# ASSISTANf EXCISE COMMISSIONER AND ORS. ETC. ETC v. ' ISSAC PETER AND ORS. ETC. ETC

- **Citation:** [1994] 2 S.C.R. 67
- **Court:** Supreme Court of India
- **Decided:** 1994-02-22
- **Bench:** J.S. Verma, Yogeshwar Dayal, B B.P. Jeevan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/assistanf-excise-commissioner-and-ors-etc-etc-v-issac-peter-and-ors-etc-etc-12640
- **Pages:** 27

## Headnote

Excise: Kera/a Abkari Act/Kera/a Abkari Shop (Disposal in Auction)
'
Rules, 1974-SectionslS-A, 21, 25, 28, 29,./Rules 6(26), (39), 8(1), (3)-Liquor
vend-Supply of a"ack to licensees l1y State-State's obligation-Contract be- c
tween State and licensees governed by statutory rules and conditions of
lice11ce-Supply of additional quantities demanded by licensees not obligatory
on State-Obligation only in respect of monthly quota-Rebate/remission or
adjustment cannot be claimed for non-supply/short supply of additional qua11tity-Executory contract'-Sections 55, 56 of Contract Act can11ot be invoked- D
Doctrines of unjust enrichment,. promissiory estoppel, estoppel by conduct,
legitimate expectation, fairness and reasonableness-Not attracted.
• ..
-{
Contract Ac4 1872: Sections 55 and 56-Frustation of contract-Contract between State and contractor-Minimum guarantee quota of
goods-Supplied by State to Contractor-State unable to supply additional E
quantity demanded by Contractor-Suoh supply being discretionary, contractor cannot invoke the provisions of Ss.55 and 56.
j
Administrative law: Doctrines--Unjust-f'romissory estoppel-Estoppel
by conduct-Legitimate expectation-Fairness and reasonableness under
Natural justice-Applir:ability of in contracts between State and contractors F
"'
for supply of additional quantity of goods which is discretionary and governed
<
by statutory prol'isions.
In Kerala the anction for the arrack shops for the excise year 1981-82
was held on 27.3.1981. The successful bidders commenced their business
after obtaining the necessary licences. The monthly quota of arrack an· G
nounced for the shops was regularly supplied by the Government. However, the Government could not supp!Y in full the additional quantities
applied for by the licensees from time to time. They tiled writ petitions
.,.
before the High Court alleging that the authorities could not supply the
additional quantities requested by them and were at the same time, H
67
68
SUPREME COURT REPORTS
[1994] 2S.C.R.
A demanding the instalments due. The Writ Petitions were allowed by a
Division Bench of the High Court. However, another Division Bench ef the
High Court took a diferent view mainly on the basis of Rule 6(26) and held
that the licensees cannot claim any remission or abatement In the amount
payable by them nor can they claim any damages for non-supply of
B additional quantitiesdemanded. The present appeals were preferred both
by the State of Kerala and the licensees.
On behalf of the State it was contended that under the Auction Rules
the Government was obiged to supply the monthly quota and the supply
of additional quantities was in the discretion of the authorities; that Rule
C 6(26) was a total bar to the claim for remission/abatement by the licesees;
that whatever additional quantities were available with the Government
had been issued to the licensees according to Rules; and that there was no
promissory estoppel on the part of the Government.
D Kerala Abkari Shops(Disposal iu Audion) Rules, 1974 read with the
On behalf of the licensees it was contended that Rule 8(1) of the
conditions or licences created a statutory obligation upon tile Government
to supply the additional quantities to meet the requirements of the consuming public; that the Government was estopped from contending that
its obligation was only to supply the monthly quota and nothing more, that
E the monthly quota fixed was unrealistic and insufficient; that there was
legi\imale expedion on the part of the licensees; that the doctrine or
fairness was applicable; and that since the failure to supply additional
quantities resulted in partial frustration or the contract, the licensees were
entitled to claim abatement/remission of the amounts payable by them.
F
Allowing appeals by the State and dismissing the appeals preferred
by the licensees, this Court
HELD: 1. According to sub-rule(l) of Rule 8 of the Kerala Abkari
Shops (Disposal in Auction) Rules, 1974, supply of monthly qu

## Text

_Characters 0–39,997 of 63,841. This is a partial read: ask again with offset=39997 for what follows._

ASSISTANf EXCISE COMMISSIONER AND ORS. ETC. ETC.
A
v.
'
ISSAC PETER AND ORS. ETC. ETC.
FEBRUARY 22, 1994
[J.S. VERMA, YOGESHWAR DAYAL AND
B
B.P. JEEVAN REDDY, JJ.]
