http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 11  

CASE NO.: Appeal (civil)  6425 of 2002

PETITIONER: Secretary, Department of Excise & Commercial Taxes & ors.        

RESPONDENT: M/s. Sun Bright Marketing Pvt. Ltd.Chhattisgarh & Anr.   

DATE OF JUDGMENT: 12/02/2004

BENCH: CJI, S.B. Sinha & S.H. Kapadia

JUDGMENT: JUDGMENT

S.B. SINHA, J:

       The judgment of the Chhattisgarh High Court dated  4.4.2001 passed in Writ Petition No. 6021 of 2000 granting  exemption from payment of licence fee is in question before  us in this appeal.   

       The respondent herein was awarded a contract for  running Indian Made Foreign Liquor shops in the district of  Raipur for the period commencing 1.4.2000 to 31.3.2001.   Although the contract was to commence from 1.4.2000, he had  been handed over the licence on 3.4.2000.   

       The respondent claimed deduction by way of remission  and/ or compensation from the amount of licence fee payable  by him for three periods for different reasons which are:

(i)     For closure of shop due to holding of municipal  election at several places wherefor the liquor  shops situated within a radius of 25 kilometers  from the Municipal Corporation of Durg and Bhilai  were directed to be closed. (ii)    For closure of shop for five days consisting of -  three days due to agitation on account of  constitution of Chhattisgarh State, one day owing  to strike with regard to constitution of High  Court Bench at Raipur and one day on account of  strike on Kargil issue. (iii)   For non-grant of the licence from 1st April,  2000 to 3rd April, 2000.

       The High Court in its judgment held that the respondent  was entitled for compensation and/ or exemption from   payment of licence fee for three days when the liquor shops  remained closed due to political agitation and  demonstration.  He was also found to be entitled for  compensation and/ or exemption from payment of licence fee  for a period of three days for the period when the shops  were directed to be closed for municipal election.  The High  Court further held that the respondent was also entitled to  exemption from payment of licence fee for three days, i.e.,  for the period from 1st April, 2000 to 3rd April, 2000 on  account of delay in handing over the licence.

       Mr. Prakash Shrivastava, learned counsel appearing on  behalf of the State would urge that the respondent herein

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 11  

was not entitled to any compensation and/ or remission in  licence fee for closure of his shops owing to holding of  election of municipal corporation at Raipur in view of the  provisions contained in Sub-Section (1) of Section 24 of the  Madhya Pradesh Excise Act, 1915 (for short "the Act") as  in terms thereof the District Collector is empowered to  direct closure of such shops for maintenance of public  peace.   

       The learned counsel would argue that closure of shops  due to political agitation and demonstration cannot give  rise to any claim for compensation in view of condition No.  18 of the Sale Memo as also General Condition No. 8.

       So far as the judgment of the High Court directing  payment of compensation for the period 1st April, 2000 to  3rd April, 2000 is concerned, Mr. Shrivastava would argue  that the same is impermissible under the provisions of the  Act.  

       Mr. P.N. Mishra, learned counsel appearing on behalf of  the respondent, on the other hand, would urge that from a  perusal of the note appended to Clause (V) of the conditions  laid down in Schedule-4 of the Sale Memo, it would be  evident that there was no embargo for claiming payment of  compensation as in terms thereof only those shops, which  fall within the area of the local bodies, where election was  to be held, were required to be compulsorily closed.

       Mr. Mishra would further submit that having regard to  the proviso appended to Sub-Section (2) of Section 24 of the  Act, a statutory duty was cast upon the licensee to close  down his shop in the event of any riot or unlawful assembly  takes place and in that view of the matter, the licensee was  entitled therefor to claim exemption and/ or remission from  payment of licence fee.    

       The learned counsel would submit that Rule VIII (3) of  the General Licence Conditions whereupon the learned counsel  for the appellant has relied upon will have no application  in the instant case.  He would urge that Rule VIII of the  General Licence Conditions will have no application in a  case where closure is forced upon the shop by reason of a  political agitation which would be apparent from the fact  that a similar embargo contained in Condition No. 42 of the  Sale Memo had been deleted.  Mr. Mishra would, therefore,  submit that the finding of the High Court cannot, thus, be  faulted as while granting relief to the respondents herein  all the relevant provisions of the Act, the General Licence  Conditions and the conditions laid down in Sale Memo had  been taken into consideration.   

