Andhra HC (Pre-Telangana)
K. Ramulu And Ors. vs The Deputy Commissioner Of Excise, ... on 2 December, 1963
Equivalent citations: AIR1965AP20, AIR 1965 ANDHRA PRADESH 20
ORDER
(1) This Writ Petition is a sequel to an akbari auction held on 26-8-1963 in respect of the privilege to sell 'sendhi' in the cities of Hyderabad and Secunderabad for the year 1963-64. The petitioners are abkari contractors who have been doing business in partnership in Hyderabad and Secunderabad for over ten years, but they were prevented from taking part in the said auction on the ground that they were defaulters and large abkari arrears were due from them to the Government. The 1st respondent in this Writ Petition is the Deputy Commissioner of Excise, who was the auctioning authority; the 2nd respondent is the Commissioner of Excise (Member, Board of Revenue); the 3rd respondent is the Government of Andhra Pradesh; and respondents 4 to 30 were the successful bidders at that auction, in whose favour the bids were knocked down and leases have been granted.
(2) The sum and substance of the case of the petitioners is that they had been prevented from bidding at that auction by the unjust, arbitrary and illegal action of the auctioning authority and in consequence their fundamental right to carry on trade or business, as guaranteed by Art. 19 (1) (g) of the Constitution, has been infringed. they further challenge the legality and constitutionality of Circular No. 24648/- Ex. 63-E4 dated 17-8-1963, issued by the Commissioner of Excise to the Deputy Excise Commissioner, Hyderabad Division, and of Rule 7 (i) (b) and (ii) of the Rules framed by the Government under the Hyderabad Abkari Act ( No. 1 of 1316 F).
(3) It is common ground that at the auction held on 26-8-1963 the petitioners were not issued hall tickets, with the result that they were effectively prevented from entering the auction-hall and bidding at the auction. The stand taken by the Excise Department is that the petitioners who had taken 'sendhi' shops on lease in previous years, had systematically defaulted in paying the abkari dues and their arrears had mounted to several lakhs ; and the only effective way of preventing the accumulation of further arrears, was to stop defaulters like the petitioners from bidding at abkari auctions. This was done in the interests of public revenue and in the 'bona fide' exercise of the powers vested in the authorities by the Abkari Act and the Rules framed thereunder. It is the further case of the department that as the arrears of excise revenue in the Hyderabad District were of the staggering order of 48 lakhs of rupees by July, 1963, and they remained uncollected in spite of the best efforts of the departmental officials, the Deputy Commissioner of Excise, Hyderabad, sought specific instructions from the Commissioner of Excise as to what was to be done at this year's auction and in reply thereto, the Commissioner sent the impugned Circular. The Circular reads thus :
"Copy of the Board's Circular No. 24648/ Ex. 63-E4 dated 17-8-1963 addressed to the Deputy Excise Commissioner, Hyderabad Division :
Sub : Auctions - Admitting Persons who are in arrears to attend sales - Certain orders requested -
Ref : D. O. Letter from Deputy Commissioner Hyderabad, on Circular No. 9847/ 63/ E2, dated 14-8-1963.
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REFERENCE :
The attention of the Deputy Commissioner of Excise, Hyderabad, is invited to the reference cited and he is informed that it is not desirable to allow defaulters of recent years to bid. Others need not be excluded since it was not done in the past. Any person whose arrears relate to 1960-61 or later may be excluded from this year's auction in Hyderabad District unless he pays off the arrears. This need not apply to other Districts. The Collectors may exercise their own discretion there.
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Assistant Secretary."
It was in pursuance of the instructions contained in this Circular that the Deputy Commissioner had in the instant case refused to issue hall tickets to the petitioners. In the Annexure to the additional counter-affidavit filed by the Deputy Commissioner of Excise, the arrears recoverable from the three writ petitioners are shown. They amount to Rs. 4,88,331-70 nP., out of which the figure for the year 1961-62 is Rs. 1,56,816-26 nP.
