Holding

Prior valuation and payment of the outgoing licensee’s plant, machinery and stock is not a mandatory condition precedent to the State’s taking possession and handing over the distillery to the incoming licensee.

Summary

Doongaji & Co., a long‑time licensee under Sections 13 and 14 of the Madhya Pradesh Excise Act, 1915, contested the award of a new distillery licence to Rajdhani Distilleries Corp. and the subsequent takeover of its distillery and warehouses on the ground that Clause 50 of the licence required the State to fix the valuation of all plant, machinery and stock and pay the outgoing licensee before possession could be transferred. The High Court held that the appellant had never enjoyed exclusive possession and dismissed the writ petition; the Supreme Court was asked to decide whether the valuation and payment were a condition precedent to dispossession. The Court examined the scheme of the licence, the relevant statutory provisions and the practical consequences of a strict construction, and held that prior valuation and payment are not mandatory nor a condition precedent. Consequently, the State’s taking over possession on 28 August 1981 was lawful and the appellant was not entitled to restitution of the plant, machinery or warehouses. The Court directed the payment of the balance amount of Rs. 53,016.45 with interest to the appellant and allowed the appeal in part.

Issues considered

Whether Clause 50 of the licence makes prior valuation and payment of plant, machinery and stock a condition precedent to the transfer of possession to the incoming licensee.
Whether the appellant is entitled to restitution of the distillery, plant, machinery and warehouses after refusing to cooperate in the valuation process.
Whether the State’s taking over possession without prior valuation violates the licence terms or any statutory provision.

Legislation cited

Indian Electricity Act, 1910 (as amended 1959)
Madhya Pradesh Excise Act, 1915s. 13, s. 14, s. 17, s. 62

Subjects

ExciseLicence valuationCondition precedentRestitutionDistilleryPublic revenueMadhya Pradesh Excise ActClause 50TenderPossession

Judgment

DOONGAJI AND CO.
A
v.
STATE OF MADHYA PRADESH AND ORS.

AUGUST 9, 1991

[N.M. KASLIWAL AND K. RAMASWAMY, JJ.] B

Madhya Pradesh Excise.Act, 1915-Sections 13 and 14-Licerice
to distil rectified spirit or. denatured spirit or liquor-Clause 50'-
lnterpretation of. Valuation of the materials such as plants & machinery
etc. of the distillery and payment thereof to outgning licensee before
handing over possession to the incoming licensee-Held to be neither C
mandatory nor a condition precedent.

" The appellants and its predecessors continuously held licences
under Sections 13 and 14 of the Madhya Pradesh Excise Act to distil
rectified spirit or denatured spirit or liquor. The last of such licence
which the appellant had related to the period from 1.4.1977 to D
31.3.1981. The next licensing period commenced from 1.4.1981 to
31.3.1986 and the respondent Rajdhani Distilleries Corporation
became the successful tenderer in respect thereof which the appellant
impugned by means of a writ petition before the High Court but failed
both before the High Court as also in this Court in a special leave
petition. Thereupon the appellant was called upon twice to be present to E
deliver the possession of the distiller) to the resp\lndent but the appel-
lant did not co-operate. Likewise the appellant did not co-operate in
fixing the value of the plant and machinery of the distillery and
warehouses as a result of which a committee was appointed in terms of
the licence which fixed a sum of Rs. 10,53,016.45 p. as the total value
payable to the appellant. Due to the non-cooperation of the appellant, F
the Excise Department took over the possession of the distillery after
m?.king inventory of stock in hand in the presence of the witnesses and
' the same was banded over to the respondent. The appellant thereafter
demanded redelivery of the distillery and on his failure to get the same
it filed a writ petition in the High Court praying for a writ of mandamus
....
seeking inter alia restitution of the distillery and the warehouses etc., G
challenging the quantum of valuation fixed. The High Court dismissed
the writ petition. The High Court found that the appellant had no
exclusive possession which always remained with the excise Depart-
ment; the appellant worked out the contract of manufacturing rectified
spirit etc. and that due to non-cooperation of the appellant, possession
was taken and delivered to the incoming licensee as per rules and the H
479
480 SUPREME COURT REPORTS [ 1991] 3 S.C.R.

