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PETITIONER: STATE OF MADHYA PRADESH & ORS.

       Vs.

RESPONDENT: M/S.M.V. VYAVSAYA & CO.

DATE OF JUDGMENT:       28/11/1996

BENCH: B.P. JEEVAN REDDY, SUHAS C. SEN

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T B. P JEEVAN REDDY, J.      The several  orders made  by a  learned Single Judge of the Madhya  Pradesh High  Court in a writ petition, impugned herein, made in total disregard of the basic norms governing the  exercise  of  writ  jurisdiction  by  the  High  Court, disclose a  disturbing state  of  affairs  affecting  public finances. The facts stated hereinafter speak for themselves.      For the  year 1995-96  [commencing on April 1, 1995 and ending with  June 30,  1996] public  auctions were  held for grant of  licences for country liquor as well as Indian made foreign liquor  [IMFL] in  Madhya Pradesh,  sometime in  the months of  February-March, 1995. The respondent-firm was the highest bidder  in respect  of Gwalior Township Group No. 2, comprising twelve  shops of  country liquor and sex shops of IMFL, in a sum of Rs. 8.52 crores. Its bid was accepted. The appellants  say   that  according   to  the  rules  and  the conditions specified in the auction notification, any person desiring to  participate in the auction shall have to pay an amount equivalent  to twenty  percent of  the amount  of the license fee  of the  preceding exercise  year. If his bid is accepted, he has to deposit an amount equivalent to 1/6th of the total  bid in  cash or  by bank  draft  soon  after  the auction, which  amount shall be adjusted against the license fee payable for the last two months of the exercise year. In addition thereto, the successful bidder, the appellants say, has to  furnish a  bank guarantee  or  a  bank  draft  or  a banker’s cheque/order  for an  amount equal to 1/12th of the total bid  amount within  seven days  of the  auction, to be adjusted  during   the  course   of  the  excise  year.  The appellants say  that the  respondent-firm deposited 1/6th of the bid  amount, i.e.,  Rs. 1.4200.000/-  and took  out  the licences but  failed to  furnish the  bank guarantee  to the extent  of   1/12th  of   the  bid  amount  as  required  by rules/conditions of  action. The appellants say further that the respondent  has also  subsequently  failed  to  pay  the monthly rental  for the month of May 1995. For the aforesaid defaults,   they   say,   notices   were   given   proposing cancellation of licence granted to it. Under this show cause notice, the respondent was called upon to explain by May 19,

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1995 why  its licences should not be cancelled and the group be re-auctioned.  [These faces  are taken  from the counter- affidavit filed  by the  District Excise Officer in the High Court.]      On May 17, 1995, the respondent filed Writ Petition No. 711 of 1995 in the Madhya Pradesh High Court [Gwalior Bench] complaining  that  though  he  has  complied  with  all  the conditions of  auction and  rules, the  authorities are  not issuing the  permits and  other forms  on account  of  which their  shops   are  facing   closure.  The  respondent  also complained that  while not  issuing the  permits  and  other forms, the  authorities are  proposing to  cancel  the  writ petitioner’s licences, which was characterised as unjust and illegal. It played for the issuance of a writ "directing the respondents  [State   of  Madhya   Pradesh  and  the  Excise autorities] not  to withhold  the permits and issue forms of the petitioner  and to  ensue that  the supply  of liquor is made to the pettioner as per the terms and conditions of the licence". Interim relief was also asked for in same terms. The writ  petition came  up befoer  the Vacation  Judge  who directed notice  to the respondents in the writ petition. on May 22,1995  a learned  single Judge  heard both the parties and passed  orders, directing  the authorites,  "not to  re- auction the  liquor shops  which are  subject matter of writ petition No.  602/1995 and  writ petition  No. 711/1995. The requisite supply  would also  be made to the petitioner. The petitioner in  both the  petitions, i.e.  W.P.No.602 of 1995 and W.P  No. 711  of 1995  has given  an undertaking to this court  that  all  financial  commitments  to  which  he  may ultimately be  found liable  would be met by him". [Emphasis supplied]. This  order was passed after noticing the case of both  the   writ  petitioner  and  the  authorities.  It  is significant  to   notice  the  purport  of  the  order:  the authorities were  restrained from  conducting a  re-action ; they were also directed to make the requisite supplies - all on a  mere ’undertaking’  of  the  firm  [licencee]  to  pay amounts which may ultimates be found payable.      The matters  came up  before the  learned Single  Judge again on  August 11,  1995. The  order on this day refers to two other writ petitions filed by the respondent firm, viz., writ Petitions  Nos.955 of  1995 and Writ Petition Nos. 1060 of 1995.  The last  para of  the order,  which is  the  only material  para,   reads:  "The   learned  counsel   for  the petitioner has  pointed out  that in the letter dated 3rd of August, 1995  some sale  price has been mentioned. According to him,  such course  was never  adopted earlier.  It may be seen that  the petitioner  is not to deposit any amount now. As such,  this amount  would also  be dealt with at the time when the  judgment is pronounced. So far as seized liquor is concerned, if the petitioner deposits the requisite duty, it would be  entitled to  have the  same. This  would be  again subject to  the final  decision." Not  only it  was observed without giving any reasons, that the licence-firm "is not to deposit to  release the  seized liquor  on payment of ’duty’ alone. No  reference to  nor any direction to the licence to pay the  arrears of  licence fee  and other  amounts due was made.      On August  25, 1995,  the matter  was taken up again in the forenoon.  It was  ordered that the matter will be taken up after  lunch and  that till  then no  further  action  be taken.  After   lunch,  the   learned  Judge   noticed   the contentions of  the parties  and posted the matter to August 28, 1995.  Till then, it was directed that no further action be taken.  The matter appears to have been taken up again on August 30, 1995. The second para of the order passed on that

