05 December 1968
Supreme Court
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P. BHOOMA REDDY Vs STATE OF MYSORE & ORS.

Case number: Appeal (civil) 2095 of 1968


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PETITIONER: P. BHOOMA REDDY

       Vs.

RESPONDENT: STATE OF MYSORE & ORS.

DATE OF JUDGMENT: 05/12/1968

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. SIKRI, S.M. HEGDE, K.S.

CITATION:  1969 AIR  655            1969 SCR  (3)  14  1969 SCC  (1)  68  CITATOR INFO :  RF         1972 SC2205  (26)  D          1984 SC1030  (17)

ACT: Mysore  Excise  (Disposal of Privileges of  Retail  Vend  of Liquors) Rules, 1967, rr. 12, 17(2)(4) and 19(1)(3) and (4)- Liquor  shops in more than one tehsil-Whether r. 19(1),  (3) and  (4) applicable-’At once’ meaning of-Whether  Divisional Commissioner  can  revise his own order-R.  12  Scope  of-R. 17(4), scope of-When next highest bid can be accepted.

HEADNOTE: The  appellant  was  the highest bidder  for  the  exclusive privilege  of retail vend of toddy and arrack for  the  year 1968-69, in a group of 1168 shops situated in 19 tehsils  in the districts of Raichur and Gulbarga.  He made the deposits of  money  required  under rr. 7(f) ’and 10  of  the  Mysore Excise  (Disposal of Privileges of Retail Vend  of  Liquors) Rules, 1967 made under s. 71 of the Mysore Excise Act, 1965. The highest bid of the appellant was accepted and  confirmed by the Divisional Commissioner of Gulbarga under r. 17(1) on June  4,  1968.   Thereafter,  the  appellant  made  further deposits  required  by  rr.  17(5) and  19(2).   In  all  he deposited  about  Rs. 40 lakhs by June 15.  On  June  18  he applied  to  the  Divisional  Commissioner  for  the  issue- licence.   He however, did not comply with r. 19(1) and  (3) which  required  that a statement  of  immovable  Properties should  be furnished and that he should furnish security  or sureties,   respectively.    The   Divisional   Commissioner Gulbarga issued a notice to the appellant to show cause  why the  sale should not be cancelled and the  deposits  already made forfeited under r. 20(2).  The appellant prayed for two months time for compliance with the requirements of r. 19, but the Divisional Commissioner rejected the application and cancelled  the sale.  He did not pass any  order  forfeiting the deposits. The  appellant filed a writ petition in the High  Court  for quashing  the  order  and  under  directions  of  the  Court deposited another Rs. 50 lakhs.  The 4th respondent, who was the  next highest bidder applied to be made a party  to  the

