Patna High Court
Ashok Kumar vs The State Of Bihar & Ors on 2 September, 2011
Author: Shiva Kirti Singh
Bench: Shiva Kirti Singh, Shivaji Pandey
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.2291 of 1998
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Arun Kumar S/o Sri Raghunath Prasad Bachan Traders, Balkishunganj, Patna 7
resident of Mohalla Balkishunganj P.S. Alamganj Town and District Patna
.... .... Petitioner/s
Versus
1. The State of Bihar, through the Secretary incharge Government of Bihar, Patna
2. Member, Board of Revenue, Old Secretariat, Bihar, Patna
3. The Excise Commissioner- cum- Secretary to State Government, Department of
Excise and Prohibition of Bihar, Patna-1
4. The Deputy Commissioner of Warehouse and Distilleries, State of Bihar, Patna
5. The Collector, Patna
6. The Collector, Muzaffarpur
7. The Collector, Vaishali at Hazipur
8. The Collector, Sitamarhi
9. The Collector, East Champaran at Motihari
10. The Collector, West Champaran at Bettia
.... .... Respondent/s
WITH
Civil Writ Jurisdiction Case No. 2292 of 1998
===========================================================
Pirthwinath Prasad S/o Sri Baleshwar Prasad resident of Durga Asthan Barh, P.S.
Barh, District Patna
.... .... Petitioner/s
Versus
1. The State of Bihar, through the Secretary incharge Government of Bihar, Patna
2. Member, Board of Revenue, Old Secretariat, Bihar, Patna
3. The Excise Commissioner- cum- Secretary to State Government, Department of
Excise and Prohibition of Bihar, Patna-1
4. The Deputy Commissioner of Warehouse and Distilleries, State of Bihar, Patna
5. The Collector, Saran
6. The Collector, Siwan
7. The Collector Gopalganj
.... .... Respondent/s
WITH
Civil Writ Jurisdiction Case No. 2293 of 1998
===========================================================
Ashok Kumar S/o Sri Raghunath Prasad resident of Mohalla Balkishunganj PS.
Alamganj, District Patna
.... .... Petitioner/s
Versus
1. The State of Bihar, through the Secretary incharge Government of Bihar, Patna
2. Member, Board of Revenue, Old Secretariat, Bihar, Patna
3. The Excise Commissioner- cum- Secretary to State Government, Department of
Excise and Prohibition of Bihar, Patna-1
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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4. The Deputy Commissioner of Warehouse and Distilleries, State of Bihar, Patna
5. The Collector, Rohtas at Sasaram
6. The Collector, Kaimur
7. The Collector, Bhojpur
8. The Collector, Buxar
.... .... Respondent/s
WITH
Civil Writ Jurisdiction Case No. 2294 of 1998
===========================================================
Kumar Rajiv Ranjan S/O Sri Raghunath Prasad resident of Mohalla Balkishunganj
PS. Alamganj, District Patna
.... .... Petitioner/s
Versus
1. The State of Bihar, through the Secretary incharge Government of Bihar, Patna
2. Member, Board of Revenue, Old Secretariat, Bihar, Patna
3. The Excise Commissioner- cum- Secretary to State Government, Department of
Excise and Prohibition of Bihar, Patna-1
4. The Deputy Commissioner of Warehouse and Distilleries, State of Bihar, Patna
5. The Collector, Gaya
6. The Collector, Jahanabad
7. the Collector, Aurangabad
8. the Collector, Nalanda
.... .... Respondent/s
WITH
Civil Writ Jurisdiction Case No. 2823 of 1998
===========================================================
1. M/S S.C.I.India Limited , Registered Office at D.N.Singh Road, P.S. Kotwali,
District Bhagalpur through one of its Director, Shri Binod Kumar Kishorpuria,
Son of Late Sanarmal Kishorpuria, resident of D.N.Singh Road, P.S. Kotwali,
District Bhagalpur
2. Binod Kumar Kishorpuria, Son of Late Sagarmal Kishorpuria, resident of
D.N.Singh Road, P.S. Kotwali, District Bhagalpur
.... .... Petitioner/s
Versus
1. The State of Bihar
2. The Member, Board of Revenue, Bihar, Patna
3. The Commissioner of Excise, Vikas Bhawan, Patna
.... .... Respondent/s
===========================================================
Appearance :
(In all the cases)
For the Petitioner/s : Mr. Y.V.Giri, Senior Advocate
Mr. Sanjeev Kumar, Advocate
Mr. Ashish Giri, Advocate
Mr Nikhil, Advocate
Mr V.K.Bharti, Advocate
Mr R.R.Choudhary, Advocate
For the State : Mr Lalit Kishore, AAG I
Mr Piyush Lal, AC to AAG I
===========================================================
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
3
CORAM : HONOURABLE MR. JUSTICE SHIVA KIRTI SINGH
and
HONOURABLE MR. JUSTICE SHIVAJI PANDEY
CAV JUDGMENT
(Per: HONOURABLE MR. JUSTICE SHIVA KIRTI SINGH)
Since all the five writ petitions involve common issues of
facts and law as they seek to challenge the vires of the Bihar Excise
(Amendment and Validating) Ordinance, 1998 which was
subsequently replaced by the Bihar Excise (Amendment and
Validating) Act , 1998 (6 of 1998) (hereinafter referred to as „the
Validating Act), hence, they have been heard together and are being
disposed of by a common judgment. CWJC No.2291 of 1998 was
argued as a leading case by Mr Y.V.Giri, Senior Advocate and
therefore, unless otherwise indicated, facts have been taken from the
records of said writ petition.
