for retail vend of country liquor by tender-cum-auction system and nothing in the Act precludes the authorities to recover the excise dues from 'actual licensee' in whose favour the privilege has been granted as distinguished from the person in whose name the licence is issued and whose status is that of an agent.
17. In Lloyd v. Grace Smith and Co., 1912 AC 716, it has been held that "if an agent commits a fraud while acting or purporting to act in the course of the business which he is authorised, or held out as authorised, to transact on account of his principal, the principal though innocent of the fraud, is liable for the fraud of the agent whether the fraud results in a benefit to the principal or not". The view has been reiterated by this Court in Rupram Kailash Nath v. Co-operative Union, Mallawah, AIR J967 All 382 and by Punjab High Court in National Bank of Lahore Ltd.v. Sohan Lal. AIR 1962 Punj 534. We do not find any acceptable principle of law to justify exclusion from the purview of Section 39 of the Act of a person who has earned "unjust enrichment" or "unjust benefit" by fraud or misrepresentation or any other deceitful means or otherwise from another.
18. The effect of fraud, misrepresentation or concealment of principal or agent has been delineated in paras 831 and 848 of the Halsbury Laws of England In the following words :
"83 J. Fraud etc. of principal or agent.--Where in the negotiation of any contract by an agent, the agent while acting within the scope of his authority is guilty, whether or not the principal is privy thereto, of fraud or innocent misrepresentation or of concealment of essential facts which ought to be disclosed to the other contracting party, the contract is voidable, and the other party thereto may rescind it and recover any benefit which has passed there under to the principal. If sues, the other party may successfully resist any action brought upon the contract whether for specific performance or otherwise. Where the other party elects to affirm the contract or has lost the right to rescind, he may bring an action for deceit if the agent has induced the contract by fraud, or sue for breach of warranty if the representation constituted a warranty. If the third party has suffered loss through a misrepresentation which was not made fraudulently he may be entitled to rescind the contract for such a representation, the Court may if it considers is equitable so to do declare the contract subsisting and award damages in lieu of rescission."
* * * * "848. Fraudulent misrepresentation.--where an agent is personally guilty of fraudulent misrepresentation and has actual or apparent authority to make the representation, the principal is responsible as for any other tort, and an action of deceit lies against him. It is irrelevant that the fraudulent misrepresentation was made before agent's authority was granted if the misrepresentation is not corrected before the third party acts upon it. Where the agent makes a representation which he honestly believes to be true, but which the principal knows to be false, the principal is responsible for fraudulent misrepresentation if there was actual fraud or dishonesty on his part, as where he employees the agent in order that the misrepresentation might be made. If however, there is no actual fraud or dishonesty on the part of the principal, he will not be liable in an action for deceit if the agent made the representation innocently without the knowledge of the principal, although the principal knew the facts which rendered the representation false."
