The State of Uttar Pradesh Through Secretary & Ors. vs Prem Chopra

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. _2417__OF 2022 (Arising out of S.L.P. (CIVIL) NO.15330 OF 2019)

STATE OF U.P. THR. SECRETARY AND ORS. … APPELLANT(S)

VERSUS

PREM CHOPRA …RESPONDENT(S)

ORDER

S. ABDUL NAZEER, J.

Leave granted.

(2) This appeal is directed against the order dated 10.05.2018

passed by the High Court of Judicature at Allahabad (Lucknow

Bench) in Misc. Single No. 2582 of 2003 whereby the High Court

has set aside the demand made by the appellants for a sum of

Rs.10,08,210.51 towards interest on arrears of excise revenue.

(3) Signature Not Verified

Brief facts necessary for disposal of this case are as under: Digitally signed by Anita Malhotra Date: 2022.04.05 16:18:43 IST Reason:

On 14.03.2002, the Government of Uttar Pradesh declared the

Excise Policy for the year 2002­03. On the basis of the Excise 2

Policy and under the provisions of U.P. Excise (Settlement of

License for Retail Sale of Country Liquor) Rules, 2002 (for short ‘the

Rules’), the District Magistrate/Collector, Lakhimpur Kheri issued

an advertisement for the settlement of the excise shops for the year

2002­03.

(4) The respondent submitted an application in the prescribed

form for grant of license for the retail sale of country liquor shop,

Mohammadi No.1, Lakhimpur Kheri. A license was granted to the

respondents for the year 2002­03 (from 01.04.2002 to 31.03.2003)

for an annual license fee of Rs.29,52,000/­.

(5) In the month of December 2002, the respondent submitted an

application for surrendering the excise shop/license.

(6) As per the terms and conditions of the settlement, the

respondent was liable to pay license fee for the shop for the

aforesaid period i.e. from 01.04.2002 to 31.03.2003. The

respondent had lifted quota of Rs.20,35,212/­ by the month ending

31.12.2002.

(7) The appellants vide notice dated 06.01.2003 apprised to the

respondent that the application filed by him for surrender of excise

shop can be entertained only after deposit of balance of

Rs.9,16,788/­ towards license fee. On 25.01.2003 the appellants 3

again issued notice to the respondent to pay the outstanding license

fee amounting to Rs.9,16,788/­ within a week.

(8) The respondent preferred Writ Petition No.855 (MB) of 2003

wherein the High Court directed the respondent to file an appeal

before the Additional Commissioner Excise (Licensing and

Industrial Development) U.P. Accordingly, the respondent filed an

appeal on 19.02.2003 before the Excise Commissioner, U.P.,

Allahabad. Subsequently on 08.03.2003, the license of the

respondent was cancelled. The Excise Commissioner, while

dismissing the appeal vide order dated 23.04.2003, held that under

Rule 19 and Section 36 of the U.P. Excise Act, 1910 (for short, ‘the

Act’), the respondent is liable to pay entire dues. The revision filed

by the respondent was also dismissed by the Secretary, Excise

Department by order dated 18.07.2003.

(9) After cancellation of the license, the District Excise Officer

recalculated the total amount due against the respondent and

adjusted the amount of security of Rs.2,95,200/­ out of total

amount of Rs.9,38,762/­ and found the respondent was still liable

to pay Rs.6,43,562/­ to the Department.

(10) Aggrieved by the order dated 18.07.2003, the respondent filed

the writ petition, Misc. Single No.2582 of 2003, before the High 4

Court of Judicature at Allahabad (Lucknow Bench). The High

Court, vide order dated 01.08.2003, stayed the said recovery

proceedings subject to deposit of Rs.2,75,000/­ by the respondent

before the District Excise Officer.

(11) The appellants filed counter affidavit in the writ petition on

13.02.2004. On 21.12.2015, the writ petition was dismissed by the

High Court for non­prosecution. In the year 2017, the respondent

deposited the remaining amount of Rs.3,68,562/­ with the

Department. Thus, the amount which was due in 2003 was paid in

the year 2017 but the respondent failed to make payment of

interest to the Department. The order dated 21.12.2015 was

recalled by the High Court on 19.01.2018.

(12) Further, on 10.01.2018, the Department issued notice to the

respondent for payment of Rs.10,08,210.51 due towards interest.

On 10.05.2018 the High Court passed the impugned order holding

that the demand of Rs. 10,08,210.51 towards interest was not

justified as the respondent was under the protection of an interim

order.

(13) Learned counsel for the appellants submits that as per the

terms and conditions of the settlement, the respondent was liable to

pay the license fee for the shop for the year 2002­03. He did not 5

pay the license fee from January 2003 to March 2003. He went on

challenging the demand made by the Department for payment of

balance of license fee and remained unsuccessful in his challenge.