(4) I may straightaway say that for purposes of this writ petition, I see no sufficient reason to doubt the correctness of the above statement viz., that the petitioners are defaulters to the tune of several lakhs of rupees. Indeed, in the petition presented by the writ petitioners to the Commissioner of Excise under Rule 9 of the Rules, complaining against the action taken by the auctioning authority and requesting the Commissioner to cancel the auction, the petitioners made a candid admission. The relevant portions of their representation may be extracted :
"The Deputy Commissioner of Excise conducted the excise auctions of Hyderabad and Secunderabad Cities on 26th instant for the year 1963-64. It is necessary to obtain hall tickets before one enters the auction hall for bidding. As usual, we approached the hall ticket issuing authority for tickets. To our great surprise, he refused to issue tickets to us saying that we belonged to Katamraju Company group. We were taken aback by this surprise action of the authorities. We were confused and confounded and so we could not make arrangements for bidding in the auctions through any one of our friends . .. . . . .. .. .. . . . . . . ... . . . . . ... . . . . .. . .. . . .. . . .. .. . .. . . . .. . .. . . . . . . .. . . .. . .. . . . . . . . .. . . . . .. . . . . . . . . . . . . . ... .. . . . . .. . . .. . . . . .. . . . .. . . . . .. . . .. .. .. . ............................ .. .. .. . .. .. . .. . .. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .. . . . . . . .. . . . . .
In spite of our being long standing excise contractors, we were prevented from securing sendhi shops for the years 1963-64 in the auctions conducted on 26th instant. Hence we feel that it was a pre-arranged plan to prevent us from participating in these open auctions.
It is a fact that some of the partners of that Katamraju Company are due to the Government, certain disputed and controversial tree tax since long. Though it was decided once by the concerned Minister, the question was again taken up to him by the so-called defaulters and thus this has been under correspondence. It is but fair that such contractors whose arrears question is in correspondence should be permitted to take part in public auctions, while some chronic defaulters are given the chance to bid in public auctions all over our State.
For the sin of a few so-called defaulters of Katamraju Company, is there any fair play or justice for all the partners of this company to be debarred from bidding in open auctions ? If these so-called defaulters had been infromed beforehand that they would not be allowed into the auction hall, they would have taken the permission from the higher authorities to bid or deposited the tree tax in question under protest with the Government and entered the hall for securing the shops. The information that all the partners of Katamraju Company would not be permitted into the sale hall was given to them just when they approached the authority to issue the hall tickets, that is about half an hour before the commencement of the auctions."
This petition was signed by the three writ petitioners and another person as partners of Katamraju Company.
(5) It is also necessary to mention at this stage that the petitioner filed the above petition before the Excise Commissioner on 22-8-1963 but did not wait for full one month from the date of the auction, within which, under Rule 9 of the Rules, the Excise Commissioner had plenary power to cancel the auction and order a re-auction, but chose to prefer the present writ petition to the High Court on 20-9-1963 and a rule nisi was issued on 24-9-1963.
(6) Now the crucial question for consideration in this writ petition is whether, despite the fact that the petitioners were defaulters and owed large sums of abkari arrears to the Government, they had a legal right to take part in the auction held on 26-8-1963 for the privilege to sell 'sendhi' during the year 1963-64, and whether the abkari authorities were under a legal duty to permit the petitioners to attend the auction and offer their bids.
(7) It was contended by Mr. Bhujanga Rao on behalf of the petitioners that arrears or no arrears, the petitioners had an indefeasible right to participate in the auction because it was a public auction, and the aforesaid Circular issued by the Board of Revenue, and Rule 7 (i) (b) and (ii) of the Rules upon which the action of the auctioning authority was apparently founded, are illegal and unconstitutional. On the other hand, the learned Advocate General appearing for respondents 1 to 3, supported the action taken by the auctioning authority as fully warranted by the Akbari Act and the Rules and argued that the instructions contained in the impugned Circular were intended to protect the public revenue and were within the competence of the Commissioner of Excise by virtue of the powers vested in him under Sec. 3 (i) (a) of the Abkari Act ; and that sub-rules (i) (b) and (ii) of R. 7 are not open to challenge as violative of any of the constitutional rights of the petitioner/s.
(8) The impugned Circular has been extracted supra and it would be convenient here to set out the relevant Rules pertaining to Abkari auctions .
"Government of Andhra Pradesh.
ABSTRACT.
Excise - Conditions governing abkari auctions and other General and Special Conditions relating to sale of intoxicants in Urdu - Correct English transactions - re-issued.
