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PETITIONER: RAJA MALLAIAH AND ANR.

       Vs.

RESPONDENT: ANIL KISHORE AND ORS.

DATE OF JUDGMENT25/04/1980

BENCH: REDDY, O. CHINNAPPA (J) BENCH: REDDY, O. CHINNAPPA (J) SEN, A.P. (J)

CITATION:  1980 AIR 1502            1980 SCR  (3) 794

ACT:      Andhra Pradesh  (Lease  of  Right  to  sell  Liquor  in Retail) Rules,  1969-Rule 12  read with  Rules 3  and 4  and administrative  instruction   thereunder,  scope  of-Whether regrouping of 78 shops as a single lot for auctioning at the postponed auction  without recording  reasons  therefor  and holding of  such an  auction within  half  an  hour  of  the decision regarding regroup is contrary to Rule 12.

HEADNOTE:      Under Rule  4 of  the Andhra  Pradesh Excise  (Lease of Right to  sell  Liquor  in  Retail)  Rules,  1969,  made  in exercise of  the powers  conferred upon  the  Government  by section 72 read with section 17, 29, 31 and 64 of the Andhra Pradesh Excise  Act, 1968,  a notification  dated August 20, 1979 was  published in  the District  Gazette, Hyderabad, by the Commissioner  of Excise  Andhra Pradesh, giving a notice of a  proposal to  hold an auction from September 1, 1979 to September 3, 1979, of the right to sell arrack, in retail in respect of  78 arrack  shops in the twin cities of Hyderabad and Secunderabad  during the  Abkari year October 1, 1979 to September 30,  1980. The  notification mentioned that 22 out of 78  shops would  be auctioned  in ten  groups of  two and three shops, while the remaining 56 shops would be auctioned individually.  This  was  according  to  the  pattern  which obtained for  the year  1978-79 for  which year  the auction fetched an  aggregate monthly rental of Rs. 32,99,537-72 np. On  account   of  some   representations  made   by   Excise Contractors in  regard  to  some  conditions  regarding  the bottling of  arrack, the  auction was postponed to September 7, 1979.  Auction was sought to be held on September 7, 1979 and September  12, 1979 but there were no bids. On September 21, 1979,  the Collector (the auctioning authority) followed a peculiar  procedure. First he auctioned 34 arrack shops in Hyderabad  City   individually  and   the  bids  fetched  an aggregate of  Rs. 6,49,700 (monthly rental). Then he put the 34 shops  to auction  as a  single lot but there was no bid. Similarly he  auctioned the  44 arrack shops of Secunderabad city individually  and they  fetched an aggregate bid of Rs. 6,02,100 (monthly  rental). He  then put  the  44  shops  to auction as a single lot, but there was no bid. Thereafter he put the  entire lot  of 78 shops to auction as a single lot. There was no bid. The auction was postponed to September 22,

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1979 and  on  that  day  the  same  peculiar  procedure  was repeated. The  highest bid  for all  the 78 shops in one lot was Rs.  24,00,000/-, while  there were  two tenders for Rs. 15,11,111/11 ps  and Rs.  25,55,555/55  ps.  Therefore,  the tender for Rs. 25,55,555/55 ps. was accepted.      Seventeen persons  who were lessees of the arrack shops in the  twin cities  during the  year 1978-79 filed two writ petitions in  the High  Court of  Andhra Pradesh questioning the auction  held on  September 21,  1979 and  September 22, 1979 on the ground that the Collector had no jurisdiction to auction the 78 shops as one lot, thereby altering the entire pattern of the auction as 795 notified earlier.  It was  pleaded that  the action  of  the Collector was  contrary to  rule 12  of the  A.P. (Lease  of Right  to  sell  Liquor  in  Retail)  Rules,  1969  and  the administrative   instructions    issued   by    the   Excise Commissioner by  which the  Collector was  bound. A  learned single Judge  allowed the  writ petitions and directed a re- auction to  be held  within a  period of  fifteen days.  The present appellants  and some others, as well as the State of Andhra Pradesh  preferred appeals  under clause  15  of  the Letters Patent.  The Division  Bench dismissed  them on  the ground that  there was  a contravention  of Rule  12 of  the Rules as  the auctioning  authority failed to record reasons for grouping the 78 shops in one lot.      Dismissing all the appeals by special leave, the Court ^      HELD :  1. The  scheme of the Andhra Pradesh Excise Act shows that  the Commissioner  is at the apex, as it were, of the Excise  Administrations of  the State.  He is  the Chief Controlling Authority  for all  matters connected  with  the administration of  the Excise Act and has the control of the administration of  the Excise  Department. The Collector who is invested  with the  power to  perform  various  functions under the  Act  is  also  subject  to  the  control  of  the Commissioner. Having regard to the scheme of the Act, it may be presumed  that such functions as are directly assigned to the Commissioner  under the  Rules  are  considered  by  the Legislative delegate  to  be  important  functions  for  the purposes of the Act and if the Commissioner is authorised to issue instructions,  those  instructions  are  meant  to  be obeyed by  the other  authorities constituted under the Act. [803 A-C]      Under Rule  3 it  is the  Commissioner that is invested with the  power to fix the number of shops to be established in an  area,  their  location  and  the  minimum  guaranteed quantity that should be sold in each shop. These matters are required to  be determined  by the  Commissioner before  the auction notice  is published  under R. 4 so that the details may be  incorporated in  the  auction  notice.  The  auction notice has  to specify, among other particulars, the shop or group of  shops in respect of which the lease to sell liquor is proposed  to be  granted by  public auction.  The advance notice is obviously meant to enable the intending bidder and tenderers to make the necessary preparations including vital arrangements regarding  finance, since the successful bidder has to  deposit one  month’s rental  and two  percent of the annual rental  forthwith on  acceptance of the bid or tender and an additional two months rental within fifteen days from the date of auction. [803 D-F]      The fixation  of number  of shops,  the location of the shops and their grouping is considered so important a matter that the  power in  regard to  it  is  vested  in  the  apex authority, the  Commissioner. If  some changes  have  to  be