Excise: Kera/a Abkari Act/Kera/a Abkari Shop (Disposal in Auction)
'
Rules, 1974-SectionslS-A, 21, 25, 28, 29,./Rules 6(26), (39), 8(1), (3)-Liquor
vend-Supply of a"ack to licensees l1y State-State's obligation-Contract be- c
tween State and licensees governed by statutory rules and conditions of
lice11ce-Supply of additional quantities demanded by licensees not obligatory
on State-Obligation only in respect of monthly quota-Rebate/remission or
adjustment cannot be claimed for non-supply/short supply of additional qua11tity-Executory contract'-Sections 55, 56 of Contract Act can11ot be invoked- D
Doctrines of unjust enrichment,. promissiory estoppel, estoppel by conduct,
legitimate expectation, fairness and reasonableness-Not attracted.
• ..
-{
Contract Ac4 1872: Sections 55 and 56-Frustation of contract-Contract between State and contractor-Minimum guarantee quota of
goods-Supplied by State to Contractor-State unable to supply additional E
quantity demanded by Contractor-Suoh supply being discretionary, contractor cannot invoke the provisions of Ss.55 and 56.
j
Administrative law: Doctrines--Unjust-f'romissory estoppel-Estoppel
by conduct-Legitimate expectation-Fairness and reasonableness under
Natural justice-Applir:ability of in contracts between State and contractors F
"'
for supply of additional quantity of goods which is discretionary and governed
<
by statutory prol'isions.
In Kerala the anction for the arrack shops for the excise year 1981-82
was held on 27.3.1981. The successful bidders commenced their business
after obtaining the necessary licences. The monthly quota of arrack an· G
nounced for the shops was regularly supplied by the Government. However, the Government could not supp!Y in full the additional quantities
applied for by the licensees from time to time. They tiled writ petitions
.,.
before the High Court alleging that the authorities could not supply the
additional quantities requested by them and were at the same time, H
67
68
SUPREME COURT REPORTS
[1994] 2S.C.R.
A demanding the instalments due. The Writ Petitions were allowed by a
Division Bench of the High Court. However, another Division Bench ef the
High Court took a diferent view mainly on the basis of Rule 6(26) and held
that the licensees cannot claim any remission or abatement In the amount
payable by them nor can they claim any damages for non-supply of
B additional quantitiesdemanded. The present appeals were preferred both
by the State of Kerala and the licensees.
On behalf of the State it was contended that under the Auction Rules
the Government was obiged to supply the monthly quota and the supply
of additional quantities was in the discretion of the authorities; that Rule
C 6(26) was a total bar to the claim for remission/abatement by the licesees;
that whatever additional quantities were available with the Government
had been issued to the licensees according to Rules; and that there was no
promissory estoppel on the part of the Government.
D Kerala Abkari Shops(Disposal iu Audion) Rules, 1974 read with the
On behalf of the licensees it was contended that Rule 8(1) of the
conditions or licences created a statutory obligation upon tile Government
to supply the additional quantities to meet the requirements of the consuming public; that the Government was estopped from contending that
its obligation was only to supply the monthly quota and nothing more, that
E the monthly quota fixed was unrealistic and insufficient; that there was
legi\imale expedion on the part of the licensees; that the doctrine or
fairness was applicable; and that since the failure to supply additional
quantities resulted in partial frustration or the contract, the licensees were
entitled to claim abatement/remission of the amounts payable by them.
F
Allowing appeals by the State and dismissing the appeals preferred
by the licensees, this Court
HELD: 1. According to sub-rule(l) of Rule 8 of the Kerala Abkari
Shops (Disposal in Auction) Rules, 1974, supply of monthly quota Is
G obligatory upon the government while the supply of additional quantity/q,uota is discretionary. The condition of licence Is however of am·
blguous nature. While the first Division Bench of the High Court
•
understood the said condition as saying that "the Assistant Commissioner
·~
would permit issue of arrack in •~xcess or the announced monthly quota",
H the latter Division Bench understood the said clause as saying "the Assis·
' ..,
'1 ,
'
"
'
EXCISE COMMR. v. ISSAC PETER
69
tant Commissioner may permit issue of arrack in excess of "nnounced A
monthly quota'. This difference of opinion has arisen because the original
licence form is in Malayalam language. Both Benches have translated It
defferently. 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-l'laking authority used the expression B
'may' in the Rule but chosr to l\Se the expression 'would' in the Form or
licence. (82-F-H, 83-A]
2. 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' c
is not used in Rule 8(1) which 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 mothly quota of arrack which shall be allowed for the shop'.
