Judgment

CHANDRACHUD, CJI.:- These appeals, have a long history. Liquor vends were put to auction by the Excise Department of the Government of Haryana whereupon, the highest bidders were given the necessary licences to sell liquor. Some of the licensees committed defaults in the payment of amounts due from them under the terms of the auction. Thereupon, the vends were reauctioned except for three vends which, though published for reauction, were given by private negotiations. The original licensees, who were called upon to pay the difference between the amount which they were liable to pay and the amount realised by resale of the vends, filed writ petitions in the High Court of Punjab and Haryana contending that the State Government had no power to demand the various amounts which they had allegedly defaulted in paying. The High Court accepted that contention, holding that the State Government had no authority to demand the amounts for failure to pay which the vends were put to resale. As a necessary consequence of that finding, the fresh grants made by reauction or private treaty were held invalid. The result of this was that the writ-petitioners stood relieved of their obligation to make good the shortfall. This is the broad history of these appeals.

2. We will take up Civil Appeal No. 1507 of 1969 for consideration first. The facts of that case and the events leading to the present proceedings are mentioned in a judgment of this Court reported in State of Haryana v. Jage Ram, (1980) 3 SCR 746. In this case, an auction was held on March 27, 1967 for the grant of a retail vend known as Biswan Meel, Sonepat, for the year 1967-68. The respondents Jage Ram and others offered the highest bid in that auction. Under Condition 14 (iii) of the auction, respondents became liable to pay an amount calculated at the rate of Rs. 17.60 per litre, which came to Rs. 10,92,960.00. They paid a security deposit for the due performance of the terms of the auction but they committed default in payment of instalments which fell due on April 10 and April 25, 1967. On May 17, 1967 the Excise Authorities cancelled the licence of the respondents and informed them that the vend will be resold on May 23, 1967 at the risk of the respondents. In pursuance of the order dated May 17, the Biswan Meel vend was reauctioned on May 23, the highest bid offered being in the sum of Rs. 2,46,000.00. On July 11, respondents were called upon by a notice to pay a sum of Rupees 7,41,577.40, being the difference between the amount which they were liable to pay under the terms of the original auction and the amount fetched in the reauction. Thereupon, respondents filed a writ petition in the High Court challenging the legality of that notice. The High Court allowed the writ petition, quashed the order cancelling the respondents licence as also the notice calling upon them to make good the shortfall of seven lakh rupees and odd. The High Court gave to the State of Punjab a certificate to appeal to this Court.

3. The appeal came up for hearing before a three-Judge Bench which by its aforesaid judgment dated April 21, 1980, held that the writ jurisdiction of the High Court, under Article 226 cannot be used for avoiding contractual obligations. On merits, it was. held by this Court following a Constitution Bench decision in Har Shankar v. Dy. Excise and Taxation Commr. (1975) 3 SCR 254 that since rights in regard to the manufacture and sale of intoxicants are vested in the State, it is open to the State to part with these rights, which are in the nature of a privilege for consideration. The Court further held that the amounts which the State Government had charged to the respondents were neither in the nature of a tax nor in the nature of an excise duty but were in the nature of a price which the State Government was entitled to charge as consideration for parting with its privilege in favour of the licensees.

4. After setting aside the judgment of the High Court and upholding t