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made, as  a measure  of emergency such changes also can only be made  in accordance  with the administrative instructions issued on  the subject  by the  Commissioner. Even  so,  the emergency exercise  can only  be undertake  if  reasons  are recorded in writing. The freedom of the auctioning authority to  regroup   and  rearrange   shops  is  thus  deliberately circumscribed. It  is not  for the  auctioning authority  to make ad-hoc experiments on the spot if he decides to regroup the shops. If he desires to regroup the shops, he has (1) to act  in  accordance  with  the  administrative  instructions issued on the subject by the Commissioner, and (2) to record in writing the reasons for the change. [803 G-H, 804 A] 796      It  is   true  that   the   Collector,   as   per   the administrative instructions  issued on June 10, 1975, sought instructions from  the Commissioner  on September  20,  1979 over  the  phone  and  the  Commissioner  did  give  certain instructions on September 21, 1979. All that was said in the instructions dated  September 21,  1979 was  that regrouping might be  done to  get maximum revenue. It did not mean that the instructions  previously in  force were to be ignored or thrown overboard  or that  complete freedom was given to the auctioning authorities  to act at their discretion. All that it meant was that regrouping might be done, if necessary, to get maximum revenue, but such regrouping was naturally to be in accordance  with the instructions already given from time to time. In the earlier instruction dated June 10, 1975, the Commissioner pointed  out that the shops and groups approved by  the  Board  of  Revenue  (Commissioner  of  Excise)  and notified for  auction should be auctioned without disturbing the approved  pattern. Bigger  groups could  be  split  into smaller groups  and auctioned  if the highest rental offered was lower  than the  current rental for the bigger group. It was strictly  stipulated that  approved groups should not be enlarged under  any circumstances  and where groups were re- formed reasons  should be  recorded in  detail. The emphasis throughout was  on  the  splitting  of  bigger  groups  into smaller groups  but was never in the opposite direction i.e. forming bigger  groups in  the place  of smaller groups. The instructions were  definitely against  creation of monopoly. The instructions  dated August  3, 1979 also emphasised this aspect and  expressly  mentioned  that  monopoly  should  be broken as  that would  fetch better  Revenue.  The  specific instructions given on September 20, 1979, i.e. on the eve of the adjourned  auction were that two to four groups might be formed in  the case  of the arrack shops of the twin cities. [806 F-H, 807 A-C]      In the  instant case,  the regrouping  of all  78 shops into a  single group was clearly opposed to the instructions issued  by  the  Commissioner  of  Excise  particularly  the specific instruction  issued  on  September  20,  1979  with respect to  the very  shops in  the twin cities of Hyderabad and Secunderabad.  It was  opposed to  the  earlier  general instruction that  ‘approved groups  should not  be  enlarged under any circumstances’ and monopoly should be avoided. The accident that  the regrouping  fetched a  higher bid  is not sufficient  justification   of  the   departure   from   the administrative instructions which aim at breaking a monopoly in regard  to lease  of excise  shops. The result could well have been otherwise and the bids lower. [807D-E]      The  question  whether  a  provision  is  mandatory  or directory is  not to  be resolved merely by reference to the emphatic or  gentle language  employed in the provision, nor even by  the presence  or absence  of an express stipulation regarding the  consequences of  a breach  of the  provision.

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These are  circumstances of  importance which naturally have to be considered. But one must give greater consideration to the statutory  design and the importance of the provision in the  context  of  that  design.  Generally  one  may  say  a provision which  insists upon recording of reasons before an action is  taken  must  prima  facie  be  considered  to  be mandatory, as it is aimed at preventing arbitrariness. Where the rights of citizens are involved there can be no question that such a provision should be regarded as mandatory. Where the  provision   involves  the   public  interest  also  the provision must  be regarded  as mandatory.  Examined in that light the  Andhra Pradesh  Excise Act  is an Act intended to raise and  secure revenue  to the State, without at the same time sacrificing the public interest involved which requires the regulation of 797 trade in  intoxicants. The  administration of  the  Act  is, therefore,   vested   primarily   and   centrally   in   the Commissioner of Excise who is expected to take a decision on all vital  matters. The  fixation of  the number  of  shops, their  location   and  grouping   are  considered   by   the legislative delegate  to be matters of such vital importance in Excise  administration that  the power in regard to these matters is  vested  in  the  Excise  Commissioner.  In  that setting, the  object of  the rule  is clearly  seen to be to secure strict  compliance with  the arrangement already made by the Commissioner of Excise, the highest authority, and to permit no departure from the arrangement save in exceptional cases, on  the clearest  of grounds. What is involved is the protection of  revenue and what is to be prevented is ad hoc improvisation  which   jeopardises  the   revenue.  That   a particular improvisation  yielded better  results may be the exception which proves the rule. The public interest is thus seen to  be served  in two ways by the recording of reasons, first by  protecting the  public revenue  and next by making public authorities  not to function arbitrarily and also not appear to function arbitrarily. [807 G-H, 808 A-E]      It is  true that  the Government is the exclusive owner of all rights and privileges in regard to intoxicants and no citizen has  any right in regard to them. Here, the question is whether  the Government  having invited  members  of  the public to  participate in  a public auction on certain terms and conditions, it is open to the officer entrusted with the task of  conducting  the  auction  to  vary  the  terms  and conditions publicly announced earlier, without assigning any reasons when  the statutory  rules require  the recording of reasons. Departure  from the rules and failure to record the reasons is  impermissible merely  because no citizen has any right in  the sale  of intoxicants. The situation changes as soon as  statutory provision  and rules  are  made  and  the public is  invited to participate in the auctions to be held as provided  by rules.  Therefore, the requirement regarding recording of  reasons contained  in Rule  12 of  the  Andhra Pradesh Excise  (Lease of  Right to  Sell Liquor  in Retail) Rules, 1969 is mandatory. [808 E-H, 809 A]      To record  the reasons  contemporaneously, that  is  to say, soon  after the  auction was  held is  not proper.  The object of the insistence upon the recording of reasons is to eliminate  arbitrariness.   Reasons,  if  given,  substitute objectivity for  subjectivity. When  reasons are set down in writing greater thought goes into it and greater objectivity is attained.  Where  the  action  to  be  taken  involves  a departure from  what has  already been  decided by  the apex authority and  the public  interest is involved, the reasons required to  be recorded  must be  recorded before  and  not

