2003 Supreme(SC) 303

2003(2) Supreme 646
Supreme Court of India
(From Mumbai High Court)
Chief Justice of India and S.B. Sinha, A.R. Lakshmanan, JJ.
Government of Maharashtra & Ors. —Appellants
versus
M/s. Deokar’s Distillery —Respondent
Civil Appeal No. 7399 of 2001
With
Civil Appeal No. 7400 of 2001
And
Civil appeal No. 1302 of 2003
(Arising out of SLP (C) No. 22142 of 2001)
Decided on 10-3-2003
Counsel for the Parties :
For the Appellants : Soli J. Sorabjee, Attorney General, U.U. Lalit, S.S. Shinde, Arun Pednekar and V.N. Raghupathy, Advocates.
For the Respondent : V.B. Joshi, Advocate.

Important point
Demand notice issued by appellant No. 4 – Sub-Inspector of State Excise to the respondents (who are liquor licencees under Bombay Prohibition Act, 1949) to pay the differential amounts of cost of supervision on account of revision of pay-scales with retrospective effect is valid.

Headnote:Bombay Prohibition Act, 1949—Section 58A—Power of State of Maha­rashtra for recovery of cost of ex­cise­ supervision from the liquor licences under—State increasing wages of its employees—Appellant 4 issuing demand of increased wages retrospectively—Respondents challenged in writ—D.B. held that State Government is not empowered to collect increased supervision charges with retrospective effect under the Prohibition Act—Appeals to Supreme Court—Whether High Court was right (No by Majority 2 : 1)—Appeal allowed by Majority of 2 : 1.

       Held (Per CJI and A.R. Lakshmanan, J.) : For the aforesaid reasons, we are of the opinion that the impugned demand notice was nothing but final settlement of accounts communicated by appellant No. 4, one contracting party to the other contracting party, the respondents, in terms of the contract executed between them, which is executed at the time of grant/renewal of the licence. The contract is executed after the licensee gives the undertaking in the application in Form P.L.A. prescribed under the Rules of 1966 or the licence in Form C.L.A. prescribed under the Rules of 1973, to abide by directions/orders and complies all other requirements and when the application is accepted by the appellants by grant/renewal of the licence. The respondents/licensees, therefore, cannot wriggle out of the contractual obligation of payment of the entire cost of supervision regarding which they receive a final account or bill through the impugned demand notice and, therefore, the respondents ought to pay the amount demanded. As pointed out by Y.V. Chandrachud, C.J., as he then was, what the respondents agreed to pay was the price of a exclusive privilege which the State parted with in their favour. They cannot, therefore, avoid their liability by contending that the payment which they were called upon to make is truly in the nature of excise duty and that no such duty can be imposed on liquor not lifted or purchased by them. The respondents, in our view, must fail in their contention both on account of the objection to the maintainability of the appeals and on merits concerning the nature of the payment which they are liable to make. For the foregoing reasons, we allow all the appeals and set aside the impugned judgments. However, there shall be no order as to costs. (Paras 39, 40 and 41)

       Held (Per S.B. Sinha dissenting) : An act on the part of the State to increase wages of its employees is a welfare act. When such increase takes place with retrospective effect the validity thereof can be upheld only ­because it is for the benefit of the employees. Such a beneficial act on the part of the State, however, would not bind a third party. An increase in wages by the State with a ­retrospective effect was an unilateral act on the part of the State. If, it will bear repetition to state, if it was intended to be passed on by the State to the respondent the same ought to have been the subject matter of a specific contract so as to avoid the uncertainty of the terms of contract as contemplated under Section 29 of the Indian Contract Act. The rule of construction of a contract is that if the terms of the agreement are so vague and indefinite that it may not be ascertained with reasonable certainty as regard intention of the parties, the same would not be enforceable at law. Meaning of a contract must be clear on its face. In any event, in the instant case, the contract had been worked out. Once the contract had been worked out, a fresh liability cannot be thrust upon a contracting party. It is now accepted that the decision of the Full Bench of the Bombay High Court in Mohan Meakin s case was not brought to the notice of the Bench deciding Polychem. The parties referred to two conflicting views of the High Court. This Court applied its mind and approved the judgment rendered by the Division Bench in Bilimoria s case. There is no rule of practice or precedent that where a Bench of the High Court is faced with two conflicting views; one rendered by this Court and another by a Full Bench of the same High Court; both have to be read together. In fact both can t be so read unless the decisions are such which can be explained and the ratio of one may be held to be not applicable in the fact of the matter. In the instant case, the views of the Full Bench and this Court are diametrically opposite and thus both the ­decisions could not have been given effect to simultaneously by reading them together or otherwise. For the aforementioned reasons, I am of the opinion that the impugned ­judgment cannot be faulted. This appeal is, therefore, dismissed. (Paras 80, 81 and 82)