UNITED EXCISE Vs. STATE OF MADHYA PRADESH

JUDGEMENT

(1.) THIS application under Article 226 of the Constitution for a writ of mandamus and certain directions to the respondents, to be presently stated, has been filed in the following circumstances.

(2.) THE petitioner, M/s United Excise, Ujjain, a partnership firm, obtained from the State the privilege for the wholesale supply of country spirit in Ujjain Distillery area. Clause 4 of the deed, by which the privilege was granted to the petitioner, conferred on it the exclusive right to supply country spirit wholesale at the warehouses mentioned in the schedule to the deed. It laid down that the plain spirit supplied by the petitioner shall be a blend of fifty per cent Mahua based spirit and fifty per cent molasses spirit; and that the petitioner -licensee shall be paid for such spirit according to the rates sanctioned by the State Government. It was further provided by clause -4 that the licensee shall purchase molasses based spirit from the Ratlam Alcohol Plant, Ratlam, for blending it with Mahua spirit and that the spiced (Masala) shall be manufactured at the Ujjain Distillery in accordance with the procedure shown in the annexure to the deed; and that the licensee shall be paid according to the rate sanctioned by the State Government. Clause -6 of the deed, which is very material here, is in the following terms - "THE licensee shall distil mahua based spirit within the State at Ujjain distillery. In ease the licensee fails to supply spirit in the proportion of 50 per cent mahua based and 50 per cent molasses based on account of non -availability of mahua or any other special circumstances beyond his control and is required to supply pure mahua spirit or pure molasses spirit or blended spirit not in the prescribed proportion, he shall be entitled to the cost price as may be determined by the Excise Commissioner after approval of the State Government and such price shall be binding on the licensee. In case the licensee fails to supply spirit for any reason beyond his control he may be permitted by the Excise Commissioner to obtain spirit from any other distillery located within the State and in that casa the licensee shall be entitled to the price determined by the Excise Commissioner. THE petitioner says that the Ratlam Alcohol Plant is a State undertaking run by the State controlled Corporation constituted by the State Government. THE Ratlam Alcohol Plant supplied to the petitioner molasses based spirit at Misc. Petition No. 416 of 1967 decided on 26 -3 -1968. BR/J. the rate of 45 paise per proof litre in accordance with the tender notice dated the 29th March 1967. According to the rate sanctioned by the Government, the petitioner was paid for the supply of blended spirit at the rate of 79 paise per proof litre and at the rate of Rs. 1.45 per proof litre for the supply of spiced spirit. It is common ground that the Ratlam Alcohol Plant was unable to maintain supplies of molasses based spirit to the petitioner. In the return filed by the respondents, it has been stated that this inability on the part of the Ratlam Alcohol Plant was due to a general shortage of molasses and sugar throughout the country. THE State Government, therefore, purporting to act under clause -6 of the deed of licence, communicated to the applicant, by a memorandum issued by the Excise Commissioner on 29th August 1967, its decision to supply 100% Mahua or Gur based liquor at the rate of Rs. 1.75 per proof litre.