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after the action is taken. [809 A-C]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal Nos. 3427- 3432 of 1979.      From the  Judgment and  Order dated  22-11-1979 of  the Andhra Pradesh  High Court in Writ Appeal Nos. 367, 368, 397 and 398/79 respectively.      V. M. Tarkunde, P. N. Ramalingam and A.T.M. Sampath for the Appellants in CA Nos. 3429-3432/79.      K. K.  Venugopal and B. Parthsarathy for the Appellants in CA  Nos. 3427-3428/79  and for the State in CA Nos. 3429- 3432/79. 798      S. N.  Kacker, P.  R. Mridul,  R. Satish, V. K. Pandita and E.  C. Aggarwal  for the Respondents 1, 3, 4 and 7 in CA Nos. 3427-3432/79.      The Judgment of the Court was delivered by      CHINNAPPA REDDY,  J.-Apparently there  is big  money in the liquor  business. When,  at the  close of the hearing on Friday 18th  April, 1980,  we asked  M/s. Kacker  and Mridul whether their  clients were  prepared to  deposit or furnish security in a sum of Rs. 35 lakhs in order to guarantee that the bids at a re-auction, if so ordered, would so start that their aggregate  would be  not less  than Rs. 35 lakhs, they agreed with  alacrity. We asked the question as we wanted to satisfy ourselves  about their  bonafides. On a request made on April  21, 1980, we have given them a week’s time to give security to  the satisfaction of the Commissioner of Excise, Hyderabad.      On August 20, 1979, a notification was published in the District Gazette,  Hyderabad, by the Commissioner of Excise, Andhra Pradesh,  giving notice  of a  proposal  to  hold  an auction, from September 1, 1979 to September 3, 1979, of the right to sell arrack in retail in respect of 78 arrack shops in the  twin cities of Hyderabad and Secunderabad during the Abkari year,  October 1,  1979 to  September 30,  1980.  The notification was  published  under  Rule  4  of  the  Andhra Pradesh Excise  (Lease of  Right to  Sell Liquor  in Retail) Rules, 1969,  made in  exercise of the powers conferred upon the Government  by s.  72 read with ss. 17, 29, 31 and 64 of the  Andhra  Pradesh  Excise  Act,  1968.  The  notification mentioned that  22 out of the 78 shops would be auctioned in ten groups  of two  and three  shops, while the remaining 56 shops would be auctioned individually. This was according to the pattern  which obtained  for the  year 1978-79 for which year the auction fetched, an aggregate monthly rental of Rs. 32,99,537.72 ps.  On account of some representations made by excise contractors  in regard  to some  conditions regarding the  bottling  of  arrack,  the  auction  was  postponed  to September 7,  1979. The  first auction was held on September 7, 1979,  when no bids were received for the arrack shops. A second auction  was held  on September  12, 1979  and  again there were  no bids. On September 19, 1979, no auction could be held  as all  the bidders  walked out.  On September  21, 1979, the  Collector (the  auctioning authority)  followed a peculiar procedure.  First he  auctioned 34  arrack shops in Hyderabad  city   individually  and   the  bids  fetched  an aggregate of  Rs. 6,49,700 (monthly rental). Then he put the 34 shops  to auction  as a  single lot but there was no bid. Similarly he  auctioned the  44 arrack shops of Secunderabad city individually  and they  fetched an aggregate bid of Rs. 6,02,100 (monthly rental). He then put the

