Case Law Details

Case Name : Babu Khan Vs State of Rajasthan (Rajasthan High Court)
Appeal Number : S.B. Civil Writ Petition No. 7543/2021
Date of Judgement/Order : 15/09/2021
Related Assessment Year :

Babu Khan Vs State of Rajasthan (Rajasthan High Court)

In Babu Khan v. State of Rajasthan and Ors. there were a total of 121 Writ Petitions filed by the Liquor Vendors seeking waivers on the annual guarantee fee and tax relief for the second wave time period of COVID-19.

In the case, the Petitioners contended that on account of lock-down, the licensed liquor shops remained closed for a mammoth total of 395 hours out of the prescribed 680 hours. Furthermore, it was contended that in April and May, 2021, the shops were shut for 67.74% of the total time. Further, the Petitioners argued that the functional hours of 6:00 A.M. to 11:00 A.M. were completely bogus and due to which, their sales dropped exponentially.

Furthermore, the Petitioners contended that the criteria to levy the annual guarantee fee must be reasonable. They claimed that the waiver of only 30% on the said fee is impractical as it doesn’t take the COVID situation into account. Further, it was contended by the Petitioners, that the Respondents must not insist on the payment of the annual guarantee fee by taking consideration of the bids made by the Petitioner earlier as they had made the said bids in the earlier stages of the pandemic and there was no way to foresee the extension of the pandemic up to the month of March 2021. For further substantiation, the Petitioner also pointed out that the State Government had not included a clause of Force Majeure (a clause that includes all the unforeseeable circumstances that may prevent the fulfillment of a contract). Essentially, the Petitioners contended that the demand of the annual guarantee fee from them is totally arbitrary and lacks rationality.

After taking perusal of all the facts and evidences, the Honorable Rajasthan High Court held that the loss caused to them cannot be put on the shoulders of the Government as with their open eyes they have submitted higher bids and accepted the conditions of the policy. The Petitioners cannot now turn around and claim as a right from this Court for mandamus as against the State.

FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT

1. Since all these writ petitions raise common issue and the prayers are also similar, as jointly agreed by learned counsel for the respective parties earlier when these cases had come up before this Court, a decision was taken to hear these cases at this stage and the pleadings were also directed to be completed in SB Civil Writ Petition No. 7543/2021 (Babu Khan Vs. State of Rajasthan & Ors.) and the learned Advocate General was allowed to file reply only in the said case. Accordingly, the facts of the case of Babu Khan have been taken as a lead case for deciding the issue.

2. The Government of Rajasthan issued an Excise Policy on 06/02/2021 for sale and control of liquor in Rajasthan for the year 2021-22. The policy was to come into force for the period from 01/04/2021 to 31/03/2022 and it was also mentioned that for the year 2022-23, the minimum reserve price shall be 25% increase of the year 2021-22 and shall be renewable accordingly.

3. In the policy of 2021-22, entire system/procedure for grant of composite license was elaborated for retail sale of Country Liquor, Indian Made Foreign Liquor and Beer.

4. The new policy which introduced the composite license system for both Country Liquor and Indian Made Foreign Liquor/Beer required Retail off Vends through competitive bidding. As per Clause 2.3 of the policy, the reserve price for bidding system was introduced and the same was to be ascertained by adding the excise duty on Country Liquor, Rajasthan Made Liquor, Indian Made Foreign Liquor/Beer (hereinafter referred to as ‘CL, RML, IMFL/Beer respectively) and for ascertaining this amount, Exclusive Privilege Amount (EPA) for CL and RML for the year 2020-21 and excise duty & additional excise duty for IMFL/Beer for the year 2019-20 was taken up as a base and 20% was to be increased accordingly. This amount was to be paid as annual guarantee amount. The amount was to be deducted/adjusted in the nature of excise duty and additional excise duty as leviable on the lifting of liquor. Further, the basic license fees @ Rs.42/- per bulk liter for CL and @ Rs.102/- per bulk liter on RML was payable.

5. All the petitioners submitted bid for different places in Jaipur and for different districts at different locations. They were declared successful and were issued sanction letter for opening of retail outlet. The petitioner-Babu Khan, in the lead case, submitted a bid amount of Rs.3,41,57,640/- and deposited the earnest money as stipulated in the sanction order and also deposited 2% security amount, advanced annual guarantee amount and 50% of the composite fee.

6. It is to be noticed that final bid amount as per Clause 2.8 of the policy is the annual guarantee amount which is to be paid in 12 equal installments. Accordingly, the bidder has to lift the liquor worth the said amount in 12 installments and the excise duty as well as additional excise duty are, therefore, set off by such lifting of the liquor worth the amount equal to the said installments. However, if the licensee is not able to lift the liquor equivalent to the said installments, he has to make good the difference of annual guarantee amount payable for the period as well as the basic license fees payable on short lifted liquor. The amount has to be paid in cash at the end of each quarter.