2. The facts are not in dispute and can be easily gathered
from an earlier judgment rendered by a Division bench of this Court
on 28.5.1996 in the case of M/s Sheo Narain Jaiswal Vs. The State of
Bihar, reported in 1996 BBCJ 469. However, for the sake of ready
reference and convenience, some essential facts may be noticed. In
exercise of powers under Section 22 of the Bihar Excise Act, 1915,
the State of Bihar decided to grant exclusive privilege for manufacture
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
4
and wholesale supply of country liquor. The whole State of Bihar had
been divided into nine zones for this purpose. The Board of Revenue,
Bihar issued tender notice dated 3.6.1995 (Annexure-1) inviting
tenders from interested parties for grant of the aforesaid privilege in
different nine zones for the period 1st July, 1995 to 31st March, 1999.
The terms of tender notice permit grant of exclusive privilege for
manufacture and wholesale supply of country liquor to more than one
licensee in a particular zone and it also provided that the licence fee
had to be paid in equal proportion by the licensees in a particular zone.
For each zone an annual guaranteed quantity was worked out on the
basis of the gross sale of country liquor in different zones during the
year 1994-95 and the licence fee was determined at the rate of Re.1
per L.P. litre of the guaranteed quantity. The successful tenderers
such as the petitioners were informed of the grant of licence through
different communications which contain a condition inconformity
with the terms of the tender notice, noticed above. One such
communication dated 23rd June, 1995 (Annexure-2) shows that the
petitioner- Arun Kumar and another licensee for the Muzaffarpur zone
were informed about annual minimum guarantee on the basis whereof
licence fee was to be realized. In clause 6 of that communication for
grant of the exclusive privilege it was indicated that for each licensee
of a particular zone, the licence fee would be at the rate of Re.1 L.P.
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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Litre on the minimum guaranteed quantity payable proportionately in
advance. It was clarified that the licence fee would be payable only
for each financial year in advance and in case the quantity supplied
exceeds the guaranteed quantity, further licence fee would be payable
by each licensee over such excess quantity.
3. When the petitioners who had been granted licence for
exclusive privilege for manufacture and wholesale supply of country
liquor along with some other licensees in same zone were coerced to
pay the entire licence fee for the zone and not proportionately along
with other co- licensee of the zone, two licensees- Sheo Narain
Jaiswal and M/s Ellen Breweries & Distilleries Pvt. Ltd. preferred writ
petitions which were allowed by the judgment in the case of M/s Sheo
Narain Jaiswal (supra). The Division Bench of this Court considered
the meaning of clause 2 (kha) and 3 (ga) of the notice inviting tenders
as well as clause 6 of the conditions of grant to come to a conclusion
that the terms of the grant provide that the licence fee calculated in the
manner prescribed shall be paid by each of the grantee in equal
proportion and no other meaning could be given to the said clause.
The Division Bench after giving the aforesaid finding in paragraph 13
of the judgment went on to consider the results that would accrue if
the case of the State was accepted and in paragraph 14 of the
judgment it held that it would result in clear unfairness between sole
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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grantee of any zone vis-à-vis co-grantees in another zone. For the
sake of convenience paragraph 13 and 14 of the judgment are
reproduced herein below :
"13. It was submitted by the counsel for the State
that in the earlier year when the licence was granted
with effect from 1st of July, a proportionate reduction
had been granted in the licence fee having regard to the
fact that the grantees could not carry on their business
for three months. He, therefore, submitted that use of the
word „SAMANUPATIC‟ has relevance only for reduction
in the licence fee in case a grantee is not granted the
licence for the whole year. In our view, neither clause 2
(kha) and 3 (Ga) of the notice inviting tenders, nor
clause (6) of the licence referred to, conceive of a
situation where the lease is granted for a shorter term.
The reduction in the licence fee on account of the term of
the licence being curtailed may be the logical
consequence in law. Clause (6) of the grant appears to
us to be clearly applicable to a case where more than
one grantee is granted special privilege by the State in a
particular zone. In such a situation, the term provides
that the licence fee calculated in the manner prescribed
shall be paid by each of the grantee in equal proportion.
We are not able to give to the said clause any other
meaning.
14. Counsel for the petitioners submitted that
even if it is possible to give more than one meaning to
the terms and conditions of the grant, that meaning
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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should be given which is in consonance with fairness and
justice and is also consistent with commonsense. An
interpretation which results in absurd or unfair results
must be avoided. He submitted that if the clauses in the
notice inviting tenders and clause (6) of the grant is
construed in the manner sought to be construed by the
respondents, it would result in an absurdity, and in any
event an unfair result. If the licence fee is the price for
parting with the exclusive privilege of the State which is
parted with in favour of a private person or persons, the
State can only insist upon the payment of price. If within
a zone more than one grantee is granted exclusive
privilege, the benefit derived by the grantee is reduced in
as much as has to compete with other grantees within the
same zone. What the state parts with in favour of a
grantee is more when there is a single grantee and less
when there are several grantees. If each grantee is held
liable to pay the licence fee determined for the zone
individually, the State would greatly benefit by charging
the price many times over, but the grantee would get a
lesser benefit than what he would have got had he been a
single grantee in whose favour the exclusive privilege
was granted. The unfair consequence that may result
can also be demonstrated by taking another illustration.
If in respect of zones A and B the licence fee is
determined at rupees one lac each, and if there is only
one grantee in zone A and four grantees in zone B, the
State will get a sum of rupees one lac only in zone A but
would get rupees four lacs in Zone B by way of price of
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
8
the privilege which is otherwise equally valued. On the
other hand, the grantee of Zone A would be in a much
more advantageous position by paying less than the
grantees of Zone B who shall have to pay the same
amount for getting lesser benefit. Such would be the
resultant unfairness if clause (6) is construed in the
manner commended by counsel for the State."
