1. Dispute over entitlement to rebate or remission of license fees due to alleged failure of the State to supply additional quantities of arrack under the Kerala Abkari Act. (Para 2 , 3 , 4 , 7 , 8 )
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1994 Supreme(SC) 274
SUPREME COURT OF INDIA
(BEFORE J.S. VERMA, YOGESHWAR DAYAL AND B.P. JEEVAN REDDY, JJ.)
ASSISTANT EXCISE COMMISSIONER AND OTHERS
Versus
ISSAC PETER AND OTHERS
Civil Appeal Nos. 3442 of 1984, 655 of 1991, 1161-62, 1164-66, 1167-69 of 1994, 87 of 1991, 4291 of 1986, 1170-71, 1163, 1172-76, 1181, 1177-78, 1180 of 1994, 4429, 4442 of 1984, 1817 of 1992, 2796 of 1987, 4993-95, 3443-60 of 1984, 1551-54 of 1985, 4430-41, 4443-50 of 1984 and 1818 of 1992, decided on February 22, 1994
Advocates appeared :
V.R. Reddy, Additional Solicitor General, Santosh N. Hegde, A.S. Nambiar, V.M. Tarkunde, G. Ramaswamy, V.B. Nambiar, G.V. lyer and C.S. Vaidyanathan, Senior Advocates (K.R. Sasiprabhu, A. Jayaram, V.G. Prakashan, J.P. Verghese, Dr M.P. Raju, S.P. Sharma, Shanta Vasudevan (Smt), P.K. Manohar, R.N. Keshwani, e E.M.S. Anam, M.A. Firoz, K.V. Vishwanathan, Pratap Venugopal, K.J. John, S. Balakrishnan, N. Sudhakaran and V.J. Francis, Advocates, with them) for the appearing parties.
Important Points
The Court ruled that in voluntary statutory contracts, express terms prevail over implied ones. Since additional supply was discretionary and remission was explicitly barred by rules, licensees cannot claim rebates for non-supply of additional quantities. Doctrines of fairness or legitimate expectation cannot be used to modify express contractual obligations.
Subject
Contract Law - LIQUOR LICENSE
Act Referred
CONSTITUTION OF INDIA: Art.14
CONTRACT ACT: S.56, S.55
KERALA ABKARI ACT: S.21, S.29, S.28, S.18(a), S.25
KERALA ABKARI SHOPS DISPOSAL IN AUCTION RULES: R.6(3)(9), R.8(1), R.6(2)(6), R.8(3)
CONTRACT ACT: S.56, S.55
KERALA ABKARI ACT: S.21, S.29, S.28, S.18(a), S.25
KERALA ABKARI SHOPS DISPOSAL IN AUCTION RULES: R.6(3)(9), R.8(1), R.6(2)(6), R.8(3)
Headnote
Kerala Abkari Act - Constitution of India,1950 - Article 226 - Contract Act - Sections 55, 18-A , 15 , 24 17, 18, and 56 - Entitled to any rebate/remission - Public auction - State and some by licensees/contractors - Matters arise under Kerala Abkari Act - All of them pertain to excise year question is whether there was a failure on part of State in supplying arrack undertaken by it to supply and whether the licensees are entitled to any rebate/remission in amounts payable by them under contracts, on account of such failure, if any - Earliest decision is in OP No. Commissioner1 - It was a writ petition filed by the licensee - Several other matters were allowed following said decision against which the State has filed appeals - Another Division Bench of the High Court, took a contrary view in AS No. and batch disposed – Held, Whether they make profit or incur loss is no concern of the State it is entitled to its money under contract - It is not as if licensees are going to pay more to the State in case make substantial profits – Court reiterate said hereinabove is in context of contracts entered into between State and its citizens pursuant to public auction, floating of tenders or by negotiation - It is not necessary to say more this for purpose of these cases - What would be position in case of contracts entered into otherwise than by public auction, floating of tenders or negotiation – Court need not express any opinion herein - All that was done was to advise IOC to take appellant into confidence before putting an end to his long-enjoyed right - Observations in judgment are confined to particular facts of case - It is significant to note it was not a case where the rights of the parties were governed by a contract - Appeals preferred by the State are allowed
Legal Category Hierarchy
- administrative law
- contract law
- excise law
Advocates:
A.N.JAYARAM, A.S.NAMBIYAR, C.S.VAIDYANATHAN, E.M.S.ANAM, G.RAMASVAMY, G.V.IYER, J.P.Verghese, K.J.JOHN, K.R.SASIPRABHU, K.V.VISHWANATHAN, M.A.Firoz, M.P.RAJU, N.SUDHAKARAN, P.K.MANOHARAN, Pratap venugopal, R.N.KESHWANI, S.BALAKRISHNAN, S.P.SHARMA, SANTOSH HEGDE, SHANTA VASUDEVAN, V.B.NAMBIAR, V.G.PRAGASAM, V.J.Francis, V.M.TARKUNDE, V.R.REDDY
A.N.JAYARAM, A.S.NAMBIYAR, C.S.VAIDYANATHAN, E.M.S.ANAM, G.RAMASVAMY, G.V.IYER, J.P.Verghese, K.J.JOHN, K.R.SASIPRABHU, K.V.VISHWANATHAN, M.A.Firoz, M.P.RAJU, N.SUDHAKARAN, P.K.MANOHARAN, Pratap venugopal, R.N.KESHWANI, S.BALAKRISHNAN, S.P.SHARMA, SANTOSH HEGDE, SHANTA VASUDEVAN, V.B.NAMBIAR, V.G.PRAGASAM, V.J.Francis, V.M.TARKUNDE, V.R.REDDY
Table of Contents
2. Whether the State had a statutory obligation to supply additional arrack quantities and if licensees are entitled to fee remission based on legitimate expectation or contract frustration. (Para 12 , 13 )
3. The court found that while monthly quotas are obligatory, additional supplies are discretionary; Rule 6(26) bars remission unless the State fails its primary statutory obligation. (Para 14 , 15 , 16 , 17 , 18 , 21 , 23 , 25 , 26 )
4. Express statutory terms of a contract entered into via public auction cannot be modified by implied terms, legitimate expectation, or the doctrine of fairness and reasonableness. (Para 16 , 26 )
5. Appeals preferred by the State allowed and appeals preferred by the licensees dismissed. (Para 28 )
6. Is the State obligated to supply additional quantities of liquor beyond the announced monthly quota in excise contracts?
