The deposit made by the auction purchaser represented security for the due performance of the contract and could be forfeited for breach of conditions, as authorized by the Kerala Abkari Act.

Headnote:
forfeiture - Kerala Abkari Act - Section 29(2)(r) - Rule 6(28)
Fact of the Case:

The licensees for toddy shops failed to pay kist amount, leading to cancellation of their license and forfeiture of their security deposit. The licensees challenged the forfeiture rule under the Kerala Abkari Act.
Finding of the Court:

The court held that the rule providing for forfeiture of the security deposit was valid under Section 29(2)(r) of the Kerala Abkari Act. The court emphasized that the deposit represented security for the due performance of the contract and could be forfeited for breach of conditions.
Issues: The primary issues were whether the rule for forfeiture of security deposit was ultra vires and without legislative sanction, and whether the Indian Contract Act applied to the contracts entered into by the licensees.
Ratio Decidendi: The court interpreted the rule in light of the Act, emphasizing that the rules should facilitate the Act's objectives without violating its provisions. The court held that the deposit represented security and could be forfeited for breach of conditions, as authorized by the Act.
Final Decision: The appeals filed by the State Government were allowed, and the original petitions filed by the licensees were rejected. The court upheld the validity of the rule for forfeiture of the security deposit.

Judgment :-

H.L. Dattu, C.J.

The core issue in these appeals filed by the State of Kerala and the Original Petitions filed by the licensees who were issued with licences under the provisions of the Kerala Abkari Act read with Kerala Abkari Shops (Disposal in Auction) Rules, 1974 is, as to whether it is permissible for the State Legislature to enact a provision for the forfeiture of the whole or any portion of the kist deposited by persons who purchased the right to sell toddy, arrack, foreign liquor or ganja in addition to damages recoverable by the Government on account of the breach of conditions of sale laid down by the Government from time to time.

2. The law we are concerned with is, the provisions of the Kerala Abkari Act and the Kerala Abkari Shops (Disposal in Auction) Rules 1974. The statutory provisions which we are required to interpret in these appeals are Section 29(2)(r) of the Abkari Act and Rule 6 (28) of the Abkari Shops (Disposal in Auction) Rules.

3. The source of power for the State Government to make the laws in regard to intoxicating liquors is traceable to Entry 8 of List II of Schedule VII to the Constitution of India which provides for intoxicating liquor, that is to say, production, manufacture, possession, transport, purchase and sale of intoxicating liquors, and Entry 51 which provides for Duties of Excise on the goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India. (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics; but not including medicinal and toilet preparations containing alcohol or any substance included in sub paragraph (b) of this entry.

4. The provisions which require to be noticed are Sections 18A, 24, 26 and 29 of the Abkari Act and Rule 5(4 B) and 5(10), 5(15), 5 (16), 5(17), 5(19) and rule 6 (28) of the Abkari Shops (Disposal in Auction) Rules.

5. We will now briefly state the factual matrix in order to appreciate the reasoning and conclusion reached by the learned Single Judge and the contentions canvassed by the learned counsel for the parties to the lis. The facts are few and they are not in dispute. For the purpose of disposal of the bunch of appeals and the original petitions, we may notice the facts stated in O.P.No.26942 of 2001.

6. The petitioners in the Original Petition are the licencees for the conduct of toddy shops in Pathanamthitta Excise Range. In the auction held for granting privilege to conduct the toddy shop, the petitioner was the highest bidder and he had accepted to take the privilege for conducting the toddy shop for an amount of Rs.1,20,02,000/-. The period of licence was from 1.4.2000 to 31.3.2001. The bid amount is the annual rental or kist for the shop. The same is payable as per the rules in 10 equal monthly instalments commencing from the month of April.

7. At the time of executing the preliminary agreement with the excise authorities, petitioner was required to deposit in cash or bank draft or both, an amount equivalent to not less than 30% of the amount of his bid or such other amount as may be fixed by the officer conducting the sale. In fact, the petitioner had paid 30% of the bid amount in a sum of Rs.39,80,000/-. He had also produced before the auction officer solvency certificate for an amount of not less than 30% of the bid amount.

8. After the confirmation of the sale by the Board of Revenue, the Excise Commissioner had issued the licence to the petitioner to conduct the vending of toddy for the excise year 1.4.2000 to 31.3.2001. After commencement of the business, the petitioner had remitted the kist instalments for the months of April, May, June, July, August and September. Since, according to him, he had suffered heavy loss in the business, he could not pay the kist amount for the month of October onwards.

9. The authorities under the Act, after issuing the demand notice to the petition

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