4. Clearly, the licence fee realized or demanded by the State
was found to be against law on two counts- (1) it was contrary to plain
meaning of relevant clauses in the notice inviting tenders as well as the
terms of the grant and (2) it was based upon a view which was clearly
unfair and unjust. By now it is well settled in law that unfairness in
State action would negate the mandate of Article 14 of the Constitution
of India.
5. While allowing writ petitions the Division Bench
noticed the interim order dated 13th March, 1996 which required
deposit of the licence fee but with an interim protection that in case the
writ petitions was allowed, the petitioners would be entitled to refund
of excess amount deposited by them together with interest calculated
at the rate of 16% per annum within one month of the date of
judgment. In terms of the interim order, final direction was issued to
refund to the petitioners the excess amount of licence fee deposited by
them with interest at the rate of 16% per annum calculated from the
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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date of deposit till the date of payment. The refund was to be made
within a period of one month.
6. Against the judgment of this Court noticed above, the
State of Bihar preferred Special Leave Petitions before the Supreme
Court which were dismissed by judgment and order dated 24.10.1997
in the case of State of Bihar Vs. M/s Sheo Narain Jaiswal Pvt. Ltd,
reported in AIR 1998 SC 233. The Apex Court noticed the
arbitrariness in State‟s stand in paragraph 6 of the judgment in the
following words :
" Petitioner 1 has charged from each of the
contractors in one zone the full licence fee calculated at
the rate of Re 1 per L.P. litre based on consumption for
the year 1994-95 in that zone. But according to the
respondents, the licence fee so calculated is for each
zone."
It was further held that the High Court judgment was correct in
holding that in the light of provisions in the tender notice and under
the licence, the total licence fee for the zone was to be realized from
the contractors of that zone in equal proportion. The plea of the State
of Bihar that since the licence fee related to manufacture and sale of
liquor and, therefore, it was open for the State to charge full licence fee
from each contractor in a zone was negatived by the Apex Court on the
ground that "if the tender conditions and the conditions of the licence
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
10
do not so provide, the State will not be able to collect the full licence
fee from each of the licensees/ contractors."
7. After the Division Bench judgment of this Court stood
confirmed by the Supreme Court, the State Government apparently
chose to nullify the said judgments requiring refund of the excess
licence fee with interest, by promulgating the Validating Ordinance
dated 21.2.1998. The ordinance is Annexure-4 and the Act replacing
the same is Annexure-7 in CWJC No.2291 of 1998. Since the
Validating Act is paramateria same as the Ordinance, it will be useful
to refer to the provisions in the Validating Act for deciding the issue of
vires. In the objects and reasons there are four clauses. In the first
clause, it has been reiterated that in the State of Bihar, the grant of
exclusive privilege of wholesale supply of country liquor is governed
under Section 22 of the Bihar Excise Act, 1915. In clause (2), the
provision in clause 2 (kha) of the tender notice for proportionate
licence fee at the rate of Re.1 per L.P. litre on the minimum guaranteed
quota specified for the zone has been mentioned. In clause (3), the
judgments of this Court and of the Supreme Court in the writ petitions
filed by two grantees have been mentioned. Clause (4) runs as follows:
"(4) Under the above circumstances, the existing
system of realization of licence fee at the rate of Re.1 per
L.P. litre from each grantee of a specified zone and to
legitimate the realized licence fee, it has become
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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necessary to validate the said provisions of the Act.
Therefore, necessary provisions have been made in the
Act, enactment of which is the object of this Act."
The objects and reasons noticed above no doubt mention the necessity
to validate provisions of the Bihar Excise Act, 1915 but they ignore an
important fact that the High Court or the Supreme Court did not
declare the demand for licence fee as made by the State, illegal on
account of any lacuna or shortcomings in that Act or on account of
invalidation of any provisions of that Act. That explains vagueness in
the expression- "said provisions of the Act". Three is no clear
indication as to which provision of the Act required validation and
why?
8. The preamble of the Act contains eight clauses. The
preamble runs as follows :
"Preamble.- WHEREAS, the Cabinet had approved
the proposal of the Excise & Prohibition Department
for imposing licence fee on every licensee of the zone at
the rate of Rupee 1 per L.P. litre on the M.G.Q. of the
zone and the tender notice was to be issued
accordingly;
AND, WHEREAS, the tender notice was issued for
the period 1st July 1995 to 31st March 1999 and the
period of supply of country liquor during the first year
being only 9 months the Excise & Prohibition
Department intended to grant a proportionate reduction
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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of licence fee for the shorter period and with this
intention had used the expression on "Samanupatik" in
the tender notice and licence;
AND, WHEREAS, at the time of negotiations of
rates and its determination all the tenderers were fully
aware of the number of tenderers in each zone and the
rate was fixed and agreed upon after including Rs.2 per
L.P. litre for covering the licence fee burden which was
intended to be passed on to the retailer/ consumer;
AND, WHEREAS, The tenderers had accepted the
rate fixed in writing and 13 out of 15 tenderers paid the
licence fee at the rate of Rupee 1 per L.P. litre on
M.G.Q. for the years 1995-96, 1996-97 and 1997-98
and did not challenge the imposition of the said licence
fee;
AND, WHEREAS, only two tenderers filed writ
petitions in the Patna High Court, after depositing
licence fee at the above rate for the period 1995-96 and
all the tenderers supplied monthly liquor at the fixed
agreed rate and passed on the licence fee burden to the
retailer/ consumer;
AND, WHEREAS, the Hon‟ble Supreme Court and
the High Court held that the expression „samanupatik‟,
in the context, meant that the total licence fee for the
zone was to be paid by the licensees of the zone in equal
proportion;
AND, WHEREAS, the Hon‟ble Supreme Court had
held that the State will not be able to charge from each
contractor in a zone the full licence fee unless it is so
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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provided clearly in the tender conditions and the
conditions of licence;
AND WHEREAS, it has become necessary to
validate and impose licence fee in accordance with the
intent of the policy approved by the Cabinet on 13th
June 1995, by rectifying the unintended error in the
tender notice dated 3rd June 1995 and the licences
issued in pursuance thereof, and also to validate the
collection of licence fee already made from each
licencee;
Be it enacted by the Legislature of the State of
Bihar in the forty-ninth year of the Republic of India as
follows :"
9. As is usual with the Validating Acts, sub-section (3) of
Section 1 makes the Act retrospective by providing that the Validating
Act shall be deemed to come into force with effect from 1 st June, 1995.