Finally, he filed the writ petition before the High Court i.e. Misc.

Single No.2582 of 2003 wherein an interim order was granted. On

account of this order, the appellants were restrained from collecting

license fee. The writ petition was dismissed for non­prosecution.

The respondent had deposited the remaining license fee in the year

2017 but failed to pay the interest to the Department. It is argued

that when the writ petition was dismissed, the respondent ought to

have paid the interest accrued on the license fee. It is further

argued that the High Court was not justified in denying interest on

the ground that the appellant had the protection of an interim order

granted by the court.

(14) On the other hand, learned counsel for the respondent

submitted that the High Court had restrained the appellants from

recovering the license fee by an interim order. The respondent has

paid the license fee in the year 2017. Therefore, the appellants are

not justified in demanding interest for the period during which a

stay on recovery of license fee was granted by the High Court.

(15) Having regard to the contentions urged, the question which 6

falls for consideration is whether the respondent is liable to pay

interest for the period during which recovery of license fee under

Section 36 of the Act was stayed by the High Court and eventually

when the writ petition was dismissed.

(16) Section 38­A of the Act specifically provides for payment of

interest on arrears of excise revenue which is as under:

“38­A. Interest on arrears of excise revenue – (1) Where any excise revenue has not been paid within three months from the date on which it become payable, interest at such rate not exceeding twenty­four per cent per annum, as may be prescribed, shall be payable from the date such excise revenue becomes payable till the date of actual payment:

Provided that until a higher rate is prescribed, the rate of interest will be eighteen per cent per annum.”

(17) It is not disputed that the respondent was liable to pay license

fee under Section 36 of the Act for the year 2002­03, even on

surrender of the license. The High Court had granted an interim

order restraining the appellants from recovery of the license fee for

three months, subject to the respondent depositing a sum of

Rs.2,75,000/­ within a period of six weeks. Admittedly, the writ

petition was dismissed on 21.12.2015 for non­prosecution, which

was restored later.

(18) When the interim order was in force, the recovery of license fee 7

was temporarily suspended. The restraint was only against the

Department not to recover the license fee. There was no prohibition

for the respondent to deposit the balance of license fee. It is to be

stated here that the High Court has not quashed the demand of

license fee made by the appellants. There is a difference between

stay of operation of an order and quashing of an order which has

been explained by this Court in Shree Chamundi Mopeds Ltd. V.

Church of South India Trust Association CSI CINOD

Secretariat, Madras1 as under:

“While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence.”

(19) Following the said decision, this Court in Kanoria Chemicals

and Industries Ltd. and Others v. U.P. State Electricity Board

and Others,2 has held that an order of stay which is granted during

the pendency of a writ petition/suit or other proceeding comes to an

1 (1992) 3 SCC 1 2 (1997) 5 SCC 772 8

end with the dismissal of the substantive proceedings and it is the

duty of the court in such cases to put the parties in the same

position that they would have been in but for the interim order of

the court. In that case, this Court rejected the contention that

when the operation of the notification itself was stayed, no

surcharge could be demanded upon the amount withheld. It was

held thus:

“11. …. Holding otherwise would mean that even though the Electricity Board, who was the respon­ dent in the writ petitions succeeded therein, yet de­ prived of the late payment surcharge which was due to it under the tariff rules/regulations. It would be a case where the Board suffers prejudice on account of the orders of the court and for no fault of its. It succeeds in the writ petition and yet loses. The con­ sumer files the writ petition, obtains stay of opera­ tion of the notification revising the rates and fails in his attack upon the validity of the notification and yet he is relieved of the obligation to pay the late payment surcharge for the period of stay, which he is liable to pay according to the statutory terms and conditions of supply — which terms and conditions indeed form part of the contract of supply entered into by him with the Board. We do not think that any such unfair and inequitable proposition can be sustained in law.

xxx xxx xxx

It is equally well settled that an order of stay granted pending disposal of a writ petition/suit or other pro­ ceeding, comes to an end with the dismissal of the substantive proceeding and that it is the duty of the court in such a case to put the parties in the same position they would have been but for the interim or­ 9

ders of the court. Any other view would result in the act or order of the court prejudicing a party (Board in this case) for no fault of its and would also mean rewarding a writ petitioner in spite of his failure. We do not think that any such unjust consequence can be countenanced by the courts. As a matter of fact, the contention of the consumers herein, extended logically should mean that even the enhanced rates are also not payable for the period covered by the order of stay because the operation of the very noti­ fication revising/enhancing the tariff rates was stayed. Mercifully, no such argument was urged by the appellants. It is ununderstandable how the en­ hanced rates can be said to be payable but not the late payment surcharge thereon, when both the en­ hancement and the late payment surcharge are pro­ vided by the same notification — the operation of which was stayed.”

