The State Of Bihar vs M/S Riga Sugar Co. Ltd.

2 | Page the 17 lowest applicants in the financial bid would be

eligible for grant of Exclusive Privilege in accordance

with their preference to a particular zone. By an order

dated 04.03.2014, Exclusive Privilege for manufacturing

and supply of country liquor for zone 11 constituting the

districts of Muzzafarpur, Sitamarhi and Sheohar for the

period between 01.04.2014 to 31.03.2019 was awarded

to M/s Riga Sugar Company Limited (hereinafter, ‘the

Respondent’). The base rate fixed for supply of 200 ML

PET bottle of country liquor was fixed at Rs.5.78/-. The

difference between the base price and the bid price (in

this case Rs.4.07/-) calculated on the Minimum

Guaranteed Quantity (MGQ) was payable by the supplier

to the Government in advance for a period of every

three months i.e. on 15th March, 15th June, 15th

September and 15th December. As per the tender

conditions the supplier is required to obtain a licence in

Form 27 for manufacture and supply of country liquor to

Bihar State Beverages Corporation Limited (BSBCL) at

the rate of Rs.1/- per litre calculated on the Minimum

Guaranteed Quantity.

3 | Page

3. The Respondent was required to supply

5,25,220.786 LPL country liquor of 60 degree strength

per month. After issuance of a letter of grant on

04.03.2014, a liquor licence was obtained by the

Respondent. Pursuant thereto, the Respondent

established a bottling plant at Muzzafarpur and

commenced production and supply of country liquor to

BSBCL on 01.02.2015. As the Respondent was not

supplying the prescribed quantity of country liquor to

BSBCL, a warning was issued to ensure that the

prescribed quantity of country liquor was supplied. On

09.12.2015, a penalty of Rs.1 lakh was levied on the

Respondent for non-supply of minimum quantity of

country liquor. Pursuant to the inspection report dated

13.12.2015, the premises of the Respondent was sealed

by the Superintendent of Excise, Muzzafarpur for non-

supply of minimum quantity of country liquor.

4. The State of Bihar announced a New Excise Policy

and imposed total ban on consumption of alcohol in the

4 | Page State in a phased manner. The New Excise Policy which

was announced on 21.12.2015 contemplated that no

licence for manufacturing, trading and consumption of

country liquor shall be granted from 01.04.2016. The

respondent questioned the order dated 13.12.2015 by

which its premises was sealed by filing a writ petition.

Lack of opportunity to the Respondent before the order

of sealing was passed prompted the High Court to allow

the Writ Petition by its judgment dated 25.01.2016. In

the meanwhile, the licence of the Respondent was

suspended for a period of 90 days by an order dated

20.01.2016 issued under Section 42 (3) of the Bihar and

Orissa Excise Act, 1915 (for short “the Act”) as the

liquor supplied by the Respondent was found to be of

higher strength of 70.8 degrees UP instead of required

strength of 60 degree UP. Another Writ Petition was filed

by the Respondent questioning the order of suspension

dated 20.01.2016 which was dismissed as withdrawn in

view of the order of the Excise Commissioner, Bihar

dated 04.02.2016 by which the earlier order of

suspension dated 20.01.2016 was withdrawn. A

5 | Page notification was issued on 04.02.2016 directing that

production, sale and utilization of all country liquor shall

be completely prohibited in the State of Bihar w.e.f.

01.04.2016 and that the remaining stocks of all country

liquor lying in the outlets as on 31.03.2016 shall be

destroyed.

5. The Respondent submitted a representation

seeking refund of the licence fee and differential amount

for the period between 13.12.2015 to 04.02.2016 during

which its manufacturing unit was closed. The

Respondent quantified the amount of refund at

Rs.1,29,42,928/-. On 31.03.2016, a notification was

issued implementing the New Excise Policy by imposing

an absolute ban on manufacturing, bottling, distribution,

sale, purchase, possession and consumption of country

liquor w.e.f. 01.04.2016.

6. The Respondent filed a Writ Petition in the High

Court seeking a direction to the Appellants to refund the

proportionate amount of licence fee calculated at the

6 | Page rate of Rs.1/- per LPL on the Minimum Guaranteed

Quantity of country liquor and the differential amount

calculated on the Minimum Guaranteed Quantity of

country liquor for the period between 13.12.2015 and

04.02.2016.

