28 November 1996
Supreme Court


Case number: C.A. No.-014921-014926 / 1996
Diary number: 17828 / 1995






DATE OF JUDGMENT:       28/11/1996




JUDGMENT:                THE 28TH DAY OF NOVEMBER, 1996 Present:               Hon’ble Mr.Justice B.P.Jeevan Reddy               Hon’ble Mr.Justice Suhas C. Sen      Satish K. Agnihotri, Adv. for the appellants.                       J U D G M E N T      The following Judgment of the Court was delivered :                       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 seven 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 licence fee  of the  preceding excise  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 licence fee payable  for the  last two months of the excise year. In addition 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  during the  course of  the excise year.  The appellants  say that  the  respondent-firm deposited 1/9th  of bid  amount, i.e., Rs. 1,42,00,000/- 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 auction. 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, 1995 why  its licences should not be cancelled and the group be re-auctioned.  [These facts  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 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 prayed for the issuance of  a writ  "directing the  respondents  [State  of Madhya Pradesh  and the  Excise authorities] not to withhold the permits  and issue forms of the petitioner and to ensure that the  supply of  liquor is made to the petitioner as per the terms and conditions of the licence". Interim relief was also asked for in the same terms.      The writ petition came up before 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 authorities,  "not to re- auction the  liquor shops  which are  subject-matter or 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  reauction; they were also directed to make the requisite supplies - all on a  mere ’undertaking’  of  the  firm  [licencee]  to  pay amounts which may ultimately be found payable. The matters came up before the learned Single Judge again on August 11,  1995. The  order on this pay refers to two other writ petitions  filed by  the respondent  firm,  viz.,  Writ Petition 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 licencee-firm "is not to deposit any amount now", the authorities were directed to release the  seized liquor  on payment  of ’duty’  alone. No reference to  nor any  direction to  the licencee 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 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 21, 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 two  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  sale  at  two  retail  outlets.  The functionaries of  the Excise Department would not  interfere with sale  process. Whatever  sale amount  is  received,  it would be handed over to the office after obtaining 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      requisite amount is being deposited      in the  treasury. The  challans  on      the basis of which supply of liquor      was being claimed stands exhausted.      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 taken 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  purchased 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 release 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 a 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 he  should be given back some amount 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 State 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 is  not doubt in arrears but  these arrears have mounted only because of non- supply of  liquor form  time to time. The learned Judge also noted  the   grievance  of  the  writ  petitioner  that  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 made  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 September 1995.  The commission  would consist  of Shri R.A. Roman and  Shri H.D.  Gupta, 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 petition, the records sent to us do not contain orders dated  August 25,  1995, August  25, 1995, August 30, 1995, September 4, 1995 [first order, as we have called it], 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 filed by it and are taken from the said 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 185th  March, 1996 from the Excise Officer, Gwalior to the Deputy Commissioner [Excise], Gwalior Division- a copy o 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 sum of Rs. 2,88,54,431/-.      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 sent 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 ensures that the decision is 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 take 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 well nigh impossible to recover any arrears after the event. It is for this reason that the rules of all the States  insist upon  adequate  deposits  and  securities beforehand to  be adjusted  towards 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 fully paying the amounts due under the orders of the court. A very, 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 ensure that the individual  receives fair  treatment, and  not to ensure that the  authority, after according fair treatment, reaches on a  matter which  it is  authorised or  enjoined by law to decide for  itself a conclusion which is correct in the eyes of the  court". The  principle has  been  referred  to  with approval  in  innumerable  decisions  of  this  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  nether unlimited nor unrestrained, much less unguided.      A Constitution  Bench of this Court held in Har Shankar & Ors. v. The Deputy Excise and Taxation Commissioner & Ors. [1975 (1)  S.C.C. 737]  that "the  writ jurisdiction of High Courts under Article 226 of the Constitution is not intended to   facilitate   avoidance   of   obligations   voluntarily incurred". Of  course, where there is a statutory violation, interference would  be permissible  even in  the case  of  a contract but  not where  the relevant facts are disputed and which dispute calls for an elaborate enquiry which cannot be conveniently done by the High Court in a writ petition.



    A perusal of the orders extracted hereinabove show that the learned  Single Judge-  it appears  that almost  all the orders are made by the same learned Judge [T.S. Doabia, J.]- has not kept in view any of the norms governing the exercise of writ  jurisdiction of  the High Court. The relevant facts were seriously disputed before him, each party alleging that the other  has violated  the terms and conditions of licence and the rules. The repeated interim orders passed permitting the supply  of liquor to the writ petitioner, sale of liquor by  the   writ  petitioner  under  the  supervision  of  the authorities,  partial  deposits  of  the  amounts  with  the authorities and release of the balance of the amounts of the writ petitioner,  appointment of an advocate commissioner to act    as  a  "conduit"  between  the  State  and  the  writ petitioner and  appointing a  "commission" comprising of two advocates to  look into and decide the daily dispute arising between the  parties -  are  all  the  outcome  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 was  to brought  to  their  notice  that  it  involved disputed question  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] has 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 revenue but it blamed it  on the  alleged wrongful acts of the authorities. Yet the  learned Judge  went on  supervising the case  on an almost day-to-day  basis. This  was certainly no part of the High Court’s  function. It  has also resulted in substantial loss of revenue 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  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.