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Put very shortly, the essential facts are these. On March 11, 1969, the Deputy Excise & Taxation Commissioner, Hissar held an auction for grating the right to sell country liquor for Mandi Dabwali for the year 1969-70 at the Collectorate. At the commencement of the auction, the Deputy Excise & Taxation Commissioner had read out the auction announcements and conditions of auction as required under r. 36(4) of the Punjab Liquor Licence Rules, 1956 ('Rules' for short). The respondents Messrs Lal Chand Bal Raj etc. offered the highest bill of Rs. 10,11,000 and their bid was provisionally accepted by the Deputy Excise & Taxation Commissioner and they were declared to be the highest bidder as required under r. 36(22) of the Rules. Subsequently, the bid was accepted by the Excise & Taxation Commissioner exercising the powers of the Financial Commissioner on March 21, 1969 as required under r. 36(22) of the Rules. The respondents however failed to deposit Rs. 50,550 as security amount as required under r. 36(22A) and thereby contravened condition No. 15(i) of the conditions of auction and r. 36(23) of the Rules. They were accordingly served with a notice dated April 9, 1969 by the Deputy Excise & Taxation Commissioner requiring them to show cause why the licence for country liquor vend, Mandi Dabwali should not be put to re-auction under r. 36(23A) of the Rules and the deficiency in price and all expenses of such re-auction recovered from them in the manner laid down in s. 60 of the Punjab Excise Act, 1914. in response to the same, the respondents by their letter dated April 12, 1969-tried to wriggle out of their contractual obligations by saying that before the auction it was announced that no wine shop shall be opened within a radius of three miles of liquor vend, Mandi Dabwali, but across the border the State Government of Punjab had sanctioned the establishment of a Iiquor shop at village Killianwali which was hardly 2-1/2 miles from the State border and this would mean that there would be two country liquor shops one at Mandi Dabwali in the State of Haryana and the other at village Killianwali in the State of Punjab and this was in breach of condition No. 13(iii) read with r. 37(8B) of the Rules, as applicable to the State of Haryana. Upon this basis, the respondents represented that before requiring them to deposit the security amount, they should be given an assurance that no other liquor shop would be opened.

Although in the show-cause notice, the respondents were intimated that in case they desired to be heard in person, they should appear before the Deputy Excise & Taxation Commissioner at Chandigrah on April 14, 1969, but none of them turned up on that date. On the same day, the Deputy Excise & Taxation Commissioner rejected the representation of the respondents and directed re-sale of the licence for retail vend of the country liquor shop at Mandi Dabwali for the year 1969-70 under r. 36(23) of the Rules. The respondents have purposely kept back the reply that they received from the Deputy Excise & Taxation commissioner conveying the rejection of their representation which intimated to them that the licence for retail vend of country liquor shop at Mandi Dabwali would be re-auctioned on April 23, 1969 at the Collectorate, Hissar. By his letter dated April 15, 1969 addressed to all the Excise & Taxation Officers in the State, the Deputy Excise & Taxation commissioner forwarded the notice of re-auction asking them to give wide publicity to the notice alongwith the announcements to be made at the time of re-auction. Copies of the circular letter and the notice of re-auction were sent not only to the commissioner, Ambala and all the Deputy Commissioners in the State but also to the Chief Secretaries and the Excise Commissioners of different States and they were also requested to give wide publicity in their States regarding the re-auction of the licence. At the time of re-auction held on April 23, 1969, there were as many as 52 bidders and ultimately the liquor vend, Mandi Dabwali was re-sold at the highest bid of Rs. 6,65,000 for the remaining part of the financial year. On May 8, 1969, the respondents were served with a notice of demand of Rs. 3,46,000 representing the loss on re-sale. The High Court by the judgement under appeal, quashed the notice of demand following the decision in Kanhiya Lal Bhatia & Co. v. State of Haryana & Ors.

Civil Appeal No. 154 (N) of 1971 There is no substance in the contention that the respondent were not served with a notice under r.36(3) of the Rules. The date of reauction was fixed by the Excise & Taxation Commissioner under r.36(2). On April 14, 1969, the Deputy Excise & Taxation Commissioner rejected the representation made by the respondents and directed resale of the licence for retail vend of country liquor shop, Mandi Dabwali for the year 1969-70. It is accepted before us that the Deputy Excise & Taxation Commissioner had conveyed to the respondents that their representation had been rejected and that the Iicence for retail vend for Mandi Dabwali shop would be reauctioned on April 23, 1969, at the Collectorate, Hissar. The respondents have withheld the document and an adverse inference "must necessarily be drawn against them. It is quite obvious that the respondents were duly given notice of re-auction as under r.36(3). It is evident from the return filed by the State Government that copies of circular letter dated April 15, 1969 by the Deputy Excise & Taxation Commissioner and the notice of re-auction, of even date issued by him were vent not only to the Commissioner, Ambala but to all the Deputy Commissioners as well as to all the Excise & Taxation officers in the State but also to the Chief Secretaries and the Excise Commissioner of different State. From this, it is quite apparent that wide publicity was given throughout the State of Haryana as well as in other State regarding the date and place of re-auction as enjoined by r.36(3) of the Rules. As already stated, there were as many as 52 bidders present at the time of re-auction. The decision in Jage Ram's case supra is clearly distinguishable on facts. There, the Court on a consideration of the material on record found that there was nos substantial compliance either in the letter or in spirit with the requirements of r.36(3) of the Rules. Since the re-auction in that case did not conform to the rules, the Court held that the defeating bidders could not be held liable to make good the difference between the amount which was payable by them and the amount which was fetched at the re-auction. The principle laid down in Jage Ram's case, supra is clearly not attracted in the facts and circumstances of the present case. The first contention regarding the invalidity of reauction held on April 23, 1969 based on r.36(3) of the Rules must therefore fail.

The respondents could not. unilaterally by their letter dated April 12, 1969 rescind the contract on the pretext that the State Government of Punjab hail opened 2 new Iiquor shop at village Killianwali across the State border which was contrary to condition No. 13(iii) of the conditions of auction read with r. 37(8B) of the Rules. Even though this may have been in breach of the inter-State agreement between the State Governments of Punjab and Haryana, the opening of such a liquor vend by the State Government of Punjab at village Killianwali could not justify the respondents in not making the security deposit of Rs. 50,550. It appears from the return filed by the State Government that although condition No. 13(iii) had been read out before the auction began as required under r. 36(4), there was no mention that there was an inter-State agreement between the two State Governments and that it was a condition of sale that the State Government of Punjab would not open a liquor vend within a radius of three miles from the State border. Nor would this amount to a breach of the conditions on the part of the State Government of Haryana or furnish a ground absolving the respondents of their liability to pay the shortfall. The second contention that the respondents had withdrawn their bid and were therefore not liable for the loss of re-auction of liquor vend at Mandi Dabwali cannot be sustained.