(20) In Rajasthan Housing Board and Others v. Krishna

Kumari,3 this Court observed that Order 39 of the Civil Procedure

Code, 1908 provides for grant of temporary injunction at the risk

and responsibility of the person who obtains it and, if ultimately

case is decided against such person, he would be liable to pay

interest on the arrears of any amount due which had been stayed

by the injunction order. The legal maxim actus curiae neminem

gravabit, which means that an act of the Court shall prejudice no

man, becomes applicable in such a case.

(21) In South Eastern Coalfields Ltd. V. State of M.P. and

Others,4 the writ petitioner therein had argued that interest 3 (2005) 13 SCC 151 4 (2003) 8 SCC 648 10

accrued due to non­payment of enhanced amount of royalty was

protected by a judicial order of an interim nature and, therefore,

merely because the writ was finally dismissed, the writ petitioner

should not be held liable for payment of interest so long as money

was withheld under the protective umbrella of the injunction order.

This submission was rejected by this Court by holding as under:

“The principle of restitution has been statutorily recognized in Section 144 of the Code of Civil Proce­ dure, 1908. Section 144 CPC speaks not only of a decree being varied, reversed, set aside or modified but also includes an order on a par with a decree. The scope of the provision is wide enough so as to include therein almost all the kinds of variation, re­ versal, setting aside or modification of a decree or order. The interim order passed by the court merges into a final decision. The validity of an interim or­ der, passed in favour of a party, stands reversed in the event of a final decision going against the party successful at the interim stage. Unless otherwise or­ dered by the court, the successful party at the end would be justified with all expediency in demanding compensation and being placed in the same situa­ tion in which it would have been if the interim order would not have been passed against it. The success­ ful party can demand (a) the delivery of benefit earned by the opposite party under the interim or­ der of the court, or (b) to make restitution for what it has lost; and it is the duty of the court to do so unless it feels that in the facts and on the circum­ stances of the case, the restitution far from meeting the ends of justice, would rather defeat the same. Undoing the effect of an interim order by resorting to principles of restitution is an obligation of the party, who has gained by the interim order of the court, so as to wipe out the effect of the interim or­ der passed which, in view of the reasoning adopted 11

by the court at the stage of final decision, the court earlier would not or ought not to have passed. There is nothing wrong in an effort being made to restore the parties to the same position in which they would have been if the interim order would not have ex­ isted.”

(22) In Nava Bharat Ferro Alloys Limited v. Transmission Cor­

poration of Andhra Pradesh Limited and Another,5 the appellant

therein had challenged the revised tariff rates imposed by the re­

spondent therein and obtained an interim order of stay against col­

lection of the disputed amounts. The High Court subsequently up­

held upward revision of tariff. Thereafter, the respondent therein

raised a demand for additional charges/interest on outstanding

amounts from the date of tariff revision and the High Court upheld

such demand holding that there was no subsisting relief once the

demand was upheld. This Court further held that the principle of

restitution entitles the successful party to be restored back to the

position it would hold had there been no order/judgment adverse to

it. The appellant therein had obtained only an ad­interim order of

stay against enforcement of tariffs. A party who fails in the main

proceedings cannot take benefit from the interim order issued dur­

ing the pendency of such proceedings. Therefore, it was held in

that case that the amount became recoverable from the appellant

5 (2011) 1 SCC 216 12

therein no sooner the judgment of the High Court was reversed and

the revision of tariffs was upheld.

(23) In State of Rajasthan and Another v. J.K. Synthetics Lim­

ited and Another,6 the interest for the period of which recovery of

royalty was to be paid under Section 9(2) of the Mines and Minerals

(Development and Regulation) Act, 1957 remained stayed under the

interim orders of the court. However, eventually the writ petition

was dismissed. This Court held that whenever there is an interim

order of stay in regard to any revision in rate or tariff, unless the or­

der granting interim stay or the final order dismissing the writ peti­

tion specifies otherwise, on the dismissal of the writ petition or va­

cation of the interim order, the beneficiary of the interim order shall

have to pay interest on the amount withheld or not paid by virtue of

the interim order. It was held thus:

“23. It is therefore evident that whenever there is an interim order of stay in regard to any revision in rate or tariff, unless the order granting interim stay or the final order dismissing the writ petition speci­ fies otherwise, on the dismissal of the writ petition or vacation of the interim order, the beneficiary of the interim order shall have to pay interest on the amount withheld or not paid by virtue of the interim order. Where the statute or contract specifies the rate of interest, usually interest will have to be paid at such rate. Even where there is no statutory or contractual provision for payment of interest, the court will have to direct the payment of interest at a 6 (2011) 12 SCC 518 13

reasonable rate, by way of restitution, while vacat­ ing the order of interim stay, or dismissing the writ petition, unless there are special reasons for not do­ ing so. Any other interpretation would encourage unscrupulous debtors to file writ petitions challeng­ ing the revision in tariffs/rates and make attempts to obtain interim orders of stay. If the obligation to make restitution by paying appropriate interest on the withheld amount is not strictly enforced, the loser will end up with a financial benefit by resort­ ing to unjust litigation and the winner will end up as the loser financially for no fault of his. Be that as it may.”