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day, which alone is relevant, reads: "The State is agreeable to hand  over 1/4th of the liquor which was taken possession of on  22nd of  August, 1995. The petitioner is permitted to sell the  same. This  is, however,  subject to the condition that the  entire sale proceeds of this liquor and also other sales made  on 30th of August, 1995 and 31st of August, 1995 are deposited with the State authorities".      On September 4, 1995, two different orders were passed. The first  order refers  to an  earlier order  dated  august 31,1995 whereunder the statement of the writ petitioner that he would  deposit a  sum of  Rupees five  lakhs on September 1,1995 was  recorded. The order says that the petitioner has since deposited the said amount and then says, "the state is agreeable to  release the  remaining seized  stock. This  is however subject to certain riders. These riders are that the sales be made at one or tow shops only. The further rider is that these  sales have [to be] made under the supervision of the officials  of Excise department. Accordingly, the Excise Department would  release the  seized stock  and permit  the sales at  two retail  outlests.  The  functionaries  of  the Excise Department would not interfere with the sale process. Whatever sale  amount is received it would be handed over to the office  after obtaining  the receipt  at the  end of the closure of  the business  that day. The interim order passed on 25th  of August  ,1995 shall  continue". The second order passed on that day disposes of writ petition No. 711 of 1995 as having become infructuous. It reads:      "1.  The   prayer  made   in   this      petition is  more or  less rendered      infructuous. The  grievance of  the      petitioner was that permits are not      being issued  to it even though the      requested amount is being deposited      in the  treasury. The  challans  on      the basis of which supply of liquor      was being claimed stands exhausted.      The requisite supply has been made.      The  grievance  of  the  petitioner      does not survive.      2. This  petition  is  disposed  of      accordingly."      Though writ  petition No.711 of 1995 was disposed of as stated above  on September  4,1995 the  matter came up again before the  learned Judge on September 11, 1995. The learned Judge ordered,  ".......Some challans  have been  placed  on record. The  state will  take notice of the same and release the liquor.  This is  however subject  to the condition that the entire  sale proceeds would be deposited with the state. The state  would be  at liberty to supervise the source from which the  liquor is  purchase and  also supervise the shops from where  liquor is  to be  sold. Seizure  of this  liquor would not  be effected  " The  learned judge  made a further curious direction  to the  following effect  "As there  is a constant dispute  Shri H.D.  Gupta Advocate  is appointed as commissioner. In  future any  grievance of  this  nature  be brought to  his notice  and he  would act as conduit between the state  and the  petitioner.  The  state  would  released liquor on the same terms as being done in the month of April 1995." The  aforesaid commissioner  was  to  get  a  fee  of Rs.250/- for every grievance on any single day.      The matter  was again  taken up  on September 14, 1995. The learned  Judge refers  to statement  of the petitioner’s counsel that  the petitioner  "would be  depositing a sum of Rs. one  lac for  the purpose  of purchasing the liquor" and notes his  request that  be should be given back some amount