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799 44 shops  to auction  as a  single lot but there was no bid. Thereafter he  put the  entire lot  of 78  arrack  shops  to auction as  a single  lot. There  was no  bid. There  was  a tender but the tender had to be rejected as the tenderer was not present  in the  auction hall even after an announcement was made  on the  microphone and  the  auctioning  authority waited  for  a  considerable  time.  The  auction  was  then postponed to  September 22,  1979 and  on that day, the same peculiar procedure  was repeated.  The 34 shops of Hyderabad city when auctioned individually fetched bids aggregating to Rs. 6,75,000.  There were also tenders. The aggregate of the highest bid  or tender  for the  different shops came to Rs. 7,78,060/55 ps.  The 44 shops in Secunderabad city were then auctioned individually.  The aggregate  of the  bids came to Rs. 8,30,000.  There were tenders also. The aggregate of the highest bid  or tender  for the  different shops came to Rs. 10,82,885 .27.  Thereafter 34  shops of  Hyderabad city were auctioned as  one lot  and there  was a bid for Rs. 8,00,000 and a  tender for  Rs. 10,55,229.  Similarly the 44 shops in Secunderabad city  were auctioned as one lot and the maximum bid was  Rs. 13,50,000  while two tenders were received, the highest of  which was  Rs.  14,11,111.  The  Collector  then auctioned all  the 78  shops as one lot. The highest bid was Rs.  24,00,000   while  there   were  two  tenders  for  Rs. 15,11,111/11  and  Rs.  25,55,555/55.  The  tender  for  Rs. 25,55,555/55 for all 78 shops was accepted.      17 persons  who were lessees of the arrack shops in the twin cities during the year 1978-79 filed two Writ Petitions in the  High Court of Andhra Pradesh questioning the auction held on  September 21,  1979, and  September 22, 1979 on the ground that the Collector had no jurisdiction to auction the 78 shops  as one lot, thereby altering the entire pattern of the auction  as notified  earlier. It  was pleaded  that the action of  the Collector was contrary to R. 12 of the Andhra Pradesh (Lease  of Right  to Sell  Liquor in  Retail) Rules, 1969, and  the administrative  instructions  issued  by  the Excise Commissioner by which the Collector was bound.      Amareswari, J.,  who heard  the Writ  Petitions in  the first instance,  in a  careful and  well-considered judgment held :  1. The  action of  the auctioning authority grouping all  the  78  shops  into  one  group  was  opposed  to  the administrative   instructions    issued   by    the   Excise Commissioner and  hence contrary to R. 12; (2) the action of the auctioning  authority was  contrary  to  the  rule  also because the  auctioning authority  failed to record reasons, as he  was required  to do  under the  rule before  he could regroup the  shops; and,  (3) the petitioners were not given sufficient time  to make  preparations to bid at the auction of 78  shops as  a single lot since half an hour’s time only was given to them. 800 On those  findings Amareswari J., allowed the Writ Petitions and directed  a reauction  to be  held within a period of 15 days.      The present  appellants and some others, as well as the State of Andhra Pradesh preferred appeals under Clause 15 of the  Letters  Patent.  The  Appellate  Bench  consisting  of Kuppuswamy and  P. A.  Chaudhary, JJ.,  did not  agree  with Amareswari J’s  view that  the auction was contrary to R. 12 read  with  the  administrative  instructions  or  that  the petitioners in  the Writ  Petition were not given sufficient time to  make preparations  for participating in the auction of the  78 shops  as a single lot. They, however, upheld the judgment of  Amareswari J.,  on the  ground that there was a

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contravention  of  R.12  of  the  Rules  as  the  auctioning authority failed to record reasons for grouping the 78 shops into one lot.      It was  argued by  Shri V. M. Tarkunde, learned counsel for  the   successful  bidder-appellants   and  Shri  K.  K. Venugopal, learned  counsel for  the State of Andhra Pradesh that  the  rule  requiring  recording  of  reasons  was  not mandatory and,  in any  case, recording of reasons was not a condition precedent.  The rule  was sufficiently complied by reasons being  recorded immediately  after the auction. Shri Kacker and Shri Mridul, learned counsel for the respondents, urged that  the rule  was mandatory  and that  recording  of reasons was  a condition  precedent to  regrouping of shops. They also  contended the view expressed by Amareswari J., on the other two questions was the better view.      A brief  reference to  some of  the provisions  of  the Andhra Pradesh  Excise Act  and the  Andhra  Pradesh  Excise (Lease of  Right to  Sell Liquor  in Retail) Rules, 1969, is necessary here. S .3 of the Act provides for the appointment of the Commissioner of Excise for the State who is to be the Chief Controlling  authority in  all matters  connected with the administration  of the Act. He is to have the control of the administration  of the  Excise Department. S. 4 provides that the Collector shall exercise the powers and perform the functions assigned  to him  under the  Act, subject  to  the general control  of the  Commissioner. Chapter IV of the Act deals with  the manufacture, possession, and sale of liquor. S. 17  in particular empowers the Government to grant leases for the  supply, manufacture  or  sale  of  any  intoxicant. Chapter VI deals with licences and permits. Chapter IX deals with ‘Appeals and Revisions’. S. 63 provides that any person aggrieved by  an order  passed by any Officer other than the Commissioner  or   Collector  may   appeal  to   the  Deputy Commissioner and  any person aggrieved by an order passed by the Deputy Commissioner or Collector may 801 appeal to the Commissioner. S. 72 empowers the Government to make rules  for carrying  out all  or any of the purposes of the Act.      In exercise  of the  powers vested  in  the  Government under s.  72 of  the Act, the Government has made the Andhra Pradesh Excise  (Lease of  Right to  Sell Liquor  in Retail) Rules. R.  2(vi) defines  "Excise Year"  as a  period of  12 months commencing from 1st October of a year and ending with the 30th  September of  the succeeding  year.  R.  2  (viii) defines "Highest  Bidder"  as  the  person  who  offers  the highest price by bid or tender. R. 2(ix) defines "Rental" as rent payable  in respect  of a  shop or  group of  shops  in consideration of  the grant of lease for the sale of liquor. R. 3(1)  prescribes that every lease of right to sell liquor in retail  shall be  granted by  auction  ordinarily  for  a period or  one excise  year. The  Commissioner is,  however, empowered to  grant a  lease in  any other  manner, with the prior  approval   of  the  Government  if  he  considers  it necessary to do so. R.3(2) is important and it is as follows :           "3(2)  The   Commissioner  shall  be,  before  the      publication of  auction notice  under rule 4, competent      to fix  the number  of shops  to be  established in  an      area, their  location, the total number of excise trees      to be  earmarked to  each shop, the assignment of trees      for tapping,  and the  minimum guaranteed quantity that      should be sold in the case of the arrack shops in every      excise year". R. 4 is also important. It is as follows :

