Madras High Court
M.P. Mariappa Nadar And Others Etc. vs State Of Tamil Nadu And Others, Etc. on 21 January, 1997
Equivalent citations: AIR1997MAD406, AIR 1997 MADRAS 406, (1997) WRITLR 814
ORDER Kanakaraj, J.
1. In all the above Writ Appeals us well as in Writ Petition No. 209 of 1997, the challenge of the petitioners/appellants is against the attempt of the respondents to allot certain liquor shops governed by the Tamil Nadu Liquor (Retail vending) Rules 1989, thereinafter called as 'the rules') to co-operative SOCIETIES or to the Tamil Nadu State Marketing Corporation or to the Tamil Nadu Civil Supplies Corporation by nomination, in preference to the petitioners/ appellants. All the matters were dealt with by a learned single Judge of this Court, except Writ Petition No. 209 of 1977 and a common order was passed by the learned single Judge, rejecting the contention raised by the petitioners/appellants. Though the prayers in all the writ petitions are slightly different from each other, in substance all of them are directed against the attempt of the respondents to grant the privilege of vending liquor to such other Co-operative Societies or Corporations. It will therefore be sufficient to refer to the facts of one case to understand the scope of the arguments.
2. In Writ Petition No. 10460 of 1996 (Writ Appeal No. 13 of 1997). the facts arc as follows:
The retail shop No. 2 in Srivilliputhur Municipal Town was sold in auction for the year 1992-93, for a sum of Rs. 3,80,000/- per year and the petitioner was the successful bidder. Under the Rules, the period of licence is for three years, subject to the option to be exercised by the lessee for renewal at the end of each year at an enhanced lease amount. Thus, the petitioner, was running the shop upto 31st May. 1995. The period of lease commencing from 1st June, 1992. For the licensing year 1995-96, commencing from 1st June 1996 the shop was again put up in auction and the petitioner himself was the successful bidder for Rs. 12,06,000/- per year. At the end of the year viz., after 31st May, 1996, the petitioner did not choose to apply for renewal. Therefore, under the Rules, the shop was put up in auction for the year 1996-97 and the upset price fixed at Rs. 13,86,900/-. The upset price was fixed as per the Rules at 15 per cent per annum over and above the privilege amount of Rs. 12,06,000/- for the year 1995-96. The petitioner had offered a sum of Rs. 7 lakhs as the privilege amount for taking the shop in auction. There were no other bidders. A second auction was conducted and there were no bidders. A Third auction also was conducted on 9-7-1996 and it did not fructify. The Rules prevent the grant of privilege for any amount less than the upset price. It was under those/circumstances that instructions were given to the respondents to allot the shops on nomination basis under Rules 3 of the Rules. Again according to the petitioners, under the Rules and the Government Orders, the upset price in respect of Co-operative Societies could be fixed by adding fifty per cent to the upset price fixed in the year 1992-93. In other words, in respect of Co-operative Societies, the upset price was likely to be fixed at Rs. 2,25,000/- based on 1992-93 upset price viz., Rs. 1,50,000/-. The grievance of the petitioner/ appellant is that such a procedure results in great loss to the State Exchequer and he himself was being prevented from taking the shop at a higher privilege amount.
3. The above set of facts are almost identical in respect of all other shops, with which we are concerned in all the above Writ Appeals and Writ Petition. Therefore, the prayer of the Petitioners/ appellants is either to prevent the gram of such shop to Co-operative Societies or to renew the shops in their own names. Several counsel have argued the plea of the petitioners/appellants and it would he convenient to arrange the points raised by them in seriatim, for convenient consideration of the respective points:
4. (i) Under Section 170 of the Tamil Nadu Prohibition Act 1937. the fixation of the privilege amount for any shop under Section 17C of the Act has to be undertaken only by making Rules under the Act. Therefore, the Government Orders. G.O.Ms. No. 54 (Prohibition and Excise (E. VI) Department), dated 29th March, 1995 and G.O.Ms. No. 139 (Prohibition and Excise Department), dated 20th June. 1996 cannot be invoked for the purpose of alloting the shops to Co-operative Societies or corporations under the proviso to Rules 3 of the rules:
(ii) The fixation of upset price, while alloting the shops under the proviso to Rule 3 of the Rules is not in accordance with the Tamil Nadu Prohibition Act, 1937 :
(iii) Even assuming that the Government Orders, enable the grain of privilege to the Cooperative Societies, it shall relate only to unsold shops and not with reference to the non renewed shops:
(iv) Rule 13A of the Rules in relation to the grant of privilege to Co-oprative Societies had not been kept in mind:
and
(v) The grain of privilege to Co-operative Societies for the year 1996-97 affects the revenue of the State Government,