As against this, the next sentence says 'the Assistant Excise Commissioner D
may, however,pe1111it the issue arrack in excess of the announced monthly
quota.' The use of words 'may' and "permit' clearly indicate a discretion
In the authority. In the race or the said language, It cannot be said that the
State Is under an obligation to supply all the quantity that is asked for b~
the licensee, or quantities equal to the previous years' supplies. Rule 8(3) E
Is an independent power. Even where ample supplies are available, the
Board of Revenue can yet restrict the supply or additional quota to a shop
having regard to the local requirements. But Rule 8(3) cannot be relied
upon to say that unless the Board or Revenue places a restriction, the
Assistant Commissioner of Excise is bound to supply all that is demanded,
irrespective of the availability of arrack an the requirements of other F
licensees. No such absolute right can be recognized.[83-B-E]
State of Rajastha11 v. Na11d/a/1 [1993] Snppl. 1 SCC 681, relied on.
State of M.P. v. Sunder Lal Jaiswal, (1976) M.P.LJ. 254 at 263, G
approved.
Churchward v. The Queen, (1865) 66(1) Q.B.D. 173, referred to.
lllterpretation of Statutes by Lewison. Chapter V - 'Implied Te1111s' ·pages 97
- Para 3.02 and para 5.07 at page 106, referred to.
H
70
SUPREME COURT REPORTS
[1994) 2 S.C.R.
A
3.1. Rule 6(26) says that no remission or abatement in the licence fee
·shall he "claimable" by the licensee "on any account whatsoever'. This
sub-tole should no doubt he read alongwith Rule 8(1), which sets out the
only situation In which the duty and commission payable wilf be adjusted,
· ' Not only the conditions are statutory in this case but they are formally
B · drawn In the shape of statutory Rules. In such a situation, it would not he
permissible to say that there was some other condition or term agreed
upon or Implied between the parties which Is not found therein. Moreover
any Implied term should he consistent witlt the express terms of the
coatract and not othenrise. [83-G-H, 84·A·BJ
C
· 3.2. 'There is no right in the licensees to compel the government to
D
supply what all they demand nor has the State the right to compel the
licenseei to purcl.ase all that it proposes to sell to them. In the absence of
a statutory right in the licensee to get additional supplies there is no basis
in law for the claim of remission or rebate.[8S·A, BJ
Panna Lal and Others v. State of Rajasthan and Others, [1973J 2
S.C.C. 633, relied on.
\
4. Not only monthly·quota was supplied in full for the whole of the
.year, additional qnantltes were also supplied to a substantial extent. So
. · · E there Is no question of the licensees n.ot being able to observe the requirement of Rule 6(14). There is also no room in the facts or these cases for
Importing the plea or frustration of contract or for that matter, the
principle of Section 55. In the absence of a legal right to claim additional
supplies, the claims based on sectlnns 55 and 56 of the Co11tract Act cannot
F he countenanced. {86·C, DJ
Union Territory of Pondicherry and Ors. v. P. V. Suresh etc. etc. & Ors.,
J.T. {1993) S.C. 410, distinguished.
G
5. The government had made e\•erytbing clear. If the licensees offered
their bl.ds with their eyes open they cannot blame anyone else tor the loss,
If imy, sustained by them, nor are they entlUed ·to say that licence fee
should he reduced proportionate to the.actual supplies made. [89-EJ
6. It is well known that In executory contracts there is always an
H element or risk. Many an unexpected development may occur which may
EXCISECOMMR. v. ISSAC PETER
71
either cause loss to the contractor or result in large profit. Such contracts A
,;
did not imply a warranty • or a guarantee • or profit to the contractor. It
is a business for him • Profit and loss being normal incidence 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 or the contractual obligations entered
into by the licensees. (89-H, 90-A-C]
·.:
7. Rules of promissory estoppel and estoppel by conduct can not ·be
Invoked to alter or amend specific terms of contract or against statutory
. -13.
provisions. (90-D]
C
8. The Role of legitimate exrectatiu11 cannot 111•0 be invoked to
modify or vary the express terms or contract, more so when they are
statutory in nature. (90-E]
D
9. Doctrine or fairness or the duty to act fairly and reasonably is a
doctrine developed in the adm:uistratlve law field to ensure the Rule or
Law and to prevent failure or justice where the action is administralve in
nature. Just as principles of natural justice ensure fair decision where the
function is qnasi-judiclal, the doctrine u: :aimess is evolved to ensure fair
action where the function is administrative. But it can certainly not be E
invoked to amend, alter or vary t;;e express terms or the contract between
the parties. This is so, even if the contract Is governed by statutory
provisions. It is one thing to say that a contract must be construed
reasonable having regard to its language. But this is not what the licenliees
say. They seek to create an obligation on the other party to the contract, F
just because it happens to be the State. They are not prepared to apply the·
very same rule In a converse case, i.e., where the State ha8 abundant
supplies and wants the licensees to lift all the stocks. The licensees will
undertake no obligation to lift all those stocks even lftbe State suffers loss.