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for re-investment  . The  learned Judge accordingly directed that "the  petitioner be given liquor on the day the challan is filled  up. 75%  of the  sale proceeds would be deposited with the state and 25% be kept by the contractor for reinvestment."      On September  19, 1995,  matter was  taken up again The learned Judge  noticed the  grievance of  the state that the petitioner is not depositing the licence fees and also noted the contention of the writ petitioner that it is no doubt in arrears but  these arrears have mounted only because of non- supply of  liquor from  time to time. the learned Judge also noted the grievance of the writ petitioner the its employees were threatened  with arrest  also. On the basis of the said representation and  in view of the alleged constant disputes between the  parties the  learned  Judge  make  Yet  another curious direction to the following effect "The petitioner to give requisite  facts and figures before the commission. The commission to  furnish its report by 25th of September 1995. The commission  would consist  of Shri  R.A. Roman  and Shri H.D. Gupat Advocates. They would be paid a fee of Rs. 2500/- each." The  learned Judge  then referred to the statement of the writ  petitioner that  it had  deposited a  sum  of  Rs. 82,000/- and  stated that  on such  deposit, liquor would be supplied at  the rates at which supplies were made in April, 1995. The learned Judge also made certain further directions with respect  to part  deposit of  sale  proceeds  and  part release in favour of the writ petitioner.      We may mention that though we called for the records of the writ  petitioner the  records sent  to us do not contain orders dated  August 25,1995,  august 30,1995  September 11, 1995 September 14, 1995 and September 19, 1995. These orders have of  course been  supplied by  the state in the material paper book.      The state  has  preferred  the  present  Special  leave petition against the aforesaid orders This court entertained the same and passed an order on December 8, 1995 staying the operation of  the  orders  impugned  in  the  special  leave petition. The  court further  directed that  "the respondent [writ petitioner  ]  shall  not  be  entitled  to  lift  any supplies unless  he pays  up all  the arrears  due".  it  is brought to  our notice  that pursuant  to the said order the commissioner of Excise has stopped all supplies of liquor to the respondent  from the  date of  receipt of  a copy of the order and that all the concerned shops were taken possession of by the department on December 12 1995 and re-auctioned on December 23,  1995. It is further stated in the letter dated 18th March  , 1996  from the  Excise officer  Gwalior to the Deputy Commissioner  [Excise }  Gwalior Division  a copy  of which has  been placed  before us by the learned counsel for the State-  appellant -  that as  on the date of re-auction, the total  amount due from the respondent- firm was in a sum of Rs.2,88,431/-.      Though the respondent is served it has neither appeared nor is  it represented by counsel. After hearing the learned counsel for  the petitioner-State, we called upon the Madhya Pradesh High court [Gwalior Bench] to send to this court the entire records  of this writ petition [No.711 of 1995] which have accordingly been sent. We have perused the same.      Leave granted.      It has  been repeatedly  held by  this court  that  the power  of   the  High   court  under   Article  226  of  the Constitution is  not  akin  to  appellate  Power.  It  is  a supervisory Power.  While exercising  this power  the  court does not  go into  the merits  of the  decision taken by the authorities concerned  but only endures that the decision is