5. It is necessary 10 notice the stand taken by the State Government before the learned single Judge, in a common counter affidavit filed by the Special Commissioner and Commissioner of Prohibition and Excise. Government of Tamil Nadu. The Common counter affidavit explains the manner and method of conducting the auction sales for granting privilege to the retail vending shops . There are as many as 4500 liquor vending shops in the State of Tamil Nadu. Rule 3 of the Rules says that the Privilege shall be granted to any person by auction in accordance with the provisions of the Rules. The first proviso enables the Commissioner to direct the Licensing Authority to gram the privilege to Co-operative Societies or corporations in respect of shops not exceeding 40 per cent of maximum number of retail shops. The second proviso says that the Commissioner shall, in filing the privilege amount, have regard to the upset price for similarly placed shops in the locality and obtain the prior approval of the Government, Rule 14 of the Rules provides for renewal of the shops for first and second years. For the first year, the renewal shall he on payment of 15 per cent of the privilege amount and for the second year, the privilege amount shall he enhanced by ten per cent over the second year privilege amount. At the end of the third year. viz., at the expiry of 31st May. 1996. 4500 shops were brought up for sale in auction. Out of these shops. 4415 shops were sold and licences were granted for the year 1995-96. At the end of the first year, the licensee should opt for renewal. Only 3857 licensees opted for renewal for the next year viz., 1996-97. In other words, 558 shops were left non-renewed. As per the Government directions, the 85 shops which were unsold during the year 1995-96 and the 558 shops, which were non-renewed at the end of the year 1995-96 were put in auction during the month of June. 1996, Only 146 shops were sold for privilege amounts over and above the upset price. The balance of 497 shops were continued to be unsold retail shops. If the said 497 shops had not been allotted to any person on account of the tactics adopted by the licensees, the Gov eminent would have suffered heavy loss of revenue. It was under those circumstances. the directions were given to follow the two G. Os. Ms. Nos. 54 and 139 (Prohibition and Excise Department), dated 29-3-1995 and 20-6-1996. respectively for granting the privilege in respect of the said unsold shops numbering 497 by way of nomination under the proviso to Rule 3 of the Rules. It is against the said policy of the Government lo grant the privilege of retail vending in respect of 497 shops, which remained vacant and unsold to the Co-operative Societies on certain favourable terms that is being challenged by the licensees. At this stage it is necessary to mention that the petitioners had successfully prevented the allotment of shops lo Co-operative Societies by obtaining interim orders from this Court, in July 96 and such interim orders came lo be vacated by the common Judgment of the learned single Judge of this Court, dated 24-12-1996. It does not lie in the mouth of the petitioners to shed crocodile tears that the State was suffering loss of revenue by granting the licence to the Co-operative Societies for a low privilege amount. This is because, right from the date of filing of the writ petition till 24-12-1996, the date of passing of the impugned order, the licensees had successfully prevented the Government from receiving any amount in respect of 497 shops. It is also pointed out in the counter affidavit that the two Government Orders above referred to are by way of granting the privilege under the Second proviso to Rule 3 of the Rules.
6. Before dealing with the points raised by the various petitioners/appellants, it is absolutely necessary to notice the relevant portions of the said Government Orders. In G.O.Ms, 54. dated 29-3-1995, the Government accepted certain proposals of the Commissioner of prohibition and one of the directions given therein were as follows :--
"(vi) No shops need be reserved fur Cooperative Civil Supplies Corporations and the Tamil Nadu State Marketing Corporation Limited. After completing two or three rounds of fresh auction, Commissioner of Prohibition and Excise will review the petition in consultation with Co-operatives and District Collectorate and assess and allot on nomination basis such number of shops required for Co-operative from among the unsold shops and then continue auction profess for the remaining unsold shops....."
In G.O.Ms. No. 139. dated 20-6-1996. the above paragraph was considered with particular reference to the second proviso in Rule 3(1) of the Rules, relating to the upset price of similarly placed shops in the locality and also to Rule 13A of the Rules, providing for the gram of privilege on nomination only on payment of the privilege amount. as fixed by the Commissioner of Prohibition. Therefore, the Government of Tamil Nadu issued the Clarification for fixing and adopting the upset price in respect of the unshold shops either granting them to the Co-operative Socities or to the Corporations on nomination and also ratified the action of the instructions given to all the Collectors to go ahead with the allotment of shops to the Co-operative Societies. The following were the directions:
"The Government have carefully examined Ihe proposal of the Comissioner of Prohibition and Excise. Sanction is accorded to the Commissioner of Prohibition and Excise for fixing and adopting the upset price fixed for 1995-96 issued is G.O.Ms. No. 54 (Prohibition and Excise Department). dated 29-3-1995 for the respective unsold Indian made Foreign liquor shops while granting them to Co-operatives on nomination basis, the Government also ratified the action of Ihe Commissioner of Prohibition and Excise in having instructed the Collectors to go ahead on the basis while granting shops to the co-operatives on nomination basis."