19. The next question that arises is whether the excise revenue cannot be recovered from a person with whom there is no express contract and who is not the signatory to the counterpart agreement. Sri S. S. Ray, appearing for the petitioners submitted that aid of Section 39 of the Act can be resorted to only against a person who is signatory to the counterpart agreement. Sri S. S. Ray placed credence on Supreme Court decision in State of V. P. v. Kishon Lal, AIR 1980 SC 680", and a Division Bench decision of this Court in Lochan Singh v. State of U. P., Civil Misc. Writ Petition No. 27 of 1982, decided on 9.12.93, to give prop to his contention that recovery of excise dues in the instant cases cannot be made from the petitioners in that there was no concluded contract between the parties. Lochan Singh petitioner therein was the highest bidder in an auction sale for the vend of foreign liquor held at Allahabad. On being required to deposit, 25% of the bid made by him at the fall of the hammer he deposited only a partial amount and the District Magistrate gave him four days' time to deposit the balance and recommended to the Excise Commissioner for the bid being accepted. The Excise Commissioner accorded sanction to the bid of Rs. 80 lacs offered by "Lochan Singh, who subsequently moved an application indicating his desire to withdraw the offer and praying for refund of Rs. 2 lacs which he had deposited on the date of the auction. The Excise Commissioner cancelled the auction and ordered fresh auction. It appears that subsequent auctions could not fetch the money offered by Lochan Singh and therefore, the short-fall was sought to be recovered from Lochan Singh as arrears of land revenue after adjusting the initial amount of Rs. 2 lacs deposited, by Lochan Singh. The Division Bench held that no concluded contract had come into play between Lochan Singh and the Excise Commissioner and the amount sought to be recovered from him was not recoverable as arrears of land revenue under Section 39 of the Act. The Division Bench held that the amount sought to be recovered from Lochan Singh was 'neither duty nor fees, nor tax nor fine to come within the expression "excise revenue" inasmuch as in the absence of a concluded contract, amount sought to be recovered could not be said to be the 'amount due on account of the contract' as what was sought to be recovered was the difference between the amount of bid by the petitioner therein and the amount, recovered by the Collector in subsequent auction sale. The Court held that "amount claimed as short-fall is neither duty, nor fees, nor tax, nor fine to come within the expression "Excise revenue". Construing the expression "amount due on account of the contract" occurring within the meaning of Section 39 of the Act the Division pench held as under :
"According to the New Webster Dictionary P. 60, the phrase "on account of" means that the amount must as long as be payable because of the or, by reason of the contract i.e., it must be due under the contract. Damages which accrued to the injured party after terminating or rescinding the contract, cannot be said to be by reason, or because of the contract. The implication is that the contracts should be subsisting capable of being enforced. For instance, if the Excise authorities do not accept the repudiation and decide to hold on the contract they can. demand performance and recover payment of installments by licence fee as and when they fall due. This is not possible after forfeiture of the contract."
20. We are of the considered view that the said decisions do not commend themselves for application to the facts of the present case for if it is established that the ostensible licensees were in fact the agents or servants commissioned by the petitioners, then in that event, the amount due against the ostensible licensees could be recoverable from the petitioners as amount due on account of the contract relating to the excise revenue. The contract which was admittedly concluded between the ostensible licensees on one hand and Excise authorities on the other, would be deemed to be a contract between the authorities and the petitioners in the case of relation of principals and "agents being established between the petitioners and the ostensible licensees. In other words, in case it is found that the ostensible licensees were acting on behalf of the petitioners or were the alter-ago of the petitioners in that event, the agreement executed by the ostensible licensees would be taken to have been executed by the petitioners.
21. It is settled law that there is no wrong without a remedy and a wrong doer/malefactor should not be allowed to capitalise on his own wrongs. Therefore, if it is found in a proper enquiry conducted in tune with the principles of natural justice, that the licence issued in the names of "ostensible licensees" were, in fact, meant for the benefit of the petitioners or that the licences were obtained by the petitioners by playing fraud by making their agents/servants a proxy, the liability for payment of excise dues would fall back upon them under the statute as If the agreement and counter-part agreement had been executed by them. The view, we are persuaded to take, will promote the object of Section 39 of the Act and enable the revenue to meet the challenges arising out of unforeseen human conduct in the field of contract. in the words of Lord Scarmen; "At the end of the day the Court, applying legal principles of interpretation, selects the meaning which it believes the law requires. "See Fothergill v. Morach Airlines, (1980) 2 All ER 696 at p. 715.