It is difficult to appreciate the one-sided obligation, in modification or G
express terms orthe contract, in the name or duty to act falrly.(91-D-G]
Issac Peter v. The Assistant Excise Commissioner, Calicu{ & Ors.,
reversed.
Dwarkadas Maefatia v. Board of Tnistees of the Port of Bombay, (1989] H
72
SUPREME COURT REPORTS
(1994] 2 S.C.R.
A
3 SSC 293; Kumari Shrilekha Vidyanhi and Others v. State of U.P. and
Others, [1991] 1 S.C.C. 212 and Mahabir Auto Stores and Othm v. lndian
Oil Corporation and Others, [1990] 3 S.C.C. 752, distinguished.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3442·
B 60/84.
From the Judgment and Order dated 14.11.83 qf the Hight Court of
Kerala, in O.P. No. 2325/81.
V.B. Nambiar, Santosh Hegde, G.Ramaswamy, V M. Tarkunde, C.S.
C
Vaidyanathan, EMS Anam, J.P. Verghese, S.P. Sharma, Sdnjay Kumar,
R.M. Keshwani, M.T. George, Viswanathan, Praiap Venugopal and KJ.
John for the appearing parties.
The Judgment of the Court was deli'"';re<l by
D
B.P. JEEVAN REDDY, J. Leave franted i11 the S.L.Ps.
In this batch of appeals, some are preferred by the Stat" and some
by tD.e licencees/contractors. The matters arise under the Kerata Abkari
Act. All of them pertain to the excise, year 1981-82. The que.stion is
E whether there was a failure on the part of the State in supplying the arrack
undertaken by it to supply and whether the licenceesi are entitled to any
I
rabate/remission in the amounts payable by them under the contracts, on
account of such failure, if any. The earliest decision is in O.P.No. 23)5 of
198i ' I (Issac Peter v. The Assistant Excise Commissioner, Calicllt and
F
Ors.). It was a writ petition filed by the licencee. It was allowed by a
Division Bench of the Kerala High Court on 14th Nove!"ber, 1983 against
which the State of Kerala and its officers have filed C.ANo.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 Cour1, however, took a contrary view in A.S. No. 293 of 1983 and
G batch disposed of on 26th October, 1980. By ibis judgment, the suits filed
by licencees/contractors were dismissed. following the said judgment,
several other appeals were disposed of in favour of the State. The licencees
have filed appeals against those judgments.
H
The Kerala Abkari Act (1 of 1077-corresponding to 1902 AD) was
\
.>
'j
'
•.
EXCJSECOMMR v. ISSACPE1ER[JEEVANREDDY,J.]
73
enacted to consolidate and amend the law relating to Import, Export, A
Transport, Manufacture, Sale and possession of intoxicating liquors and of
intoxicating drugs in the State. Section 15 says that no liquor of intoxicating
drug shall be sold without a licence from the Commissioner. Section 18A
provides for grant of exclusive of other privilege of manufacture and sale
of liquor. Sub-section (1) says: "it shall be lawful for the Government to B
grant to any person or persons, on such conditions and for such period as
they may·deem fit,'the exclusiv.e or other privilege (i) of manufacturing ac
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 th~ Government of C
an amount as rental in consideration of the grant of such privilege. The
amount of rental may be sett!~d by audio•, regotiation or by any other
method as may be determined by the Government, from time to time, and
may be .::ollected to the exclusion of, or in addition to, th~ duty or tax
. leviable under sections 17 and 18." Section 24 prescribes the forms and
conditions of licence. Section 25 prescribes the counterpart agreement to D
be executed by licenree. Section 28 says that all duties, taxes, fines and fees
payable to the Government under any of the provisions of tlie Act or of
any licence or permit issued thereunder may be reoovered as if they are
arrears of Land Revenue. S~cticn 29 empowers the Government to make
rules for carrying out the purposes of the Act. It is not necessary to notice E
other prO\isions of the Act.
Rules have been made by the Government governing the mode of
grant of licencees,called the Kerala Abkari Shops (Disposal in Auction),
Rules 1974. Rufe 6 prescribes the general conditions applicable to licencees or arrack shops, both retail and wholesale. Sub-rule (26) of Rule 6 F
which constitutes thC basis or the later judgment of the Division Bench of
the High Court reads: "No remission or abatement of the rental shall be
claimable by the licencee on any account whatsoever." Sub-rule (39) says
that "the licencee shall be bou'ld by all the. rules which have been passed
under the Abkari Act and which may hereafter be made under the said G
Act or under any law relating to Abkari Revenue which may hereafter be
made.' Rule 8 prescribes the special conditions applicable tolicenceesfor
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
H
74
A here:
SUPREMECOURTREPORTS
[1994) 2 S.C.R.