7. (i) Section 17-D of the Tamil Nadu Prohibition Act, 1937 :--
We are unable to appreciate the point raised by the petitioners/appellants based on Sections 17-C and 17-D of the Tamil Nadu Prohibition Act. 1937, because Section 17-D of the Tamil Nadu Prohibition Act. 1937 only says that the State Government may by Rules, levy a sum or lee both in consideration of the grant of any exclusive or other privilege under Section 17-C of the said Act. The emphasis made by the petitioners/appellants is on the words 'by Rules' and their argument is that the privilege amount cannot be fixed by Government Orders. The Rules have been made in exercise of the powers conferred by Sections 17-C and 17-D and other related provisions of the said Act. The word, 'privilege amount' is defined in Section 2(v) of the Rules. It is as follows :--
"(v) 'privilege amount' means the highest amount offered by bid or tender and accepted by the Sale Officer" :-- The word 'upset price' is defined in Section (z) of the said Rules. It is as follows :--
"(z) 'upset price' means the price below which a privilege shall not he granted."
As already stated the first proviso to Rule 3 (1) of the Rules enable the Commissioner to grant the provilege to Co-operatives and Corporations, provided it does not exceed 40 per cent of the maximum number of retail shops. The second proviso only says that in fixing the privilege amount, the Commissioner shall have regard to the upset price for similarly placed shops in the locality and obtain the prior approval of the Government. We have already noticed that the G.O.Ms. No. 139. dated 20-6-1996 has been made with particular reference to the second proviso to Rule 3(1) of the Rules and Rule 13-A of the Rules. In other words, by the impugned Government orders, the Government have exercised their powers under the second proviso to Rule 3 (I) of the Rules. The relevant provision in Rule 13A of the Rules has also been taken care of by the Government of Tamil Nadu. while issuing the said G.O.Ms. No. 139. dated 20-6-1996 We do not find any illegality in the manner in which the power under Rule 3(1) of the Rules has been exercised hy the Government and we do nol accept the argument of the petitioners/ appellants that Section 17-D of the Tamil Nadu Prohibition Act. 1937 has been violated in any manner. The rules had been framed by virtue of the power granted under Section 17-D of the Tamil Nadu Prohibition Act. 1937 and by virtue of the power granted under Ihe provisos in Rule 3(1) of the Rules, the Government have exercised their powers legally in accordanace with law and as per the Rules. The first point fails.
(ii) The fixation of upset price, while allotting the shops under the proviso to Rule 3 of the Rules is not in accordance with the Tamil Nadu Prohibition Act, 1937."
The petitioners/appellants sought to argue that the Government did nut have any regard to the second proviso to Rule 3(1) of the Rules, in asmuch as they did not have any regard to the upset price for similarly placed shops in the locality. Illustrations were sought to be made from the facts and figures in relation to some of the shops. For instance, it wax pointed out that in respect of shop No. 2 in Srivilliputhur Municipal Town concerned in Writ Appeal No. 13 of 1997, the privilege amount for the year 1995-96, when the petitioner was the successful bidder was at Rs. 12,06,000/-. Since the petitioner did not opt for the renewal the upset price for the year 1996-97 was fixed at Rs. 13,86,900/-. The petitioner alone was the highest bidder for Rs. 7 lakhs and therefore, it was not granted to him. The said shop is now sought to be given to A Co-operative Society on nomination basis for the privilege amount of Rs. 3,25,000/-. The argument is that the Government not only loses revenue, but did not have any regard to the upset price for similarly situated retail shops in the 1ocality. This argument is no doubt attractive but it must be taken along with the other allegations found in the counter affidavit of the State Government. The allegations in the counter affidavit are as follows :--
"Regarding the contention, it is submitted that during 1995-96. fresh auction has been conducted for 4500 IMFL (Retail Vending) shops alloted by the Government and distributed to the various districts, after fixation of flat rate upset prices, depending on locution in ureas like Corporation. Municipality and Urban and Rulral areas. During such trial of auction, the above shops were sold with reference to their location and commercial potentiality basis for more than the upset price rangeing from just above the above upset price or even at exorbitant rates. For the year 1996-97. the renewal of the shops were made only by the willing licensees and several shops left non revewed. The reasons behind arc obvious. But specific to be mentioned that the category of shops which left non-renewed due to the real reason of incurring loss during the business carried on by such licensees is very remote, whereas the major reason for the non renewal of the shops are due to the dilatory tactics of the licensees/ syndicate who have taken the shops in large, at a compact block or locality. The renewals were made by them for the shops which they took just above the upset price during 1995-96 and leaving the shops which they have on higher rates and locted in the adjoining or enclaved area of their block left non-renewed. By this act, their intention to gain more profit with their renewed shops paying the lowest