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petition  and contended that the appellant was  a  benamidar for  other  persons  and so acceptance  of  his  tender  was forbidden  by  r.  12.  The High Court  dismissed  the  writ petition holding (1) that the appellant did not comply  with the  mandatory  requirements  of r. 19 in that  he  did  not furnish  the statements and apply ’at once’ for licences  as required by r. 19(1); (2) the appellant was a benamidar; and (3)  the  authorities should consider  the  advisability  of -accepting the bid of the 4th respondent.  On the very  next day  after the judgment of the High Court,  the  respondent- State  issued licences in respect of 1168 shops to  the  4th respondent. In appeal to this Court. HELD  : The licences issued to the 4th respondent should  be cancelled and a writ of mandamus should issue for the  grant of licences to the appellant. [26 A]                              15 (1)(a)  The opening part of r. 19(4) requires the  purchaser to furnish to ’the tehsildar’ the location of shops and  the boundaries of the shop sites that is to the tahsildar within whose  tehsil  the  shops are situated.  If  the  shops  are situated  in more than one tehsil, the details can  be  fur- nished  to the several tahsildars, but in such a case it  is not possible to give effect to the last part of the sub-rule and  also  to the provisions of sub-rr. (3)  and  (4).   The statement  of  immovable properties under the last  part  of sub-r. (1) can be furnished to only one tahsildar so that he can  peruse the same; and on such perusal or on  independent inquiry ascertain under sub-r. (3) whether or not  purchaser is of doubtful solvency and satisfy himself under sub-r. (4) whether or not the value of the immovable property  tendered as  security  is  adequate.  Sub-rr.  (3)  and  (4)  do  not contemplate findings by more than one tahsildar nor do  they provide any machinery for resolving the conflict of opinion, if  any, between two or more tahsildars.  The last  part  of sub-r.  (1) and sub-rr. (3) and (4) do not apply  where  the shops  are situated in two or more  tahsils.   Consequently, those  provisions  were  not attracted to the  sale  in  the present  case and the appellant was not required  to  comply with those provisions. [22 E] (b)  In the absence of ’an independent enquiry under  sub-r. (3),  the  appellant could not be regarded as  a  person  of doubtful solvency. (c)  Under  the Mysore Excise Licences (General  Conditions) Rules, 1967, a licencee is required to commence his business on  July  1.  The expression ’at once’ in  r.  19(1),  means within a reasonable time before July 1. In the present case, the appellant sufficiently complied with subrule. [23 D-E] (d)  Under  r. 17(2) it is only the excise  commissioner  or the  State  Government that could revise the  order  of  the divisional commissioner confirming a sale and the divisional commissioner  himself was not authorised to revise his,  own order or cancel it. [23 G] Therefore,  the High Court was in error in holding that  the appellant committed breaches of r. 19. [Rule  19 is clumsily drafted, its import is not clear,  its tight  time  schedule works hard-ship and its  procedure  is cumbersome.  The Government should immediately consider  the question of redrafting the rule.] [24 C-D] (2)  The appellant was a retired inspector drawing a pension of  about  Rs.  75 per month and, is not  an  income-tax  or wealth-tax  assessee.   He  evidently  has  the  backing  of powerful financiers, but the purchase is not illegal  merely because  the  appellant obtained necessary funds  from  some financiers.   The  onus  of proving  that  appellant  was  a

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benamidar  was on the 4th respondent and from the  materials on record it is not possible to hold that he is a  benamidar for some other person. [25 D] (3)  Under  r.  17(4), it is only when the  highest  bid  is rejected that the next highest bid may be considered.  Where there is an acceptance of the highest offer and ’if for some reason it is revised, r. 17(4) cannot be invoked.  In such a case  there must be a fresh disposal of the right of  retail vend of liquor in accordance with the Rules.  Therefore, the High  Court erred in observing that the ’authorities  should consider the -advisability of accepting the 4th  respondents bid. [26 E]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION: Civil.  Appeal No.  2095  of 1968. 16 Appeal from the judgment and order dated September 17,  1968 of the Mysore High Court in Writ Petition No. 1889 of 1968. D.   Narsaraju, M. C. Chagla, R. V. Pillai, Subodh Markendya and M. Narayana Reddy, for the appellant. M.   C.  Setalvad,  B. R. L. Iyengar and S.  P.  Nayar,  for respondents Nos. 1 to 3. M.   K.  Nambyar,  Shivaswamy  and  R.  Gopalakrishnan,  for respondent No. 4. The Judgment of the Court was delivered by Bachawat J. This appeal raises the question of the  legality of  the  cancellation of the sale to the  appellant  of  the exclusive  privilege of retail vend of toddy and arrack  for the  year  1968-69 in a group of 1168 shops in  Raichur  and Gulbarga districts under the Mysore Excise Act, 1965 and the Mysore  Excise  (Disposal of Privileges of  Retail  Vend  of Liquors)   Rules,  1967.   On  May  10,  1968   the   excise commissioner  of Mysore published a notice stating that  the exclusive  privilege would be sold by tender-cum-auction  by the divisional commissioner, Gulbarga on May 28 and inviting tenders  by May 27.  On May 27, the appellant made a  tender offering  Rs. 9,99,999/- towards the monthly rental  of  the shops and deposited the requisite earnest money amounting to Rs.  1,85,168/-  as required by r. 7(f).  Respondent  No.  4 K.V. Niranjan made a tender offering Rs. 9,69,999/-  towards the  monthly  rental.   The appellant was  the  only  bidder present  at  the  auction on May 28.  His  offer  being  the highest   was  accepted  by  the  divisional   commissioner, Gulbarga,  under r. 17(1).  The appellant deposited  another sum of Rs. 8,14,831/- which together with the earnest  money made  up one month’s rent as required by r. 17(5).  On  June 4, the divisional commissioner, Gulbarga, confirmed the sale under r. 17(1). On  June  6,  the deputy commissioner,  Gulbarga,  issued  a notice asking the appellant to make deposits according to r. 19  immediately  and to obtain licences from  the  concerned tahsil  officers after completing other formalities.   Under r.  19(2) the appellant was required to deposit another  one month’s  rent within 15 days from the date of the sale.   By June  15,  the appellant deposited in  all  Rs.  39,99,996/- amounting  to  4 months’ rent.  By a letter (Ex.   B-1)  the appellant  informed  the  excise commissioner  that  he  had deposited 4 months’ rent as required by circular No. EXE. 1. 15  7  5 issued by the excise commissioner on  December  12, 1967  and asked for permission to obtain licences  from  the deputy commissioners of Raichur and Gulbarga.  On June 18/19 he applied to the divisional commissioner, Gulbarga, for the