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Revenue (T) Department.
G. O. Ms. No. 1423 Dated the 15th July 1959.
READ : -
G. O. Ms. No. 1469, Revenue dated 5-8-1957.
Read again : -
(1) Govt. Memo No. 13764/ TO BE 57-7, dated 13-3-1959.
(2) From the Board of Revenue (Excise) C. R. No. 238/ Ex/ 59- E 1, dated 2-6-1959.
(3) Board's C. R. No. 238/ Ex/ 59, dated 30-6-1959.
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The following Notifications will be published in the Andhra Pradesh Gazette.
NOTIFICATION In exercise of the powers conferred by Sections 3 and 15 of the Abkari Act (Hyderabad Act 1 to 1316-F) and in supersession of the previous rules and orders on the subject, the Government of Andhra Pradesh hereby makes the following rules.
(BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH) Ram Lal.
Secretary to Government .
RULES CONDITIONS OF THE AUCTION OF THE PRIVILEGE OF SALE OF INTOXICANTS.
No person shall be permitted to bid in the auction without tendering solvency certificate in the prescribed form. If any person is unable to produce solvency certificate, he may tender a bond in the prescribed form with requisite Court-fee stamp, on the basis of which permission to bid may be given, subject to the condition that immediately after a bid is knocked down, the bidder shall remit on the same day one month's rental amount in cash, which shall be in addition to the prescribed earnest money.
Solvency Certificate relating to property situated in the district should be one issued by the concerned Tahsildar and in the Cities of Hyderabad and Secunderabad and the cantonment area, issued by the Collector after verification of the property by the concerned Tahsildar, Solvency Certificate should be issued in the pro forma prescribed by the Excise Department.
Note : Bids shall be offered in terms of monthly rental and not yearly one.
(2) For obtaining a fresh lease, previous solvency certificate shall not be accepted. On the other hand, every year fresh solvency certificates shall have to be tendered. No one shall enter the auction hall without presenting a hall ticket, which may be obtained after tendering the solvency certificate or bond. Hall ticket shall be issued free of cost.
3. No person shall be permitted to bid for an amount exceeding 1/6th of the value of the solvency certificate. Permission to bid exceeding this amount may be given subject to the condition that immediately after the bid is knocked down, the bidder on the same day shall tender a fresh solvency certificate as per Cl. 1 or shall deposit cash to the extent of the excess bid.
x x x x x x 7 (1) The auctioning authority may, at his own discretion reject any person's bid who :
(a) has been convicted for any penal offences or any offence under the Abkari, Opium and Intoxicating Drugs Act ; or
(b) is a debtor to the Government of Andhra Pradesh in the Excise Department, or
(c) has been convicted for breach of any condition of licence.
(ii) The auctioning authority shall be competent to reject any bid without assigning any reasons therefor.
x x x x x x 9 (1) It shall be within the competence of the auctioning authority viz., the Collector of the Districts except Hyderabad District and the Deputy Commissioner of Excise, Hyderabad Division for the Hyderabad District and the Cities of Hyderabad and Secunderabad to knock down bids. Within a month from the date of auction, the Excise Commissioner shall however, be competent to ;
(a) cancel the original auction of any group or shop irrespective of the fact whether the privilege of sale has been affected of the auction-purchaser or not and to order re-auctioning of the shop or group or make any other arrangements regarding the shop or group ;
(b) Cancel reauction in the event of any shop or group being reauctioned and to restore the same to the original auction-purchaser as well as to order payment of damages to the second auction-purchaser from the first auction-purchaser at his own discretion not exceeding one month's rental of the reauction."
(9) Turning to the various contentions raised in support of this writ petition, firstly I am unable to accept the extreme contention that the petitioners had an inherent and absolute right to attend the auction and take part in it. A public auction is hardly a public pastime nor is it a device to enrich private individuals at the expense of public revenue. The primary object of the Abkari Act is to derive revenue by auctioning the right to trade in liquor and 'sendhi' and to achieve this object, the authorities must necessarily have the power to keep out undesirable persons, that is to say, persons whose participation in the auction would be injurious to public revenue. Furthermore the system of issuing hall tickets to eligible bidders, rules out the existence of an unrestricted right in all persons to bid at abkari auctions. If there were such an absolute right, the issue of hall tickets would be reduced to an idle and meaningless formality.