7. The present writ petitions have been filed in the wake of the second waive of Covid-19 pandemic and all the writ petitioners before this Court have come up with the prayer to direct the respondents to withdraw their notice for demand or quash the respondents’ action whereby they are demanding the aforesaid amount payable by the petitioner for the first quarter and also prayed that the respondents be directed to adjust/reduce/waive the statutory amount payable by the petitioners for the number of days during which the vendees/licensees were unable to operate fully due to the irregular times laid down by the State Government for opening of the shop and for the period during curtailment of hours of closure, the excise duty, additional excise duty, license fee installments may not be imposed. Further, a complete waiver on monthly guarantee amount be allowed instead of 30% rebate/relaxation given to the petitioners in the monthly guarantee amount and basic license fees for the period from 16/04/2021 to 30/04/2021 and in May, 2021 wherein additional 15% of the period was granted till the time the weekend curfew was imposed.

8. Learned counsel for the petitioners submitted that on 09/04/2021, the State Government imposed restrictions and the shops were ordered to be closed by 7.00 PM. Vide another order dt. 14/04/2021, the timings of opening of the shops were reduced to 5.00 PM. Vide order dated 16/04/2021, weekend curfew was announced and the shops were closed completely from evening of 16/04/2021 till 19/04/2021 morning. On 18/04/2021, ‘Jan Suraksha Pakhwada’ was announced and the times of opening of shops were curtailed from 10.00 AM to 5.00 PM. On 23/04/2021, fresh timing instructions were imposed and the shops were directed to be opened only for 5 hours in the morning i.e. from 6.00 AM to 11.00 AM. Weekend lock-down was continued. On 30/04/2021, the State Government directed that till 17th May, 2021, the shops timings will be from 6.00 AM to 11.00 AM which continued upto 08/06/2021 whereafter, the State Government permitted the shops to open from 6.00 AM to 4.00 PM. However, the shops were not allowed to be opened on Saturday and Sunday completely. Vide order dated 16/06/2021, the shops were allowed to operate from 6.00 AM to 4.00 PM with closure of shops on Sunday.

9. The petitioners have submitted that on account of the aforesaid lock-down orders, the licensed shops have virtually remained closed for more than 395 hours out of 680 hours. It is stated that in April and May, 2021, the shops remained closed for 64.28% of the time and in June, 2021, they remained closed for 67.74% of the time. It is further submitted that allowing opening of liquor shops from 6.00 AM to 11.00 AM was wholly impractical as in the morning hours there is no sale of liquor at all and the sale was reduced immensely.

10. Learned counsel for the petitioners submitted that as per the excise policy, which was made a basis for submitting the bids, the State Government had allowed the shops to be opened from 10.00 AM to 8.00 PM and the shops were not to be closed except on 5 dry days as mentioned in the Clause 17 of the excise policy and thus, for the year 2021-22, the petitioners had a right of operating shops in the evening upto 8.00 PM and collect revenue but due to the pandemic, the State Government was unable to adhere to the said conditions as laid down in the excise policy and therefore, the petitioners ought not be insisted upon to adhere to the conditions. It is stated that in-fact, the shops remained closed for 64.28% in April and May, 2021 and 67.74% in June, 2021. Similarly, for July, 2021, the shops were not permitted to be opened. It is further submitted that the liquor sale is always higher in the first quarter whereas the quarter has already gone in almost complete lock-down. In the previous years, the excise policy was different and the shops were sanctioned/allotted on the basis of lottery and a predetermined license fees for the year was to be paid whereas now the licenses are issued on the basis of auction and minimum bid price for each shop in each district is to be settled by the department and the shortfall has to be replenished by cash deposit and thus, the petitioners-licensees have been burdened forcefully to lift higher quantity of liquor. It is further submitted that even the Hotels/Bars have not been able to lift the liquor and there has been huge downfall of sale during the entire quarter and insisting on payment of annual guarantee amount by only reducing 30% is wholly unjustified. It is submitted that show cause notices issued to the petitioners are therefore, unjustified and the basis for the excise amount should be on the basis of the actual sale of each shop in each district.