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issue   of   licences.   On.   June   19,   the   divisional commissioner, issued a 17 notice to the appellant stating that as he had not submitted a  solvency certificate of his property or the  property  of his sureties he was required to deposit the balance to  make up  six  months’ rent as required by r. 19 (3 ) (i)  and  to furnish  security  for  six months  rental  or  sureties  as require  by r. 19(3) (ii) and (iii) by June 25, and that  in default  action would be taken under r. 20(2).  A notice  to the same effect was given orally on June 19, when he met the divisional   commissioner  at  Bellary.   On  June  22,   he presented  a petition under s. 62 to the,  state  government asking  for the issue of licences, as he had  complied  with the  conditions of the circular.  In view of the  subsequent writ petition the government did not pass any orders on this petition.  The  notice dated.  June 19 was received  by  the appellant  on  June,  23.  On  June  25,  he  wrote  to  the divisional  commissioner stating, that he had complied  with the conditions of the rules read with the, circular and  was entitled to the licences, that he had reason to believe that necessary orders would be passed by the state: government on his  petition under s. 62 and that if necessary,  the  terms for  compliance with the requirements of r. 19 be  extended. by   two   months.   On  the  same   date   the   divisional commissioner,  rejected  the application  for  extension  of time,  and  issued a notice to the appellant asking  him  to show cause before June 26,why in view of the  non-compliance with the notices dated June 6 and 19, the sale should not be cancelled  and  the  deposits already  made  should  not  be forfeited  to the government.  The notice was served on  his advocate on June 25 at 7.40 p.m. On June 26, the.  appellant submitted a petition to the divisional commissioner  stating that  he  had  complied  with the terms of  r.  19  and  the circular, that abrupt cancellation of the sale would  result in  irreparable  injury and that in any event  the  time  to deposit  the balance two, months’ rental be extended  for  a reasonable  time.  By an order dated June 26, (Ex.  J),  the divisional   commissioner  rejected  the   application   for extension  of time and cancelled the sale starting that  (1) the  appellant  did  not "at one&’  apply  in  writing,  for licences  in  accordance  with  r.  19(1);  (2)  though   he deposited two months’ rent as required by r. 19 (2), he  did not  file  a  statement  of  his  immovable  properties   in accordance   with  r.  19(1);  and  should   therefore   be, considered  as  a person of doubtful solvency; (3)  he  was, therefore, required to deposit another 2 months’ rent  under r.  19  (3) (i) and to furnish securities  for  six  months’ rental or surety under r. 1 9 ( 3 ) (ii) and (iii) ; (4)  he failed to comply with r. 19 in spite of notices dated June 6 and’  June  19;  (5)  the  circular  issued  by  the  excise commissioner  was  opposed to r. 19 and could not  be  acted upon;  (6) that even under the circular he was  required  to give  two  months’  collateral security  in  addition  to  4 months’  cash  deposit  if  he was  a  person,  of  doubtful solvency;  and (7) that the sale conducting,officer  has  no power   to   extend  the  time  for  compliance   with   the formalities.. 18 On  June 28, the appellant filed writ petition No.  1889  of 1968  against  the  State of Mysore and others in  the  High ,Court of Mysore for quashing the order dated June 26,  (Ex. Jr) and for the grant of licences to him to vend liquors  in the  combined  groups  of  shops  in  Raichur  and  Gulbarga ,districts  and for other reliefs.  The appellant  submitted