appellant was not entitled to restitution. Hence this appeal by special
A
leave. It is contended on behalf of the appellant that clause SO enjoins
the State to fix the valuation of all the materials belonging to the appel-
lant and pay the same to it as an outgoing licensee, before taking over
possession and handing over the distillery and the attached warehouses
.... ..
to the respondents. According to it, it is a condition precedent under
B clause SO to dispossess the appellant and start the operation of the
contract by the respondent which admittedly were not done. This is a
contravention of the mandallory conditions of the licence and the rules.
The respondents on the other hand contend that the appellant is not
entitled to restitution as it was due to its non-cooperation, possession
was taken. According to them prior valuation and payment are not .. ;- .
condition precedent to work out the licence.
c
Partly allowing the appeal, this Court,

HELD: In the light of the scheme of valuation of the plant and
machinery of the distillery, or the apparatus in the warehouses and the
D stock in trade, the Court lileld that strict construction (of clause SO)
would lead to innumerable complications and loss of public revenue.
We are inclined to hold that before the expiry of the licence, if the '
.
outgoing licensee cooperat1!S, the value can be fixed with consensus,
payment should also be made within the time stipulated. In all other
cases it could be done even after the expiry of the stipulated period. In
E that perspective the Court had no hesitation to hold that prior valuation
of plant and machinery in the distillery, stock in trade therein or the
value of the machinery in the warehouses and stock of the liquor stored
therein and payment thereof before taking possession and handing
,. •
~

them over to the incoming licensee is not a mandatory, nor a condition
precedent. Therefore, taking over possession from the appellant on
F August 28, 1981 and handing over the plant and machinery, etc. to the
respondent is not illegal. [490C-E]

In this case admittedly the conditions of licence are not ques-
tioned, but expressly given op in the High Court. Even before us the
validity of the valuation has not been questioned. It cannot cut the
G branch on which appellant sits to assail the constitutional validity of the
I- •
conditions of the licence. Accordingly we have no hesitation to hold that
the appellant is not entitled to the restitution of the plant and machinery
of the distillery at Ujjain and the attached warehouses. [491A-B]

It is open to the appellant to make a representation to Govern-
H ment and any officer not below a Secretary preferably of the concerned
DOONGAJI v. STATE OF M.P. !RAMASWAMY, J.I 481

Department wonld go into the matter and decide the valne as per the A
material on record. It is open to the appellant to place all its material. It
is also open to the respondent to place its material and the authority
wonld consider after giving an opportnuity of hearing through counsel,
if asked for, and decide the value accordingly. [491D]

Godhra Electricity Co. Ltd. and Anr. v. State of Gujarat and B
Ors., [1975] 2 SCR 42; Har Shankar & Ors. v. Dy. Excise & Taxation
Commissioner and Ors., [1975] 2 SCR 254 and State of M.P. v. Nandlal
Jaiswa/, [1987] 1SCR1, Referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5483
of 1983.
c
From the Judgment and Order dated 7.10.1982 of the Madhya
Pradesh High Court in M.P. No. 169 of 1982.

R.F. Nariman and P.H. Parekh for the Appellants.
D
V.N. Ganpule, V.M. Tarkunde, S.K. Agnihotri, S.K. Sinha.
• -1 Rajinder Narain, R.S. Singh, and Rameshwar Nath for the Respondents.