       Mr. Mishra would further contend that as the respondent  was not legally entitled to run the shop for the period   1st April, 2000 to 3rd April, 2000, as no licence was  granted to him, it must be held that the licence remained  suspended for the said period and in that view of the matter  the High Court must be held to have correctly arrived at the  conclusion that the respondent was entitled to grant of  remission in payment of licence fee for the said period.

STATUTORY PROVISIONS:

       Section 24 of the Act reads as under:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 11  

"24. Closing of shops for the sake of  public peace \026 (1) The District  Magistrate, by notice in writing to the  licensee, may require, that any shops in  which any intoxicant is sold shall be  closed at such times or for such period  as he may think necessary for the  preservation of the public peace.

(2). If a riot or unlawful assembly is  apprehended or occurs in the vicinity of  any shop, a Magistrate of any class, who  is present, may require such shop to be  kept closed for such period as he may  think necessary:

       Provided that, when any such riot  or unlawful assembly occurs, a licensee  shall, in the absence of the Magistrate,  close his shop without any order.

(3). When any Magistrate issues an order  under sub-section (2), he shall  forthwith inform the Collector of his  action and his reasons thereof."

       Rules II and VIII of the General Licence Conditions  read as under:

"II. Payment of fees \026 (1) the licence  fees for all intoxicant shall be payable  at the treasury or, in outlying tahsils,  at the sub-treasury, on or before the  first working day of each month.

(2) The licence fees for intoxicating  drugs and country liquor shall be paid  in twelve equal monthly instalments.  If  a licence fee be not exactly divisible  by 12, the remainder left over after  division by 12 shall be paid with the  first instalment.

(3) No remission or abatement shall be  claimable except in accordance with the  provisions of Section 32 of the Act, or  of rule VIII below.  An advance  deposited as security shall be credit to  fees due in the closing months of the  year."

"VIII. Shops to be kept open and  adequately stocked. \026 (1) Shops shall be  kept open every day throughout the year  unless their temporary or permanent  closure has been authorised by the  Collector.  Such supply of liquor or  intoxicating drugs as the Collector may  consider sufficient to meet the local  requirement shall be maintained.   Subject to the provisions of section 38  of the Act, and to the exceptions  specified in rule XIV, sales be made to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 11  

all comers on payment at the current  rate of sale.  Shops for the sale of  tari may be closed during the rains,  i.e. from 1st June to the 14th  October.

(2) Shops shall remain closed for the  whole day on such days as the Collector  may announce at the time of auctions:

Provided that the Collector, or District  Excise Officer, or in their absence a  Deputy Collector, duly authorised by the  Collector, may require foreign liquor  licensees holding licenses in Forms F.L.  1 and F.L. 2 to open the shops on such  days for sale of foreign liquor to bona  fide foreign visitors.

(3) Shops shall also remain closed in  any area or areas for such period as the  State Government may in public interest  deem necessary so to do.  An intimation  to the effect shall be given to the  licensee through the Collector of the  district well in advance as far as  possible:

Provided that, when a shop is closed  under this rule, the Collector may, with  the previous sanction of the Excise  Commissioner, award compensation to the  licensee for loss of profits."

       The relevant clauses of Schedule-4 appended to Sale  Memo are as under:

"(IV) In addition to this, the  Collector shall have power in  administrative and public interest to  issue orders for closure of any one or  more shops of any place or all the shops  of Tehsil or Distt. for additional 3  days and the shops shall remain closed  accordingly.

(V) During Lok Sabha and Assembly  General Elections/ by elections, the  shops shall remain closed for 48 hours  before the time fixed for closure of  election/ voting i.e. on the date of  election and one day before the date of  election and so far the question of  declaring the days as dry days after the  election and counting days is concerned,  the concerned Collector shall be  empowered to take decision in view of  local circumstances as to whether there  is a need from administrative point of  view or not to declare dry days after  the election and counting days.   Similarly, shops shall also remain  closed during i.e. for general/ by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 11  

elections of local bodies.