"8. (1) The monthly quota of Arrack which shall be allowed for
the shop that is put up to auction shall be announced by the
auctioning officer. The Assistant Excise Commissioner may howB
ever permit the issue of arrack in excess of the announced monthly
quota on realisation of commissioner at a rate to be fixed by the
Board of Revenue. The- Assistant Excise Commissioner shall be
competenc to permit the issue of the undrawn quantity in any
quarter for any shop in the next quarter. The Range Inspectors
c
D
E
F
G
shall be competent to issue the lapsed quota of arrack of a mouth
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 Wllrehouse by the supply contractor.
Nothing shall be added to it to increase its intoxicating power or
for any other purpose.
(3) If a Iicencee'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 whal it
considers to be necessary for the purpose of sale in the shop. The
Board of Revenue is also competent to fix the quantity of Arrack
that may be sold in any shop or locality.'
An analysis of rule 8(1) discloses the following features: (i) the Rule
contemplates a monthly quota of arrack 'which shall be allowed for the
shop' and which shall be announced by the auctioning officer at the time
H of the auction.
~I
·•
r
,
•
EXCISE COMMR. v. ISSAC PETER [JEEV AN REDDY, J.)
75
(ii) Additional supplies of arrack which the Assistant Excise ComA
misioner 'may ...... pennit in excess of .the announced monthly quota on
realisation of commission at a rate to be fixed by the Board of Revenue.'
(iii) Any undrawn quantity in any quarter can be allowed to be drawn
in the next quarter by the Assistant Excise Commissioner. Similarly, Range B
Inspectors are competent to issue !be lapsed quota of arrack of a month
during the subsequent month of the same quarter.
(iv) In case the Government is unable in the last quarter to supply
wholly or partlyany additional quota for which the contractor has r~:-Uttecl
the duty and commission, the Assistant Excise Commissioner shail be C
competent to adjust the duty and commission on the arrack. not issued
towards the Abkari dues of !be contractor.
Sub-rule (3) empowers !be Board of Revenue to restrict the additional demand in respect of any shop if it finds that !be demand in respect
of any shop is in excess of the total requirements of !bat shop.
D
The e,xcise year in Kerala corresponds to the financial year. The
auctions are normally conducted before the commencement of !be excise
year. For !be excise year 1981-82, with which we are concerned in this
batch of appeals, auctions were notified to be held in the month of March. E
For !be sake of convenienee, we shall take !be facts in C.,'\.:3442184 as
broadly representative of !be facts in all the other matters. It concerns 18
shops \OU! of 28 in Sultan Battery range and 15 out of .18 shops in Kalpetta
range. The first date of auction notified was 18th March, 19$1. There
were no bidders on !bat day and no auction could take place. The reason
for this is stated to be the scarcity of arrack !bat had developed during , the F
last two months of the previous excise year, i.e., February and March 1981.
The auction was adjourned to 26.3.1981. It is stated by !be licencees that
on 19th March, 1981 !be Minister for Excise, Kerala made a statement to
!be effect that steps will be taken by the Government to supply requisite
quantities of arrack to the licencees. Even so, no bidders were present on G
26th March, 1981, whereupon the auction was adjourned to the next day,
i.e., 27th March, 1981. At !bat auction the bid of Issac Peter, (respondent
in Civil Appeal 3442 of 1984), being !be highest, was accepted in respect
of the aforesaid shop& in the two ranges. The particulars of the shops
obtained by the respondent are as follows :
H
B
76
SUPREME COURT REPORTS
[1994] 2 S.C.R.
Bid Amount
Monthly quota of
Range
Arrack announced
Rs.
Liters
Sultan Battery
50,43,000.00
1,350.00
(18 shopsi
Kalpetta (15 shops)
51,11,000.00
2,353.00
The respondent
deposited 30 percent of the bid amount (Rs.
15,12,900) as required by Rules and also executed the counterpart agreeC ments 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 non-supply of
additional quantities applied for by the respondent flam time to time which
could not be fully met by the Government. The Reepondent has filed a
D statement showing particulars of licence fee, monthly quota, additional
supplies demanded and supplied for the previous two years, for the year
1981-82 as well as for the subsequent year. It is, however, necessary to
mention that the Su!tan Battery range comprfaes 28 shops out of which the
respondent had taken only 18 shops; similarly Kalpetta range comprises of
18 shops, out of which the respondent had obtained only 15. ·The parE
ticulars in the following table are furnished for all the 28 shops in Sultan
Battery and all the 18 shops in Kaipetta:
F
Range of
Year
shops
Bid amount
1979-80
Kalpetta
45,%,000
(13 shops)
S.Battery
60,01,000
(9 shops)
G
1,05,97,000
1980-81
Kalpetta
50,76,000
(13 shops)
S.Battery
70,01,000
(9 shops)
H
1,20,77,000
Monthly
quota
supplied
34,:100
25,:!00
60,1100
34,800•
25,150
59,950
Add\.