The Judgrnent of the Court was delivered by

K. RAMASWAMY, J. This appeal by special leave arises E
against the judgment of the Division Bench of the Madhya Pradesh
High Court, Indore Bench dismissing M.P. No. 169 of 1982 dated
October 7, 1982. The appellant, a partnership firm filed the writ peti-
- ... tion seeking writ of mandamus and other direction to remove
Rajdhani Distilleries Corporation, the 7th respondent in the writ peti-
tion in the High Court and 6th respondent in this appeal for short F
'respondent' or his 'servants' or 'agents' and to deliver vacant and
peaceful possession of Ujjain Distillery and warehouses attached to it
and the plant and machinery mentioned in the schedule Annexure P-3
to the writ petition. It also sought for mandamus or other order to have
the valuation of the plant and machinery in Annexure P-3 assessed or
direction to return the goods or things described in Annexure P-7 or on G
its failure to pay a sum of of Rs.8,48, 179.28 and a mandamus directing
the State Govt. to terminate the licence granted on August 25, 1981 to
the respondent and to issue licence to the appellant under s. 13 of the
M.P. Excise Act, 1915, for short 'the Act', etc. Thus this appeal.

The material facts, to dispose of the point arose in this appeal, lie H
482 SUPREME COURT REPORTS [199H 3 S.C.R.

A in a short compass as stated hereunder:

In the State of Madhya Pradesh nine distilleries for the
manufacture of spirit were established and one of which was situated
at Ujjain. The appellant and its predecessors continuously had licence
under ss. 13 and 14 of the Act in form D-2 to distil rectified spirit or
B denatured spirit or liquor and D-1 licence for wholesale supply of
country made liquor in the distillery to retail vendors in the area
attached to the distillery. The licence was for a period of 5 years. The
last licence of which was for the period from April 1, 1977 to March 31.
1981. The normal procedure in vogue was to call for tenders and the
lowest was being accepted, though sometimes highest was also prefer-
red. Next licensing period commenced from April I, 1981 to March 31,
c 1986 and the respondent became the successful tenderer which the
appellant impugned in Misc. Petition No. 701/81 and obtained stay of
dispossession from the distillery and the attached warehouses. The
interim stay was later vacated and the petition was dismissed on
August 20, 1981. We may also mention here that the writ petition was
D also dismissed and the special leave petition was dismissed by this
court. Thus grant of licence to the respondent under D-1 and D-2
licences became final. On August 21, 1981 the Officer-in-Charge of
the distillery wrote a letter to the appellant calling upon them to be
present on August 22, 1981 to deliver the distillery, plant, machinery,
etc. to the respondent. The appellant neither received it nor coope-
E rated to deliver possessipn of the distillery, etc. to the respondent.
Instead it locked the distillery and went away. In the meanwhile the
Excise Department also put their locks on the distillery etc. On August
27, 1981 the District Excise Officer again called upon the appellant to
be present on August 28, 1981 to deliver possession of the distillery,
etc. to the respondent. But the appellant remained absent. Conse-
F quently possession was taken of the distillery and warehouses, after
taking inventory of stock in hand in the presence of the witnesses and
the same were handed over to the respondent on August 28, 1981. The
appellant sent a letter on February 23, 1982 valuing the goods taken
possession of at Rs.8,36,988.61. On August 8, 1982 the appellant
demanded redelivery of the distillery, plant and machinery and
G warehouses and the value of the stock in trade or pay the amount. On
March 16, 1982 the appellant filed the writ petition in the High Court
but was dismissed.

The appellant contended in the High Court that it had been in
exclusive possession of the distillery, plant and machinery at Ujjain
H and the attached warehouses and dispossession was unlawful and that,
DOONGAJI v. STATE OF M.P. [RAMASWAMY, J.J 483

therefore, the appellant was entitled to restitution of the plant and
machinery and also to the grant of licence after cancellation of the fl.
licence granted to the respondent. The High Court found that the
appellant had no exclusive possession which always remained with the
Excise Department. The appellant worked out the contract of
manufacturing rectified spirit or spirit (country made liquor) in the
distillery and wholesale supply to the retail vendors within the area B
attached to the distillery. Due to non-cooperation of the appellant
possession was taken and delivered to the incoming licensee, the
respondent, as per rules and the appellant was not entitled to restitu-
tion. The other findings are not necessary as they are not pressed
before this court. The appellant had given up the reliefs of valuation of
the plant and machinery and stock in trade. During the pendency of
the appeal on an application made by the appellant this court directed C
the state to make over payment of a sum of Rs.10 lacs deposited by the
respondent with the State Govt. and also further directed the respon-
dc~t to deposit· a sum of Rs.5 lacs in .the Registry of this court and
directed the Registry to keep that amount in fixed deposit to earn
interest thereon subj?ct to adjustment at the final hearing. D