11. Mr. RN Mathur, learned Senior Advocate submitted that the criteria ought to be reasonable and having nexus to the purpose sought to be achieved. It is submitted that the curtailment or reduction of annual guarantee amount only 30% as laid down by the respondents is wholly impractical and does not taken into consideration the aforesaid circumstances. While the reserve price for bidding of shops is fixed district-wise, 30% reduction is generalized for all shops in Rajasthan. Therefore, the benefit ought to be each district-wise. Learned Senior Counsel further submitted that the yardstick adopted is without application of mind and fixing time of opening of liquor shops from 6.00 AM to 11.00 AM during five days of the week, is wholly unrealistic and unreasonable. It is submitted that no person comes for purchasing to the shops at the wee-hours of the morning and in such circumstances, the State should compensate the dealers proportionally as per lock-down and actual liquor which has been lifted should be the criteria for payment of first quarter of annual guarantee amount and the annual guarantee amount should be accordingly proportionally reduced instead of continuing to insist for payment on the basis of the bid offered by the petitioners earlier. Learned Senior Counsel relied upon the judgment rendered by the Apex Court in Energy Watchdog Vs. Central Electricity Regulatory Commission and others & connected cases: (2017) 14 SCC 80 to submit that it was impossible to carry on the contract for the said period and the principles of force majeure ought to be taken into consideration for giving benefit to the petitioners. Learned Senior Counsel has also relied upon the judgment of the Apex Court rendered in State of Rajasthan Vs. Nand Lal: 1993 (Suppl.) SCC 681.

12. Mr. KK Sharma, learned Senior Counsel submitted that while the petitioners had submitted their bids during the Covid Pandemic in the year 2020-21, no one could envisage the stipulate of pandemic upto March, 2021. Even the State Government did not put any clause of force majeure and an arbitrary obstinate approach has been taken by the State. When the reduction in sale is upto 69.62%, the demand for continuing payment of amount for which liquor has not been sifted or sold is wholly unjustified. It is submitted that the petitioners can only purchase the liquor from GSM. It is further submitted that in such circumstances, the petitioners have no other pledge and if the State has suffered a loss of revenue on account of pandemic, it cannot be recovered from those who are the source of earning revenue. It is submitted that it was impossible for the petitioners to lift the entire liquor as per the annual guarantee amount in the first quarter as their shops remained closed, instead of five dry days, for several days together.

13. Mr. RB Mathur, learned counsel, in addition to the aforesaid arguments, pointed out that the police has changed from earlier policies and there was no binding on the shopkeeper earlier to lift for each quarter. He has asserted again that the bid prices were different for different shops. In April and May, the shops were closed for a considerable period.

14. Mr. Rajveer Sharma, learned counsel has also adopted the aforesaid arguments but has also further submitted that even the liquor which was lifted was per-force and actually there was no sale at all and the liquor in excess is lying in the shops.

15. Per-contra, Mr. MS Singhvi, learned Advocate General, appearing for the respondents submitted that the petitioners are engaged in sale of liquor and with their open eyes they participated in the bids/auctions as per the Excise Policy for the year 2021-22. All the petitioners have taken shops by bidding on a higher price than the bid amount. It was admittedly a Covid period and the petitioners were having full knowledge that the pandemic may again have an effect of lock-down. After having participated in the bid and having agreed on terms of contract for payment of annual guarantee amount in 12 equal installments as per the bid, they have now prayed for direction to withdraw or quash the demand notice issued to them and to adjust/reduce/waive the statutory amount payable by the petitioners to the number of days the vendee was allowed to operate on irregular timings and further allow them to make payment of excise duty/additional excise duty and basic license fees as collected upon the actual sale/liquor lifted for the period.

16. Learned Advocate General further submitted that as per Clause 7.3 of the terms and conditions appended with the license issued to the petitioners, it was open for the State Government to modify the timings of the shops or for closure of the shops. Thus, if the State Government has acted upon the said Clause and modified the timings or has also directed for closure of shops, the licensee would not be required to pay any compensation or rebate. Learned Advocate General further submitted that there is concealment in the statement of facts and the petitioners have not placed on record the terms and conditions of the license. It is also stated that there is misstatement that there has been decline in sale from 70% to 90% during ‘Jan Anushashan Pakhwada’ and therefore, the writ petitions warrant dismissal.

17. Learned Advocate General further submitted that the petitioners are under a contractual obligation and in writ jurisdiction, this Court would not direct for deviation from the contractual obligations. In support of above submissions, learned Advocate General, relied upon the judgments rendered in Panna Lal Vs. State of Raj.: 1975(2) SCC 633; Assistant Excise Commissioner Vs. ISSAC Peter: 1994(4) SCC 104; Khoday Distilleries Vs. state of Karnataka: 1995(1) SCC 574; Ugar Sugar Works Limited Vs. Delhi Administration: 2001(3) SCC 635; Government of Maharashtra & Ors. Vs. Deokar’s Distillery: 2003(5) SCC 669; Nawal Singh Ratnawat Vs. State of Raj. & Ors.: DB Civil Writ Petition No.19947/2013, decided by this Court on 11/03/2014; State of Rajasthan & Ors. Vs. M/s. C.K.M. & Company: DB Civil Special Appeal (Writ) No.212/2007, decided by this Court on 10/05/2017; Smt. Renu Vs. State of Raj. & Ors.: S.B. Civil Writ Petition No.4470/2020, decided by this Court on 17/02/2021; Satyabrata Ghose Vs Mugneeram Bangur and Co. & anr: AIR 1954 (SC) 44 and State of W.B. Vs. Keshoram Industries Ltd. & Ors.:2004(10) SCC 201.