Addi.
quota
quota
supplied
supplied
1,45500
1,45,500
1,52, 700
1,52,700
2,98,200
2,98,200
40,000
1,29,650
50,000
1,51,400
2,81,050
•For Feb. & March application for add!. quota was
Ka\petta Battery Supply nil.
•
'
EXCISE COMMR. v. ISSAC PETER [JEEV AN REDDY, J.]
77
i981-82
Kalpetta
(18 shops)
64,23,000
34,800
4,58,200
1,04,200 A
1981-82
S. Battery
(28 shops)
77,03,000
25,200
4,10,000
77,250
1,41,26,000
60,000
868,200
1,81.450 B
1982-83
Kalpetta
(18 shops)
42,01,000
34,800
2,05,864
1982-83
S. Battery
(28 shops)
52,01,000
25,200
2,28,205
94,02,000
60,000
4,34,069 c
(The in~rease in the number of shops in each range, it is stated,
makes no difference, since the area remains the same. Only the number of D
shops has gone up.)
The particulars mentioned above disclose that for Kalpetta range,
the additional supplies during the previous excise year (1980-81) were
1,29,650 liters whereas for the relevant excise year (1981- 82), they totalled E
1,04,200 liters, for Sullal1 Battery, the additional supplies in the previous
excise year were l,Sl,400 whereas for 1981-82 the supplies were 77,250
liters. A fact worth noticing is the very high level of demand by the
Respondent during 1981-82 as compared to the previous year 1979-80.
(Particulars of demand for the excise year 1980-81 are not furnished.) Be
that as it may, the fact remains that the additional quantities supplied by F
the Government during the excise· year 1981-82 were less than those
supplied during the previous year for both these ranges. The respondent
has, of collfse, not furnished particulars relating to his shops separately. In
that sense, correct picture with respect to his shops is not available.
The respondent filed the writ petition in the Kerala High Court even
during the currency of the excise year, i.e. on 11th May, 1981. His grievance
in the writ petition was that during the months of April and May the.
authorities could not supply the additional quantities requested for by him
G
and at the same time they were demanding the instalments due. He sought H
78
SUPREME COURT REPORTS
(1994}2 S.C.R.
A the following reliefs in the writ petition:
(a) to declare Rule 6(26) of the Auction Rules as ultra vires;
(b) to direct the respondents to supply additional quantity of arrack
B as requested by the petitioners;
(c) to direct the respondents not to enforce monthly payments due
except that amount as is payable on tlie basis of mack actually supplied;
and
f
C
( d) to prevent the Government from conducting the re-auction or
from terminating his licence.
The writ petition was allowed by the Division Ben:h on 14th November, 1983. Several other matters were disposed of following the said
decision. Several suits were also filed by licencees against the Government
D for similar reliefs in addition to claim for damages against the government
for its failure to supply additional qwllltities demanded. Some suits were
\,
decreed while some 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
E
the said Rule the licencees cannot claim any remi5sion or abatement in the
amount payable by them nor can they claim ;my damages for non-supply
of additional quantities demanded.
Shrl V.R. Reddy the learned Additional Solicitor General appearing
F
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
G 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 licencees. The
licencees have no statutory right to supply of additional quantities. Nor can
they seek any remission/abatement in the commission arid other amounts
H
payable on account of non-supply of any of the additional quantitities
'
....
EXCISECOMMR. v. ISSACPElER[JEEVANREDDY,J.]
79
demanded.
A
(2) Rule 6(26) is a total bar to the claim for remission/abatement by
the licencees .. Rule 8(1) specifies that the only situation in which the
Iicencee can ask for adjustment of the amount remitted by him. Except in
the situation provided in Rule 8(1), no other claim for remission/abatement
can be made in !Rw.
B
(3) There is no complaint by any of the licencees herein that the
Government did have supplies and yet it did not supply ailditional quantities to the licencees. Nor is there any complaint ot inequitable distribution. Whatever additional quantities were available with the Government C
have been issued to the licencees as and when they asked and paid for it
according to Rules. There is no further or other obligation upon the
Government.
(4) The writpetitionsfiled by the licencees are not maintainable in D
law. The remedy under Article 226 cannot be resorted to either for
enforcing or for avoiding contractual obligations.
(5) The Auctioning authorities made no promise nor did they give
any assuranee .that whatever quantities were demanded wiU be. issued nor
did they hold out any promise or assurance that ad.ditional quantities equal E
. to. the previous year's· supplies will be maintained during the excise year
1981-82.