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that  (1) he had complied with the rules read with the  cir- cular;  (2) he did not file any statement of  his  immovable properties under r. 19(1) as he had immovable properties  in Andhra Pradesh; (3) as there was no inquiry nor, finding  by any tahsildar ,that he was of doubtful solvency r. 19(3) was not  attracted; (4) ,the divisional commissioner,  Gulbarga, was not competent to ask for deposits and security under  r. 19(3), nor was he competent to pass an order cancelling  the sale; and (5) r. 19(3) was violative -of Arts. 14 and 19  of the Constitution. On  June 28, the High Court admitted the writ  petition  and ,directed  the state government to stay further  proceedings and  to issue licences to the appellant.   Subsequently  the High  Court ,confirmed the stay order on condition that  the appellant  would  deposit  another two  months’  rent.   The appellant deposited about Rs. 20,00,000/- in accordance with the order.  On June 30, the divisional commissioner  granted licences  to him.  On July 1, he commenced his  business  in all the 1168 shops.  Thereafter he ,duly deposited about Rs. 30,00,000/-  on  account  of rent for the  months  of  July, August  and  September.  The state  government,  the  excise -commissioner and the divisional commissioner filed separate affidavits disputing the appellant’s contentions.  The rival -tenderer,  K. V. Niranjan was added as respondent No. 4  in W.P. No. 1889 of 1968 on his own application under an  order of  the  High Court dated July 7. K. V.  Niranjan  filed  an affidavit  stating  that the appellant was a  benamidar  for other persons and the acceptance of his tender was forbidden by  r. 12.  K. V. Niranjan also filed W.P. No. 2088 of  1968 for quashing the orders of the divisional commissioner dated May  28,  and  June 4, whereby the  appellant’s  tender  was accepted and for a mandamus directing the acceptance of  his next highest tender under r. 17(4). The  two  writ  petitions  were  heard  together  and   were dismissed  by the High Court by a common judgment  delivered on September 17.  The High Court held that (1) the appellant did not comply with the mandatory requirements of r. 19; (2) r. 19(3) -was not ultra vires the rule-making power under s. 71  nor violative of Arts. 14 and 19, and the appellant  was estopped from challenging it; (3) the circular of the excise commissioner could not modify r. 19; the appellant could not rely on the circular as he came to know of it long after the sale,  nor had he complied with its terms by depositing  the entire four months rent before 19 June  12;(4) the appellant was a benamidar for other  person or  persons and in view of r. 12 was incompetent to bid  and (5)  the, order dated June 26 (Ex.  J) was valid.  On  these findings  the  High Court dismissed W.P. No. 1889  of  1968. With  regard  to W.P. No. 2085 of 1968 the High  Court  said that as the sale to the appellant had been cancelled by  Ex. J, it was not necessary to set aside the order accepting and confirming  his bid.  The High Court held that under  r.  17 (4) it was not obligatory on the officer conducting the sale to  accept the next highest offer of respondent No.  4.  The High Court, however, said "in the circumstances of the case, it  is necessary to observe that the  authorities  concerned will  consider the advisability of accepting the bid of  the fourth  respondent,  subject to his complying with  all  the requirements   of  the  Act  and  the  Rules."  With   these observations the High Court dismissed W.P. No. 2085 of 1968. By  a telegram dated September 18, the  excise  commissioner instructed the divisional commissioner, Gulbarga, to  direct the tahsildars of Raichur and Gulbarga to issue licences  to respondent  No. 4 on his complying with certain  conditions.