18. Learned Advocate General further submitted that the petitioners do not have any legal right to seek mandamus against the State for adjustment/reduction or waiver of the contractual liability. Learned AAG further submitted that although the State was not obligated to provide any reduction or waiver of the contractual obligations, still vide its communication dated 29/05/2021 and 17/06/2021, it extended the rebate of 30% for the period from 16/04/2021 to 07/06/2021 and 15% for the period from 08/06/2021 till the time weekend curfew remained imposed in the monthly guarantee amount and basic license fees which the petitioners and others were liable to deposit. Both the orders by which the reduction was made upto 30% and 15% are not under challenge.

19. It was further sated by the learned Advocate General that no legal right or contractual correspondence obligation can be claimed towards the respondents to grant additional rebate or waiver. He has also pointed out that in a particular case, the petitioners could have challenged the demand notice by filing of an appeal under Section 9A of the Rajasthan Excise Act, 1950.

20. Learned Advocate General further submitted that the right to trade in liquor is not a fundamental right and is an exclusive privilege of the State.

21. It is further state that there are in all 7456 licenses operating in the State and to all the licensees, 30% rebate as stated above, was granted for the period from 16/04/2021 to 07/06/2021. Thus, sufficient reduction was given to all the licensees equally without any discrimination and therefore, further reduction was not required to be given and adequate rebate has been granted. The prayer for further rebate is wholly uncalled for.

22. It is further submitted that the State Government took an exercise of calculation of sale figures during the period of modified working hours and it was revealed that compared with the year 2019-20, during the corresponding period, there was decline of sale of liquor to the down of 29% from 16/04/2021 to 07/06/2021 and a decline of 14% from 08/06/2021 to 10/07/2021 and accordingly, a rebate was granted of 30% and 15% for the respective periods. It is submitted that loss of 55 working days as asserted is totally misleading and the State Government has already provided suitable relaxations/rebates.

23. It is further stated that the Excise Policy of 2020-21 is to be read with Clause 7.3 of the terms and conditions of the license. It is submitted that further by a communication dated 17/06/2021 the last date to deposit the remaining amount of composite fees has been permitted to be deposited in three monthly installments without being subjected to any interest thereupon for the extended period. Thus, the Government has already granted relaxation and the petitioners cannot be allowed to turn around and escape from their agreed contractual obligations. A total rebate to the tune of Rs.656.47 crore has been granted by the State Government.

24. As regards 100% rebate granted to hotel bars, club bars and restaurant bars, it is submitted that they constitute a different class and there licenses are also given separately. The nature of license given to those are in contradistinction to license of retail sale as given to the petitioners. In support of his submissions, he relied upon the judgments rendered in K.V. Raja Lakshmiah Shetty Vs. State of Mysore: AIR 1967 (SC) 993 and The Naihati Jute Mills Ltd. vs. Khyaliram Jagannath: AIR 1968 (SC) 522.

25. In rejoinder, learned counsel for the petitioners submitted that while in the Excise Policy, the period for which the shops could be closed was only 5 days, the actual period for which the shops were closed was almost 70% of the total days of Covid lock-down i.e. 55 days out of 79 days. It is submitted that even from the sales figures in bulk liters recorded by the Rajasthan State Breweries Corporation Limited (RSBCL) for the months of April to June, 2021, decline of 56% has been registered which shows that there was a huge sale decline. The Rajasthan Tourism Development Corporation has also shown a drastic decline of sales of about 73%. Thus, the petitioners cannot be forced to pay the excise duty and additional excise duty for the liquor which was not sold at all. The petitioners also cannot be asked to perform an impossible contract. The situation of Corona pandemic was beyond the control of the petitioners. It is further submitted that the notification issued by the Joint Secretary of the Government does not taken into consideration the parameters for the purpose of granting of reduction. It is submitted that the State Government itself realizes that there was a pandemic situation, however, the criteria of corresponding waiver only upto 30% and 15% is wholly unjustified and the actual loss of business hours and sales was beyond 70%.

26. In order to show that there was a huge reduction, charts have also been placed on record by the petitioners showing sale for the period from 01/04/2021 to 30/05/2021 of the various shops in Jaipur City and from 01/06/2021 to 30/06/2021.

27. After considering the submissions made by learned counsel for the parties, this Court has gone through the material available on record.

28. Before adverting to the submissions and giving conclusion thereon, it would be appropriate to quote some of the judgments out of whole lot of judgments cited before the Court.

