STATE OF HARYANA & ORS. versus LAL CHAND & ORS

Citation: [1984] 3 S.C.R. 715 · Decided: 02-05-1984 · Supreme Court of India · Bench: D.A. DESAI · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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J, .. 
715 
STATE OF HARYANA & ORS. 
A 
v. 
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LAL CHAND & ORS: 
May 2, 1984 
B 
. · (D.A. DESAI, A.P. SEN AND V. BALAKR!Sf!NA ERADI, JJ.J 
Constitution of India 1950·, Article 299(1) Condition ,to be satisfied before .:z 
bfndi~g Co!Uract between the Union or State c~mes into existen1:e-What are. Con· 
0 
tracts execued in exercise of statutary power and contracts which are Statu.f_ory.in 
nature-Existence of distinction indicated--.Article 299(1) inappli<~able wizen Uni.1n 
or StGte .enters int(] a contrart.'which is statutory in nature, 
Excise_Contract;_A statutory contract-Requirements Of Article 299(1) cannot 
be invoked. 
Punjab Excise Act 1914, Section 60 &.- Punjab .Lf{zuor Licence Rules 1956, 
.Rules 32(2), 36(22), 36(23), an:/ 36(23A) . 
D 
Excise Contract-Reauction-Recovery of difference between bid amount in 
original auction aiid that fetch€d in reauctidn_;_State whether entitled to recove,. the 
dijfere~tia/ amoqnl from the original licencee. 
E 
Indian Contract Act 1872. Co1nmercial Contrat:t-:Perforn1ance of-Definit.e 
time fixed and mode ofpa;iment specified-Time essence of such contract-Excise 
contract-Time whether essence of contract. 
· 
The I)~puty Excise&· Taxation Coni1nissiorier held an auction for gfantiog 
the right to sell country-Liquor 'for liquor v~nd.. The respondents olTered tfie · 
highest bid.which \vas .provisionally acc.epted and they were declared the highest 
bidder under Rule 36(2)' of the Punjab 'Liquor Licence Rules J956. 
Sub-
sequently, the Excise and Taxation Coin missioner accepted the bid as. requi.red 
Rule 36{22). The resp0ndents however failed to depos'it the security amount as 
required under Rule 3fi(22A)' and thereby contravened -conditions No- 15(1) of 
the co~ditions o.f auction and Rule 36(23)'. the Deputy EXcise & Taxation 
Commissioner therefore serVed the respond:.::nt<; with a notice to show-cau~c 
why the licence for c~untry liquor vend, shoul-i not be rc-:iuction under Rule 
36('!3A) and ihe ,~eficicncy in· price, a n_d all expenses of su·-.:h re-auctjon rl?covered 
from them under S:!ction 60 of the Punjab Excise Act, 1914. The n~spondents 
reprcse.nted t4at b:'!forc the auction it 
\Vas announcej that no wine shop 
would be opened wit-bin a radius of thrCe miles of the liquor vend but acro5s 
the bo1der the State Government of J'unjab had sanctioned the establishment of 
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716 
SUPREME COURT REPORTS 
[l9f4] 3 H .R 
a liquor Shop Which was hardly 2-1 {1 miles from the border and tbis·-would inean 
that there would be two_ country liquor shops one in the State of IIaryana and 
the Other in the State of Punjab and this was in breach of condition No. 13(iii) 
. real! with. Rule 37(88) of the Rules. The Deputy Excise and Taxation Commis· 
sioner reJected the representation alld directed the re.sale of the licence fot retail 
vend of the cOuntry•liquor shop under :Rule 36(23). Th•shop_Was re~auctioned. ·: 
At the time. of re-auction f~1ere were 52 bidders and the shop Was re~sold at 
the highest bid of Rs. 6.65 lakhs. The respondents were served with a notice of 
demand of Rs 3.46 lakhs representing the loss on re-.sale. 
Ill their writ petitions. to the.High Court the res pendents as~ailed the notice 
of demand. Followiilg the decision in Ka~1hi'ya Lal_ Bhatia & Co. v. State of 
Ha•yaita & Ors. the High Court held that.the State had no authority to demand 
the amounts for failure of which the·.vends were put to re,;.auction on the ground 
1hat the licence fee levied was in the nature .of excise duty .. 
' ·Jn the. Appeals to this Court, on the question whether_ the State Governn1ent 
was-entitled to realise the difference which· the respondents ·had agreed to. pay 
un(\er the terms of auct~on of a liquor vend and the amo1.Jnt realized ori re~ 
auction of the vend, as also the defaulted instalments of the licence fee payable 
~n respect of a liquor vend : 
Allowing the appeals, 
HELD: t. (i) There i~ a distinction between contracts which are executed in 
exercise of _the executive powers and contracts which are statutory in· natureA 
Under Att.299 (1), thrr!e conditions b'ave to be satisfied before a binding contract. 
by the Union or th~ State~in exercise.of the executive power comes into t--Xistence : 
(1) The contract must be expressed' to be made by the PresiJent or the Governor. 
as· the case may be . .(2) It must be executed in writing. And - (3) the execution 
.thereof shollld be by such person and in such manner. as
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