7. The High Court heard the Writ Petition filed by the

Respondent along with three other Writ Petitions. It was

held that there was an earlier adjudication that the

sealing of the premises was wholly unjust and improper

and hence, the Respondent and other writ petitioners

were entitled for refund of the licence fee and the

differential amount as prayed for. The Appellants,

therefore, were directed to refund the amount of licence

fee and the differential amount recovered from the

Respondent for the period during which the

manufacturing unit was sealed. Another reason for grant

of relief by the High Court is that the manufacturers

were not given an opportunity before orders of

suspension and cancellation of licenses were passed.

There was a further direction that the Appellant should

7 | Page consider the claims of the Respondent and the other Writ

Petitioners regarding compensation for the value of the

furnished raw material which could not be liquidated by

31.03.2016 due to the unlawful closure of the

manufacturing premises.

8. It was contended by Mr. Maninder Singh, learned

Senior Counsel appearing for the Respondent that the

tender conditions were incorporated in the Exclusive

Privilege and the licence was granted to the Respondent

as per the scheme of the Act. The Exclusive Privilege in

relation to the activities of the Respondent was under

the supervision and control of the State. The employees

of the Excise Department are deployed on the

manufacturing plant to ensure that the tender conditions

are complied with scrupulously. He submitted that the

premises of the Respondent was sealed on 13.12.2015

for non-supply of the prescribed quantity of country

liquor for the month of December, 2015 despite the

warning issued on 23.11.2015 and a penalty levied on

09.12.2015. Another ground for sealing the premises

8 | Page was violation of the condition to maintain required buffer

stock. During the pendency of the Writ Petition filed

against the order dated 13.12.2015 by the Respondent

in the High Court, the licence of the Respondent was

suspended on 20.01.2016 on the basis of an inspection

report of the Excise Chemical Engineer in which it was

found that the strength of the liquor was higher than the

prescribed 60 degree UP. Though the sealing order was

set aside by the High Court on 25.01.2016, the premises

were de-sealed only on 04.02.2016, on which date the

order of suspension was withdrawn. Mr. Singh

submitted that the order of sealing dated 13.12.2015

has no connection with the order of suspension dated

20.01.2016 which was for a different violation of the

conditions of licence. He relied upon Clause 22 of the

licence to submit that the Respondent is not entitled for

any compensation. In this regard, he also referred to

Section 42 (4) of the Bihar Excise Act according to which

the holder of a licence shall not be entitled for any

compensation for its cancellation or its suspension. The

said provision further contemplates that the licensee is

9 | Page not entitled for any refund of any fee or deposit made. It

was further submitted by Mr. Singh that the High Court

committed an error in taking up all the four Writ Petition

together, especially when the facts are different. He also

questioned the finding of the High Court that the show-

cause notice is necessary before an order of suspension

was passed.

9. Mr. Navaniti Prasad Singh, learned Senior Counsel

appearing for the Respondents submitted that the

sealing order dated 13.12.2015 was set aside by the

High Court by a judgment dated 25.01.2016 in CWJC

No.1364 of 2016. The judgement has become final and

necessarily the Respondent is entitled for refund of the

licence fee and the deferential amount for the period

between 13.12.2015 and 20.01.2016. The order dated

20.01.2016 by which the licence of Respondent was

suspended was not brought to the notice of the High

Court by the Appellants when CWJC 1364 of 2016 was

heard. He submitted that in this case no notice was

given before the order of suspension was passed. The

10 | P a g e Writ Petition filed assailing the validity of the suspension

order had to be withdrawn in view of the revocation of

the order suspending the licence. He argued that the

Respondent is entitled for refund of the licence fee and

the differential amount even for the period between

20.01.2016 and 04.02.2016.

10. The point that arises for our consideration in this

case is whether the Respondent is entitled to refund of

the licence fee and the differential amount for the period

during which the unit was sealed. Admittedly, the

closure for the period between 13.12.2015 and

20.01.2016 was the subject matter of the judgement in

CWJC No.1364 of 2016 which was allowed by the High

Court and the judgment has become final. There cannot

be any dispute that the Respondent is entitled for the

refund of the licence fee and the differential amount in

respect of the period between 20.01.2016 and

04.02.2016 covered by sealing order. We are also of the

opinion that the Respondent is entitled for refund of the

licence fee and differential amount even for the period of

11 | P a g e suspension i.e. 20.01.2016 to 04.02.2016 for the reason

that no show-cause notice was given before the order

was passed. Since orders of cancellation and suspension

are punitive, the licensee should be given an opportunity

before the licence is cancelled or suspended. 1

Therefore, the judgment of the High Court is affirmed.