Vide section 2 of the Validating Act three new sections, namely,
Sections 22D, 22E and 22F have been inserted in the Bihar Excise Act,
1915 after Section 22. For the sake of convenience they are extracted
herein below :
"22D- Grant of exclusive/ special privilege for
bottling/ sacheting and wholesale supply of country
liquor- 1. The State government may grant to any
person/ persons on such conditions and for such terms
and conditions and for such period as it may think fit,
the exclusive/ special privilege for supplying country
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
14
liquor on wholesale basis, after sacheting/ bottling.
There may be more than one grantee in a zone of
supply.
2. No Grantee of any privilege under Sub-section
(1) shall exercise the same unless he has received a
licence in that behalf from the Board of Revenue /
Excise Commissioner/ Collector.
3. A licence fee shall be paid in advance in one
lump sum by each licensee of the zone determined by
the member, Board of Revenue/ Excise Commissioner at
the rate of Rupee 1 per L.P. litre calculated on the basis
of the annual M.G.Q. Additional licence fee shall be
paid by each licensee of the zone if the total wholesale
supply of the country liquor in the zone exceeds the
annual M.G.Q. which would also be calculated at the
rate of Rupee 1 per L.P. litre on the excess quantity.
4. The condition regarding payment of advance
licence fee and additional licence fee as per sub-section
(3) would be deemed to be included in the tender notice
dated 3rd June, 1995 issued by the Excise & Prohibition
Department for wholesale supply of country liquor
during the period 1st July, 1995 to 31st March, 1999 and
would also be deemed to be included in all the licenses
issued in pursuance thereof and any expression, term or
condition to the contrary contained in the tender notice
and licenses would be deemed to be deleted and
substituted accordingly.
22E. Validating of Licence Fee. - 1.
Notwithstanding anything contrary contained in a
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
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judgment/ decree or order of any court, Tribunal or
Authority, advance licence fee in the lump sum on each
licence for wholesale supply of country liquor after
sacheting / bottling granted pursuant to tender notice
dated 3rd June, 1995 issued by the Bihar Excise &
Prohibition Department shall be deemed to have been
imposed on every licence at the rate of Rupee 1 per L.P.
litre calculated on the annual .M.G.Q. and additional
licence fee at the same rate on excess supply shall also
be deemed to have been imposed on every licence of the
zone where the total wholesale supply in the zone
exceeds in the annual M.G.Q.
2. The amount of licence fee collected from the
various licensees at the above rate shall be deemed to
have been validly collected, irrespective of any term or
condition contained in the tender notice dated 3rd June,
1995 and the licence issued in pursuance thereof and
the licence fee so collected shall not be refundable and
no Court, Tribunal or Authority shall order for refund
of such licence fee :
Provided that if any licensee has not paid licence
fee as specified in subs-section (3) of Section 22D under
the order of any Court, Tribunal or Authority the State
Government shall realize the same as arrears of
revenue.
22F. Overriding effect of the Ordinance.-
Notwithstanding anything to the contrary contained in
any judgment, decree or order passed by any court and
in any law for the time being enforce, the provision of
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
16
this Ordinance shall prevail and have effect".
10. Section 3 of the Validating Act provides for repeal of the
Bihar Excise (Amending and Validating) Ordinance, 1998 but saves
actions taken under the same as one under the Validating Act.
11. On behalf of the petitioners it has been submitted that
the challenge to the action of the State in seeking to realize entire
licence fee of a zone from each of the grantees of that zone ignoring
the proportionate clause was not on the ground of invalidity or
inadequacy of any provision in the Bihar Excise Act, 1915 and in fact,
the judgments rendered by this Court and the Supreme Court in the
matter, which have attained finality, have found and held the decision
of the State Government bad only on account of explicit provisions in
the notice inviting tender and the conditions of grant and on account of
lack of fairness, hence, there is no scope to undo such judgments
against the State of Bihar by resorting to legislative powers. In other
words, according to petitioners there can be no valid ground or
justification for enactment of a Validating Act unless a tax or fee is
declared by a court to be illegally collected under an ineffective or
invalid law and only in such a case, the cause for ineffectiveness or
invalidity may be removed under powers available to the legislature
before validation can be effective. Hence, according to the petitioners
there can be no valid or effective validation in the present case where
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
17
the illegality as found by the court emanates from terms of the tender
notice and the grant and on account of unfairness and injustice inherent
in the decision and stand of the State.