(3.) UNDER the licence, the contractor receives ex -Eatlam, molasses -based liquor at the rate of Rs. 0 -45 per proof litre. For transport and other expenses incurred by him, as also his profit, a sum of Rs. 0.13 which appears to be reasonable, may be assumed and may be added to the price at which the molasses -based liquor is available to him at Ujjain distillery site. This comes to Rs. 0.58 per proof litre. This figure would have to be divided by half, for arriving at the cost of 50% proportion of molasses -based liquor, which goes to compose one proof litre blended liquor. This comes to Rs 0.79. The cost price rate of blended liquor in this area is Rs. 0.79 per proof litre. Deducting the cost of molasses based liquor i e. Rs. 0.29 from Rs. 0.79, the cost price of 50% Mahua based part of the liquor, comes to Rs. 0.50. This, therefore, reflects in monetary terms the contractual obligation of the contractor in regard to supply of 50% Mahua -based liquor. 6 The contractor would, however, under the revised supply arrangement be required to substitute even the remaining 50% molasses -based supply by Mahua -based supply. For determining the cost price rate of this additional Mahua -based liquor, it would be necessary, as also fair, to the contractor, to keep the existing supply conditions and the prevailing price of Mahua in view. According to the information given by the distillery contractors themselves, at present the price of Mahua per quintal at distillery site comes to Rs. 70.00 per quintal. The contractors have also pointed out that there is possibility of further rise in prices of Mahua during jthe remaining part of the financial year. Therefore, an average price of Rs. 80.00 per quintal may be assumed. In March 1967, when the distillery contract was entered into, the prevailing price of Mahua was between Rs. 45 00 and Rs. 50.00 per quintal. The average of the then prevailing prices may, therefore, be assumed Rs. 48 -00 per quintal. The price rise from between March 1967 and the remaining part of the current financial year has been in the proportion of 48.80 or 3.5. Since I have already arrived at the figure of Rs. 0 -50 per half proof litre, as the price of Mahua -based liquor, the cost price of the remaining half proof litre of Mahua based liquor in the case of Seoni distillery area (which is higher i e. Rs. 0.75) may be taken as basis to allow for the proportionate rise, the rise comes to, from Rs. 0.75 to Rs. 1.25 per half proof litre. The distillery contractor would, therefore, have to supply the remaining 50% of Mahua -based liquor at the rate of Rs. 1.25 per half proof litre. 7. The reasonable cost price rate of 100% Mahua -based liquor would therefore be Bs. 1.75 per proof litre i. e. Rs. 0.50 plus Rs. 1.25. The cost price rate of supply of 100% Mahua -based liquor is therefore fixed by me at Rs. 1.75 per proof litre under clause 6 of the licence." 5. It was argued by Shri Cbitale, learned counsel for the petitioner, that clause -6 of the deed of licence had no applicability when the failure to supply spirit in the proportion of 50% Mahua based and 50% molasses -based was due to the failure of the State to supply molasses -based spirit and not on account of any fault of the petitioner; that assuming that clause -6 was attracted, then on a true construction of that clause the power there under had to be exercised for determining the composite rate applicable to 100% Mahua -based spirit; and that the rate fixed under clause -6 could not be exproprietary and had to be the cost price in a changed context. It was said that in fixing the rate for 100% Mahua - based spirit, the Excise Commissioner erred in applying the norms worked out in the tender rate; that there was no justification whatsoever for supplying contract -rate for 50% Mahua -based component under the initial grant or for applying the onerous conditions, which the petitioner's tender entailed, in substitution and in lieu of the molasses -based component as well; that, at any rate, the molasses -based component had to be evaluated objectively with reference to the cost of Mahua flowers in the changed circumstances and the cost of manufacture and the other overhead charges and expenses; and that under the initial grant the licensee had got ready molasses -based spirit and had not suffered any cost of manufacture for it. It was, therefore, submitted that there was a complete failure on the part of the respondents to determine the cost price for 100% Mahua -based spirit as contemplated by clause -6. Learned counsel added that the State Government had exclusive right of manu. facturing any country liquor; that the State was entitled, in the exercise of its "police powers", to regulate the manufacture of liquor; that, therefore, the lease by the State to the petitioner of the privilege of manufacturing country liquor and to fixation of the price of manufactured liquor were acts done by the State in exercise of its "police powers" and that, consequently, if the price of the manufactured liquor was not fixed by the State as envisaged by clause -6 of the deed, then the petitioner was entitled to a writ of mandamus directing the State to fix the price in accordance with clause -6, and it could not be maintained that in seeking this relief the petitioner was seeking a relief for the enforcement of a contractual obligation resting on the State. In support of his contentions, learned counsel referred us to Cooverjee v. Excise Commissioner, Ajmer,. AIR 1954 SC 220. Guruswami v. State of Mysore, AIR 1954 SC 592. Ohaio Mai & Sons v. State of Delhi AIR 1959 SC 65. and United Collieries v. E. in -Chief, S. E. Rly .,. 1963 M P L J 701=A I R 1964 M P 42.