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         "4. Auction Notice:-(1) Whenever it is proposed to      grant the lease for sale of liquor in retail in respect      of a shop or a group of shops, a notice of the proposed      auction containing  the particulars  mentioned  in  sub      rule (2)  shall  be  published,  atleast  ten  days  in      advance of the date of auction, by the Collector of the      district in  the  Andhra  Pradesh  Gazette  or  in  the      District  Gazette  or  in  such  other  manner  as  the      Collector may deem fit :           (Provided that the time limit of 10 days shall not      be applicable in the case of postponed auctions).           (2)  The  auction   notice   shall   contain   the      following particulars, namely-                (i)  the name  or locality of a shop or group                     of shops which sell liquor in the area;                (ii) the place of auction with time and date;                (iii)the  last   date,  time  and  place  for                     receipt of tenders; 802                (iv) the conditions governing the auction;                (v)  the period of lease; and                (vi) any other matter which may be considered                     by the  auctioning  authority  necessary                     for  the   information  of  bidders  and                     tenderers". R. 10  empowers the  Collector or any other Gazetted Officer not below  the rank  of a Deputy Collector authorised by the Collector in  that behalf  to conduct the auction. There are some provisos  with which  we are  not concerned.  R. 12  is vital for the purposes of these appeals and it is as follows :           "12. Auction  of  Shops:-(1)  The  right  to  sell      liquor  may   ordinarily  be   auctioned  shopwise   or      groupwise according  to the  list of  shops approved by      the Commissioner of Excise under Rule 3. The auctioning      authority may  for reasons  to be  recorded in writing,      either regroup any shop or split any group of shops and      re-arrange them  in accordance  with the administrative      instructions issued  on the subject by the Commissioner      at the  commencement of  the auction  or  at  any  time      before the sale is knocked down.           (2) The  Commissioner may  withdraw any  shop from      the auction before the auction is commenced.           (3) The  auctioning authority  may, for sufficient      cause, postpone  the date of auction of a shop or group      of shops." R. 13  regulates the  manner of  submission of  tenders  and bids. A  tender is  to be  opened  only  if  the  auctioning authority decides that the highest bid offered for a shop or group of  shops is  satisfactory. The  tender  may  then  be considered  alongwith   the  highest  bid  offered.  If  the auctioning  authority   considers  that   the  bid   is  not satisfactory and  decides to postpone the auction the tender is to  be opened  at the postponed auction after the bidding is over.  It shall  be at  the discretion  of the auctioning authority to accept or reject any tender or bid but he shall record his  reasons therefor.  R.  16  stipulates  that  the auction purchaser  shall pay  two per  cent  of  the  annual rental as  earnest money together with one month’s rental on the day  of the  auction immediately after the acceptance of the tender  or bid as the case may be. The earnest money and one month’s  rental are  to be  in addition  to the  further deposit, required to be made by R. 18, of two months’ rental in cash  or any  fixed deposit  certificates within  fifteen days  from   the  date   of  auction.   R.  17  enables  the

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Commissioner suo  moto or  on  an  application  made  by  an aggrieved  party   within  seven   days  from  the  date  of acceptance of  bid or  tender, for reasons to be recorded by him in writing, and after giving an opportunity to the 803 party concerned,  to cancel the auction of any shop or group of shops and order a reauction.      The scheme  of the  Act shows  that the Commissioner of Excise  is   at  the   apex,  as  it  were,  of  the  Excise Administration of  the State.  He is  the Chief  Controlling Authority for  all matters connected with the administration of the  Excise Act and has the control of the administration of the Excise Department. The Collector who is invested with the power to perform various functions under the Act is also subject to the control of the Commissioner. Having regard to the scheme of the Act, we may presume that such functions as are directly  assigned to  the Commissioner  under the Rules are considered  by the  legislative delegate to be important functions  for   the  purposes   of  the   Act  and  if  the Commissioner is  authorised  to  issue  instructions,  those instructions are meant to be obeyed by the other authorities constituted under the Act.      Now under  R. 3 it is the Commissioner that is invested with the  power to fix the number of shops to be established in an  area,  their  location  and  the  minimum  guaranteed quantity that should be sold in each shop. These matters are required to  be determined  by the  Commissioner before  the auction notice  is published  under R. 4 so that the details may be  incorporated in  the  auction  notice.  The  auction notice has  to specify, among other particulars, the shop or group of  shops in respect of which the lease to sell liquor is proposed  to be  granted by  public auction.  The auction notice with all these particulars has to be published in the Andhra Pradesh  Gazette or  in the  District Gazette atleast ten days  in advance of the date of the auction. The advance notice is  obviously meant  to enable  the intending bidders and tenderers  to make  the necessary preparations including vital arrangements  regarding finance,  since the successful bidder has  to deposit one month’s rental and two percent of the annual  rental forthwith  on acceptance  of the  bid  or tender and  an additional  two months’ rental within fifteen days from the date of auction.      From the  scheme of  the Act  and the  rules it appears that the  fixation of  the number  of shops, the location of the shops  and their  grouping is  considered so important a matter that  the power in regard to it is vested in the apex authority, the  Commissioner. If  some changes  have  to  be made, as  a measure  of emergency such changes also can only be made  in accordance  with the administrative instructions issued on  the subject  by the  Commissioner. Even  so,  the emergency exercise  can only  be undertaken  if reasons  are recorded in writing. The freedom of the auctioning authority to  regroup   and  rearrange   shops  is  thus  deliberately circumscribed. It  is not  for the  auctioning authority  to make 804 adhoc experiments  on the  spot if he decides to regroup the shops. If he desires to regroup the shops, he has (1) to act in accordance with the administrative instructions issued on the subject  by the  Commissioner,  and  (2)  to  record  in writing  the  reasons  for  the  change.  The  case  of  the respondents is that both these conditions were not fulfilled by the auctioning authority in the present case.      We may  now refer  to the  administrative  instructions issued by  the Commissioner  from time to time in connection