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On the same date licences were issued to- respondent No.  4. On September 19, the High Court dismissed an application for stay  of operation of its order dated September 17,  and  on the  same day granted to the appellant a  certificate  under Art. 1 3 3 ( 1 ) (b) of the Constitution.  On September  25, the  appellant filed a stay application in this  Court.   On September  27,  the Court passed an  order  restraining  the respondents  from  forfeiting  the  deposits  made  by   the appellant. It  is  convenient at this stage to refer  to  the  relevant provisions  of  the Mysore Excise Act, 1965 and  the  Mysore Excise  (Disposal of Privileges of Retail Vend  of  Liquors) Rules,  1967.   Section 3(1) of the Act  provides  that  the excise   commissioner,  "shall  be  the  chief   controlling authority  in all matters connected with the  administration of  this  Act." Section 15(1) provides that  "no  intoxicant shall be sold except under the authority and subject to  the terms  and conditions of a licence granted in that  behalf." Under S. 15 (2) a licence for sale can be granted (a) by the deputy commissioner if the sale is within a district or  (b) by the excise commissioner if the sale -is in more than  one districts Section 17 ( 1 ) (b) empowers the state government to  lease  to any person, on such conditions  and  for  such period  as  it thinks fit the exclusive or  other  right  of selling  by  the wholesale or by retail any  Indian  liquors within any specified area.  Contravention of the Act or  any Rules made thereunder is punishable under s. 32.  Section 71 empowers the state government to make rules.  Rule 3 of  the Mysore  Excise  (Disposal of Privileges of  Retail  Vend  of Liquors) Rules, 1967 provides that the right of retail  vend of liquors shall 20 be  disposed  of by tender or by auction or  by  tender-cum- auction.    The   auction  is  conducted   by   the   deputy commissioner  or the divisional commissioner under r. 5  and the  tender  has  to be made to them under r.  7  (1).   The tenderer  is  required by r. 7 (f ) to deposit  as,  earnest money  an  amount  equal to 1/4 of the shop  rental  of  the previous year of the shop or groups of shops.  The appellant complied with the requirement of r. 7 (f ). Rule 10 requires an intending bidder or tenderer to furnish a certificate  of his solvency or two sureties having similar certificates  or bank  guarantee  or  cash deposit to cover  four  times  the earnest  money  fixed under rule 7(f).  It is  not  disputed that   the  appellant  made  sufficient  cash  deposits   in compliance  with r. 10.  Rule 12 read & : "Benami  bids  not allowed.  No person except a power of attorney holder  shall be  entitled  to bid for another person." The  sale  to  the appellant  was not cancelled on the ground that he  bid  for another  person.  Rule 17 regulates the procedure at  sales. Rule  17(1) empowers, the officer conducting the auction  to accept the highest offer.  The acceptance is subject to  the condition  of confirmation by the deputy commissioner or  by the divisional commissioner.  The confirmation is  effective unless revised by the excise commissioner or the government. Rule   17(2)  empowers  the  excise  commissioner   or   the government to revise the order of confirmation.  Rule  17(4) provides that if the officer conducting the sale rejects the highest bid or offer, he may either accept the next  highest bid or offer or re-sell the shop.  Rule 17 (5) requires  the person whose bid is accepted to make a further deposit which together  with the earnest money would make up  one  month’s rent.  The appellant made the deposit required by r.  17(5). His  bid  was  accepted  and  was  later  confirmed  by  the divisional  commissioner.  Neither the  excise  commissioner

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nor  the  state government passed any order under  r.  17(2) revising the decision confirming the acceptance of his  bid. Rule 19 provides as follows :-               "19  Successful bidder to apply  for  licence:               Every person to whom the right of retail  vend               of liquors is sold or whose tender in  respect               thereof  has been accepted under  these  rules               and  who  has made  deposits  as  hereinbefore               provided shall               (1)   at once apply in writing for licence for               such  shop confirmed in his name and within  a               week thereafter furnish to the Tahsildar  the,               details of boundaries of the site selected  by               him  for  the  location  of  the  shop  and  a               statement  in the prescribed form  annexed  to               the   notification  showing  details  of   the               immovable  property  possessed by  him  or  in               which   he  has  an  interest  together   with               accurate and full details of encumbrances,  if               any, thereon; 22               (5)   The purchaser shall get the bond and the               mortgage   deed  registered under  the  Indian               Registration Act, 1908    at his expense.               (6)   The   purchaser  or  his  surety   shall               produce  an  encumbrance certificate in  cases               where  immovable property is mortgaged to  the               Governor of Mysore." It  is  not alleged that the appellant did not  furnish  the details  of the shop sites as required by r. 19 sub. r.  (1) within 15 days of the date of the confirmation of the  sale. The appellant made a deposit of two months rent as  required by  r.  19  sub-r. (2).  The appellant  did  not  furnish  a statement of immovable properties under r. 19 sub-r. (1) nor did  not he furnish security or sureties under r. 19  sub-r. (3).  It is also alleged that he did not apply for  licences at  once  as  required  by r. 19  sub-r.  (1).   Rule  20(2) provides : "On failure to comply with the provisions of  rr. 17  and 19 the deposits already made shall be forfeited  and the  right of retail vend of liquors in such shop or  groups disposed of in such manner under these rules, as the  Excise Commissioner may direct".  No order was passed by the excise commissioner under r. 20(2). In  our opinion, the provision of r. 19sub. r.(1)  requiring the  successful  bidder  to  furnish  a  statement  of   his properties to the Tahsildar and the provisions of r. 19 sub- rr.  (3) and (4) do not apply where the shops in respect  of which  the right of retail vend is sold is situated in  more than  one  tahsil.   The opening part  of  r.  19  sub-r.(1) requires  the  purchaser to furnish to "the  tahsildar"  the location of the shops and the boundaries of the shop  sites. The  expression  "the tahsildar" is not defined, but  it  is reasonable  to  think that the details regarding  the  shops should be furnished to the tahsildar within whose tahsil the shops are situated.  If the shops are situated in more  than one  tahsil,  the  details  can  be  furnished  to   several tahsildars.   But it is not possible to give effect  to  the last part of sub-rule (1) and the provisions of sub-rr.  (3) and  (4) in cases where the shops are situated in more  than one tahsil.  The statement of immovable properties under the last  part  of  sub-r. (1 ) can be furnished  to,  only  one tahsildar so that he can peruse the same and on such perusal or on independent inquiry ascertain under sub-r. (3) whether or  not  the purchaser is of doubtful solvency  and  satisfy himself  under  sub-r. (4)whether or not the  value  of  the

