TaxTMI 
TaxTMI 
1994 (2) TMI 294
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....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 1 1984 KLT 88 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 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 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 ....
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....undrawn quantity in any quarter for any shop in the next quarter. The Range Inspectors shall be competent to issue the lapsed quota of arrack of a month during the succeeding month of the same quarter. In case the duty and commission had been remitted by the contractor for the additional quota of arrack for the last quarter of the contract period and the quantity in full or part thereof could not be issued before the completion of the contract, the Assistant Excise Commissioner shall be competent to adjust the duty and commission on the quantity of arrack which could not be issued, towards the abkari dues of the contractor. (2) All arrack kept or offered for sale shall be unadulterated and undiluted and it shall be of the same quality and strength as issued from the distillery or warehouse by the supply contractor. Nothing shall be added to it to increase its intoxicating power or for any other purpose. (3) If a licensee's demand for arrack at any time be found in excess of the total requirements of the shop it shall be competent to the Board of Revenue to restrict such demand to what it considers to be necessary for the purpose of sale in the shop. The Board of Revenue is also c....
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....ees. Even so, no bidders were present on March 26, 1981, whereupon the auction was adjourned to the next day, i.e., March 27, 1981. At that auction the bid of Issac Peter, (respondent in Civil Appeal No. 3442 of 1984), being the highest, Was accepted in respect of the aforesaid shops in the two ranges. The particulars of the shops obtained by the respondent are as follows: Range Bid amount Rs. Monthly quota of arrack announced Litres Sultan Battery (18 shops) Kalpetta (15 shops) 50,43,000 51,11,000 1350.00 2353.00 8. The respondent deposited 30 per centof the bid amount (Rs 15,12,900) as required by rules and also executed the counterpart agreements on the same day. He took out licences and commenced the business. The monthly quota announced for the shops was regularly supplied. There is no complaint on that score. The complaint is only about nonsupply of additional quantities applied for by the respondent from time to time which could not be fully met by the Government. The respondent has filed a statement showing particulars of licence fee, monthly quota, additional supplies demanded and supplies for the previous two years, for the year 1981-82 as well as for the....
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....were dismissed. All of them reached the High Court by way of appeals. On this occasion, however, another Division Bench took a different view mainly on the basis of Rule 6(26). It held that by virtue of the said rule the licensees cannot claim any remission or abatement in the amount payable by them nor can they claim any damages for non-supply of additional quantities demanded. 12. Shri V.R. Reddy the learned Additional Solicitor General appearing for the State of Kerala urged the following contentions : (1) Under the Auction Rules the only obligation of the Government is to supply the monthly quota. Supply of additional quantities over and above the monthly quota is in the discretion of the authorities. If sufficient arrack is available, additional quantities will be supplied. In the absence of availability of arrack there is no obligation upon the Government to supply the additional quantities demanded. Indeed, the Government cannot be expected to supply whatever quantity is demanded by the licensees. The licensees have no statutory right to the supply of additional quantities. Nor can they seek any remission/abatement in the commission and other amounts payable on account of ....
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....vernment to supply the additional quantities to meet the requirements of the consuming public of the area concerned. (2) The monthly quota announced for each of the shops/groups is wholly unrealistic, which would be evident from the level of supplies made during the previous excise years as also during the subsequent excise years. For example, if confined to the monthly quota alone in the case of Sultan Battery, the licensee would have had to sell each litre of arrack at the price of not less than Rs 310 in order to pay the licence fee alone due to the Government, which was an impossibility. The supply of additional quantities was therefore, implicit in the circumstances. The past conduct coupled with the assurances given by the Minister of Excise and the auctioning authorities obligated the authorities to supply additional quantities at least at the level of the previous year's additional supplies. The Government is estopped from contending that its obligation is only to supply the monthly quota and nothing more. (3) The Board of Revenue has not passed any orders as contemplated by Rule 8(3) holding that the additional supplies demanded by the licensees are not really required n....
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....the Act, the rules, the conditions of licence and the counterpart agreement. They constitute the terms and conditions of the contract. They are binding both upon the Government and the licensee. Neither of them can depart from them. It is not open to any officer of the Government to either modify, amend or alter the said terms and conditions, not even to the Minister for Excise. It is, therefore, not really necessary for our purpose to examine what precisely was the statement made by the Minister for Excise on March 19, 1981 or by the auctioning authorities at the time of auction. Even according to the licensee, the Minister merely stated that steps will be taken in the coming days to supply requisite quantities. The statement is sought to be proved by producing a newspaper report, Deshabhimani, dated March 19, 1981. On the basis of this newspaper report, it is difficult to record a finding as to what exactly did the Minister say. In any event, even the newspaper report does not say that he held out an assurance to supply all such additional quantities as may be demanded by the licensees or additional quantities equal to previous year's supply. All he said was that "steps will be t....
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....d it differently. In the face of such ambiguity, it would be proper to read the said condition of licence consistent with Rule 8(1). It would not be reasonable to presume that the rule-making authority used the expression 'may' in the rule but chose to use the expression 'would' in the Form of licence. 16. The concept of monthly quota is a well-known one in excise contracts all over the country. In several States it is called 'minimum guarantee quota'. It is true that the expression 'minimum guarantee quota' is not used in Rule 8(1). Rule 8(1) speaks of 'monthly quota'. But if the said expression is read along with the accompanying words it would be evident that it means 'minimum guarantee quota' alone. The first sentence in Rule 8(1) says "the monthly quota of arrack which shall be allowed for the shop". As against this, the next sentence says "the Assistant Excise Commissioner may, however, permit the issue of arrack in excess of the announced monthly quota...... The use of words "may" and "permit" clearly indicate a discretion in the authority. In the face of the said language, it is difficult for us to accept the contention that the State is under an obligation to supply all t....