No. The court held that while the monthly quota is obligatory, the supply of additional quantities is discretionary, as indicated by the use of the word may in the relevant rules. (Para 15 , 16 )
7. Can a licensee claim remission or abatement of rental fees if additional supplies are not provided?
No. Rule 6(26) provides a total bar to remission or abatement on any account, except where the Government fails to perform its primary statutory obligation, such as supplying the monthly quota. (Para 16 )
8. Can the doctrine of fairness and reasonableness be used to alter the express terms of a commercial contract entered into with the State?
No. The doctrine of fairness applies to administrative actions to prevent failure of justice but cannot be invoked to amend, alter, or vary express terms of a voluntary commercial contract. (Para 26 )
9. Does the principle of legitimate expectation allow a party to modify express statutory contract terms based on past practice?
No. The rule of legitimate expectation cannot be invoked to modify or vary express terms of a contract, especially when those terms are statutory in nature. (Para 25 )
10. Can a contractor seek relief from contractual obligations on the ground that the contract is onerous or results in loss?
No. In executory contracts entered into via public auction, profit and loss are normal business incidents; the onerous nature of terms is no ground to resile from obligations. (Para 16 , 23 )
Judgment
B.P. JEEVAN REDDY, J.- Leave granted in the SLPs.
2. In this batch of appeals, some are preferred by the State and some by the licensees/contractors. The matters arise under the Kerala Abkari Act. All of them pertain to the excise year 1981-82. The question is whether there was a failure on the part of the State in supplying the arrack undertaken by it to supply and whether the licensees are entitled to any rebate/remission in the amounts payable by them under the contracts, on account of such failure, if any. The earliest decision is in OP No. 2325 of the 1981-1, (Issac Peter v. Asstt. Excise Commissioner1). It was a writ petition filed by the licensee. It was allowed by a Division Bench of the Kerala High Court on November 14, 1983 against which the State of Kerala and its officers have filed CA No. 3442(NT) of 1984. Several other matters were allowed following the said decision against which the State has filed appeals. Another Division Bench of the High Court, however, took a contrary view in AS No. 293 of 1983 and batch disposed of on October 26, 1980. By this judgment, the suits filed by licensees/contractors were dismissed. Following the said judgment, several other appeals were disposed of in favour of the State. The licensees have a filed appeals against those judgments.
3. The Kerala Abkari Act (1 of 1077 - corresponding to 1902 AD) was enacted to consolidate and amend the law relating to Import, Export, Transport, Manufacture, Sale and possession of intoxicating liquors and of intoxicating drugs in the State. Section 15 says that no liquor or intoxicating drug shall be sold without a licence from the Commissioner. Section 18-A b provides for grant of exclusive or other privilege of manufacture and sale of liquor. Sub-section (1) says "It shall be lawful for the Government to grant to any person or persons, on such conditions and for such period as they may deem fit, the exclusive or other privilege -
(i) of manufacturing or supplying of wholesale or (ii) of selling by retail or (iii) of manufacturing or supplying by wholesale and selling by retail, any liquor or intoxicating drugs within any local area on his or their payment to the Government of an amount as rental in consideration of the grant of such privilege. The amount of rental may be settled by auction, negotiation or by any other method as may be determined by the Government, from time to time, and may be collected to the exclusion of, or in addition to, the duty of tax leviable under Sections 17 and 18." Section 24 prescribes the Forms and conditions of licence. Section 25 prescribes the counterpart agreement to be executed by licensee. Section 28 says that all duties, taxes, fines and fees payable to the Government under any of the provisions of the Act or of any licence or permit issued thereunder may be recovered as if they are arrears of Land Revenue. Section 29 empowers the Government to make rules for carrying out the purposes of the Act. It is not necessary to notice other provisions of the Act.
4. Rules have been made by the Government governing the mode of grant of licences, called the Kerala Abkari Shops (Disposal in Auction) f Rules, 1974. Rule 6 prescribes the general conditions applicable to licensees of arrack shops, both retail and wholesale. Sub-rule (26) of Rule 6 which constitutes the basis of the later judgment of the Division Bench of the High Court reads : "No remission or abatement of the rental shall be claimable by the licensee on any account whatsoever." Sub-rule (39) says that "the licensee shall be bound by all the rules which have been passed under the 9 Abkari Act and which may hereafter be made under the said Act or under any law relating to Abkari Revenue which may hereafter be made". Rule 8 prescribes the special conditions applicable to licences for the privilege of vending arrack in independent shops. Having regard to their crucial relevance, sub-rules (1), (2) and (3) of Rule 8 may be extracted here :
"8. (1) The mont