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with the  grouping  and  regrouping  of  arrack  shops.  The earliest of the instructions was issued on June 10, 1975 and it is  common ground  that it  is still in force. It will be useful to extract these instructions in their entirety. The instructions were as follows :           "Collectors are  being advised  every year  of the      policy of  Government regarding  formation of groups of      toddy and  arrack shops.  Accordingly,  Collectors  are      submitting proposals  for approval of the Commissioner.      After scrutiny  of their  proposals, approval  is being      communicated  to  them  for  notification  and  auction      accordingly.      But it  has been  noticed that at times some changes in the grouping  of shops,  are being  made by  the  Collectors without  assigning   reasons,  on   the  eve   of   auction, apparently, in  exercise of  the powers  given in Rule 12 of Andhra Pradesh  Excise (Lease  of Right  to Sell  Liquor  in Retail) Rules  1969. This  procedure is  not in keeping with the instructions.      In many  cases this  exercise of  power has only led to formation of bigger groups, thereby encouraging monopolistic tendencies, loss in revenue and defeat of the policy aims of the Government.  Such an exercise of powers under Rule 12 of Andhra Pradesh  Excise (Lease  of Right  to Sell  Liquor  in Retail) Rules,  1969 with  the object  of  obtaining  higher rentals, has  also received severe criticism on the floor of the Legislative Assembly.      The following  instructions are therefore, renewed once again for strict compliance :      (1)  The shops  and groups  approved by  the  Board  of           Revenue  and   notified  for   auction  should  be           auctioned without disturbing the approved pattern.      (2)  The rentals  offered or tenders received should be           compared  with   the  current   rentals.  If   the           auctioning authority is satisfied that there is no           collusion among bidders for the slightly and lower           bid than that of last year the bid 805           ultimately  received   is  regarded  as  the  best           available one,  the auction  should  be  finalised           recording the reasons.      (3)  In case the highest rental offered is considerably           lower than  the current  rental and the auctioning           authority has  reasons to  believe that extraneous           factors are  influencing the  bids he may exercise           the discretion  vested in  him under  Rule 12  and           split any  group of  shops or  rearrange them into           smaller groups and auction them.                It may  be noted  for strict  compliance that           approved groups  should not  be enlarged under any           circumstances. Where approved groups are re-formed           otherwise, the  reasons for  such action  must  be           recorded in  detail and  the  facts  of  the  case           reported to  the Commissioner  within 10 days from           the date of auction.      (4)  Inspite of  splitting the  notified groups and re-           arranging them  as discussed at (3) above the bids           offered  for  them  are  lower  than  the  current           rentals they  may  be  disposed  of  on  the  best           available bid.  Auctions should  not be  postponed           beyond September of the year in which auctions are           held. Sd/- Anil De                                     Commissioner of Excise". On August  3, 1979  the Excise  policy for  the Excise  year