12. On behalf of the respondent State a heavy reliance has
been placed upon objects and preamble of the Validating Act to justify
the provisions therein which are supposed to provide lawful basis for
the fee demanded and realized by the State. The stand of the
respondent is that in the business of liquor, the State has absolute
monopoly to grant or not to grant a privilege and to determine the
terms and conditions for such grant, including fees. Therefore, there
could be no issue of fairness or arbitrariness in such matters and
Article 14 of the Constitution has no application in a case of the
present nature. It has further been submitted that the Validating Act
contains provisions which remove the basis on which the judgments
were rendered by the High Court and the Supreme Court against the
State and such provisions are within the legislative competence of
State legislature. Hence, there is no constitutional infirmity in the
Validating Act.
13. The law relating to validating statutes in general is to be
found in a catena of judgments. We can do no better than to quote
paragraph 4 from the judgment of the Supreme Court in the case of
Shri P.C. Mills Vs. Broach Municipality, AIR 1970 SC 192 rendered
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
18
by a Constitution Bench of five Judges :
"4. Before we examine Section 3 to find out
whether it is effective in its purpose or not we may say a
few words about validating statutes in general. When a
legislature sets out to validate a tax declared by a Court
to be illegally collected under ineffective or an invalid
law, the cause for ineffectiveness or invalidity must be
removed before validation can be said to take place
effectively. The most important condition, of course, is
that the legislature must possess the power to impose the
tax, for, if it does not, the action must ever remain
ineffective and illegal. Granted legislative competence,
it is not sufficient to declare merely that the decision of
the Court shall not bind for that is tantamount to
reversing the decision in exercise of judicial power
which the legislature does not possess or exercise. A
Court‟s decision must always bind unless the conditions
on which it is based are so fundamentally altered that
the decision could not have been given in the altered
circumstances. Ordinarily, a court holds a tax to be
invalidly imposed because the power to tax is wanting
or the statute or the rules or both are invalid or do not
sufficiently create the jurisdiction. Validation of a tax
so declared illegal may be done only if the grounds of
illegality or invalidity are capable of being removed and
are in fact removed and the tax thus made legal.
Sometimes this is done by providing for jurisdiction
where jurisdiction had not been properly invested
before. Sometimes this is done by re-enacting
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
19
retrospectively a valid and legal taxing provision and
then by fiction making the tax already collected to stand
under the reenacted law. Sometimes the legislature
gives its own meaning and interpretation of the law
under which the tax was collected and by legislative
fiats makes the new meaning binding upon Courts. The
legislature may follow any one method or all of them
and while it does so it may neutralize the effect of the
earlier decision of the Court which becomes ineffective
after the change of the law. Whichever method is
adopted it must be within the competence of the
legislature and legal and adequate to attain the object of
validation. If the legislature has the power over the
subject- matter and competence to make a valid law, it
can at any time make such a valid law and make it
retrospectively so as to bind even past transactions. The
validity of a Validating law, therefore, depends upon
whether the legislature possesses the competence which
it claims over the subject-matter and whether in making
the validation it removes the defect which the Courts
had found in the existing law and makes adequate
provisions in the validating law for a valid imposition of
the tax." (Emphasis by me)
14. From the aforesaid paragraph it follows that the present
case is not one belonging to the ordinary category which invites
validating statutes because in the present case the court has not held
the fee in question to the invalid because of want of power or because
the statutes or the rules or both are invalid or because they do not
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
20
sufficiently create jurisdiction. The judgments proceed on the basis
that power to levy the fee is available and there is no lack of
jurisdiction. The judgments do not hold the statute or the rules to be
invalid. In such a situation, the primal issue is to decide whether
Validating Act could have been enacted by the legislature of the State
so as to nullify the basis of the judgment of this Court affirmed by the
Supreme Court. The other issue would be whether the contents of
newly added sections 22D, 22E and 22F are within the legislative
competence of the State legislature for rectifying the illegalities
which form the basis of the judgments of this Court and the Supreme
Court. And lastly, whether such provisions in the Validating Act could
be given retrospective effect.
15. Learned counsel for the petitioners has placed reliance
upon several judgments of the Supreme Court in support of his stand
noticed earlier. The judgment in the case of Shri P.C. Mills (supra)
has already been noticed earlier in respect of general features of
validating statutes. The next judgment is in the case of Ahmedabad
Corporation Vs. New S.S. and Weaving Co. Limited, AIR 1970 SC
1292. Paragraph 7 of that judgment reiterates the views expressed in
the case of Shri P.C. Mills. It emphasizes further that the legislatures
under the Indian constitution, within the prescribed limits, have the
powers to make laws prospectively as well as retrospectively. By
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
21
exercise of such powers the legislature can remove the basis of a
decision rendered by a competent court so as to render the decision
ineffective. But no legislature in our country has power to ask the
State or its instrumentalities to disobey or disregard the decisions
given by the courts. In paragraph 9 reliance was placed upon
judgment of the Supreme Court in the case Janpada Sabha,
Chhindwara V. Central Provinces Syndicate Ltd., 1970 (1) SCC 509.
Part of the said judgment has been extracted and it reads thus-
"On the words used in the Act, it is plain that the
legislature attempted to overrule or set aside the decision
of this Court. That in our judgment, is not open to the
Legislature to do under our constitutional scheme. It is
open to the Legislature within certain limits to amend the
provisions of an Act retrospectively and to declare what
the law shall be deemed to have been, but it is not open to
the Legislature to say that a judgment of a court properly
constituted and rendered in exercise of its power in a
matter brought before it shall be deemed to be ineffective
and the interpretation of the law shall be otherwise than
as declared by the Court." (emphasis is mine)
16. In the case of M. M. Pathak Vs. Union of India, AIR
1978 SC 803, a Constitution Bench of 7 Judges declared as void the
Life Insurance Corporation (Modification and Settlement) Act, 1976
on the ground that it offended Article 31 (2) of the Constitution of
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
22
India. As a consequence, the Life Insurance Corporation was declared
bound to obey the Writ of Mandamus issued by the Calcutta High
Court to pay annual cash bonus for the year 1975-76 to class III and
class IV employees.