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immovable properties tendered as security is adequate.  Sub- rr. (3) and (4) do not contemplate findings by more than one tahsildar  nor do they provide any machinery  for  resolving the  conflict  of  opinion,  if any,  between  two  or  more tahsildars.  In our opinion, the last part of sub-r. (1) and the provisions of sub-rr. (3) and (4) do not apply where the shops are situated in two or more tahsils. 23 The right of retail vend sold to the appellant is in respect of shops situated in 19 Tahsils in the districts of  Raichur and   Gulbarga  Consequently,  those  provisions  were   not attracted to this sale and the appellant was not required to comply with those provisions. The  divisional commissioner, Gulbarga, could not  record  a finding  under  r. 19 sub-r. (3) that the purchaser  was  of doubtful solvency.  Even a tahsildar could not record such a finding  without  making  an independent  inquiry  where  no statement  regarding.  immovable  properties  was  furnished under sub-rule (1).  No independent inquiry under sub-r. (3) was  made  by  any  tahsildar   For  this  reason  also  the appellant  cannot  be  regarded  as  a  person  of  doubtful solvency  and he was therefore not required to  comply  with the  provisions  of sub-r. (3).  The appellant  has  so  far deposited  about  Rs. 90,00,000/- and it  is  impossible  to believe that he is a person of doubtful, solvency. The  remaining  charge  is that the appellant  did  not  "at once"’  apply  for licences.  Rule 20(2)  provides  for  the forfeiture  of  the deposits on failure to comply  with  the provisions  of  r.  19.  Under the  Mysore  Excise  Licences (General  Conditions) Rules, 1967 a licensee is required  to commence his business on July 1. The purpose of the Act  and the Rules is achieved if the application for licence is made within sufficient time so as to enable the issue of licences before  July 1. Having regard to the object of the  Act  and the  Rules  the expression "at once" in r.  19  sub.-r.  (1) means  within a reasonable time before July 1. It could  not have,  been  intended that the deposits would  be  forfeited where the purchaser applies for licence within a  reasonable time.  The appellant sufficiently complied with r. 19 sub-r. (1) by applying under Ex.  B, to the excise commissioner for permission  to  obtain  licences  and  by  applying  to  the divisional  commissioner  on  June  18  for  the  issue   of licences. The  divisional commissioner, Gulbarga was not competent  to pass  the impugned order (Ex, J) cancelling the sale.   Only the excise commissioner or the state government could  under r.  17(2) revise his previous order confirming the sale  and on   such   revision  cancel  the  sale.    The   divisional commissioner,  Gulbarga  was not authorised by r.  17(2)  to revise his own order or to cancel it.  In hi-,, notice dated June 19, the divisional commissioner, Gulbarga, stated  that he  would take action under r. 20(2).  In his  notice  dated June  25, he asked the appellant to show cause why the  sale should  not be cancelled and why the deposits  already  made should  not be forfeited to the government.  But he did  not pass  any  order  forfeiting  the  deposits.   Nor  was   he competent to pass any order under r. 20(2).  Only the excise commissioner could pass such an order. 24 It follows that the High Court was in error in holding  that the appellant committed -breaches of r. 19.  The finding  of the  divisional commissioner, Gulbarga, that  the  appellant committed  such breaches is erroneous, nor was he  competent to  record  the finding or to pass an order  cancelling  the sale.