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1979-80 was announced and the grouping policy was enunciated in these terms :      "Grouping of toddy and arrack shops :           The grouping  policy for  toddy and  arrack  shops      followed for the Excise Year 1978-79 shall continue for      the ensuring  Excise Year  1979-80 with  the  following      modifications.           The arrack  shops which  have been  monopolised by      certain persons,  if they  are fetching low rentals and      are contiguous,  may be  grouped together  provided the      shops are  located  within  a  radius  of  8  kms.  The      auctioning authority  after recording reasons may split      a group,  re-arrange groups or regroup any shops at the      time of auction under Rule 12 of the Auction Rules with      a view  to breaking  monopoly  and  to  achieving  more      revenue or  for other  administrative reasons. Under no      circumstances should  the groups  be split or regrouped      or re-arranged and auctioned if there is any likelihood      of loss of rentals hitherto 806      secured. No shops given to existing Tappers Cooperative      Society and  under Trees  for Tapper  Scheme  shall  be      clubbed with  the Group shops even if they are within 8      Kms. radius". On September  20, 1979,  the District  Collector appears  to have sought,  on the  telephone, specific  instructions with regard to  the auction  of arrack  shops in the twin cities. The instructions  received were  noted in  the note-file and they are  as follows  : "Received  certain instructions from the Commissioner  of Excise  for regrouping  of entire  twin city arrack  shops into two to four groups. As per the above instructions groups  may be  formed". On  September 21, 1979 the  Commissioner   of  Excise  addressed  a  communication, apparently to  all the  Collectors  in  the  State,  to  the following effect :           "The Government  in the reference first cited have      informed that  the auctions  of arrack  and toddy shops      should be  completed by 27th instant positively as 29th      and 30th  happen to  be Public holidays. The Government      have further  directed that  the remaining shops should      be disposed off at the best available bids.           Regarding auction  of  shops,  where  bottling  is      proposed to  be introduced,  where contractors  are not      offering reasonable  bids inspite  of Government having      given   them   maximum   concessions   the   auctioning      authorities may regroup the shops, if necessary, to get      best available bids".      Now, it  will be  seen that  in the  instructions dated June 10,  1975, the  Commissioner of  Excise expressly  drew attention to  the circumstance  that changes in the grouping of shops were being made by the Collectors without assigning reasons and  that such  a procedure  was not in keeping with the instructions  given. He  pointed out  that the shops and groups approved  by the  Board of  Revenue (Commissioner  of Excise) and notified for auction should be auctioned without disturbing the  approved pattern.  Bigger  groups  could  be split into  smaller groups  and  auctioned  if  the  highest rental offered  was lower  than the  current rental  for the bigger group.  It  was  strictly  stipulated  that  approved groups should  not be  enlarged under  any circumstances and where groups  were re-formed  reasons should  be recorded in detail. The  emphasis throughout  was on  the  splitting  of bigger groups  into smaller  groups but  was  never  in  the opposite direction  i.e. forming  bigger groups in the place of smaller  groups. The instructions were definitely against

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creation of  monopoly. The instructions dated August 3, 1979 also emphasised  this aspect  and expressly  mentioned  that monopoly  should  be  broken  as  that  would  fetch  better Revenue. 807 The specific  instructions given on September 20, 1979, i.e. on the  eve of  the adjourned  auction were that two to four groups might  be formed  in the  case of the arrack shops of the twin  cities. Some  argument was  advanced to the effect that the  instructions dated  September 21, 1979 altered the position and  that  liberty  was  given  to  the  auctioning authorities to regroup the shops in any manner they liked to get maximum  revenue. The  instructions do  not warrant  any such conclusion. All that was said in the instructions dated September 21,  1979 was that regrouping might be done to get maximum revenue.  It did  not  mean  that  the  instructions previously in  force were  to be ignored or thrown overboard or  that  complete  freedom  was  given  to  the  auctioning authorities to  act at  their discretion.  All that it meant was that  regrouping might  be done,  if necessary,  to  get maximum revenue,  but such regrouping was naturally to be in accordance with  the instructions already given from time to time.      In the instant case the regrouping of all 78 shops into a single  group was  clearly  opposed  to  the  instructions issued  by  the  Commissioner  of  Excise  particularly  the specific instruction  issued  on  September  20,  1979  with respect to  the very  shops in  the twin cities of Hyderabad and Secunderabad.  It was  opposed to  the  earlier  general instruction that  "approved groups  should not  be  enlarged under any circumstances" and monopoly should be avoided. The accident that  the regrouping  fetched a  higher bid  is not sufficient  justification   of  the   departure   from   the administrative instructions which aim at breaking a monopoly in regard  to lease  of excise  shops. The result could well have been otherwise and the bids lower.      Shri Tarkunde and Shri Venugopal argued that the object of the  requirement that reasons should be recorded under R. 12 was  to enable  the Commissioner  of Excise  to  exercise appropriate   supervisory   powers   over   the   auctioning authority. It  was not  intended to  vest any  right in  the contractors participating  in the auction and so, if reasons were not  given the  contractors could  not  complain.  They urged that  the Government  is the  exclusive owner  of  all rights and  privileges  in  regard  to  intoxicants  and  no citizen had  any justiciable  right in  them. Viewed in that light,  they  submitted,  the  rule  had  been  sufficiently complied with as reasons were recorded first on the 21st and again after the auction on the 22nd September, 1979.      We are  unable to  agree with  the submission  that the requirement regarding  the recording of reason is directory. The question  whether a  provision is mandatory or directory is not to be resolved merely by reference to the emphatic or gentle language  employed in  the provision, nor even by the presence or absence of an express stipulation regarding 808 the consequences  of a  breach of  the provision.  These are circumstances of  importance  which  naturally  have  to  be considered. But  one must  give greater consideration to the statutory design  and the importance of the provision in the context of  that design.  Generally one  may say a provision which insists  upon recording of reasons before an action is taken must  prima facie be considered to be mandatory, as it is aimed  at preventing  arbitrariness. Where  the rights of citizens are  involved there  can be no question that such a