17. In the case of D. Cawasji and Co. Vs. State of Mysore
1984 (supp). SCC 490, the issue related to constitutionality of Mysore
Sales Tax Amendment Act, 1969 which provided for levy of higher
rate of tax with retrospective effect to nullify the judgment and order
of the High Court for refund of excess amount of tax illegally
collected. On the basis of Articles 14 and 19, the Act was held to be
unconstitutional being unreasonable and arbitrary. The Court further
held that the Act in question could not be considered to be a validating
Act because in words of the Court -
"A validating Act seeks to validate earlier Acts
declared illegal and unconstitutional by courts by
removing the defect or lacunae which led to invalidation
of the law. With the removal of the defect or lacunae
resulting in the validation of any Act held invalid by a
competent court, the Act may become valid, if the
validating Act is lawfully enacted. ........ The
retrospective operation of a validating Act properly
passed curing the defects and lacunae which might have
led to invalidity of any act done may be upheld, if
considered reasonable and legitimate."
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
23
18. In the case of S. R. Bhagwat Vs. State of Mysore,
(1995) 6 SCC 16, the Supreme Court was called upon to test the
validity of certain provisions in the Karnataka State Civil Services
(Regulation of Promotion, Pay and Pension) Act, 1973. The Court
held that the provisions disentitling deemed promotees to the arrears
for the period prior to actual promotion had to be read down as they
were contrary to judgments of competent courts which had attained
finality against the State. It also held that the State legislature could
not simply review and nullify judgments and orders of court which
have become final. In paragraph 13 of the judgment, reliance was
placed upon a Constitution Bench judgment of the Apex Court in the
case of Cauvery Water Disputes Tribunal, Re, 1993 Supp (1) SCC 96
and the following passage was extracted :
"The principle which emerges from these authorities
is that the legislature can change the basis on which a
decision is given by the Court and thus change the law in
general, which will affect a class of persons and events
at large. It cannot, however, set aside an individual
decision inter partes and affect their rights and liabilities
alone. Such an act on the part of the legislature amounts
to exercising the judicial power of the State and to
functioning as an appellate court or tribunal."
In paragraph 15, the Court held as follows :
"We may note at the very outset that in the present
case the High Court had not struck down any
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
24
legislation which was sought to be re-enacted after
removing any defect retrospectively by the impugned
provisions. This is a case where on interpretation of
existing law, the High Court had given certain benefits
to the petitioners. That order of mandamus was sought
to be nullified by the enactment of the impugned
provisions in a new statute. This in our view would be
clearly impermissible legislative exercise." (Emphasis
is mine)
19. In the case of Delhi Cloth & General Mills Co. Ltd. Vs.
State of Rajasthan, (1996) 2 SCC 449, the issue was legal effect of a
Validating Act. In paragraph 17, the Court found that some provisions
existing on the statute book unamended were mandatory and had not
been followed and hence, the defect was not cured by the Validating
Act. On that account the Validating Act was held to be bad in law and
was struck down.
20. In the case of Kerala Samsthana Chethu Thozhilali
Union Vs. State of Kerala, (2006) 4 SCC 327 in paragraphs 22 to 24
the Apex Court held that Article 14 of the Constitution would be
attracted even in the matter of trade in liquor. In paragraph 24, a
passage from another judgment of the Apex Court in the case of
Khoday Distilleries Vs. State of Karnataka, (1995) 1 SCC 574 was
extracted to highlight that -
"when the State permits trade or business in the
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
25
potable liquor with our without limitation, the citizen
has the right to carry on trade or business subject to
the limitations, if any, and the State cannot make
discrimination between the citizens who are qualified
to carry on the trade or business."
21. On the other hand, learned AAG 1 appearing for the
State has placed reliance upon the following judgments of the Apex
Court-
(1) I. N. Saxena Vs. State of M.P.
(1976) 4 SCC 750
(2 Comorin Match Industries (Pvt.) Ltd. V. State of T.N.
AIR 1996 SC 1916
(3) State of Bihar V. Bihar Pensioners Samaj
(2006) 5 SCC 65
22. In the case of I. N. Saxena (supra), a government
servant was compulsorily retired after the attainment of 55 yeas of age.
The challenge to order of compulsory retirement succeeded in the
Supreme Court on account of a lacuna in the fundamental rules. The
said lacuna was removed by promulgation of rules under Article 309
of the Constitution with retrospective effect. This was done prior to
judgment of the Supreme Court but the rules were not brought to the
notice of the Court. Thereafter, the State promulgated an Ordinance
validating the retirement of certain government servants including Mr
I. N. Sexena. The Apex Court held that all the three tests for
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
26
determining validity of a validating law were made and hence, no
relief was granted to Mr Saxena. The three tests noticed in the
judgment are as follows : Firstly, whether the legislature possesses
competence over the subject matter, secondly, whether by validation
the legislature has removed the defect which the courts had found in
the previous law and thirdly whether the validation is consistent with
the provisions of Part III of the Constitution. It was further noticed in
paragraph 20 that the earlier judgment of the Court was not a money
decree and did not raise a judgment- debt. Since the judgment was
merely a declaratory decree, it was held that it did not create an
indefeasible right of property and hence, there was no merit in the
argument that the validating Act sought to acquire property vested in
the appellant without payment of compensation and, therefore, the
impugned Act could not be treated as unconstitutional. Clearly, in that
case the validating Act removed the lacuna in the earlier law and the
Act was found to be within the competence of the concerned
legislature.