(24) From the above discussion, it is clear that imposition of a stay

on the operation of an order means that the order which has been

stayed would not be operative from the date of passing of the stay

order. However, it does not mean that the stayed order is wiped out

from the existence, unless it is quashed. Once the proceedings,

wherein a stay was granted, are dismissed, any interim order

granted earlier merges with the final order. In other words, the in­

terim order comes to an end with the dismissal of the proceedings.

In such a situation, it is the duty of the Court to put the parties in

the same position they would have been but for the interim order of

the court, unless the order granting interim stay or final order dis­

missing the proceedings specifies otherwise. On the dismissal of

the proceedings or vacation of the interim order, the beneficiary of 14

the interim order shall have to pay interest on the amount withheld

or not paid by virtue of the interim order.

(25) Coming to the facts of the present case, the respondent was

not successful in his challenge to the notice dated 06.01.2003 de­

manding the balance of license fee before the Authorities under the

Act. Therefore, he filed the writ petition bearing Misc. Single

No.2582 of 2003 before the High Court wherein the High Court, by

an interim order, stayed the recovery of the monthly instalment of

license fee for the months January 2003 to March 2003, subject to

deposit of Rs.2,75,000/­ within a period of six weeks before the Dis­

trict Excise Officer. It is not disputed that this amount of

Rs.2,75,000/­ was deposited by the respondent. The said writ peti­

tion was dismissed by the High Court for non­prosecution vide Or­

der dated 21.12.2015. On 23.12.2017, the respondent deposited

the remaining amount of Rs.3,68,562/­ towards license fee.

However, the respondent did not make payment of interest to the

Department. The writ petition was restored on 19.01.2018. In the

meantime, the appellants issued a notice calling upon the

respondent to pay Rs.10,08,210.51/­ towards interest due. The

High Court held that the respondent was not liable to pay interest

as he was under the protection of the interim order. Given the 15

settled position of law, in our view the High Court has erred in

holding that the respondent was not liable to pay interest due to the

protection given under the interim order.

(26) In the result, the appeal succeeds and it is accordingly al­

lowed. The order of the High Court dated 10.05.2018 in Misc. Single

No. 2582 of 2003 is set aside.

(27) At this stage, learned counsel for the respondent submits that

the respondent may be permitted to make an application under

one­time settlement scheme 2021 wherein certain concessions have

been made for payment of interest dues. The submission of the

learned counsel is accepted and the respondent is permitted to

make an application in terms of the said scheme within a period of

eight weeks from today. We make it clear that if such an

application is filed by the respondent, the authority concerned is

directed to consider the same in accordance with law. No costs.

……………..………………J. (S. ABDUL NAZEER)

………………...................J. (VIKRAM NATH) New Delhi March 25, 2022.

16

ITEM NO.33 Court 7 (Video Conferencing) SECTION XI

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C) No(s). 15330/2019

(Arising out of impugned final judgment and order dated 10-05-2018 in MS No. 2582/2003 passed by the High Court of Judicature at Allahabad, Lucknow Bench)

THE STATE OF UTTAR PRADESH THROUGH SECRETARY & ORS.Petitioner(s)

VERSUS

PREM CHOPRA Respondent(s)

Date : 25-03-2022 This petition was called on for hearing today.

CORAM :

HON'BLE MR. JUSTICE S. ABDUL NAZEER HON'BLE MR. JUSTICE VIKRAM NATH

For Petitioner(s) Mr. Samar Vijay Singh, AOR Mr. Amit Ojha, Adv.

Mr. Vipin singh Bansal, Adv.

For Respondent(s) Mr. Ashok Kumar Singh, AOR Ms. Pragya Singh, Adv.

Mr. Akshay Singh, Adv.

Mr. Shantwanu Singh, Adv.

UPON hearing the counsel the Court made the following O R D E R Leave granted.

The appeal is allowed in terms of the signed order. Pending applications, if any, also stand disposed of.

(NEELAM GULATI) (ANJU KAPOOR) ASTT. REGISTRAR-cum-PS COURT MASTER (NSH) (Signed order is placed on the file)