priviIege and covering the area in respect of their shops left non-renewed, whose prices were exorbitant now when such non-renewed shops brought to auction for this year 1996-97. there is 'no bid' for most of the shops and lesser bids for some of the shops. This may be due to the intervention or influence of the lincensees who left the shop non-renewed by not allowing the third party to take up the shop in order to square up his business from the uncovered area of the non renewed shops, liven two or three rcauctions tried with for such shops ended in 'No Bid' or 'Low Bid'. When such is the position alone the Government have now decided to allot the shops to the Co-operative on nomination basis to curb the minting of money by such licensees/syndicate who have caused loss of revenue to Government due to the non-functioning of the shops. The induction of the co-operative is only a resistances to curb the activities of the syndicates, in public interest. The allegation of malafide is vague."
8. The above reasons given by the Government have been accepted by the learned single Judge. We also find thut as many as three auctions were conducted in respect of the unsold and non-renewed shops and thereafter only the shops were reserved for allotment to the Co-operative Societies under nomination basis. In other words, the petitioners and the general public had enough opportunity to bid in the auction and take the shop at a competitive price. The Government cannot be a party to the attempt of such licensees to knock off the shops at a price lesser than the market value so as to enable them to make a profit nor do the licensees have any such right to make a profit on account of the running of the retail vending Iiquor shops. The fact that by allotment of the shops to the Co-operative Societies, the Government lost even the higher prices offered by the petitioners/appellants, even though they were less than the upset prices does not appeal to us because the Govenment is not running the trade of retail vending in liquor for the purpose of earning profit only. The right of the Government. vis-a-vi s the right of the licensees in liquor trade has been amly explained by the Supreme Court of India in State of Orissa v. Hari Narayan. . The several principles laid down in the above said decision would deny the rights claimed by the petitioners in all those cases. We would however, quote one passage :--
"Once the Government declines to accept the highest bid, the auction held became useless. Similar is the effect when the Government refused to accept the highest lender. That left the Government free to have recourse to other methods. The power given to the Government by the Act to sell the exclusive privilege in such other manner as it thinks fit is a very wide power. That power is unrestricted, it undoubtedly includes the power to sell the privileges in question by private negotiation."
We have earlier referred to the fuel that the petitioners arc really shedding crocodile tears, when they say that the Government loses revenue, by alloting the shops to the Co-operative Societies. We also accept the reasoning of the learned single Judge in paragraph 15 of the impugned Judgment, while rejecting the plea of loss of revenue.
9. We have already referred to the defintion of the words 'upset price' and 'privilege amount'. So far as the fixing of upset price, when a retail shop is sold in public auction, the upset price is fixed by the Commissiner of Excise, with prior approval of the Govenment. The Government have exercised their power strictly with reference to the report of the Commissioner of Prohibition and Excise as to how the upset price should be fixed. There is no quarrel about the same because, there is no dispute that when two or three auctions were conducted, there were no bidders above the upset price fixed. So far as the fixation of the privilege amount, white adopting the nomination basis for allotment of shops to Co-opetaive Societies is concerned, the proviso to Rule 3 of the Rules Govern the whole issue. The only limitation on the Commissioner is to fix the amount having regard to the upset price for similarly placed shops in the locality and to obtain prior approval from the Government. These two limitations have been duly taken care of, because as many as three auctions were conducted and there were no bidders beyond the upset price, it is precisely for this reasons that the prior approval of the Government was taken for allotment of shops to Co-operative Societies by fixing the privilege amount well below the fixed upset price, having regard to the capabilities of (he said societies and the interest of the general public. The petitioners have not been successful in pointing out any flaw in the manner of fixing the privilege amount in so far as the Co-operative Socicitiesare concerned. What is more, the actual privilege amounts fixed in respect of the various retail shops c oncerned in the writ petitions have not yet been finalised and it would be presumptuous, on our part to assume any figure and hold that the fixation of the provilege amount is illegal. The Government Order. No. 139, dated 20th June, 1996. clarifying the carlier G. O. Ms. No. 54, dated 29-3-1995. only recommends the adoption 95-96 upset prices and takes care of the situation and following the Judgment of the Supreme Court in the decision above cited, we cannot fault the Government on this aspect. The first and second points urged by the petitioners/ appellants therefore fail.
