STATE OF KARNATAKA AND ORS. versus SAVEEN KUMAR SHETTY

Citation: [2002] 2 S.C.R. 49 · Decided: 26-02-2002 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

STATE OF KARNATAKA AND ORS. 
v. 
SA VEEN KUMAR $HETTY 
FEBRUARY 26, 2002 
[B.N. KIRPAL, SHIVARAJ V. PATIL AND 
BISHESHWAR PRASAD SINGH, JJ.] 
Karnataka Excise (Lease of Right of Retail Vend of Liquors) Rules, 
1969: 
Rule/8(/)-Secuirty deposit-Forfeiture of-Highest bidder failed to 
execute lease deed and furnish security deposit under R.17(/)(b)-State 
Government accordingly cancelled the bid and forfeited the bidder's deposit 
made under R.13(2)-Correctness of-Held: Once Government has exercised 
A 
B 
c 
its discretion under R.18 to cancel the bid forfeiture of the amount deposited D 
is a consequence to the said act of cancellation-Government has no discretion 
whether to exercise the right of forfeiture or not-Hence, State Government 
is right is cancelling the bid and forfeiting the deposit made under R. 13(/). 
Words and Phrases: 
'"Shall be liable lo beforfeited"-Meaning of-In the context ofR.18(1) 
of the karnataka Excise (Lease of Right oi Retail Vend of Liquors) Rules, 
1969. 
E 
The respondent was given a temporary licence for retail vend of arrack 
under the Karnataka Excise (Lease of Right of Retail Vend of Liquors) Rules, F 
1969 for which the respondent ,deposited a certain amount under Rule 13(1). 
But the respond.en! failed to make the deposit under Rule 17(l)(b) and also 
did not execute the lease deed under Rule 16. However, the appellant extended 
the temporary licence up to a certain period and thereafter the appellant, 
exercising power under Rule 18(1), cancelled the respondent's bid and G 
forfeited the an.aunt deposited under Rule 13(1). But the High Court allowed 
the respondent's writ petition on the ground that the appellant-State had the 
discretion whether to exercise the right of forfeiture or not under Rule 18 
. and directed the appellant to pass a fresh order after giving an opportunity 
of hearing to the respondent. Hence this appeal. 
49 
H 
50 
SUPREME COURT REPORTS 
[2002] 2 S.C.R. 
A 
Allowing the appeal, the Court 
'f 
HELD: 1. The respondent was under an obligation to make the deposit 
under Rule 17(1)(b) of the Karnataka Excise (Lease of Right of Retail Vend 
of Liquors) Rules, 1969 and also execute the lease deed under Rule 16. When 
B 
the respondent failed to do so, the Government under the first part of Rule 
18(1) exercised the jurisdiction in not cancelling the bid but extended· the 
temporary licence. When there was further default and non-compliance with 
Rules 16 and 17, it is only thereafter that the Government exercised its 
discretion in cancelling the bid. Once the bid was cancelled, then the latter 
part of Rule 18(1) comes into play and the deposit made by such person was 
c liable to be forfeited. Nothing more was required to be done. (55-B-C] 
~ 
Indo-China Steam Navigation Co. Ltd v. Jasjit Singh, Additional Collector 
of Customs., (1964] 6 SCR 595, followed. 
Superintendent and Remembrancer of Legal Affairs to Government of West 
D Bengal v. Abani Maity, (1979] 4 SCC 85 and Chern Taong Shang v. Commander 
S.D. Baijal., (1988) 1 SCC 507, relied on. 
State of MP v. Azad Bharat Finance Company., [1966) Supp. SCR.473, 
held inapplicable. 
E 
2. Once a discretion has been exercised by the Government under Rule 
18 to cancel the bid then a forfeiture of the amounts deposited is a consequence 
to the said act of cancellation and there is no discretion in the Government 
whether to exercise the right of forfeiture or not. This being so, the question 
of affording an opportunity to the respondent before effecting the forfeiture 
,. 
cannot arise. Opportunity was granted before cancelling the bid. Admittedly, 
~-
F there was a default in non-compliance with the provisions of Rules 16 and 
17. This being so, the appellant-State was right in its decision to cancel the 
bid and to forfeit the amount deposited under Rule 13(1). (56-D-E] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1673 of 
2002. 
G 
From the Judgment and Order dated 26. 7.2001 of the Kamataka High 
Court in W.A. No. 7312 of 2000. 
Harish N. Salve, Solicitor General and N. Ganpathy for the Appellants. 
H 
A.K. Ganguly, Padmanabha Mahale and Rajesh Mahale for the 
.... 
STA TE v. SA VEEN KUMAR SHETTY [KIRPAL, J.] 
51 
Respondent. 
A 
The Judgment of the Court was delivered by 
KIRP AL J. Special leave granted. 
On 4th May, 1999, auction for retail vend of arrack for the year 1999- B 
2000 in respect of272 shops in Mangalore Taluka took place. The respondent 
was declared successful bidder on 12th May,

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