29. In Assistant Excise Commissioner Vs. ISSAC Peter (supra), the Supreme Court was seized with the question as to whether there was a failure on the part of the State in supplying arrack undertaken by it to supply and whether the licensees are entitled to any rebate/remission in the amounts payable by them under the contracts, on account of such failure, if any. The matter related to Kerala Abkari Act for the excise year 1981-82. In the facts of the said case, it was argued on behalf of the licensees that a failure to supply additional quantities resulted in partial frustration of the contract on which basis the licensee would be entitled to claim abatement/remission of amount which was payable in terms of conditions of contract.

It was also submitted in the said case, like in the present case, that where the injustice and inequality is glaring, the Court should step in to do justice between the parties. The Government cannot be allowed to make capital out of the misery of the licensees. If the contract between the parties is understood in the sense urged by the Government, it would be an impossible contract. A contract where loss is inherent and implicit is no contract and the Court should mould the relief in such situations to suit the circumstances [See Para 13(8)] ibid.

Considering the said submissions, the Supreme Court quoted that the principle required for reading the terms of contract as laid down by Ckckburn, C.J., in Churchward Vs. Queen: (1965-66) 1 QBD 173 that “Where a contract is silent, the court or jury who are called upon to imply an obligation on the other side which does not appear in the terms of the contract, must take great care that they do not make the contract speak where it was intentionally silent; and, above all, that they do not make it speak entirely contrary to what, as may be gathered from the whole terms and tenor of the contract, was the intention of the parties. This I take to be a sound and safe rule of construction with regard to implied covenants and agreements which are not expressed in the contract.”

30. In Panna Lal Vs. State of Raj. (supra), it was held as under:-

“21. The licenses in the present case are contracts between the parties. The licensees voluntarily accepted the contracts. They fully exploited to their advantage the contracts to the exclusion of others. The High Court rightly said that it was not open to the appellants to resile from the contracts on the ground that the terms of payment were onerous. The reasons given by the High Court were that the licensees accepted the license by excluding their competitors and it would not be open to the licensees to challenge the terms either on the ground of inconvenient consequence of terms or of harshness of terms.”

31 Quoting the aforesaid principles, in Assistant Excise Commissioner Vs. ISSAC Peter (supra), the Supreme Court held as under:-

“23. May be these are cases where the licencees took a calculated risk. May be they were not wise in offering their bids. But in law there is no basis upon which they can be relieved of the obligations undertaken by them under the contract. It is well known that in such contracts- Which may be called executory contracts- there is always an element of risk. Many an unexpected development may occur which may either cause loss to the contractor or result in large profit. Take the very case of arrack contractors. In one year, there may be abundance of supplies accompanied by good crops induced by favourable weather conditions; the contractor will make substantial profits during the year. In another year, the conditions may be unfavourable and supplies scarce. He may incur loss. Such contracts do not imply a warranty- or a guarantee- of profit to the contractor. It is a business for him- profit and loss being normal incidents of a business. There is no room for invoking the doctrine of unjust enrichment in such a situation. The said doctrine has never been invoked in such business transactions. The remedy provided by Article 226, or for that matter, suits, cannot be resorted to wriggle out or the contractual obligations entered into by the licencees.

24. Learned Counsel for the Respondents sought to invoke the Rule of Promissory estoppel and estoppel by conduct. The attempt is a weak one for the said Rules cannot be invoked to alter or amend specific terms or contract nor can they avail against statutory provisions. Here, all the terms and conditions of contract, being contained in the statutory Rules, prevail.”

32. In State of W.B. Vs. Keshoram Industries Ltd. & Ors. (supra), the Constitutional Bench of the Supreme Court laid down principles in relation to levy of cess and the relevant principle for the purpose as under:-

“129 (8) The primary object and the essential purpose of legislation must be distinguished from its ultimate or incidental results or consequences, for determining the character of the levy. A levy essentially in the nature of a tax and within the power of State Legislature cannot be annulled as unconstitutional merely because it may have an affect on the price of the commodity. A State legislation, which makes provisions for levying a cess, whether by way of tax to augment the revenue resources of the State or by way of fee to render services as quid pro quo but without any intention of regulating and controlling the subject of the levy, cannot be said to have encroached upon the field of ‘regulation and control’ belonging to the Central Government by reason of the incidence of levy being permissible to be passed on to the buyer or consumer, and thereby affecting the price of the commodity or goods. Entry 23 in List II speaks of regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union, Entries 52 and 54 of List I are both qualified by the expression “declared by Parliament by law to be expedient in the public interest”. A reading in juxtaposition shows that the declaration by Parliament must be for the ‘control of industries’ in Entry 52 and for regulation of mines or for mineral development’ in Entry 54. Such control, regulation or development must be ‘expedient in the public interest’. Legislation by the Union in the field covered by Entries 52 and 54 would not like a magic touch or a taboo denude the entire field forming subject matter of declaration to the State Legislatures. Denial to the State would extend only to the extent of the declaration so made by Parliament. In spite of declaration made by reference to Entry 52 or 54, the State would be free to act in the field left out from the declaration. The legislative power to tax by reference to Entries in List II is plenary unless the entry itself makes the field ‘subject to’ any other entry or abstracts the field by any limitations imposable and permissible. A tax or fee levied by State with the object of augmenting its finances and in reasonable limits does not ipso facto trench upon regulation, development or control of the subject. It is different if the tax or fee sought to be levied, by State can itself be called regulatory, the primary purpose whereof is to regulate or control and augmentation of revenue or rendering service is only secondary or incidental.”