Note: The local bodies includes  Municipal Corporation, Municipal  Committee, Nagar Panchayat and Distt.  Panchayat.  During their elections,  shops of only those areas will remain  closed where elections are being held.

(VI) In addition to above festivals/  occasions, every Collector shall decide  and fix the boundaries of the industrial  area situated within their district  separately for each area and the shops  shall remain closed for two days, i.e.,  days for disbursement of salary and  expenses of workers/ labourers, which  shops are situated within the boundary  so fixed by them.  The Collector shall  fix/ decide these days in such a manner  that these days are same for all the  mills and industrial establishments of  one Town.

(VII) For the dry days as mentioned in  the above para (I) to (VI), the  concerned contractors shall not be  allowed any rebate/ concession  whatsoever in the auction money for  those days and nor they will be entitled  to any compensation whatsoever.

(VIII) If in addition to the abovesaid  fixed dry days, shops are remained  closed on the written order of  Collector, then in case of closure of  such shops, the Contractor shall be  entitled to proportionate rebate/  concession in auction money as  prescribed for the concerned shop."

       The Act is a self-contained code.   

       The licensees indisputably are bound by the provisions  of the said Act, the general conditions framed thereunder as  also the terms and conditions of the sale memo.  It is also  not in dispute that remission in licence fee would be  permissible provided the claim of the licensee is covered by  one or the other provisions contained therein.   

       The scheme of the Act, the General Licence Conditions  and the conditions contained in the Sale Memo postulate  that, in the event, the licensee is required to close a shop  in terms of an order passed by the statutory authority or  otherwise, he would be entitled to claim remission in  licence fee unless the same is expressly barred.

       Section 24 of the Act is in two parts.  Sub-section (1)  of Section 24 empowers the District Magistrate to direct  closure of any shop in which any intoxicant is sold for such  time or for such period as he may think necessary for  preservation of the public peace.  Sub-section (2) of  Section 24, however, deals with a specific situation in  terms whereof in the event of apprehension or occurrence of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 11  

a riot or unlawful assembly in the vicinity of a shop, a  Magistrate of any class may require such shops to keep  closed for such period as he may think necessary.  In the  event, however, no magistrate is available, the proviso  appended thereto mandates that the licensee shall close the  said shop without any order.   

       A bare perusal of the provisions contained in Sub- section (2) of Section 24 read with the proviso appended  thereto makes the legal position absolutely clear that  closure of a shop in the event of occurrence of a riot or  unlawful assembly is mandatory whether at the instance of a  Magistrate or at the instance of a licensee himself; the  only difference being that the Magistrate can pass an order  where a riot or unlawful assembly is apprehended, the  licensee is enjoined with a duty to close his shop whence a  riot or unlawful assembly occurs.

       It is not disputed that the shops of the respondent  remained closed for three days owing to agitations as regard  creation of State of Chhattisgarh etc.

       In terms of Clause (3) of Rule II of the General  Licence Conditions, a remission or abatement in the licence  fee cannot be claimed save and except in the cases which  would come within the purview of Section 32 of the Act or  Rule VIII of the General Licence Conditions.  It is also not  in dispute that Section 32 of the Act has no application in  the instant case.   

       Rule VIII aforementioned mandates the licensee to keep  his shop open everyday throughout the year.  Such a  statutory obligation on the part of the licensee, however,  is subject to temporary or permanent closure which is  authorised by the Collector.  Clause (2) of Rule VIII states  that the shops would remain closed for the whole day on such  days as the Collector may announce at the time of auctions.   Clause (3) of Rule VIII, however, authorises the State  Government to direct closure of any shop in public interest,  intimation wherefor is required to be given to the licensee  through the Collector of the district well in advance as for  as possible.  The proviso appended to Rule VIII, however,  empowers the Collector to award compensation to the licensee  for loss of profits.