Appeal is dismissed.

Civil Appeal No. 7952 of 2019 (Arising out of SLP (C) No.4664 of 2019) (M/S Welcome Distilleries Private Limited).

11. M/s Welcome Distilleries Private Limited, the

Respondent herein was granted Exclusive Privilege for

manufacture and supply of country liquor at the rate of

Rs.4.32/- per 200 ml. PET bottle for Zone-4, constituting

the districts of Rohtas and Kaimur for the period

between 01.04.2014 to 31.03.2019. The Respondent

established a bottling plant and commenced production

and supply of country liquor to BSBCL on 01.02.2015.

During an inspection conducted on 08.05.2015, it was

1 Thakko Choudhary vs. The State of Bihar, 1971 PLJR 199; Ramnath Prasad vs. The Collector of Darbhanga and Ors., AIR 1955 Pat 345

12 | P a g e found that the Respondent was not manufacturing

country liquor as per the Minimum Guaranteed Quantity.

A notice was issued to the Respondent on 15.07.2015 to

deposit the advance of the differential amount upto that

date as the Respondent failed to deposit earlier

instalments of the differential amount. Consequently,

the licence of the Respondent was suspended on

17.07.2015. The suspension was revoked on 20.07.2015.

During the inspection conducted on 07.10.2015, it was

discovered that the alcohol was substandard as the

strength was higher than the prescribed strength of 60

degrees UP. The premises was sealed on 19.12.2015

and the Respondent received a show-cause notice dated

24.10.2015 to which he replied on 04.01.2016. After

considering the response of the Respondent, an order

was passed on 17.01.2016 suspending the licence which

was challenged before the Board of Revenue. The Board

of Revenue stayed the order of suspension on

01.02.2016. Thereafter, the premises were un-sealed on

09.02.2016. The unit was closed for five days between

29.02.2016 to 04.03.2016 and for 15 days between

13 | P a g e 17.03.2016 to 31.03.2016 for non-payment of the

outstanding amount and for short supply of country

liquor. The New Excise Policy was implemented by a

total ban on manufacturing of country liquor w.e.f.

31.03.2016.

12. The Respondent filed a Writ Petition seeking refund

of licence of fee and the differential amount for a period

of 95 days during which either his premises was sealed

or his licence was suspended. It was contended on

behalf of the Respondent that the repeated sealing of

the premises and the suspension of the licence was

illegal.

13. The High Court allowed the Writ Petition filed by the

Respondent and directed refund as claimed for. The

main reason given by the High Court for allowing the

Writ Petitions was there was a prior adjudication that the

sealing orders were illegal, is not applicable to the

Respondent. According to the learned Senior Counsel for

the State, the orders of sealing of the premises and the

14 | P a g e suspension of the licence were not the subject matter of

any earlier adjudication by the High Court. On behalf of

the Respondent, it was submitted that the repeated

orders of sealing of the premises and the suspension of

the licence would show the mala fide intention of the

State. He brought to our notice that the order passed by

the Board of Revenue on 01.02.2016, staying the

suspension order dated 17.01.2016, in spite of which the

premises continued to be sealed thereafter.

14. The sealing of the premises and suspension of

licence of the Respondent was due to the non-payment

of the required instalment of the differential amount and

manufacturing of substandard country liquor. The order

of suspension of the licence dated 17.01.2016 was

stayed by the Board of Revenue on 01.02.2016. The

State filed a Review Application before the Board of

Revenue which was dismissed on 17.02.2016.

Immediately thereafter, the premises were un-sealed on

19.02.2016. The closure of the premises, according to

the Appellant, for five days between 29.02.2016 and

15 | P a g e 04.03.2016 was due to the non-deposit of the

outstanding differential amount and from 17.03.2016 to

31.03.2016 was due to short supply of country liquor are

justified.

15. As the closure of the premises of Respondent was

due to the violation of the tender conditions and the

conditions of licence, the High Court committed an error

in allowing the Writ Petitions filed by the Respondent.