(10) Mr. Bhujanga Rao, however, relied on two decisions as supporting his contention - one a decision of the Patna High Court in Jagat Singh v. State of Bihar, (S) and other a ruling of the Madras High Court in Kannappa Gounder v. District Forest Officer, (1958) 2 Mad LJ 268 : (AIR 1958 Mad 572). Those cases dealt with public auctions but the system of issuing hall tickets to eligible bidders was not present in either of those cases, and I do not understand them as laying down the broad proposition that even chronic and heavy defaulters are entitled as of right to bid at public auctions. In the Patna case intending bidder was shut out from bidding on an irrelevant and extraneous ground: and in the Madras case, the following observations of Ramchandra Iyer, J., who spoke for the Bench, which occur at p. 270 of the report (Mad LJ) : (at pp. 572-573 of AIR) are hardly helpful to the petitioners' contention :
"It is clear that the matter can be looked at from two points of view : (1) exclusion of a member of the public from bidding at the public auction would undoubtedly be detrimental to the public revenue as it not merely prevents the particular individual from making his offer but also leaves the other bidders without a rival bidder who by his participation in the auction would stimulate higher bids. The interests of public revenue therefore require that there should 'ordinarily' be no such exclusion of bidders and (2) in regard to the individual excluded, the exclusion would have the effect of preventing him from purchasing and doing a lawful trade in the goods and in discriminating against him in favour of other people. No person can have the fundamental or inherent right to bid at any public auction. But the essence of a public auction is that it should be open to the public and if 'unlimited power of exclusion' of individuals from such an auction is recognised, the auction would cease to be a public one."
(11) A I understand the judgment, the words 'ordinarily' and 'unlimited power of exclusion' (which I have underlined (here in ' ') in the above passage) furnish the key to the ratio of that decision, and it will be noticed that the emphasis is on the interest of public revenue which is regarded as the paramount consideration, and further it is stressed that individuals should not be arbitrarily shut out from participating in a public auction. It seems to me that the judgment does not recognise an unrestricted right of all and sundry to bid at public auctions, irrespective of their antecedents or solvency, though it does recognise the right of 'bona fide' bidders whose bids are likely to secure the maximum revenue to the State. If it were otherwise, chronic defaulters, who have no intention of honouring their obligations, can raise the bids with impunity and outbid genuine bidders. A kind of Gresham's law would then operate : the bad bidder would drive out the good and public as well as private interests would suffer.
(12) The next target of attack was the Circular issued by the Commissioner of Excise. It was contended that it was 'ultra vires' the powers of the Commissioner and secondly, that it was discriminatory in its effect and as such it offended Art. 14 of the Constitution. There is no force in either of these contentions. Section 3 of the Abkari Act clothes the Commissioner with ample power to issue directions to his subordinate officers in conformity with the policy and purpose of the Act and the instructions contained in the impugned Circular, indubitable fall in that category. The Circular was issued with a view to control and combat the thorny problem of mounting excise arrears and poor collection, and was based on the principle that prevention is better than cure.
(13) Section 3, so far as it is material, provides :
"3. For the purpose of this Act and the administration of Abkari, the Government may -
(1) (a) appoint an officer to be called the Commissioner of Abkari who shall, under the control and subject to the orders, of the Government, be deemed to be the Chief Officer for all matters pertaining to the Abkari revenue and may exercise all powers under this Act or such other powers as are conferred on the Commissioner of Abkari by virtue of any other law and he shall, in like manner, discharge all the duties entrusted to him and is so far as it is not contrary to the intention and purposes of this Act shall have such powers of inspection and control of the work of, issuing instructions to, and hearing appeals against the orders of his subordinate officers, as may from to time be conferred by the Government. So many Assistants shall be appointed under the Commissioner of Abkari as may be sanctioned, from time to time by the Government and the appointment of every such Assistant shall also be made with the sanction of the Government and he shall be entrusted with all such duties as Commissioner of Abkari may assign to him from time to time."