22. Reliance was also placed for the petitioner on a decision of Madhya Pradesh High Court in the case of Rampal Thakur Din Gupta v. Commissioner, Income Tax, 1998 (7) Taxman 350 (MP). In that case, one of the questions which the Court was called upon to decide in an Income Tax Reference under Section 256(1) of the Income Tax Act, 1961 was "whether the Tribunal erred in law in holding that the assesses though Inveigled by his employers to sign certain papers and the returns was estopped from claiming that he was not the beneficial owner of the liquor contract business taken in his name by his employers nor he had made any investment in them?" The Income Tax Tribunal in that case had held that the assessee had to answer for the tax liability as he was the real owner of the contract of the excise from the State of M. P. The view of the High Court coalesced with the view taken by the Tribunal. The substance of what was held runs as under :
"The assesses himself has acted as a contractor and singed all the papers before the Excise Department and took a contract for four years. Therefore, he has to answer for the tax liability also. It is too belated a stage to represent that behind him, somebody else was the real owner and he is only a representative of that person. Such argument cannot be countenanced for the simple reason that he singed the contract with the excise, department of the State of Madhya Pradesh which is a statutory contract and it Is he who is liable to have lifted the requisite amount of the liquor and therefore, he was the real contractor and he might be acting at the instance of somebody else but he cannot escape the liability of any breach committed by him arising out of liquor contract in the State of Madhya Pradesh. Therefore, he was the person recognised to be the real contractor with the State of Madhya Pradesh and on any profit or loss arising out of the contract, he has to pay the tax. In this view of the matter, we are of the opinion that the view taken by the Tribunal appears to be justified and all the aforesaid questions are answered in favour of the revenue and against the assessee and there is no reason for us to take a different view from the view taken by the Tribunal."
The Special Leave to Appeal preferred against the aforesaid judgment of the Madhya Pradesh High Court, came to be dismissed by a non-speaking order dated 16.1.1998. It is evident that the question of agency and its implications, we are called upon to decide in this case, was not up for consideration before the Madhya Pradesh High Court in the case afore stated. There the assesses was held estopped by his conduct from repudiating his position as an assesses. The plea that somebody else was the owner was raised there at "too belated a stage". The submission made by Sri S. S. Ray that in no case the Collector can go behind the licence and launch the recovery proceedings against the "actual licensee" as distinguished from the "ostensible licensee", does not commend itself for acceptance. In proceeding under Section 39, the Collector is not estopped by rule of estoppels from going behind the licence with a view to finding out the real/actual licensee where licence has been obtained by fraud, etc, in the name of an agent or servant. The view, we are taking, is not in conflict with any principle of legal interpretation. Since the order passed by the Collector is open to scrutiny in appeal and revision under Section 11 of the Act and ultimately in writ under Article 226 of the Constitution, any arbitrary decision by the Collector on the question relating to agency can be corrected and/or set at naught. The remedy of suit as provided by Section 287A of the U.P.Z.A, and L.R. Act, 1950 is also available. The said provision can be invoked inasmuch as recovery under Section 39 of the Act is made as arrears of land revenue the procedure for which Is provided In the U.P.Z.A. and L.R. Act. 1950. It may pertinently be observed that while exercising powers under Section 39 of the Act, the Collector exercises the powers of an Executing Court and all questions going to root of liability, can be gone into as held by the Supreme Court in Seth Banarsi Das v. District Magistrate/Collector, Meerut, 1996 (2) SCC 689. From this reckoning also, the Court is of the view that questions relating to agency in the matter of grant of exclusive privilege under the Act, would not be outside the scope of Section 39 and if any such question properly arises or is raised, the Collector can traverse upon and decide the same.
23. Relying on a decision of the Supreme Court In Jogindra Lal Shah v. State of Bihar, AIR 1991 SC 1148. Sri S. S. Ray canvassed that the Excise Act. 1912 and the Rules made thereunder, being special provisions would exclude the applicability of the Contract Act and the principle of agency. There is no quarrel with the proposition that the special provisions keep at bay the application of general law but as stated supra, the grant of privilege or for that purpose settlement of shops for retail vend of country liquor on auction-cum-tender system is essentially a contract and therefore, the principles governing contract and the law of agency shall be attracted in the matter of negotiation/contract for sale of country liquor by granting exclusive privilege in favour of a person.
