1. Auction for vending shops under Abkari Act — Delay in confirmation of sale — Withdrawal of bidder — Recovery of loss by State — Writ for refund of security. (Para 1 )
Back
Next 
1999 Supreme(SC) 1409
SUPREME COURT OF INDIA
Dr. A.S. Anand, CJI., D.P. WADHWA AND S. RAJENDRA BABU, JJ.
State of Kerala and others, Appellants
VERSUS
V. Narayana Pillai (dead) by L.Rs. and others, Respondents.
Civil Appeal No. 7415 of 1993, D/- 1-12-1999.
Failure of the State to adhere to statutory timelines for communicating auction confirmation and the subsequent withholding of relevant records from the court justifies an adverse inference and the refund of security deposits to the bidder.
Headnote:(A) Abkari Act - Section 18-A - Abkari Shops (Disposal in Auction) Rules, 1974 - Rules 5(10), 5(13) and 5(14) - Auction for vending shops - Confirmation of sale - Communication of confirmation - Delay in confirmation - Breach of mandate to communicate "as soon as possible" - Withholding of records by State Government - Adverse inference - Refund of security deposit and return of solvency certificate. (Paras 2, 3, 4)
(B) Writ Jurisdiction - Production of records - Obligation of Government to produce files - Failure to produce vital information justifies adverse inference against the State. (Paras 3, 4)
Facts of the case:
A successful bidder for the privilege of vending liquor shops deposited a security amount and furnished a solvency certificate. Due to a significant delay in the confirmation of the sale by the revenue board and subsequent communication, the bidder expressed lack of interest in running the shops. The shops were subsequently re-auctioned, and the state initiated recovery proceedings for alleged losses. A writ petition was filed seeking a refund of the security deposit and return of the solvency certificate.
Findings of Court:
The mandate to communicate confirmation "as soon as possible" was breached. Furthermore, the state failed to produce the relevant files before the High Court despite multiple opportunities, justifying an adverse inference.
Issues: Whether the delay in confirmation of the auction sale and the failure of the state to produce relevant records justified the refund of the security deposit and return of the solvency certificate.
Ratio Decidendi: When the state breaches statutory rules regarding the timely communication of auction confirmation and subsequently withholds vital records from the court, it is justified for the court to draw an adverse inference and order the refund of security deposits.
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. State contended confirmation was without delay; bidder argued justification for withdrawal due to delay in confirmation and lack of proper communication. (Para 3 )
3. State's failure to produce the confirmation file justifies an adverse inference; breach of mandate to communicate confirmation as soon as possible. (Para 3 , 4 )
4. Withholding vital records from the court justifies an adverse inference against the State, validating the refund of security deposits and return of certificates. (Para 4 )
5. Appeal dismissed; security deposit to be refunded with 12% interest and solvency certificate returned. (Para 5 , 6 )
6. What is the requirement for communicating the confirmation of an auction sale under the Kerala Abkari Shops Rules?
Rule 5(14) mandates that every confirmation or rejection of the sale must be communicated to the auction purchaser in writing as soon as possible. (Para 2 , 3 )
7. What is the legal implication when the State fails to produce vital records requested by the court?
The court is justified in drawing an adverse inference against the State government for withholding records, which may influence the court's decision to grant the relief sought. (Para 3 , 4 )
8. Can the court award interest on the refund of security deposits in cases of unjustified withholding by the State?
Yes, if the State has no justification for withholding the amount, especially after a stay of a refund order, the court may direct refund with interest from the date of deposit. (Para 5 )
JUDGMENT :- The respondents are the legal representatives of one Narayana Pillai who was the successful bidder for privilege of vending 12 arrack shops in Kunnathur Range. The auction for the year, commencing 1-4-1981 to 31-3-1982, was conducted by the Assistant Excise Commissioner on 27th March, 1981 in accordance with Section 18-A of the Abkari Act read with The Kerala Abkari Shops (Disposal in Auction) Rules, 1974. The predecessor-in-interest of the respondents on 27-3-1981 itself deposited 30% of the auction money, amounting to Rs. 8,70,300/-. He also furnished a Solvency Certificate to the extent of 20% amounting to Rs. 5,80,200/-. The temporary agreement, as envisaged by Rule 5(10) of the 1974 Rules, was executed between the parties. The successful bidder then waited for receiving confirmation of the sale from the Board of Revenue. He is reported to have sent a notice on 6-4-1981 informing the appellants that since the auction not been confirmed till then, he would not be, now interested in running the arrack shops for which he had bid on 27-3-1981. The auction sale appears to have been confirmed by the Board of Revenue on 7-5-1981 and an intimation of the same (not personally served on the bidder) is alleged to have been affixed at the place of his residence on 11-5-1981. Since, no agreement was executed by the highest bidder, whose offer had been confirmed on 7-5-1981, the shops in question were re-auctioned on 18-2-1982 by the appellants. A sale notice was issued on 12-10-1982 for sale of the immovable property of the predecessor-in-interest of the respondents, for recovery of the alleged loss suffered by the appellants on re-sale of the shops. The respondent at this stage filed a writ petition before the High Court challenging the sale notice. He also prayed for a declaration that the appellants were not entitled to enforce the penal provisions against him and had no right to appropriate the security deposit made by him. A specific prayer for refund of the security amount and return of the Solvency Certificate was made, though, challenge was also laid to the validity of certain Rules of The Kerala Abkari Shops (Disposal in Auction) Rules, 1974 in the petition. The writ petition was allowed by a Division Bench of the High Court of Kerala on 27-11-1992. By special leave the appellant-State of Kerala is before us.
2. Rule 5(13) of the Kerala Abkari Shops (Disposal in Auction) Rules, 1974 provides that no sale shall be deemed final as against the Government unless confirmed by the Board of Revenue, who shall be at liberty to accept or reject any bid for valid reason to be recorded in writing. Rule 5(14) provides that every confirmation or rejection with reasons therefore of the sale shall be communicated to the auction purchaser in writing as soon as possible.
3. Admittedly, in the present case the auction period commenced on 1st April, 1981. The auction sale had taken place on 27th March, 1981 but confirmation of sale, however, was not made by the Board of Revenue till 7-5-1981. It was not communicated to the successful bidder till 11-5-1981. The mandate of Rule 5(14) to the effect that the rejection or confirmation shall be conveyed "as soon as possible" was obviously respected in its breach. The respondent, pleaded justification, in the admitted facts of the case to withdraw because of the delay 3506 in confirmation of the sale. Before the High Court it was, however, pleaded on behalf of the appellants that confirmation of sale had been made without any delay. The High Court wanted the file relating to confirmation of sale to be produced before it to satisfy itself about the cause of delay in confirming the sale. The High Court observes:-
"In fact, we wanted to know the proceedings of the Board in regard to this matter. The Government Pleader was given sufficient opportunity after the hearing was begun to enable the production of the file. He confessed that he is not in a position to place the file before us. We have t