       The provisions of the sale memo, so far as they are not  inconsistent with the provisions of the Act or the Rules  also provide for closure of the shop on one ground or the  other.   

       Condition No. 18 contains the liquor prohibition policy  which as has been noted by the High Court reads as under:

"(18) Liquor Prohibition Policy and  closure of shops due to natural  calamities:-

       As a result of Liquor Prohibition  Policy of any neighbouring State or of  the State, any shop/ shops are closed,  then no compensation on this account  shall be payable by the State to the  contractor.  Similarly, due to Liquor  Prohibition in neighbouring State or for  any other reason, if the decision to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 11  

reauction any shop of the States is  taken or in case State consider it  necessary to open any shop during the  year 2000-2001, then the Excise  Commissioner shall have power to do so  and no objection whatsoever from the  contractor shall be entertained and  accepted and no compensation whatsoever  or any rebate/ concession whatsoever  shall be payable objector.  If during  the period of contract, contractor  suffers from any loss or damage  whatsoever as a result of natural  calamity, celestial problem or political  demonstrations, public demonstration,  movements, law and order problems, the  contractor shall not be entitled to any  compensation whatsoever.  All the  licenses shall be subject to the Madhya  Pradesh Excise Act, 1915 and Rules  framed thereunder and rules as amended  from time to time and orders/  instructions passed and issued by the  State Government, Excise Commissioner,  Collector from time to time."

       The said provision does not put an embargo on remission  in payment of licence fees in the event the closure of shop  due to any reason authorised by law.  The said provision  furthermore cannot restrict the operation of the provisions  of the Act.  As would appear from what has been stated  hereinbefore, the provision contained in Clause 42 of the  Sale Memo in this behalf had been stood deleted.         

       Schedule-4 appended to the Sale Memo provides for the  proposed dry days for 2000-2001.

       Clause (IV) of the Sale Memo empowers the Collector to  direct closure of anyone or more shops for three days in  addition to the days which have been noticed in Clause (I)  of the Schedule-4 in administrative and public interest.   Clause (V) provides for closure of shops for 48 hours during  the time fixed for holding of election.  The provisions  contained in Clause (V) also applies in case of general/by  elections of local bodies.  The note appended to the same,  however, provides that during holding of election inter alia  of local authorities, shops of only those areas would remain  closed where election is held.  It is, however, not in  dispute that the Collector of Raipur district had issued an  order purported to be in terms of Sub-Section (1) of Section  24 for keeping the shops closed for 48 hours which would  fall within a radius of 25 kilometers from the boundary of  Municipal Council, Bhilai-III of Charoda Nagar.  Such an  order, therefore, was outside the purview of Clause (V).   

       Clause (VI) of the said Memo provide for closure of the  shop in addition to the days specified in Clauses (I) to (V)  for two days within or nearabout the industrial area.

       In terms of Clause (VII) of the Sale Memo  aforementioned, the licensees are not entitled to any  rebate/ concession for the days of closure of such shops in  terms of Clauses (I) to (VI) aforementioned.  Clause (VII),  therefore, does not prohibit remission in licence fee and/  or grant of compensation if the closure is directed for any

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 11  

reason other than those mentioned in Clauses (I) to (VI) of  the said Sale Memo.

       It is also not in dispute that the power of the  Collector to direct closure of any shop may emanate from a  direction by a Competent Authority in terms of the  provisions of the other statutes.

       Sub Para 3 of Chapter 13 of the Handbook to the  Returning Officers issued by the State Election Commission  provides:

"3. Ban on sale of liquor:- (a) During  public election in every Municipal  Corporation area and within the radius  of 25 Kilometers of its limit all the  liquor shops will be closed from 48  hours before closing of the voting and  during this period the sale and purchase  of liquor will be totally prohibited."

       The power, in terms of Sub-Section (1) of Section 24 of  the Act, was, therefore, exercised by the Collector, Raipur  having regard to the aforementioned provision and not in  terms of Clause (V) of the Sale Memo.