(6) The ar~~ent of the licencees that inasmuch ·as they were selling
arrack at the rate of Rs. 25 to Rs, 30 per liter they ·must be supplied
additional arrack in such quantities as to · enable them to realise the F
amounts payable tothc Government by the~ - in addition to their expenses
and profit - is wiaccel'table for the re~son _that there is no such statutory
obligation cast upon the 11overnment. Indeed, the previous year's supply
does not mee.t tbe said test. lo _case of Sultan Battery, for the excise year
1980-81, while the total bid amount payable was Rs. 70,01,000, the total G
quantity of arrack issued was 1, 76,550 liters which means that they had to
sell the liquor at the raise of Rs. 40 per ·liter _in order to pay the licence
fee a/011e, let alone meet their ·establishment charges, other expenses and
profits. The said basis put forward by the licencees is, ·therefore, unacceptable.
H
A
B
80
SUPREME COURT REPORTS
(1994) 2 S.C.R.
On the other side, S/Shri Vaidyanathan, V.B.Nambiar, Tarkunde,
VJ. Francis and G. Ramaswamy urged the following rnbmissions:
(1) Rule 8(1) read with the co.aditions of licences cr<ated a statut01y
obligation upon the Government to supply the additioual quantities to meet
the requirements of the consuming public of the concerned area.
(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
C Battery, the licencee would have had to sell each. liter 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. Th~ eupply of additional quantities was, therefore, implicit in the circumstances. The past conduct
coupled with the assurances given by the Minister of Excise and the
D
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 ol Reve.nue has not passed any orders as conE
templated by Rule 8(3) holding that the additional supplies demanded by
the licencees are not really required nor has it fixed the quantity of arrack
to be sold in each shop. If so, the Assistant Excise Commissioner was
bound to supply additional quantities as may have been demanded by the
licencees - at any rate, to the extent of the additional quantity supplied
F
during the previous excise year.
(4) Sub-rule (14) of Rule 6 obliges the licencee to keep available
arrack in quantities sufficient to meet the local requirements on any given
day. This obligation cannot be discharged by the licencee unless he is
G supplied additional quantities. The monthly quota fJXed by the Rules is
hardly sufficient for a day in any shop.
(5) Having regard to the past practice over the several years, the
licencees entertained a legitimate expectation that supplies consistent with
the previous year's supplies' will be maintained during 1981-82 as well. Had ·
H they been told that they would not be entitled to any supplies over and
EXCISECOMMR. v. ISSACPEIBR [ffiEVANREDDY,J.]
81
above, the monthly quota, they would never have offered such huge bids as A
has been done by them.
( 6) While interpreting the Government contracts, which involve State
power, the doctrine of fairness has necessarily to be brought in, as has been
held by this Court on more than one decision. When the State entered into
the contracts with the licen• :ees herein, it postulated that sufficient quanB
tities of arrack were availal le and will be supplied as usual. While interpreting rnch contracts, it is permissible to fook to the surrounding
circumstances including the circumstances. obtaining during the previous
years.
(7) The failure to supply the additional quantities resulted in partial
frustration of the contract, on which basis the licencee would be entitled
to claim aba<ement/rembsion of the amount payable under sections 55 and
56 of the Contract Act.
c
(8) Where the mjustice and inequity is glaring, the Court should step D
in to do justice between the parties. The Goverrunent cannot be allowed
to make capitai out of the misery of the licencees. If the contract between
the parties is understood in the sense urged by the Government, it would
be an impossible contract. It would be a contract in which Joss is inherent
and implicit. There can be no such contract. The Court should mould the E
relief in such situations to suit the circumst.ances, as has been done by it
in similar matters.
The contract between the parties is governed by statutory provisions,
i.e., provisioris of the Act, the rules, the conditions of licence and the.
counter-part agreement. They constitute the terms and conditions of the
F
contract. They are binding both upon the Government and the licencee.
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 term& 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 G
made by the Minister for Excise on 19.3.1981 or by the auctioning
authorities at the time of auction. Even according to the licencee, the
Minister me(ely 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 19.3.81. On the basis of this
newspaper report, ii is difficult lo record a finding as to what exactly did H
82
SUPREME COURT REPORTS
(1994] 2 S.C.R.
A 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 licencees or additional quantities equal to previous year's
· supply. All he said was that 'steps will be taken" to supply requisite
· · quantities to arrack shops - a general declaration of intent and no more.