(14) The argument founded on Art. 14 of the Constitution was that there was no rational basis for the distinction made in the Circular between arrears after 1960-61, and before, as also between Hyderabad District and the other Districts in the Telangana area. But it should be remembered that the present Rules governing abkari auctions were published in July 1959 and from that time at least, excise contractors should have known that defaulters would be dealt with severely. Besides, for some time before the present auction, the practice of insisting on solvency certificates from intending bidders, had been discontinued and an alternative method had to be thought of for safeguarding public revenue. As regards the second branch of the argument viz., that so far as the Districts other than Hyderabad were concerned, there was no wholesale ban on defaulters but the matter was left to the discretion of the concerned Collectors, it is to be observed that the excise arrears in Hyderabad District were of the order of 48 lakhs of rupees whereas in all the other Districts put together they amounted to 93 lakhs. It was apparently for this reason that more stringent action was taken in the case of habitual defaulters in Hyderabad District. The Circular does not therefore suffer from the vice of irrational classification.
(15) It was then contended that the Rules do not authorise the auctioning authority to stop an intending bidder at the threshold although his bid may be rejected if he is indebted to the Government. It is true that the Rules do not specifically say that a defaulter is not entitled to a hall ticket but, in my opinion, the power conferred on the auctioning authority to cancel the bid of a person who is in arrear, carries with it the power to stop such a defaulter even from bidding. It is difficult to see what practical difference it would make to a contractor whether he is altogether prevented from bidding or having been allowed to bid, his bid is automatically rejected by the auctioning authority, because he is defaulter. In Guruswamy v. State of Mysore, it was laid down by the Supreme Court that the highest bidder at an auction does not acquire a right to the licence by the mere fact that the contract has been knocked down in his favour, if the acceptance of the bid is subject to confirmation or ratification. Moreover, in the instant case, R. 7 (i) (b) has to be read with the Circular referred to supra.
(16) It was next argued on behalf of the petitioner that R. 7 is invalid inasmuch as it vests an arbitrary and unbridled power in the auctioning authority to accept or reject bids. The Rule reads :
"7 (i) The auctioning authority may, at his own discretion reject any person's bid who :
(a) has been convicted for any penal offence or any offence under the Abkari, Opium and Intoxicating Drugs Acts; or
(b) is a debtor to the Government of Andhra Pradesh in the Excise Department, or
(c) has been convicted for breach of any condition of licence.
(ii) The auctioning authority shall be competent to reject any bid without assigning any reasons therefor."
(17) In my view sub-rule (i) of R. 7 does not give an unfettered discretion to the authority to reject a bid, for the obvious reason that the grounds on which a bid may be rejected, are specified. The discretion given to the auctioning authority is not disregard the sub-rule at will but to pay attention to its spirit rather than to the letter and to use his discretion so as to soften the rigour of the rule in dealing with hard cases e.g., where a person is convicted of a technical offence under the Penal Code or of a minor offence under the Motor Vehicles Act or the Prohibition Act, or where the debt due by a bidder to the Government in the Excise Department, is negligible. If, however, in a given case the discretion is exercised arbitrarily or capriciously, the aggrieved party may approach the Commissioner of Excise for redress under R. 9.
(18) Similarly the power given to the auctioning authority to reject any did without assigning reasons should not be equated with a power to cancel a bid without rhyme or reason, and where the power is misused and a person's bid is rejected for reasons other than those mentioned in sub-rule (i), the error can be corrected by the Commissioner of Excise.
(19) I am therefore of the view that no legal right of the petitioners has been invaded or infringed so as to entitle them to invoke the extraordinary jurisdiction of this Court under Art. 226 of the Constitution. Before seeking privileges under the Abkari Act, the petitioners and the like of them should discharge their legal obligations. It scarcely lies in the mouth of those who play with fire, to complain of burnt fingers. By way of contrast, it is worthy of note that none of the successful bidders viz., respondents 4 to 30, is a defaulter. A writ, order or direction under Art. 225 of the Constitution will issue to remedy a wrong, not to promote one. It will not issue where it is likely to work a public or a private mischief. In the present case I am fully satisfied that the petitioners have not made out a case for the issue of any writ or direction under Art. 226 of the Constitution. In the result, this writ petition fails and is dismissed with costs of the 3rd respondent. Advocate's fee Rs. 100/-
(20) The dismissal of this writ petition does not, however, preclude the petitioners from pursuing such other remedies as are open to them.
(21) Petition dismissed.