10. Point No. (iii) The unsold and non-renewed shops.
The argument based on this distinction that the Government Orders apply only to unsold shops is incorrect, if one goes to the statement of facts carefully. We have alrady referred to Jhe fact that for the year 1995-96 only 4415 shops were sold in auction, leaving 85 shops as unsold shops. For the year 1996-97. only 3857 shops were renewed, leaving behind 558 non renewed shops. Both Ihc 85 unsold shops and 558 non renewed shops were put up in auction in June, 1996. Only 146 shops were sold and the remaining 497 shops were unsold. Therefore, there is no distinction between the unsold and non-renewed shops, when once all of them were put up in auction in June, 1996. in which 497 shops remained unsold. Therefore, there is no question of any non renewed shops thereafter. This is precisely the reason why both the G.O.Ms. Nos. 54and 139 (Excises and Prohibition Department), dated 29-3-1995 and 20-6-1996 respectively refer only to unsold shops. The argument based on non-renewed shops is only to confuse the issue and it does not really advance the case of the petitioners/appellants.
11. Point No. (iv) Application of Rule 13-A of the Rules:--
We have already adverted to Rule 13-A of the Rules, while discussing the G.O.Ms, No. 139, dated 20th June, 1996. We have also earlier pointed out that not only the second proviso to Rule 3(1) of Ihe Rules, but also Rule 13-A was taken care of by the said Government Order, while approving the proposal of the Commissioner in fixing the upset price in respect of the unsold liquor shops. Therefore, there is no merit in the fourth point as well,
12. Point No. (v) : Revenue of the Government.
This point also has been answered by us. while discussing the first point and holding that the petitioners have no right to question the alleged loss of revenue, when they themselves had been responsible in causing revenue loss to the State, not only by refusing to opt for renewal, but also from preventing the Government from allotting the shops to the Co-operative Societies at a leasser price instead of the shops remaining vacant altogether. Further, the Judgment of the Supreme Court in the decision cited above also enables us to reject the plea based on the loss of revenue to the Government. In this connection, the following passage in ORISSA cases is apposite :
"The High Court erroncously thought that the Government was bound to satisfy the Court that there was collusion to between the bidders. The High Court was not silling on appeal against the order made by the Government. The inference of the Government that there was a Collusion among the bidders may he right or wrong. But that was not open to judicial review so long as it is not proved that it was a make believe one. The real opinion formed by the Government was that the price fetched was not adequate, That conclusion is taken on the basis of Government expectations. The conclusion reached by the Government does not affect any one's rights....."
It must also he remembered that a citizen has no inherent right to sell intoxicating liquor by retail, as held by the Apex Court in the decision cited above.
13. What remains to be considered is certain decisions cited by some of the learned counsel appearing for the petitioners. It is not really necessary for us to go into those decisions because they relate to the issue of the State, when they enter into commercial fields. It has to be kept in mind that the sale of intoxicating liquor stands apart when compared to the other commercial articles, further, as rightly pointed out by the learned Government Pleader, a Division Bench of this Court in Government V. R. v. The State of Tamil Nadu, 1991 Writ LR 275 has observed as follows :--
"..... A policy decision was obtained that all the retail shops in the State could be given to private persons by grant of licences under 1981 Rules. Now under the impugned Rules made in 1989, this policy decision has been revised to restrict the number of shops to private persons to 60% in the Stale. There is no dispute raised that the expression "person or persons" therein. as defined in General Clauses Act, would take within its fold. "TASMAC. TNOSC and Cooperative Societies" apart from private persons."
The following observations in the very same decision also are relevant:--
"He would also add by claiming that by introduction of Section 17-D T. N. Act 51 of 1981, the Legislature having intended that the privilege could be parted with by fixing amounts under Rules, by resort to rule making power, auctions cannot he held in respect of private persons and that loo when in respect of 41 per cent shops earmarked for three Agencies, the privilege amount gets fixed under the directives of the Commissioner....."
14. For all the above reasons, we do not accept any of the contentions raised by the appellants and we confirm the view taken by the learned single Judge of this Court in Writ Petition No. 10460 of 1996. etc., dated 24-12-1996. All the Writ Appeals and the Writ Petition shall stand dismissed. Consequently, all the connected miscellaneous petitions also are dismissed. However, there will be no order as to costs.
15. Order accordingly.