Case Note & Summary
In an appeal before the Supreme Court of India, the appellant, who was the highest bidder for the exclusive privilege of retail vend of toddy and arrack in a group of 1168 shops located in 19 tehsils across Raichur and Gulbarga districts of Mysore State, challenged the cancellation of the sale by the Divisional Commissioner, Gulbarga. The sale was confirmed on June 4, 1968, after the appellant deposited the required earnest money and one month's rent as per the Mysore Excise (Disposal of Privileges of Retail Vend of Liquors) Rules, 1967. However, a dispute arose regarding compliance with Rule 19, which required the purchaser to furnish a statement of immovable properties to the tehsildar and provide security or sureties. The Divisional Commissioner issued a show cause notice and subsequently cancelled the sale on June 26, 1968, for alleged non-compliance. The appellant filed a writ petition in the Mysore High Court, which was dismissed on September 17, 1968, with the High Court holding that the appellant failed to comply with mandatory provisions of Rule 19 and observing that he might be a benamidar; it also directed the authorities to consider accepting the bid of the fourth respondent, the next highest bidder. On the very next day, the State issued licences to the fourth respondent. The appellant then appealed to the Supreme Court. The core legal issues before the Supreme Court were whether Rule 19 applied to groups of shops situated in multiple tehsils, the meaning of 'at once' in Rule 19(1), whether the Divisional Commissioner had the power to cancel his own order, whether the appellant was a benamidar, and whether the next highest bid could be considered under Rule 17(4). The appellant argued that he had complied with the rules read with a circular issued by the Excise Commissioner, that Rule 19 was inapplicable due to the multi-tehsil situation, and that the cancellation was without jurisdiction. The respondents contended that there was clear non-compliance with mandatory rules, that the appellant was a benamidar, and that the sale could be cancelled and the next highest bid accepted. The Supreme Court, after analyzing the scheme of the Rules, found that Rule 19(1), (3) and (4) could not apply where shops were in multiple tehsils because the procedure required a single tehsildar to peruse statements and assess solvency, and there was no machinery to resolve conflicts between multiple tehsildars. It further held that the phrase 'at once' in Rule 19(1) meant within a reasonable time before the commencement of the licence period on July 1. The Court also decided that under Rule 17(2), only the Excise Commissioner or the State Government could revise an order of the Divisional Commissioner, and the Divisional Commissioner had no authority to cancel his own order. On the question of benami, the Court ruled that the onus was on the fourth respondent to prove the allegation, and the mere fact that the appellant might have had financial backing was insufficient to prove benami. Finally, the Court held that Rule 17(4) applies only when the highest bid is rejected, not when it was accepted and later cancelled, so the consideration of the fourth respondent's bid was impermissible. Accordingly, the Supreme Court set aside the High Court's order, quashed the cancellation, cancelled the licences issued to the fourth respondent, and issued a writ of mandamus directing the grant of licences to the appellant.
Headnote
A) Excise Law - Interpretation of Subordinate Legislation - Mysore Excise (Disposal of Privileges of Retail Vend of Liquors) Rules, 1967, Rule 19(1), (3), (4) - Where shops are situated in more than one tehsil, the requirement to furnish a statement of immovable property to the tehsildar under the last part of Rule 19(1) and the tehsildar's inquiry and satisfaction under sub-rules (3) and (4) cannot be applied as there is no machinery for multiple tehsildars to act collaterally - Held that these provisions are inapplicable and the purchaser need not comply with them (Paras 22 E). B) Excise Law - Compliance with Licensing Conditions - Mysore Excise (Disposal of Privileges of Retail Vend of Liquors) Rules, 1967, Rule 19(1) - Under the Mysore Excise Licences (General Conditions) Rules, 1967, a licencee is required to commence business on July 1; the expression 'at once' in Rule 19(1) means within a reasonable time before July 1 - Held that the appellant sufficiently complied with the sub-rule (Paras 23 D-E). C) Excise Law - Revision of Orders - Mysore Excise (Disposal of Privileges of Retail Vend of Liquors) Rules, 1967, Rule 17(2) - Under Rule 17(2), only the Excise Commissioner or the State Government may revise the order of the Divisional Commissioner confirming a sale; the Divisional Commissioner has no power to revise or cancel his own order - Held that the cancellation order was without jurisdiction (Paras 23 G). D) Evidence - Benami Transactions - Burden of Proof - A purchase of exclusive privilege is not illegal merely because the highest bidder obtained funds from financiers; the onus of proving benami is on the party alleging it - On the materials on record, it was not possible to hold that the appellant was a benamidar for someone else - Held that the benami allegation was not established (Paras 25 D). E) Excise Law - Disposal of Privileges - Mysore Excise (Disposal of Privileges of Retail Vend of Liquors) Rules, 1967, Rule 17(4) - Rule 17(4) allows consideration of the next highest bid only when the highest bid is rejected; if the highest offer was accepted and later revised, Rule 17(4) cannot be invoked, and a fresh disposal must be held - Held that the High Court erred in directing consideration of the next highest bid (Paras 26 E).
Issue of Consideration
Whether the Divisional Commissioner's cancellation of the sale to the highest bidder for non-compliance with Rule 19 of the Mysore Excise (Disposal of Privileges of Retail Vend of Liquors) Rules, 1967 was valid; whether Rule 19 applied to groups of shops in multiple tehsils; whether the appellant was a benamidar; and whether the next highest bidder could be considered under Rule 17(4)
Final Decision
The Supreme Court allowed the appeal, set aside the judgment of the High Court, cancelled the licences issued to the fourth respondent, and issued a writ of mandamus directing the grant of licences to the appellant. The Court held that Rule 19(1) (last part), (3) and (4) do not apply when shops are in multiple tehsils; 'at once' means within a reasonable time before July 1; the Divisional Commissioner could not revise his own order under Rule 17(2); benami was not proved; and Rule 17(4) cannot be invoked when the highest bid was accepted and later cancelled.
Law Points
- Legal points not extracted
- Interpretation of Rule 19 of Mysore Excise (Disposal of Privileges of Retail Vend of Liquors) Rules
- 1967: inapplicable to groups of shops in multiple tehsils
- 'at once' means within reasonable time
- Divisional Commissioner cannot revise own order under Rule 17(2)
- only Excise Commissioner or State Government can
- Benami purchase not illegal merely if backed by financiers
- onus on party alleging
- Rule 17(4) next highest bid only if highest bid rejected
- not when acceptance is revised