       Condition No. 42 of the Sale Memo which stood deleted  read thus:

"(42) Loss arising from celestrial/  natural calamities and for other  reasons: - No contractor shall be  entitled to get compensation whatsoever  from the State for the loss suffered as  a result of loss in contract business,  damages to crop or political movements,  transfer of markets or natural  calamities."

       Keeping in view the aforementioned provisions, the  correctness of the impugned judgment would have to be  considered.

       Section 24 of the Act does not militate against the  claim of remission in the licence fee, in the event a  closure is effected thereunder.

       It is a well-settled principle of law that a  subordinate legislation either by way of rules framed in  terms of the provisions of the Act or the General Conditions  issued by the Excise Commission in exercise of its statutory  power or the conditions of Sale Memo framed would be subject  to the provisions of the Act.  For proper interpretation of  the statutory provisions, the  Act and the Rules are  required to be harmoniously read.  Political agitation  resulting in unlawful assembly would clearly attract the  proviso appended to Sub-Section (2) of Section 24.  As  noticed hereinbefore, in case of a riot or unlawful  assembly, a licensee is statutorily enjoined to close his  shop.  The proviso appended to Sub-Section (2) of Section 24  is mandatory in nature.

       Rule VIII of the General Licence Conditions also  enjoins upon the licensee to keep the shop open everyday  throughout the year unless their temporary or permanent

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 11  

closure has been authorised by the Collector.  Rule VIII  aforementioned also in our considered opinion contemplates a  situation where Sub-Section (2) of Section 24 would be  attracted.  The proviso appended to Sub-Section (2) of  Section 24 will have to be read as a part of the main  enactment and not an exception thereto.  Sub-sections (1)  and (2) of Section 24 as also the proviso appended thereto  refer to the closure of shop for the reasons stated therein.   Whereas in terms of Sub-Section (1) of Section 24 the  Collector may pass an order, in a case falling within the  purview of Sub-Section (2) thereof, even a Magistrate can  pass such an order.  Thus, Rule VIII of the General  Conditions also refers to a temporary or permanent closure,  as has been authroised by the Collector and, thus, the same  having regard to the principles of purposive construction  would include an order passed by a Magistrate in terms of  Sub-Section (2) of Section 24.  In that view of the matter,  if a Magistrate is not available when a riot or unlawful  assembly occurs, the licensee having a statutory duty to  close the shop; the same shall stand at par in view of the  fact that in both the situations maintenance of public peace  is mandatory.   

       Clause (3) of Rule VIII stands on a different footing.   Proviso appended to Clause (3) of Rule VIII refers to  closure under the said rule, viz., Rule VIII.  The said  proviso does not cover clause (3) of Rule VIII alone but  also brings within its fold a case falling under Clause (1)  aforementioned.

       Therefore, in a situation of this nature, the licensee  is entitled to claim remission in licence fee and/ or  damages.

       Furthermore, it has rightly been opined by the High  Court that having regard to the fact that Condition No. 42  of the Sale Memo stood deleted, a mischief covered thereby  was sought to be removed.  To that extent Clause 18 of the  purported excise policy has not been given effect to,  presumably because the same may be held to be violative of  Section 24 of the Act.

       To us it appears that such a decision was taken  consciously.  In a case of occurrence of natural calamity,  riot or unlawful assembly, the licensee cannot discharge his  obligation to keep his shop open.  A riot or an unlawful  assembly may take place for any reason including political  agitation.   

       If an unlawful assembly takes place in course of a  political movement, having regard to Section 24 of the Act,  it might not even be possible to sustain the validity of  Condition No. 42.  Unlawful assembly owing to political  movement was within the purview of Condition No. 42 of the  Sale Memo having regard to Clause 18 of the excise policy.   By deleting the said condition, a mischief is sought to be  remedied thereby.  (See Ameer Trading Corporation Ltd. Vs.  Shapoorji Data Processing Ltd., JT 2003 (8) SC 109, Ashok  Leyland Ltd. Vs. State of Tamil Nadu & Anr., 2004 (1) SCALE  224 and Reema Aggarwal Vs. Anupam & Ors., 2004 (1) Supreme  355).         So far as the closure of the shop in terms of the  direction of the Collector dated 21.6.2000 is concerned, the  same is not in dispute.  The validity of the order of the  Collector is not in question.  Schedule-4 specifies the dry

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 11  

days and also specifies the date on which the shops are  required to remain closed.  The note appended to Clause (V)  specifically directs closure of shops of only those areas  falling within the area where elections are being held.  The  area refers to the cases in respect whereof the election is  being held and not which is outside the said area.

