LAKHANLAL ETC. versus THE STATE OF ORISSA & ORS.

Citation: [1977] 1 S.C.R. 811 · Decided: 15-10-1976 · Supreme Court of India · Bench: M. HAMEEDULLAH BEG · Disposal: Disposed off

Cited by 1 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

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\ 
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LAKHANLAL ETC. 
v. 
THE STATE OF ORISSA & ORS. 
(with connected appeals) 
October 15, 1976 
[M. 'H, BEG AND P. N, SHINGHAL, JJ.] 
811 
Bihar and Orissa Excise Act, 1915 as amended by Amending Acts of 1970 
.and 1971-ss. 22 and 29-Power of State to auction exclusive privilege to vend 
liquor-Na~w·e of payment received, 
Section 22(1) of the Bihar & Orissa Excise Act, 1915, provides that the 
States may grant to any person on such conditions and for such periods< as it 
may think fit, the exclusive privilege of manufacturing or selling in retail coun-
try liquor. The proviso provides that a public notice shall be given of the inten-
tion to grant such exclusive privilege and that a decision would be taken after 
considering objections. 
Sub-section (2) provides that no gramee 
of such a 
privilege shall exercise it unless or until he has received a licence in that behalf 
from the Collector or the Excise Commissioner. 
In the present case the Collector issued a notice in form GL 10 relating to 
the auction of the right to open a liquor shop at the site named in the notice 
and the payment of the licence fee therefor. The respondent was a successful 
bidder at the auction. 
He deposited the money under r. 103 of the 
Excise 
Rules but the Government did not grant him the licences. In a writ petition 
filed by the respondent the State Government alleged that the bids at the auc-
tion were not satisfactory and that in the interest of revenue the State Govern-
ment did not accept the bids. 
The High Court held (i) that the State Govern-
ment had no power to interfere with the auction held by the Collector after it 
had become final and could not direct reauction· and (ii) that the realisation at 
the auction was not a fee but a tax not contemplated by the Act and that the 
.auction price for a licence was not excise duty within the meaning of Entry 51 
of List II and hence r. 103 (1) of the Rules providing for fixation of licence fee 
by auction was in excess of the rule-making power of the Board. The High 
Court also held that what was purported to be given under the sale notice of the 
Collector was not the grant of exclusi_ve privilege under s. 22. 
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By the Bihar & Orissa Excise (Orissa Amendment Ordinance) 1970 which 
F 
later became the Act, s. 29 (2) was amended. 
The State Government issued an 
order for fresh settlement of the shops and the Collector accordingly called for 
tenders, 
, r 
In the respondent's writ petition the High Court held that the State Govern-
ment's order was invalid as the authorities for fixing the procedure· under s, 
29 (2) as amended had not been specified and the order left it to the uncontrolled 
discretion of the authority concerned to accept or reject any tender and to 
determine the adequacy of the amount offered in the tender. 
The State Gov-
ernment's order and the Collector"s tender notice were quashed and the Collec-
tor was directed to issue licence to the respondent. 
The High Court accord-
ingly held that the respondent was entitled to the ~rant of the exclusive privi-
lege under s. 22 because he was the highest bidder in th.._ auction. 
The Higb Court also held in a petition filed by another respondent, that in 
so far as s. 29(2) provided that the sum payable under sub-s. (!) thereof shall 
be determined "otherwise" than by calling tenders or by auction it was 
un-
constitutional· that portion of s. 29(2} should, therefore, be struck down: that 
s. 6 of the Amending Act, 1970 was ultra vires as there was exercise of judicial 
power by the legislature and, therefore, the licence fee collected by the State was 
illegal; but that as the respondent had already enjoyed the benefit of the licence 
.and voluntarily participated in the auction he WllS not entitled to it8 refund, 
3-1338S.C.I./76 
G 
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812 
SUPREME COURT REPORTS 
[1977] 1 S.C.R. 
Therefore. the Second Amendment Act, 1971 was passed. 
The vires of the 
amended sect10ns 21 and 29 was challenged in writ petition~ but the 
High. 
Court dismissed them. 
In appeals to this Court, 
HELD : ( 1) The provisions of the Act antl the express declarations 
make 
clear. that. the State .Govern1!1ent had the power to reject a bid. 
In any event 
no nght 1s created m the bidder by making a bid. 
The administration of the 
Excise Department and the collection of revenue within the district vest in 
the Collector. It is not correct to say that the notice issued by the Collector 
in form GL 1

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