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In  view of this conclusion it is not necessary to  consider whether  r.  19 sub-r. (3) offends Arts. 14 and  19  of  the Constitution and we express no opinion on the question.   We cannot  agree  -with the proposition that the  appellant  is estopped from challenging the constitutionality and vires of the  sub-rule.   It is true that .r. 24  provides  that  the purchaser  shall  be bound by all the rules.  But if  r.  19 sub-r.  (3) offends Arts. 14 and 19 it is non est and  there can  be no question of the appellant being bound by  a  rule which  does not exist.  Though we express no opinion on  the vires  ,of  the  sub-rule, we must observe  that  r.  19  is clumsily  drafted, its import is not clear, its tight  time- schedule  works hardship and its ,procedure  is  cumbersome. The government should immediately ,consider the question  of re-drafting  r.  19.  It may be noted that  Mr.   Narasaraju conceded that r. 19 is not beyond the rule-making powers  of the state government. The appellant relied on the circular No. EXE.1.1575/67  (Ex. E) dated December 12, 1967.  Exhibit E is a letter from ’the excise  commissioner to the deputy commissioner,  Bangalore, ,,on the subject of securities to be furnished by the excise contractors.  The letter stated that the procedure of r.  19 was   number-some  and  not  clear,  that   several   deputy commissioners sought clarifications on ’the subject and that the state government had -been moved to clarify and simplify the  matter.  The excise commissioner directed that  pending receipt  of  the government order  the  following  procedure should  be followed : In addition to obtaining  two  months’ cash  deposits,  (1)  two  months  cash  security  might  be accepted  and in the absence of cash security  four  months’ collateral  security  might be insisted; (2) if  the  deputy commissioner/tahsildar  was doubtful about the  solvency  of the  contractor -he could insist on six  months’  collateral security and (3) while -accepting the collateral  securities care  should be taken to see that "the  contractor  executed the   necessary   mortgage   bond.    Admittedly,    similar instructions were issued to other deputy commissioners  -and were  enforced in several districts.  There is a dispute  on the ,question whether the circular was sent to the districts of  Gulbarga  and  Raichur.   In  so  far  as  the  circular attempted  to modify r. 19 it was in-effective.  The  excise commissioner,  had  no power to -abrogate or modify  a  rule framed  under  s.  71.  On behalf of the  appellant  it  was argued  that as the chief controlling authority the  ,excise commissioner could frame regulations under S. 3 read with r. 24  and could issue general instructions on the  subject  of taking                              25 security  in  cases  not covered by r. 19.   We  express  no opinion  on  this question, as the  government  has  already withdrawn the circular.  But we must observe that relying on this  circular the appellant deposited two months’  rent  as required by the circular in addition to the two months’ rent as required by r. 19 sub-r. (2) and that such deposits  were duly  made  within  15  days from  the  date  of  the  sale. However,  it is not necessary for the appellant to  rely  on the  terms  of  the  circular.  He  has  complied  with  the provisions  of  r. 19 and the sale in his favour  cannot  be cancelled. On  behalf  of  respondent  No. 4  it  is  argued  that  the appellant  bought the right of retail vend as benamidar  for some other person, that his benami bid was opposed to r.  12 and could not be accepted and that as the sale of liquor  by the  real buyer without a licence in his favour was  illegal in view of ss. 15 and 26, the appellant was not entitled  to