23. In the case of Comorin Match Industries (Pvt.) Ltd.
(supra), the Supreme Court set aside assessments under the Central
Sales Tax Act on the ground that excise duty would not be included in
computing turnover. By retrospective amendment the definition of
turnover was amended and assessment was validated by a validating
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
27
Act. In such circumstances, the Apex Court held that the impugned
amendment Act cannot be challenged on the ground that it nullified
judgment of a court. In this case large number of judgments of the
Supreme Court were discussed but, as appears from paragraph 6, the
court found that the result of the provisions in the amending Act and in
particular, a validating provision was to change the law with
retrospective effect and to impart validity to all assessments, made
under the previous law, which had been struck down by the court.
24. Strong reliance was placed on behalf of the State on the
judgment of the Supreme Court in the case of State of Bihar v. Bihar
Pensioners Samaj (supra). In that case the Government of Bihar
issued a notification in the year 1990 revising the provisions regulating
pension, family pension and death- cum- retirement gratuity of its
employees. The notification was made effective from 1st of January,
1986 but the revision of pension thereunder was stipulated to be
merely notional and the financial benefits were to accrue only with
effect from 1.3.1989. Another notification issued in the year 1990 also
sought to rationalize pensionary principles of pre 1.1.1986 pensioners/
family pensioners. This was also made effective in similar terms. A
Division Bench of this Court upheld the right to fix the cut off date but
set aside the notifications at the instance of Bihar Pensioners Samaj
and directed the Government to reconsider as to whether there was any
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
28
justification for the date from which the notification was made
effective. The Supreme Court dismissed the SLP filed by the State.
The reconsideration resulted into enactment of an Act of 2001 passed
by the legislature of Bihar, reiterating cut off dates fixed by the
notifications. The High Court struck down the validation Act on the
ground that it was enacted to nullify the earlier decisions. In appeal,
the Supreme Court considered the only contention raised on behalf of
the respondent- Pensioners Samaj that the fixation of the cut off date
for payment of the revised benefits violated Article 14 of the
Constitution because of being arbitrary. The Supreme Court held the
legislation to be valid because the stand of the State was found
justified and not arbitrary so as to violate Article 14 of the
Constitution.
25. Learned counsel for the State highlighted that although
in the earlier round of litigation no lacuna or defect in the law was
found by the courts but yet the provisions and the validating Act were
upheld although the effect was to nullify the earlier judgments. This
submission is not based upon correct appreciation of the facts and the
issues decided in that case. The High Court judgment which was
upheld by the Supreme Court by dismissal of SLP directed the State to
reconsider the matter and that was the occasion for enactment of the
validating Act which was in substance reiteration of the earlier
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
29
decision but through a statute of State legislature. The only issue was
whether the provisions were arbitrary and, therefore, violative of
Article 14 of the Constitution. On the basis of reasons supplied by the
State, the Apex Court upheld the provisions of the validating Act.
26. Having noticed the various judgments relied upon by
the parties, it is now to be seen as to what is the effect of the validating
Act upon the two grounds on which the demand or realization of
licence fee in question was held illegal by this Court and the Supreme
Court, with a view to find out whether the basis of those judgments
have been so fundamentally altered as to render them ineffective or
not. The first basis was plain meaning of relevant clauses in the notice
inviting tenders as well as the terms of the grant. The second basis was
that the State‟s action was clearly unfair and unjust. This, in other
words, would mean that the view of the State now sought to be
validated through the Validation Act suffered from unfairness,
arbitrariness and must, therefore, be treated as violative of Article 14
of the Constitution of India.
27. So far as the second ground is concerned, it is almost
unconceivable as to how such determination by a competent court can
be denuded of its base by statutory provisions by way of Validating
Act when the findings given by the High Court and not disturbed by
the Apex Court, were on the basis of relevant facts and documents and
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
30
not on account of any legal infirmity or lacuna in the earlier law. The
effect of the demand of licence fee without any regard to provision for
proportionate payment by the licensees in a given zone will still create
the same discrimination between sole licensee of a zone and more than
one licensee in another zone. Such arbitrariness and unfairness as
noticed in paragraphs 13 and 14 of the judgment of the High Court
extracted earlier will continue to exist even if the provisions of
Validating Act are given full force. Hence, it must be held that one of
the important grounds which led to the judgment of the High Court,
still remains valid. The Validating Act cannot cure and has not cured
this defect or lacuna. As a necessary corollary, it must be held that the
judgments of this Court and of the Supreme Court in the case of two
licensees- M/s Sheo Narain Jaiswal and M/s Ellen Breweries &
Distilleries Pvt. Ltd. do not stand nullified because the Validating Act
does not succeed in changing the law so fundamentally so as to take
away the entire basis on which the judgments are founded.
28. So far as the first ground as a basis of the judgments
sought to be nullified is concerned, the Validating Act has inserted
sub-section (4) of Section 22D to create a fiction so as to delete the
stipulation of proportionate payment of licence fee by the grantees in a
zone from the tender notice dated 3rd June, 1995 as well as from the
licenses issued pursuant to that notice. Such a provision is unusual
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
31
because generally validating statutes amend earlier law which suffered
from lacuna or shortcomings and the amendments may include even
creation of a fiction in general as was done in the case of Camorin
Match Industries (Pvt.) Ltd. (supra) by amending the definition of
"Turnover". Such change of law in general would be permissible as
observed in the case of Cauvery Water Disputes Tribunal, Re (supra).