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provision  should   be  regarded  as  mandatory.  Where  the provision involves  the public  interest also  the provision must be  regarded as  mandatory. Examined  in that light the Andhra Pradesh  Excise Act  is an  Act intended to raise and secure revenue  to the  State,  without  at  the  same  time sacrificing the  public interest involved which requires the regulation of  trade in  intoxicants. The  administration of the Act is, therefore, vested primarily and centrally in the Commissioner of Excise who is expected to take a decision on all vital  matters. The  fixation of  the number  of  shops, their  location,   and  grouping   are  considered   by  the legislative delegate  to be matters of such vital importance in Excise  administration that  the power in regard to these matters is  vested  in  the  Excise  Commissioner.  In  that setting, the  object of  the rule  is clearly  seen to be to secure strict  compliance with  the arrangement already made by the Commissioner of Excise, the highest authority, and to permit no departure from the arrangement save in exceptional cases, on  the clearest  of grounds. What is involved is the protection of  revenue and  what is to be prevented is adhoc improvisation  which   jeopardises  the   revenue.  That   a particular improvisation  yielded better  results may be the exception which proves the rule. The public interest is thus seen to  be served  in two ways by the recording of reasons, first by  protecting the  public revenue  and next by making public authorities  not to function arbitrarily and also not appear  to   function  arbitrarily.  It  is  true  that  the Government  is   the  exclusive  owner  of  all  rights  and privileges in  regard to  intoxicants and no citizen has any right in  regard to  them. That is not in question here. The question is whether the Government having invited members of the public  to participate  in a  public auction  on certain terms and  conditions, it  is open  to the officer entrusted with the  task of  conducting the  auction to vary the terms and conditions publicly announced earlier, without assigning any reasons  when the  statutory rules require the recording of reasons. We do not see how a departure from the rules and failure to  record the reasons is permissible merely because no citizen  has any  right in  the sale  of intoxicants. The situation changes  as soon  as statutory provision and rules are made  and the  public is  invited to  participate in the auctions to  be held  as provided  by rules. We do not doubt that  the   requirement  regarding   recording  of   reasons contained in R. 12 of the Andhra Pradesh Excise 809 (Lease of  Right to  Sell Liquor  in Retail) Rules, 1969, is mandatory. It  was argued  that even  if  the  recording  of reasons was  mandatory it  was not a condition precedent. It was   said    that   the    reasons   could    be   recorded contemporaneously, that  is to  say, soon  after the auction was held.  We have grave doubt about the propriety of such a procedure. The  object of  the insistence upon the recording of reasons is to eliminate arbitrariness. Reasons, if given, substitute  objectivity   for  subjectivity.  It  is  common experience that when reasons are set down in writing greater thought goes  into it  and greater  objectivity is attained. Where the  action to be taken involves a departure from what has already  been decided  by the  apex  authority  and  the public interest  is involved,  we cannot  but hold  that the reasons required  to be recorded must be recorded before and not after the action is taken. The language of the rule also supports this conclusion.      Let us  examine if  any reasons  have been  recorded at all. The note file has been produced before us. On September 20, 1979, the note file refers to a telephone message to the

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effect that  the Commissioner was appraised of the situation and that  he had  instructed that the twin city arrack shops should be  grouped into  two to four groups. There is then a note that  viable groups may be formed as per the guidelines given by  the Commissioner.  On September  21, 1979 the note file begins  with the  statement  that  ‘viable  groups  are formed as  per the  guidelines given  by the Commissioner of Excise’. There is then a narration of events that took place that day,  written by  the Excise  Superintendent, signed by him and  countersigned by  the Collector. The note refers to the fact  that the  arrack shops  were first  put to auction individually, then  in two  and then  in a  single lot.  The aggregate of  the bids  is noted.  It is then mentioned that the auction  is adjourned  to September  22, 1979.  There is nothing to  indicate why  a  departure  was  made  from  the grouping that  was  announced  in  the  original  notice  of auction. The  note made on September 22, 1979 was admittedly written (it  is typed)  after the  auction on  September 22, 1979. This  note also merely narrates what took place. It is mentioned  that   the  shops   were  put  to  auction  first individually, then  in two groups, and finally as one group. The last paragraph of the note is as follows :           "As the  prospects to  achieve reasonable  bids on      small ten  groups and (56) individual shops and also on      2 groups  called Hyderabad  and Secunderabad  were  not      foreseen then  all the  (78) shops  were grouped in one      group and  called as Twin Cities group. The bids amount      offered was  Rs. 24,00,000/- and the 2 tenders received      offered Rs.  15,11,111/11 and  of Rs. 25,55,555/55. The      highest tender of Rs. 25,55,555/55 is considered as the 810      best available  bid and  the auction of the Twin Cities      Group consisting  (78) shops  is  finalised  by  me  in      favour of Sri Rajamallaiah and others on 22-9-1978". Thus it  is seen  that no  reasons at  all were mentioned on September 21,  1979 and  even on  September 22,  1979,  such reason as  had been  given was  ex-post facto and was not in accordance with  the administrative  instructions issued  by the Commissioner  of Excise.  The general instructions given earlier on  June 10,  1975 and August 3, 1979 that ‘approved groups should  not be  enlarged under any circumstances’ was flouted. The  instruction given  on September 20, 1979, with express reference  to the  arrack shops  of the  twin cities though mentioned in the note file both on September 20, 1979 and September  21, 1979  that the  shops may be grouped into two to four groups’ was ignored on September 22, 1979.      We also  notice that  the allegation of the respondents that they  were given  but half  an hour’s time on September 22, 1979,  to prepare  for the  auction of  the shops  as  a single group was not controverted. Having regard to the fact that the  rules required  large deposits  to be  made it  is impossible to  hold  that  half  an  hour’s  time  could  be considered sufficient by any stretch of imagination.      We have  already recorded  the undertaking given by the respondents that  they would  give security  of Rs. 35 lakhs within one  week from  April 21,  1980 and  that they  would start the  bids at  the re-auction  in such  a way  that the aggregate of the bids would not be less than Rs. 35 lakhs.      For the  aforesaid reasons  we confirm  the decision of the Andhra  Pradesh High  Court and  dismiss all the appeals with costs.  The re-auction  will be held within three weeks from today  and until  the new  auction purchasers take over the present appellant will continue to run the shops. S.R.                                      Appeals dismissed. 811

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