24. The expression 'by any person on account of any contact relating to excise revenue' occurring in Section 39 of the Act, is in our opinion of wide amplitude. It would embrace within its sweep "actual licensee" as distinguished from agent/servant, i.e., the person in whose name the licence has been actually issued. The application of the principle of the agency is not excluded by any provisions contained in the Act or the Rules made thereunder. On the other hand, Rule 334 clearly visualises that the licence can be granted to an unregistered private company or firm. The only restriction is that where the licence has been granted to unregistered private company or firm the licence should be issued in the name of individuals representing the corporate body and not in the name of the corporate body itself. Rule 337 (3) permits partnership in the case of shops under the auction system and where it is permitted, the partners will be liable "jointly and severally."
25. , However, the next question that falls for consideration is whether the petitioners have been rightly held to be actual licensees liable to pay excise dues outstanding against the ostensible licensees. On a perusal of the show cause notice dated 7/8.4.1997, we find that the basis on which the petitioners were taken to be the actual licensees and recover certificates against the petitioners are sought to be justified as per averments made in the counter-affidavits filed herein, was not at all disclosed in the show-cause notice. The enquiry report, if any, submitted by the Excise Officer was also not furnished to the petitioner so as to afford them an effective opportunity of showing cause. The finding recorded by the District Magistrate/ Collector, Fatehpur, in his order dated 26.5.1997 that the shops were financed and managed by the petitioners and Sarvsri Anil Singh, Manoj Singh, Rajeev Bansal, Jogeshwar Gupta, the ostensible licensees, were merely 'Sahayak Karamchari/Naukar' of the petitioners do not furnish a foundation to fasten the liability on the petitioners under Section 39 of the Land Revenue Act. In order to hold the petitioner's liable under Section 39 of the Act, there must be categorical finding that they were the actual licensees and that the ostensible licensees were their agents or that the licence was granted in favour of unregistered company or firm and due to fraud played or misrepresentation made by the petitioners it was actually issued in the names of some of the individuals excluding the petitioners representing the body corporate and finding in this regard must be recorded by following the "due process of law', i.e., by holding fair and reasonable enquiry in consonance with the rules of natural justice. In other words, as a condition precedent to proceeding against 'undisclosed principal' under Section 39, the facts constitutive of agency or of unregistered company or firm and facts and circumstances constituting fraud, misrepresentation or deceit must be succinctly stated in the show-cause notice.
26, Recovery certificate issued by the Collector is a consequential act based on the order dated 26.5.1997 and since the order dated 26.5.1997 itself is bad in law, no action can be initiated or scripted on the basis of the recovery certificates issued against the petitioners. The order cannot be sustained with the aid of the reasons disclosed in the counter-affidavits. In the case of Commissioner of Police v. Gordhan Das Bhanji, AIR 1952 SC 16, the Supreme Court has held as under :
"We are clear that the pubic orders publicly made in exercise of statutory authority cannot be construed in the light of explanation subsequently given by the officer making the order of what he meant or of what was in his mind or what he intended to do. Public orders made by the public authorities agreement to have public effect and are intended to effect the acting's and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order Itself.
* * * * If the Commissioner of Police had the power to cancel the licence already granted and was the proper authority to make order it was incumbent on him to say so in express or direct terms. The public authorities cannot play fast and loose with the powers vested in them and persons to whose detriments judgment/orders are made, are entitled to know with exactness and precision what they are expected to do or forbear from doing and exactly what authority is making the order. Reiterating the above' principle laid down Gordhan Das Bhanji, the Supreme Court observed in Mohan Singh Gill v. Chief Election Commissioner, (1978) 1 SCC 405, that the "orders are not like old wine becoming better as they grow older" and held as under :
"The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavits and otherwise. Otherwise the order bad in the beginning, may by the time, it comes to the Court on account of challenge, gets validated by additional ground later brought out."
27. As a result of foregoing discussion, the petitions succeed and are allowed. The impugned recovery certificates are quashed with liberty reserved to the Collector. Fatehpur to proceed in accordance with law and in the light of the observations made in the body of this judgment.