33. In Mary Vs. State of Kerala & Ors.: (2014) 14 SCC 272, the petitioner essentially was a successful bidder in auction for arrack shop. The concerned bidder was, however, unable to run her errack shop in the locality as it was a holy birth place of Adi Shankaracharya and there existed a Christian pilgrim centre associated with St. Thomas and therefore, informed the officers that it was not possible for her to open and run the shop and requested not to confirm sale in her favour and the contract be treated as rescinded. Her case did not find favour and she was asked to pay sum as per her bid and recovery notice was also issued and thereupon she preferred writ petition. The matter travelled to Supreme Court and the Supreme Court, after considering the conditions, observed as under:-

“15. From a plain reading of the aforesaid provision it is evident that on the failure of the auction purchaser to execute the agreement whether temporary or permanent, the deposit already made by auction purchaser towards earnest money and security money shall be forfeited. Undisputedly, the Appellant was declared as auction purchaser and, in fact, she had deposited 30% of the bid amount, that is, 7,68,600/- in terms of Rule 5(10) of the Rules. It is further an admitted position that the Appellant did not execute a permanent agreement or for that matter, did not execute the privilege. Hence, in terms of Sub-rule (15) of Rule 5, the money deposited by her is liable to be forfeited. However, as stated above, the Appellant’s plea is that it was due to the facts beyond her control that she could not derive benefit from the privilege granted to her and hence did not run the shop. Therefore, the security amount deposited by her is not fit to be forfeited. In view of the aforesaid, what falls for our determination is as to whether the Appellant could invoke the doctrine of frustration or impossibility or whether she will be bound by the terms of the statutory contract. In other words, in case of a statutory contract, will it necessarily destroy all the incidents of an ordinary contract that are otherwise governed by the Contract Act?

18. The doctrine of frustration excludes ordinarily further performance where the contract is silent as to the position of the parties in the event of performance becoming literally impossible. However, in our opinion, a statutory contract in which party takes absolute responsibility cannot escape liability whatever may be the reason. In such a situation, events will not discharge the party from the consequence of non-­performance of a contractual obligation. Further, in a case in which the consequences of non-performance of contract is provided in the statutory contract itself, the parties shall be bound by that and cannot take shelter behind Section 56 of the Contract Act. Rule 5(15) in no uncertain terms provides that “on the failure of the auction purchaser to make such deposit referred to in sub-rule 10” or “execute such agreement temporary or permanent” “the deposit already made by him towards earnest money and security shall be forfeited to Government”. When we apply the aforesaid principle we find that the Appellant had not carried out several obligations as provided in Sub-rule (10) of Rule 5 and consequently, by reason of Sub-rule (15), the State was entitled to forfeit the security money.

25. It is one thing to say that a statutory contract or for that matter, every contract must be construed reasonably, having regard to its language. But to strike down the terms of a statutory contract on the ground of unfairness is entirely different. Viewed from this angle, we are of the opinion that Rule 5(15) of the Rules cannot be struck down on the ground urged by the Appellant and a statutory contract cannot be varied, added or altered by importing the doctrine of fairness. In a contract of the present nature, the licensee takes a calculated risk. Maybe the Appellant was not wise enough but in law, she can not be relieved of the obligations undertaken by her under the contract. Issac Peter (supra) supports this view and says so eloquently in the following words:

26…In short, the duty to act fairly is sought to be imported into the contract to modify and alter its terms and to create an obligation upon the State which is not there in the contract. We must confess, we are not aware of any such doctrine of fairness or reasonableness. Nor could the learned Counsel bring to our notice any decision laying down such a proposition. Doctrine of fairness or the duty to act fairly and reasonably is a doctrine developed in the administrative law field to ensure the rule of law and to prevent failure of justice where the action is administrative in nature. Just as principles of natural justice ensure fair decision where the function is quasi-judicial, the doctrine of fairness is evolved to ensure fair action where the function is administrative. But it can certainly not be invoked to amend, alter or vary the express terms of the contract between the parties. This is so, even if the contract is governed by statutory provisions, i.e., where it is a statutory contract — or rather more so. It is one thing to say that a contract -­every contract — must be construed reasonably having regard to its language….