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....must take great care that they do not make the contract speak where it was intentionally silent; and, above all, that they do not make it speak entirely contrary to what, as may be gathered from the whole terms and tenor of the contract, was the intention of the parties. This I take to be a sound and safe rule of construction with regard to implied convenants and agreements which are not expressed in the contract." Also see Interpretation of Statutes by Lewison. Chapter V 'Implied Terms', page 97, para 5.02 and para 5.07 at page 106. If the express term says that the Assistant Commissioner of Excise "may permit", an implied term cannot be inferred and read into the contract to read it as "shall permit". Even otherwise, having regard to the context and the object underlying, there is no warrant for holding that the words "may permit" in Rule 8(1) should be read as "shall permit". The fallacy in the contention advanced by the licensees can be demonstrated by taking a converse case. Suppose in a given year, the production of arrack is abundant. The Government has huge stocks of arrack, and they are piling up. Can the Government force and compel the licensees to lift additional quanti....
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.... itself by 5 (1975) 2 SCC 633 supplying the monthly quota alone; it supplied whatever additional quantities it could. There is no grievance on this score. It is not the case of any licensee that the State did not supply arrack to them even though it was available with it nor is there any complaint of inequitable distribution in any of these cases. If we look at the figures relating to the year 1981-82, this fact becomes evident. As against the supply of 1,29,650 litres of additional supplies for Kalpetta range during the previous excise year (1980-81), the Government supplied 1,04,200 litres (in addition to the full monthly quota) during the year in question (1981-82) the shortfall is only about 25,000 litres for the whole range. In the case of Sultan Battery as against the previous year's additional supplies of 1,51,400, the supplies during the relevant year were 77,250 (in addition to the full monthly quota). We do not, however, know what portion of this additional supplies were made to the 18 shops of the respondent in Sultan Battery since the particulars furnished relate to the entire 28 shops in that range and not separately to the 18 shops of the respondent. Even so the addit....
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....80-81, while the, licence fee for the Sultan Battery was 70,01,000 the total quantity supplied including the monthly quota was 1,76,550 litres. For paying the aforesaid licence fee alone, the licensee had to sell liquor at the rate of not less than Rs 40. If we apply the same calculation to Kalpetta range for the year 1981-82, the rate at which the licensee had to sell the arrack, just for paying the amounts due to Government, would be about Rs 32 per litre the position is better than that of previous year. This only shows that the basis put forward by the licensees for establishing loss is not acceptable. May be there are some other reasons which impel the licensees to stick on to a particular shop or group of shops. It may be to maintain the continuity of their business or to prevent any new person entering that area. May be, there are other reasons. 19. We may at this stage deal with the decision in Union Territory of Pondicherry v. P.V. Suresh (1994)2SCC70:JT(1993)5SC410 a decision rendered by a Bench comprising one of us (Jeevan Reddy, J.) and S.P. Bharucha, J. upon which strong reliance is placed by Shri Vaidyanathan. According to the learned counsel, the facts of that case ....
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...., be read or understood in an absolute sense dissociated from the facts of that case. It is for that reason that the Bench took care to caution : "We must reiterate that the formula evolved by us is peculiar to the facts of this case and has been evolved in view of the exceptional facts and circumstances of this case, and shall not be treated a precedent." The said decision cannot, therefore, be cited as a precedent. 21. There is yet another reason which militates against the licensees herein. Even according to them there was scarcity of arrack during the months of February and March 1981, i.e., towards the end of the previous excise year. It is also their case that auctions had to be postponed repeatedly because no bidders were coming forward in view of the said scarcity and that half the shops in the State could not be sold during that excise year for the very same reason. It is equally clear that the intending bidders were not prepared to implicitly believe the statement of the Minister for Excise made on March 19, which is evident from the fact that no bidders were present on the adjourned date of auction, viz., March 26, 1981. We do not know what circumstances weighed with th....
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....contracts there is always an element of risk. Many an unexpected development may occur which may either cause loss to the contractor or result in large profit. Take the very case of arrack contractors. In one year, there may be abundance of supplies accompanied by good crops induced by favourable weather conditions; the contractor will make substantial profits during the year. In another year, the conditions may be unfavourable and supplies scarce. He may incur loss. Such contracts do not imply a warranty or a guarantee of profit to the contractor. It is a business for him profit and loss being normal incidents of a business. There is no room for invoking the doctrine of unjust enrichment in such a situation. The said doctrine has never been invoked in such business transactions. The remedy provided by Article 226, or for that matter, suits, cannot be resorted to wriggle out of the contractual obligations entered into by the licensees. 24. Learned counsel for the respondents sought to invoke the rule of promissory estoppel and estoppel by conduct. The attempt is a weak one for the said rules cannot be invoked to alter or amend specific terms of contract nor can they avail against ....
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....ine of fairness or the duty to act fairly and reasonably is a doctrine developed in the administrative law field to ensure the rule of law and to prevent failure of justice where the action is administrative in nature. Just as principles of natural justice ensure fair decision where the function is quasijudicial, the doctrine of fairness is evolved to ensure fair action where the function is administrative. But it can certainly not be invoked to amend, alter or vary the express terms of the contract between the parties. This is so, even if the contract is governed by statutory provisions, i.e., where it is a statutory contract or rather more so. It is one thing to say that a contract every contract must be construed reasonably having regard to its language. But this is not what the licensees say. They seek to create an obligation on the other party to the contract, just because it happens to be the State. They are not prepared to apply the very same rule in converse case, i.e., where the State has abundant supplies and wants the licensees to lift all the stocks. The licensees will undertake no obligation to lift all those stocks even if the State suffers loss. This one-sided obliga....