       In terms of Schedule-4, a remission in licence fee is  impermissible if the closure occurs for a reason mentioned  in any of the clauses referred to therein.  The shops which  are situated outside the area where election is being held  would not, therefore, come within the purview of Clause (V)  and, thus, would attract Clause (VIII) aforementioned, in  terms whereof, the Contractor becomes entitled to grant  proportionate rebate/ concession in auction money as  prescribed for the concerned shop.

       The above view also find supports from the fact that  Clause (VII) excludes those contractors who had to keep  their shops closed owing to the declaration of dry day as  provided for in Clauses (I) to (VI).  If a shop falling  outside the area has to be kept closed in terms of an order  passed under Sub-Section (1) of Section 24 of the Act,  Clause (VIII) of the Sale Memo shall be attracted.

       We may notice that recently in State of U.P. Vs.  Jagjeet Singh [JT 2003 (8) SC 40: (2003) 8 SCC 270] a 3- Judge Bench of this Court [in which one of us (the Chief  Justice of India) is a party] on interpreting Section 59 of  the U.P. Excise Act which is in pari materia with Section 24  of the said Act held:

"Section 59 empowers the district  magistrate to close any liquor shop at  such time or for such period which he  may consider necessary for preservation  of peace.  In cases where some riot or  unlawful assembly is apprehended in  vicinity of such a shop a magistrate or  any police officer above the rank of  constable, who is present may order for  closure of the shop.  The proviso to  Section 59 casts a duty on the licensee  to close the shop without any order by  any authority, where a riot or unlawful  assembly occurs at the place where the  shop is situated.  Apart from providing  for closure of the shop to maintain  peace, Section 59 does not provide for  anything either way for awarding  compensation or remission on account of  such a closure."

       In that case it was inferred that if awarding of  compensation is not specifically barred, the same may be  granted.

       While interpreting Rule 34(ii) of the U.P. Excise  Licenses (Tender-cum-Auction) Rules, 1991, it was further  observed:

"The position which finally emerges out  is that an application for remission /  damages for closure of shops in entirety

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11  

auctioned in a group as is the case in  the appeals in hand would be  maintainable.  But it is for the  authorities concerned to consider the  merit of the claim for remission/  damages and pass any appropriate order  looking to the facts and circumstances  of the case in accordance with law.  It  would be the position as it relates to  cases prior to the amendment of Rule 34  in 1998."

       However, so far as the claim of the respondent for the  period 1st April, 2000 to 3rd April, 2000 for non-grant  of licence is concerned, in our opinion, the same does not  come within the purview of the Act, the General Conditions  or the conditions of Sale Memo.  The respondent for the  aforementioned purpose must avail other remedies, if any, in  relation thereto.  We, therefore, are of the opinion that  the judgment of the High Court to that extent cannot be  sustained.  

       Ordinarily, we would have referred the matter back to  the appropriate authority for passing an appropriate order  in accordance with law but herein we find that the  respondents had filed representations which had been  rejected.  The period of licence is also long over.   Furthermore, the licence had been granted by the State of  Madhya Pradesh.  The writ petition filed by the respondent,  however, on creation of the High Court at Chhattisgarh, was  heard by it.

       We, therefore, do not intend to interfere with that  part of the judgment of the High Court wherein, having  regard to the interpretation of the provisions of the Act,  general conditions and the conditions of Sale memo, a part  of its claim has been allowed.

       For the reasons aforementioned, the appeal is allowed  in part and to the extent mentioned hereinbefore.  However,  in the facts and circumstances of this case, there shall be  no order as to costs.