26. Now, referring to the decision of this Court in the case of Brojo Nath Ganguly (supra), the same related to terms and conditions of service and the decision in the said case has been approved by this Court in the case of D.T.C. Mazdoor Congress (supra). But while doing so, the Constitution Bench explicitly observed in unequivocal terms that doctrine of reasonableness or fairness cannot apply in a commercial transaction. It is not possible for us to equate a contract of employment with a contract to vend arrack. A contract of employment and a mercantile transaction stand on a different footing. It makes no difference when the contract to vend arrack is between an individual and the State. This would be evident from the following text from the judgment:

286….This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal or where both parties are businessmen and the contract is a commercial transaction.

27. Accordingly, we are of the opinion that in a contract under the Abkari Act and the Rules made thereunder, the licensee undertakes to abide by the terms and conditions of the Act and the Rules made thereunder which are statutory and in such a situation, the licensee cannot invoke the doctrine of fairness or reasonableness. Hence, we negative the contention of the Appellant.”

34. In view of the judgments, the contract entered by the petitioners herein with the State Government would have to be treated as a statutory contract and as held in Assistant Excise Commissioner Vs. ISSAC Peter (supra), the liquor trade cannot be said to be a fundamental right. The contract between the parties is governed by the statutory provisions, namely; the provisions of the Act, Rules, conditions of license and the counter part agreement. The terms and conditions of the agreement cannot be varied, added or altered by this Court. Mutual rights and liabilities of the parties are governed by the terms of the contract. There is no compulsion for anyone to participate in such contracts and the petitioners had participated in the bids with the eyes opened and with full knowledge of the Pandemic existing. In 2021-22, there have been lock-downs and on account of sudden outburst of Corona cases, the State had to impose lock-down for the period. Realizing that it may cause loss of business, the State Government has already issued orders for rebate upto 30% in monthly installments of annual guarantee fees for the period from 16/04/2021 to 07/06/2021 and 15% for the period from 08/06/2021 upto continuation of the weekend curfew.

35. The contention of the petitioners’ counsels that such a rebate does not have any nexus to the loss caused and therefore, rebate ought to be granted by this Court to the extent of actual liquor lifted by each shop keeper and the excise duty and additional excise duty by accordingly taken for the period, in the opinion of this Court, is beyond the scope of judicial review. If the State, in its wisdom, has decided to give a particular rebate, this Court would not venture into the data as produced by the petitioners to examine whether the rebate should have been 30% or should have been 100%. Since the relationship between the petitioners and the State is purely contractual based on excise policy, the terms and conditions whereof are under challenge before this Court, in the opinion of this Court, entering into such an arena would amount to a judicial misadventure.

36. In Energy Watchdog Vs. Central Electricity Regulatory Commission & Ors and other connected cases (supra), grant of compensation tariff on account of force majeure was examined. Learned counsel for the petitioners have relied upon this judgment to submit that the principles of force majeure would have an application to certain extent. I have considered the submission. Section 56 of the Indian Contract Act, 1872 lays down the principle of force majeure as under:-

“56. Agreement to do impossible act.—An agreement to do an act impossible in itself is void.

Contract to do an act afterwards becoming impossible or unlawful.—/A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Compensation for loss through non­performance of act known to be impossible or unlawful.— Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the nonperformance of the promise.”

While considering the aforesaid principles, the Supreme Court in Energy Watchdog Vs. Central Electricity Regulatory Commission & Ors and other connected cases (supra), considered the law as laid down in Taylor Vs. Caldwell: 122 ER 309 wherein it was held that “if some unforeseen events occurs during the performance of a contract which makes it impossible of performance, it need not be performed as insisting upon such performance would be unjust.”

37. In the facts of the present cases, the aforesaid principles, therefore, would have no application as it was only for a short period that there was a shortage of sale. It is not the case of the petitioners that there was no sale at all and their entire contract cannot be performed. In-fact, the petitioners have been continuously engaged in sale of liquor, however, the sale of liquor was admittedly reduced due to Covid pandemic. Thus, the principles of force majeure that the contract is impossible to perform, would have no application to the present cases. The argument in this aspect is rejected.