But change of facts of a particular case by creating deeming fiction
through a validating Act to nullify an individual final decision inter-
partes by a competent court would amount to usurpation of judicial
functions by a legislature. That would run counter to well accepted
constitutional scheme of separation of powers between Judiciary and
other organs of State in our country and is clearly impermissible.
29. In the present case the deeming fiction created by
impugned provisions of the Validating Act is in respect of documents
such as tender notice and licence already issued which determined the
course of action for the grantees who relied upon those documents for
entering into business for stipulated gains. The fiction, if allowed to
stand, would result in loss of monetary benefits to which the grantees
became entitled in view of the judgments sought to be avoided. Instead
they would be exposed to fresh liabilities which could not have been
foreseen on the basis of actual tender notice and the licenses issued to
the grantees. Such clear disregard of the rights and liabilities on the
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
32
basis of validly issued tender notice and validly issued licenses, clearly
amount to unfairness and arbitrariness on part of the State. Hence, the
Validating Act and particularly, the provision of the same noticed
above which is meant to fundamentally remove the other ground or
basis in the judgments sought to be nullified are found to be
unconstitutional being violative of Article 14 of the Constitution of
India.
30. No doubt, on behalf of the State it was contended that
Article 14 will have no play in the present case because it relates to
demand of fees in relation to business in intoxicants. This contention,
however, stands no chance of success in view of law laid down by the
Apex Court in the case of Kerala Samsthana Chethu Thozhilali
Union (supra) which has already been noticed. Nobody can claim a
right to carry on trade or business in potable liquor or intoxicants but
once that stage is crossed and grantees are issued with licenses, the
State must be fair and equal to all the grantees. In identical situation,
the State action, in the present matter of demand of licence fee, would
place a sole licensee of a zone in much more advantageous and
privileged position compared to more than one licenses allowed to
operate in another zone. This aspect has been elaborately dealt with in
paragraph 14 of the judgment of the High Court already extracted.
31. Although the fate of the writ petitions stands determined
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
33
on account of findings given above against the fairness and validity of
Validating Act for the purpose of nullifying the concerned judgments
of this Court and the Supreme Court, it is deemed necessary to indicate
that the Validating Act does not meet the requirements of a Validating
Act in the light of judgments of the Supreme Court in the case of D.
Cawasji and Co. (supra). Parts of those judgments extracted earlier
show that an Act cannot be considered to be a Validating Act if it does
not seek to validate earlier Acts or rules declared illegal and
unconstitutional by courts. The retrospective operation of a Validating
Act may be upheld if it is considered reasonable and legitimate. In the
case of S. R. Bhagwat (supra) it was emphasized that for changing the
basis of a decision given by the court, the legislature can change the
law in general so as to affect a class of persons and events at large but
it cannot set aside an individual decision inter partes and affect their
rights and liabilities alone. On the touchstone of the aforesaid
principles, the Validating Act in the facts and circumstances of the
case lacks the essential attributes of a Validating Act. Creation of
fiction with regard to a particular individual tender notice and licenses
issued pursuant thereto, indicates an attempt only to set aside an
individual decision inter partes. Even if it is argued and accepted that
the change in the law is to affect a class of persons i.e. all the grantees
of licenses pursuant to the tender notice in question, still the substance
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
34
and effect of the deeming provision in the Validating Act is not to
bring about change in the law in general but to nullify the judgments
and orders of the Courts in question by asking to look at the existing
facts in a different manner which is function of an appellate court or
tribunal and cannot be exercised by the legislature. If such power is
acceded in favour of legislature, then in a case where State has lost a
property dispute on account of evidence and deeds of title in favour of
the other party, it may by legislative fiction force the courts to re-read
the evidence and deeds of title in a manner different than how they
were read and interpreted by the court. The legislature in India is
subject to Part III of the Constitution. Any statute, including a
Validating Act must pass the test of reasonableness and fairness if it is
made retrospective so as to affect vested rights and interests. Applying
the aforesaid principles, the deeming provision in the Validating Act in
question is found to be beyond legislative competence because of
arbitrariness as well as on account of looking at particular facts of a
case differently for indirect usurpation of judicial function with a view
to nullify judgments and orders of competent courts of law.
32. For all the aforesaid reasons, it is held that the deeming
part of the Validating Act is ultra vires and unconstitutional. Hence, it
cannot nullify the concerned judgments. Since the judgments of this
Court and of the Supreme Court in the case of two licensees- M/s Sheo
Patna High Court CWJC No.2291 of 1998 dt.02-09-2011
35
Narain Jaiswal and M/s Ellen Breweries & Distilleries Pvt. Ltd.
remain to be good, they have to be followed as binding precedents in
these cases also. Hence, it is ordered that only proportionate licence
fee shall be retained by the State of Bihar for the periods in question
and the excess licence fee realized from the petitioners shall be
refunded to them within a period of three months from the date of this
judgment. We are aware that 16% interest on the refundable amount
was awarded under the earlier judgments but that was on account of an
interim order to that effect. In these writ petitions we have not been
shown any such interim order, hence while allowing the prayer for
refund of excess licence fee deposited by the petitioners during the
year 1995-96, 1996-97 and 1997-98, we are not inclined to allow any
interest. However, in case the required refunds are not made within a
period of three months indicated above, the due amount shall become
payable along with interest at the rate of 16% per annum from the date
of this judgment till the date of actual payment. There shall be no
order as to costs.
(Shiva Kirti Singh, J.)
Shivaji Pandey, J.I agree (Shivaji Pandey, J.) The 2nd September, 2011 AFR S.Kumar