1972 (3) TMI 83 - SC - Central Excise

Supreme Court Upholds Government's Authority Over Auction Bids Under Excise Act

STATE OF ORISSA Versus HARINARAYAN JAISWAL

The Supreme Court upheld the Government's power to confirm or reject auction bids under the Bihar and Orissa Excise Act, 1915, emphasizing the state's ... Whether the highest bid should be confirmed or not? Held that:- The High Court erroneously thought that the Government was bound to satisfy the Court that there was collusion between the bidders. The High Court was not sitting on appeal against the order made by the Government. The inference of the Government that there was a collusion among the bidders may be right or wrong. But that was not open to judicial review so long as it is not proved that it was a make- believe one. The real opinion formed by the Government was that the price fetched was not adequate. That conclusion is taken on the basis of Government expectations. We are unable to agree with the High Court in its conclusion. Neither the provisions of the Act nor the order issued by the Government lend any support to such a conclusion. In the cases of public auctions or in the case of calling for tenders, orders from the Government directing its subordinates to notify or hold the auctions or call for tenders is understandable. Public auctions as well as calling for tenders are done by subordinate officials. Further due publicity is necessary in adopting those methods. TOP require the Government to make an order that it is going to sell one or more of the privileges in question by negotiating with some one is to make a mockery of the law. If the Government can enter into negotiation with any person, as we think it can, it makes no sense to require it to first make an order that it is going to negotiate with that person. We must understand a provision of law reasonably. Section 29 (2) (a) does not speak of any order. It says that 'the State Government may by general or special order direct'. The direction contemplated by that provision is a direction to subordinate officials. It is meaningless to say that the Government should direct itself. In the result these appeals are allowed Issues Involved:1. Power of Government to confirm or reject auction bids.2. Alleged violation of Articles 14 and 19(1)(g) of the Constitution.3. Validity of Government's decision to call for tenders or negotiate privately after rejecting auction bids.4. Requirement of a specific order for private negotiation under Section 29(2)(a) of the Bihar and Orissa Excise Act, 1915.Issue-wise Detailed Analysis:1. Power of Government to confirm or reject auction bids:The Government of Orissa conducted an auction for the exclusive privilege of selling country liquor, where the highest bids were provisionally accepted by the Collector but later rejected by the Government, citing inadequate prices due to alleged collusion among bidders. The High Court opined that the Government had no power to refuse confirmation of the highest bids except on good grounds and that the grounds cited were irrelevant. The Supreme Court, however, held that the Government's power to confirm or reject bids, as conferred by Sections 22 and 29 of the Bihar and Orissa Excise Act, 1915, was absolute and not subject to judicial review unless exercised for collateral purposes. The Court emphasized that the Government's primary role was to safeguard the state's financial interests.2. Alleged violation of Articles 14 and 19(1)(g) of the Constitution:The writ petitioners argued that the power retained by the Government to accept or reject bids without assigning reasons was arbitrary and violated Articles 14 and 19(1)(g) of the Constitution. The Supreme Court disagreed, stating that the right to trade in intoxicating drugs is subject to reasonable restrictions, and the Government's power to reject bids was a necessary measure to prevent revenue leakage. The Court cited precedents affirming that the state has the authority to regulate or prohibit trades that are injurious to public health and welfare, and there is no inherent right to sell intoxicating liquors by retail.3. Validity of Government's decision to call for tenders or negotiate privately after rejecting auction bids:The High Court had accepted the contention that the Government, having initially used the auction method, could not subsequently call for tenders or negotiate privately. The Supreme Court rejected this view, stating that once the highest bid was declined, the Government was free to adopt other methods, including calling for tenders or private negotiation. The Court highlighted that the Act granted the Government wide, unrestricted power to sell the exclusive privileges in any manner it deemed fit.4. Requirement of a specific order for private negotiation under Section 29(2)(a) of the Bihar and Orissa Excise Act, 1915:The petitioners contended that the Government was required to issue a specific order under Section 29(2)(a) before selling privileges through private negotiation. The Supreme Court found this argument unconvincing, noting that while orders were necessary for public auctions or tenders to ensure proper notification and procedure, requiring a similar order for private negotiation would be impractical and nonsensical. The Court clarified that the direction mentioned in Section 29(2)(a) was intended for subordinate officials, not for the Government itself.Conclusion:The Supreme Court allowed the appeals, dismissing the writ petitions and upholding the Government's actions. The Court affirmed the Government's broad authority under the Act to confirm or reject bids and to choose the method of selling exclusive privileges, emphasizing the importance of protecting state revenue and the impracticality of requiring specific orders for private negotiations.