38. As regards the argument regarding doctrine of frustration, in Energy Watchdog Vs. Central Electricity Regulatory Commission & Ors and other connected cases (supra), the Supreme Court was examining the said aspect also and following paras of the said judgment need to be noticed which read as under:-

“37. In M/s. Alopi Parshad & Sons Ltd. v. Union of India 1960 (2) SCR 793, this Court, after setting out Section 56 of the Contract Act, held that the Act does not enable a party to a contract to ignore the express covenants thereof and to claim payment of consideration, for performance of the contract at rates different from the stipulated rates, on a vague plea of equity. Parties to an executable contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, for example, a wholly abnormal rise or fall in prices which is an unexpected obstacle to execution. This does not in itself get rid of the bargain they have made. It is only when a consideration of the terms of the contract, in the light of the circumstances existing when it was made, showed that they never agreed to be bound in a fundamentally different situation which had unexpectedly emerged, that the contract ceases to bind. It was further held that the performance of a contract is never discharged merely because it may become onerous to one of the parties.

38. Similarly, in Naihati Jute Mills Ltd. v. Hyaliram Jagannath 1968 (1) SCR 821, this Court went into the English law on frustration in some detail, and then cited the celebrated judgment of Satyabrata Ghose v. Mugneeram Bangur & Co. Ultimately, this Court concluded that a contract is not frustrated merely because the circumstances in which it was made are altered. The Courts have no general power to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events.

39. It has also been held that applying the doctrine of frustration must always be within narrow limits. In an instructive English judgment namely, Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH 1961 (2) All ER 179, despite the closure of the Suez canal, and despite the fact that the customary route for shipping the goods was only through the Suez canal, it was held that the contract of sale of groundnuts in that case was not frustrated, even though it would have to be performed by an alternative mode of performance which was much more expensive, namely, that the ship would now have to go around the Cape of Good Hope, which is three times the distance from Hamburg to Port Sudan. The freight for such journey was also double. Despite this, the House of Lords held that even though the contract had become more onerous to perform, it was not fundamentally altered. Where performance is otherwise possible, it is clear that a mere rise in freight price would not allow one of the parties to say that the contract was discharged by impossibility of performance.

40. This view of the law has been echoed in ‘Chitty on Contracts’, 31st edition. In paragraph 14-151 a rise in cost or expense has been stated not to frustrate a contract. Similarly, in ‘Treitel on Frustration and Force Majeure’, 3rd edition, the learned author has opined, at paragraph 12-034, that the cases provide many illustrations of the principle that a force majeure Clause will not normally be construed to apply where the contract provides for an alternative mode of performance. It is clear that a more onerous method of performance by itself would not amount to an frustrating event. The same learned author also states that a mere rise in price rendering the contract more expensive to perform does not constitute frustration.”

39. Thus, this Court is satisfied that the doctrine of frustration would also have no application as the licensees had full knowledge of the consequences of what they are entering into during Covid pandemic period. After having submitted bids at much higher price than the bid price, they themselves have accepted that they would perform the contract in all circumstances. In view thereof, they cannot turn around and ask for changing the conditions of the statutory contract.

40. The view taken by Madras High Court in The South India Spinner Association & Ors. Vs. The Chairman cum Managing Director, Tamil Nadu Generation & Distribution Limited & Ors.: 2020 WritLR 510, treating the lock-down as force majeure event, in my humble opinion, goes contrary to the view as expressed by the Supreme Court in Energy Watchdog Vs. Central Electricity Regulatory Commission & Ors and other connected cases (supra) and the judgments cited therein.

41. Similarly, the view taken by the Punjab & Haryana High Court also does not take into consideration the law as laid down in Assistant Excise Commissioner Vs. ISSAC Peter (supra) and in the facts of the present cases, where the State Government has already provided reduction/rebate of 30% and 15%, as above, this Court would not direct the State Authorities to grant reduction/rebate as prayed by the petitioners.

42. Liquor as a business involves risks. An entrepreneur is required to take risks which is inevitable. Loss and profit is also inevitable part of business. In essence, when the petitioners took a risk to submit their bids, they were actually taking a gamble. When a person knows the risk and reward relationship, it is business. When a person accepts profit without adequate knowledge, then it is gambling. All the petitioners had full knowledge of the pandemic with which the entire State was grappling. It is with the pigeon’s-eye that they self estimated that the pandemic has gone. Loss caused to them cannot be put on the shoulders of the of the Government as with the open eyes they have submitted higher bids and accepted the conditions of the policy. They cannot now turn around and claim as a right from this Court for a mandamus as against the State.

43. Before concluding, this Court, however, deems it appropriate to observe that granting of rebate in making payments is an exclusive discretion of the State and falls within the administrative domain of the State Government who has laid down the excise policy. The State Government would, therefore, be the best to take a decision whether further reduction/rebate is required to be granted to the liquor vendors. Leaving it open for the petitioners to take up their cause before the State Government, this Court is of the firm view that writ jurisdiction cannot be invoked for such demands.

44. All these writ petitions are accordingly dismissed. All pending applications stand disposed of. No costs.

*****

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