IMPORTANT POINT
On the interpretation of Rule 18 of Karnataka Excise (Lease of Right of Retail Vend of Liquor) Rules, 1969, once a discretion has been exercised by Govt. to cancel the bid under Rule 18 then forfeiture of the amount deposited is a mandatory consequence. The question of affording an opportunity before effecting forfeiture cannot arise.

Headnote:Karnataka Excise (Lease of Right of Retail Vend of Liquors) Rules, 1969 -Rules 13(2) and 18-Auction of Liquor shops-Respondent s bid provisionally accepted-Later confirmed-Respondent did not execute lease deed under Rule 16-He also did not make the deposit of security under Rule 17(1)(b)-His bid was cancelled and deposit was forfeited-Challenged in High Court-Division Bench in appeal held that even after cancellation of bid, Govt. had the discretion whether to exercise the right of forfeiture or not under Rule 18 and thus directed to pass fresh order after giving an opportunity of being heard to respondent-Appeal to Supreme Court-Whether High Court was right ? (No)-Result-Appeal allowed-Case law discussed.
       Held : In our opinion, the High Court erred in coming to the aforesaid conclusion. Rule 13(2) is in two parts. It first deals with the situation where a deposit is required to be made under sub-rule (1) is not made. Rule 13(2) provides that in such an event the tender, offer or bid shall stand cancelled and the earnest money shall be forfeited. Therefore, the non-deposit results in automatic cancellation and forfeiture, but the authorities have the right at that time to either provisionally accept the next highest bid or offer or to dispose of the right of retail vend of liquors afresh. Where however, the deposit under Rule 13(1) has been made, the question of exercising right under Rule 13(2) does not arise. But in the event of failure of complying with the provisions of Rules 16 and 17, the Government under Rule 18 has a discretion whether to cancel the bid or not. But once it is cancelled, Rule 18(1) provides that "the deposit made by such person shall be liable to be forfeited to the State Government." (Para 15)
       In the instant case, within 15 days of the confirmation, the respondent was under an obligation to make the deposit under Rule 17(1)(b) and also execute the lease deed under Rule 16. When the respondent failed to do so, the Government under the first part of Rule 18(1) exercised the jurisdiction in not cancelling the bid but extended the temporary licence. When there was further default and non-compliance with Rules 16 and 17, it is only thereafter that the Government exercised its discretion in cancelling the bid by its order dated 14th October, 1999. Once the bid was cancelled, then the latter part of Rule 18(1) comes into play and the deposit made by such person was liable to be forfeited. Nothing more was required to be done. (Para 16)
       Held further : On the interpretation of Rule 18 in the instant case, it is clear that once a discretion has been exercised by the Government under Rule 18 to cancel the bid then a forfeiture of the amounts deposited is a consequence to the said act of cancellation and there is no discretion in the Government whether to exercise the right of forfeiture or not. This being so, the question of affording an opportunity to the respondent before effecting the forfeiture cannot arise. Opportunity was granted before cancelling the bid. Admittedly, there was a default in non-compliance with the provisions of Rules 16 and 17. This being so, the appellant-State was right in its decision to cancel the bid and to forfeit the amount deposited under Rule 13(1). For the aforesaid reasons, this appeal is allowed and the decision of the Division Bench of the High Court is set aside and the writ petition filed by the respondent before the High Court would consequently stand dismissed. The appellant would be entitled to costs. (Paras 20 & 21)

JUDGMENT

Kirpal, J.-Special leave granted.

2. On 4th May, 1999, auction for retail vend of arrack for the year 1999-2000 in respect of 272 shops in Mangalore Taluka took place. The respondent was declared successful bidder on 12th May, 1999 and thereafter this bid was confirmed.

3. Pursuant to the confirmation of the bid on 12th May, 1999, a temporary licence was given to the respondent on 28th June, 1999 and the licence was extended upto 15th August, 1999. According to the Karnataka Excise (Lease of Right of Retail Vend of Liquors) Rules, 1969 (hereinafter referred to as "Rules"), when the bid is made it is provisionally accepted and thereafter the confirmation takes place. On the provisional acceptance of bid certain money is required to be deposited and thereafter under Rule 17 security has to be furnished and a lease deed executed. In the instant case, the respondent admittedly failed to furnish the security amount under Rule 17 and also did not execute the lease deed. As a consequence thereof, on 14th October, 1999, the Government passed an order cancelling the confirmation of the bid and forfeited the deposit of Rs. 1,25,10,000/- which had been made by the respondent under Rule 13(1) when his provisional bid had been accepted.

4. The cancellation of the bid was first challenged by the respondent by way of filing a Writ Petition bearing No. 38779/1999. This writ petition was dismissed as withdrawn reserving liberty to the respondent to pursue his remedies in accordance with law. On a representation being filed, the Government of Karnataka by its order dated 1st June, 2000, came to the conclusion that Rule 20 of the aforesaid Rules did not provide for refund or adjustment of the forfeited deposit and the amount which had been deposited was liable to forfeiture under Rule 18.

5. This decision was again challenged but a Single Judge of the High Court dismissed the writ petition by coming to the conclusion that the amount had been rightly forfeited and the respondent was not entitled to refund of the same.

6. The Division Bench of the High Court, in an appeal filed by the respondent against the dismissal of the writ petition, came to the conclusion that the forfeiture contemplated by Rule 18 was not automatic. It set aside the order of the Government and directed it to pass a fresh order after giving an opportunity of hearing to the respondent. Hence, this appeal.

7. In the instant case, the licences were to be given by auction held under Rule 11 of the said Rules. The said Rule contemplates that the intending bidders in respect of each shop or group of shops are to be short-listed and, if they are not otherwise disqualified, they can take part in the auction. Each bid which is given is to be signed and the bid is not allowed to be withdrawn. Under sub-rule (7) of Rule 11 the Deputy Commissioner or the Divisional Commissioner after recording the bids is to provisionally accept the highest bid and make the said announcement.

8. It is not in dispute that in the instant case the highest bid of the respondent was provisionally accepted under sub-rule (7) of Rule 11.

9. Rule 13 which requires deposit to be made reads as follows:

"13. Deposits to be made:-

(1) The person whose tender, offer or bid is accepted provisionally under Rules 9, 10, 11 and 12 shall, immediately on the day such acceptance is announced, make a deposit of an amount which together with the earnest money deposited under sub-rule (6) of rule 5 is equal to one month s rent of the shop, or group of shops or the area or areas for which his tender, offer or bid is provisionally accepted.

(2) If the deposit as required by sub-rule (1) is not made, the provisional acceptance of the tender, offer or bid shall stand cancelled, the earnest money shall be forfeited and the Deputy Commissioner or the Divisional Commissioner may either accept provisionally the next highest tender, offer or bid or dispose of the right of retail vend of liquors afresh. In the latter case,

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2002 Supreme(SC) 271

Cases Referred (3)