STATE OF KERALA Vs. GOVINDAN PONNAMMA

JUDGEMENT

(1.) These two appeals arise from the common judgment and decrees in O.S. No. 239/81 and O.S. No. 240/8 i of the Additional Sub Court of Quilon.

(2.) The appellant in both the appeals is the State of Kerala and the State was the defendant in both O.S. No. 239/81 and O.S. No. 240/81 before the Sub Court of Quilon. O.S. No. 239/81 was filed by the respondents in A.S. No. 45/86 for declaration that the abkari contract with the State is rescinded and for mandatory injunction directing the State to refund portion of the bid amount already deposited. The plaintiffs are abkari contractors and they were the successful bidders of'25 arrack shops of Quilon excise range for the financial year 1981-82. The auction was held on 23-3-19981 as per the sale notification dated 27-2-1981. The bid amount was Rs 99,72,000/-. The auctioning officer on behalf of the State made in announcement before the auction that 5,760 litres of arrack would be the monthly quota and that any quantity in excess of the announced monthly quota of arrack would be supplied whenever demanded for as was done in the earlier years. The plaintiffs, after bidding the auction remitted Rs. ! 4,400/- as the duty for 5760 litres on 1-4-1981. As required by the rules the plaintiffs deposited 30% of the bid amount, amounting to Rs. 299,91,600/- on 23-3-1981 and furnished solvency certificate for 20% of the bid amount. But no arrack could be supplied by the State. The plaintiffs had obtained for sale in the previous year more than 6 lakhs litres in excess of the monthly quota. When the plaintiffs did not get any arrack, they made representations to the Range Officer. Circle inspector of Excise and Assistant Excise Commissioner on 2-4-1981: 3-4-1981 and 4-4-1981 respectively. But they were informed that no stock was available with the Government for supply. The plaintiffs came to know that there was acute shortage of arrack in all the warehouses. No arrangement was made by the State for supply of spirit and alcohol to manufacture arrack. According to the plaintiffs the auction was conducted in suppression of the real state of affairs and as such there was fraudulent misrepresentation on the basis of which the plaintiffs were induced to enter into the agreement with the Suite for obtaining arrack. According to the plaintiffs their monthly expenses for running the arrack shops would be Rs. 20 lakhs including the interest payable to the security deposit which was raised by taking loans from the banks and also the rent of the shops, salary and wages of the employees. Thus according to the plaintiffs the loss from 1-4-1981 to 4-4-1981 was nearly Rs. 2,64,000/-. Thus on 4-4-1981 the plaintiffs were forced to rescind the contract and notice was sent to that effect on 4-4-1981. But on 8-4-1981 the plaintiffs received a copy of letter from the Inspector of Excise, Quilon Range showing the date as 4-4-1981 intimating them that the Inspector of Excise, Pamba Distillery would be supplying 5706 litres of arrack at Thiruvalla. The plaintiffs informed that the contract was already rescinded. Then on 11-4-1981 demand notice was received under S.7 of the Revenue Recovery Act demanding the remittance of Rs. 9,97,200/- with 12% interest as kist arrears.

(3.) The same plaintiffs filed O.S. No. 240/81 against the State. The prayers in O.S. No. 240/81 were the same as in O.S. No. 239/81. The cause of action for filling O.S. No. 240/81 was that the plaintiffs were the successful bidders for 12 arrack shops in Chathanoor Excise Range in Quilon district for the financial year 1981-82 in the auction held on 23-3-1981. The sale notification was dated 27-2-1981. The hid amount was Rs. 19,10,000/-. The monthly quo!a to he supplied was 900 litres of arrack for these 12 arrack shops. There was an announcement that arrack in excess of the announced monthly quota would be supplied to the plaintiffs on demand. Thus the plaintiffs remitted Rs. 2,475/- us duty for 990 litres on 1-4-1981 and deposited 30% of the bid amount i.e. Rs. 5,73,000/- and also furnished solvency certificate for 20% of the bid amount. But no arrack was supplied by the State. The plaintiffs approached the Range Officer on 2-4-1981, the Circle Inspector of Excise on 3-4-1981 and the Assistant Excise Commissioner on 4-4-1981. But the plaintiffs were informed that there was no stock available with the Government for supply. The plaintiffs came to know that the State did not make arrangement for supply of rectified spirit or alcohol to manufacture arrack. Thus according to him the auction was conducted in suppression of the real state of affairs amounting to fraudulent misrepresentation on the basis of which the plaintiffs were induced to enter into agreement with she State. It was alleged that the monthly expenses of the plaintiffs for running the said shops would be Rs. 2 lakhs including the interest payable on the security deposit which was raised by taking loan from the banks and also rent of the shops and salary and wages of the employee. Thus the actual loss sustained by the plaintiffs from 1-4-1981 to 4-4-1981 was nearly Rs. 26,400/-. Thus on 4-4-1981 the plaintiffs rescinded the contract and sent a notice to that effect. But the Excise inspector of Chathannoor Range issued a demand notice under S.7 of the R.R. Act for remittance of Rs. 1,91,000/- with 12% interest as kist arrears of April, 1981. Thus the plaintiffs filed O.P. No. 1972 of 1981 before this Court to quash that order. That Original Petition was disposed of on 27-7-1981 with a direction to the State to send a reply to the suit notice within six weeks from 27-7-1981. 'Thus a reply was received on 28-9-1981. The State took the stand that the plaintiffs had no right. to rescind the contract. The contentions taken by the Stale were the same as in O.S. No. 239/81.