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arrived at  in accordance  with the  procedure prescribed by law and in accordance with the Principles of natural justice wherever  applicable.  Further,  where  there  are  disputed questions of  fact the  High court does not normally go into or adjudicate  upon the  disputed  questions  of  fact.  Yet another principle which has been repeatedly affirmed by this court is  that a  person who solemnly enters into a contract cannot be  allowed to  wriggle out  of it  by  resorting  to Article  226  of  the  constitution.  This  court  has  also repeatedly emphasised  the inadvisability  of making interim orders which  have the  effect of  depriving the  state [the people of  the state  ] of  the revenues legitimately due to it. The court should not tame upon itself the responsibility of staying  the recovery  of amounts  due to  state unless a clear case  of illegality  is made  out and  the balance  of convenience is  duly  considered.  Otherwise  the  odium  of unlawfully depriving  the State  the people  of  the  monies lawfully  due   to  it   them  would  lie  upon  the  court. particularly in  the  case  of  excise  contracts  generally speaking it  is for  this reason  that the  rules of all the states insist  upon adequate deposits and securities befor e hand to  be adjusted  towers the  last months  of the  year. These provisions  and the  spirit underlying  them cannot be ignored or  violated. Now  in the  case of this contract the loss to  the state  is the  whopping sum of Rs.2,88,54,431/- how much of this loss is attributable to the impugned orders is difficult  to assess  but it  can be  said with certainty that but for these orders the state would have conducted the re-auction in  the month  of may  1995 itself in which event the loss  to  the  state  would  have  been  far  less.  The respondent-firm  carried   on  till  December  1995  without properly and July paying the amounts due under of the court. A very sad tale.      In chief  constable of  the North Wales police V. Evans [1983 (3)  All.Eng Reports  141], the  House  of  Lords  has observed that  " the purpose of judicial review is to ensure that the  individual receives  fair  treatment  and  not  to endure that  the authority  after according  fair  treatment reaches on  matter which it is authorised of enjoined by law to decide  for itself  a conclusion  which is correct in the eyes of  the court".  This decision  clearly  sets  out  the limits of  the supervisory  power under  article 226  of the constitution and  emphasises that the jurisdiction under the said Article is neither unlimited nor unrestrained much less unguided.      A Constitution Bench of this court held in Harstate and the  writ   petitioner  and   appointing  a   "commission  " comprising of  two advocate  to look  into and  decided  the daily disputes  arising between the parties- are all the out come of  a total  disregard of  the norms Governing the writ jurisdiction. We  are surprised  that such orders could ever have been  passed by  the high  court at  any  rate  without safeguarding the  interests of  the State. The proper course for the  high court  as to  dismiss the writ petition at the very inception  when it  was brought to their notice that it involved dispute  questions of  fact. It is equally relevant to notice  that in  none of the orders mentioned hereinabove has the learned Judge recorded any finding that the state or its authorities  have acted  in contravention  of the law or that they  have  failed  to  perform  any  of  their  duties enjoined  by  any  of  the  relevant  statutory  provisions. Similarly  no   finding  is   recorded  that   the  licencee [respondent herein ] ha done what all it had to do under the terms of  the contract  and the law. Indeed at one stage the respondent-firm admitted  that it  is in  arrears of  excise

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revenue but it blamed it on the alleged wrongful acts of the authorities. Yet  the learnedd Judge went on supervising the case on  an almost  day-to-day basis.  This was certainly no part of  the High  courts function.  It has also resulted in substantial loss of to the state - to the people.      For the  above reasons  the appeals are allowed and the orders impugned  herein are set aside. The writ petition No. 711 of  1995 is  dismissed. The  question then  arises  what should happen  to the  huge arrears due from the respondent. The order  dated May 22, 1995 records an "undertaking" given by the  licencee-firm to  the High  court to the effect that ’all financial  commitments to  which he  may ultimately  be found liable  would be  met by him" the writ petitions filed by the  respondent -  firm have been dismissed. his licences have been cancelled re-auction conducted and loss due to the state to  the people  - has been ascertained. The High court ought to  enforce the  undertaking now by proceeding against the respondent-firm  [licencee] and  all its  partners.  the violation of  the undertaking  it  needs  to  be  mentioned, amounts to contempt of court. It is the duty of the court to try to   repair  the damage  to the  extent possible. No one should be  allowed to suffer on account of the act(s) of the court. We,  therefore request  the High  court  to  initiate appropriate  proceedings   for  enforcing  the  "undertaking aforesaid. Even  otherwise. the  interim orders  passed  are always subject  to the  final  orders  in  the  matter.  The interim orders  can always  be corrected  or revised  at the final stage.      Since the  respondent is  not represented before us, we are desisting  from imposing penal costs which we would have imposed otherwise.