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any  relief in view of the decision in Venkata  Subbayya  v. Attar  Sheik Mastan(1).  The onus is upon the respondent  to prove that the appellant made a benami purchase.  It appears that the appellant is a retired inspector drawing a  pension of  about Rs. 75/- per month.  He is not an income-tax or  a wealth-tax assessee, He does not own any property in  Mysore State.  The appellant says that he owns immovable properties in  Andhra  Pradesh but he did not file the title  deeds  in respect  of them.  However, the appellant was in  possession of  a  large  amount  of ready cash.   Before  June  25,  he deposited about Rs. 40 lakhs and thereafter deposited  about Rs. 50 lakhs.  There can be no doubt that the appellant  has the  backing  of powerful financiers. There is  no  specific charge  that some named person is the real purchaser.   From the  materials on the record it is not possible to record  a finding  that  the -appellant is a benamidar and  that  that some  other person is the real purchaser.  The  purchase  is not  illegal  merely  because  the  appellant  obtained  the necessary funds from some financiers.  The government  never alleged  that  the  appellant’s bid was  a  benami  bid  and opposed to r.  12. His bid was accepted and such  acceptance was subsequently confirmed.  Under r. 17(1) the confirmation is effective until revised by the appropriate authority.  It is  neither alleged nor proved that sonic person other  than the appellant had been managing the shops and selling liquor in  contravention of s. 15.  Respondent No.4 has  failed  to establish contravention of either r. 12 or s. 15.  The  High Court  was in error in holding that the appellants  bid  was opposed to r. 12. Having  regard  to the fact that the appellant  had  already deposited  about Rs. 40 lakhs the  divisional  commissioner, Gulbarga,   acted  rather  precipitately  and   harshly   in cancelling the sale. (1) A.I.R. 1949 Mad. 252. Sup CI/69-3 26 For  the  reasons already given ,the order  of  cancellation (Ex.J)  is invalid.  The order must be set aside and a  writ of  mandamus  must issue for the grant of  licences  to  the appellant. Some  complication arises out of the fact that the  licences have been granted to respondent No. 4 after the disposal  of the,  writ petitions by the High Court.  Licences cannot  be given to both the appellant and respondent No. 4 for  retail vend of liquors in respect of the same groups of shops.   In order to give effect to our order for the issue of  licences in  favour  of  the appellant it is necessary  to  give  the further direction that the licences issued to respondent No. 4  should  be  cancelled.  We can  give  this  direction  as respondent No. 4 is a party to this appeal. While  holding  that  r. 17 sub-r. (4) did  not  compel  the officer conducting the sale to accept the next highest offer of  respondent  No.  4  the High  Court  observed  that  the authorities  concerned should consider the  advisibility  of accepting  his bid.  This observation is not  in  accordance with  law and has given rise to  unnecessary  complications. Rule 17(4) provides that "if the officer conducting the sale rejects  the highest bid or offer, he may either accept  the next highest bid or offer or re-sell the shop." The sub-rule cannot  be  invoked if the officer conducting the  sale  has accepted  the  highest  offer.  In  the  present  case,  the officer  accepted  the appellant’s highest offer  and  later confirmed it.  The confirmation is still effective under  r. 17(1).  If for some reason the confirmation is  subsequently revised or set aside, the officer cannot act under r. 17(4).

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In  such a case there must be a fresh disposal of the  right of  retail vend of liquor in accordance with the Rules.   It follows  that  the  bid of respondent No.  4  could  not  be accepted  under  r.  17(4) after the disposal  of  the  writ petitions on September 19. It is rather surprising that the Government acted so hastily and  issued  licences  to  respondent  No.  4  on  or  about September 18. It is not quite clear how licences in  respect of  1168 shops could be issued on a single day.  The  effect of  this precipitate action on, the part of  the  government was  that the appellant could not on the next day  obtain  a stay  of the operation of the High Court’s order.  There  is ground  for  suspecting that the  government  was  favouring respondent No. 4. In the result the appeal is allowed with costs in this Court and  in the High Court.  The order passed by the High  Court is  set aside.  Writ Petition No. 1889 of 1968  is  allowed. The  order  dated  June  26, 1968 (Ex.   J)  is  set  aside. Respondents  1  and  2 ;ire directed  to  grant  immediately licences  to the appellant to vend liquors in  the  combined groups of shops in Raichur and                              27 Gulbarga  districts  for the remaining period  of  the  year 1968-1969.  Respondents 1 and 2 are also directed to  cancel forthwith the licences issued to respondent No. 4 in respect of the aforesaid groups of shops. Y.P.                                         Appeal allowed. 28