B Siniilarly we do not know what precisely was the assurance held out by the
auctioning authorities, namely, the ·District . Collector and the Assistant
Excise. of Cbmmissioner who conducted the auction relating to Sultan
Battery and Kalpetta ranges. According to the respondent (para 5 ofW.P.),
they 'assured that necessary ·~xcess quantity of arrack should be supplied
as in the previous year'. The respondents in the Writ Petition (appellants)
C have denied the said averment. The High Court has accepted the
respondents' averment in the writ petition on the ground that neither the
Collector nor the .Assistant Excise Commissioner filed affidavits denying
the said averments. Learned Additional Solicitor General criticized the
High Coiirt's view on the ground that the Collector was not obliged to file
D his affidavit unless he was impleaded as a respondent es nomine. In any
event, he say$, itwas not competent to any of the authorities to make any
pro~ or. give. any assurance over and aoove those contained in the
statutory provisions inCludiDg the Rules and conditions of licencee. We
· agree with the littler part of the submission of the learned Solicitor
· General. We do nc>t wish to go into the disputed question whether any such
E · statement was indeed made by the said officials: It is enough to note that
they were not competent to hold out any such' promise nor any such
promise ean'clothe the iicencees with any legitlly enforceable rights. We
shall, therefore, go strictly by what is contained in the Statutory provisions.
F
. · ·. S~b-iules (i) to (3) of Rule 8 have already been set out by us.
According to sub-rule (1), suply of rnollthly quota is oblkigiitory upon the
goverilriient while the suppiy of acldiitional quantity/quota is discretionary.
T~e conditi<)n of licence upon which reliance is placed by the appellants
appears to be of an ambiguous natme. While the first Devision Bench
understood the said condition as saying that 'the Assistant CommissionerG would permit issue of arrack fu excess of the anno~nced monthly quota",
the latter Division Bellch understood th,e said clause as saying 'the Assistant Commissioner may permit issue of arrack in excess of announced
monthly quota': This difference of opinion has arisen because the original
licence form is in Malayalam language. Both Benches have translated it
H differently. In the face of such ambiguity, it would be proper to read the
•
)
J
EXCISE COMMR. v. ISSAC PETER [JEEV AN REDDY, J.]
83
said condition of licence consistent with Rule 8(1). It would not be A
reasonable to presume that the rule-making authority used the expression
'may' in the Rule but chose to use the expression ~muld' in the Form of
licence.
The concept of monthly quota is a well'knowit one iri excise contracts
all over the country. In several States it is called 'minimum guarantee
B
quota'. It is true that the.expression 'minimum guaraniee quota' is not used
in Rule 8(1). Rnle 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. This first sentence in Rule 8(1)
says "the monthly quota of arrack which shall be allowed for the shop'. As C
against this, the next sentence says "the Assistant Excise Commissioner may
however, pennit 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 ihe contention that the State is under an obligation to supply all · D
that quantity that is asked for by the licencee, 01 quantities equal to the
previous years' supply on for that matter, equal to the average of previous
three years supplies. Reliance upon Rule 8(3) is of not help. Rule 8(3) is
an independent power. Even where ample supplies arc available, the Board
of Revenue can yet restrict the supply of additional quota to a shop having E
regard to the local requirements. But Ruic 8(3) cannot be relied upon to
say that unless the Board of Revenue places a restriction, the Assistant
Commissioner of Excise is bound to supply all that is demanded, irrespective of the availability of arrack and the requirements of oilier licencees.
No such absolute right can be recognized. This is also the view taken by
this Court in State of Rajasthan v. Nandla~ (1993] Suppl 1 SCC 681 and F
this is how it has been understood all these years. See State of M.P. v.
Sunder Lal /a1$w~(1976)M.P.LJ. 254 .at 263. Now, coming to the licencees'
right to claim rebate/remission/abatement, RUie 6(26) says that no remission or abatement in the lincence fee shall be 'claimable' by the licencee
'on any account whatsoever'. This sub-rule should no doubt be read G
alongwith Rule 8(1), which sets out the only situation in which the duty and
comission payable will be adjusted. (Of course, where the government fails
to perform its statutory obiligation e.g., if it fails. to supply the monthly
quota referred to in Rule 8(1) it may not be open to ihe government io
84
SUPREME COURT REPORTS
(1994] 2 S.C.R.
A invoke Rule 6(26).) In such a situation, it is not
0
possible to say that in
addition to the situation contemplated by Rule 8(1) there are other situations also wherein such rebate/remission o_r adjustment is permissible. Not
only the conditions are statutory in this case but they are formally drawn
in the shape of statutory Rules. In such a situation, it would not be
B permissible to say that there was some other condition or term agreed upon
or implied between the parties which is ~ot found therein. Moreover any
implied term should be consistent with the express terms of the Contract
'
and not otherwise. This principle was affirmed as far back as 1865 by
Cockburn, CJ., in Churr:hward v. The Queen, [1865-66] 1 Q.B.D. 173.