Admittedly, there was no prior adjudication in respect of

the sealing of the premises or suspension of the licence

in favour of the respondent. Therefore, the reason given

by the High Court for holding that the Respondent is

entitled for refund i.e., on the ground of prior

adjudication is not correct. The High Court erred in

holding that no show-cause notices were issued before

the orders of suspension and sealing of the premises

were passed. The notices given on 15.07.2015,

24.12.2015, 25.02.2016 and 26.03.2016 would indicate

that the Respondent was given sufficient opportunity.

Moreover, in its response to show-cause notice dated

16 | P a g e 24.12.2015, the Respondent submitted his explanation

in which there was an admission of production of sub-

standard country liquor. The judgment of the High Court

cannot be sustained and is set aside.

Civil Appeal No. 7957 of 2019 (Arising out of SLP (C) No.3593 of 2019) (M/S Shipra Beverage Private Limited).

16. M/s Shipra Beverage Private Limited, the Respondent

herein was granted Exclusive Privilege for manufacture

and supply of country liquor in zone-5 constituting Gaya

and Aurangabad districts. An inspection was conducted on

04.01.2016 during which it was found that there is a deficit

stock and there was violation of Clauses 2(d) (iii) and

Clause 2(d) (ii) (f) of the letter of grant and Clause 9(f) of

the Licence. A show-cause notice was issued to the

Respondent on 27.01.2016. In view of the aforesaid

irregularities, the licence of the Respondent was

suspended under Section 42 of the Bihar Excise Act on

02.02.2016. Thereafter, the licence was cancelled on

13.02.2016. The Respondent filed CWJC No.2704 of 2016.

The High Court set aside the order dated 13.02.2016 by its

judgment dated 20.04.2016.

17 | P a g e

17. The complaint of the Respondent is that the

manufacturing unit stood closed between 02.02.2016 and

31.03.2016 due to suspension and cancellation of the

licence. The orders were challenged successfully in the

High Court. The Respondent filed a Writ Petition seeking

refund of the licence fee and the differential amounts for

the period of closure between 02.02.2016 and 31.03.2016.

18. As the suspension of the licence of the Respondent

and cancellation of the licence have been declared illegal

by the High Court by its judgment dated 20.04.2016 in

CWJC No.2704 of 2016, the Respondent is entitled for the

relief granted by the High Court. The Appeal is dismissed.

Civil Appeal No. 7958 of 2019 (Arising out of SLP (C) No.3595 of 2019) (M/S K.M. SUGAR MILLS LIMITED).

19. M/s K.M. Sugar Mills Limited, the Respondent-herein

was a successful bidder for manufacturing and supply of

country liquor for Zone-10, constituting districts of East

Champaran and West Champaran for the period from

01.04.2014 to 31.03.2019. An inspection was conducted on

27.05.2015 during which it was found that the strength of the

18 | P a g e manufactured liquor was below the required strength of 60

degree UP. A notice was issued on 27.05.2015 by which the

Respondent was directed to show cause as to why his licence

should not be terminated for causing huge loss to the

Government. The Respondent was also directed to explain

as to why a fine of Rs.4,51,08,493/- should not be imposed

on him for not maintaining the prescribed strength of 60

degree UP and for illegally manufacturing excess liquor. The

Respondent submitted its explanation on 11.06.2015 and

01.07.2015. After considering the explanation submitted by

the Respondent, the Excise Commissioner imposed a penalty

of Rs.4,51,08,493/- under Section 42 (g) (i) of the Act. As the

Respondent failed to pay the penalty amount, the premises

were sealed on 22.02.2016. As stated above, the New Excise

Policy came into force on 31.03.2016, and the grievance of

the Respondent in the Writ Petition was that the sealing of

the premises for the period between 02.02.2016 to

31.03.2016 is illegal. Therefore, the Respondent is entitled

for refund of licence fee and the differential amount. The

High Court failed to notice that there is no prior adjudication

in favour of the Respondent and the Respondent was given

an opportunity to show cause as to why the premises should

not be sealed. After considering the explanation submitted

19 | P a g e by the Respondent, the penalty was imposed on the

Respondent and due to the failure of the payment of the

amount of penalty, the premises were sealed.

20. In view of the above, the Civil Appeal No. 7958 of 2019

arising out of SLP (C) No. 3595 of 2019 is allowed.

All the Appeals are disposed of accordingly.

..…................................J. [L. NAGESWARA RAO]

..…................................J. [HEMANT GUPTA] New Delhi, October 18, 2019.

20 | P a g e