Despite issuance of several notices by the department, the appel-
lant did not cooperate in the estimate of the value of the plant and
machinery of the distillery and warehouses. the Committee appointed
in terms of the conditions of the licence, fixed a sum of
Rs.10,53,016.45 as total value payable to the appellant. Since a sum of E
Rs.10 lacs had already been paid, the appellant is still entitled to the
balance amount of Rs.53,016.45.

. .,, Sri. R.F. Nariman, learned counsel for the· appellant, in his
thorough and analytical arguments based on record made a shift in the
stand and now contended that on a reading of several clauses in the F
licence Ex. P-2, in particular, clause 50 enjoins the state to fix the
valuation of all materials like buildings, still, machinery, etc. belong-
ing to the appellant as an outgoing licensee; should be purchased by
the respondent before the expiry of the contract and commencement
of the succeeding contract of the respondent; the Committee appoin-
ted by the Excise Department in this behalf should estimate fair valua- G
"' 1 tion and payment thereto be made to the appellant before taking over
possession and handing over the plant and machinery of the distillery
and the attached warehouses to the respondents as a condition prece-
dent to dispossess the appellant and start the ->peration of the contract
' by the respondent which admittedly were not done. This is in contra-
vention of the mandatory conditions of the licence and the rules. The H
484 SUPREME COURT REPORTS [ 1991) 3 S.C.R.

appellant, therefore, is entitled to restitution of the plant and machi-
A
nery of the distillery and the attached warehouses illegally taken pos-
session of by the respondent and the state. In support thereof he
placed strong reliance in Godhra Electricity Co. Ltd. & Anr. v. State of
Gujarat & Ors., [1975) 2 SCR 42. He also referred to us in support of
his contention various documents. In our view it is not necessary to
dwelve deep into them. Sri Ganpule and Sri Tarkunde, the learned
senior counsel for the State and the respondent, contended that the
appellant was requested twice to·be present for delivery of the plant
and machinery in the distillery and warehouses to the respondent and
due to its non-cooperation possession was taken. Even for the assess·
ment of the valuation, before the expiry of the contract, the appellant
was given several notices requesting it to furnish the evidence of the
c value of the plant and machinery stock in trade, etc., and due to its
non-cooperation. the valuation could not be made. Prior valuation and
payment are not condition precedent to work out the licence. The
appellant has no right to the restitution after the expiry of the licence.
Sri Tarkunde, in particular, emphasised that the restitution prayed for
D became infructuous on account of the subsequent events, namely,
pursuant to December 1984 Govt. policy the respondents established
their distillery at Ujjain at their own expenses. . .....
The second period of licence also expired in 1991. There was ,
further change in the policy of the Govt., namely each District was
made a supply area under a separate licence for two years. Under
these circumstances the appellant is not entitled to any reliefs. It is also
further contended that the conditions in the licence in Ex. P-2 marked
in the High Court should be read harmoniously. It is clear that prior ...
fixation of the valuation and the payment of the price is not a condition ,. .
precedent. The ratio in Godhra Eletricity Co. Ltd. case is inapplicable
F to the facts of this case.

The sole question is whether fixation of the price of the plants
and machinery at Ujjain and the attached warehouses and stock in
trade and payment thereof to the appellant is a condition precedent to
take possession and delivery thereof to the respondent on August 28,
G 1981. At the outset we may make it clear that, though Sri Nariman
contended that the grant of licence to the respondent was in gross
violation of the conditions of the tender as the respondent did not
comply with any of the mandatory conditions stipulated therein and
the delivery of the possession of the distillery in pursuance of the ,
illegal contract is without jurisdiction, we decline to go into this ques-
H tion, though prima facie may be plausible to be countenanced, for the
DOONGAJI v. STATE OF M.P. !RAMASWAMY, J.] 485

reasons that tne grant of licence for the period of 1981 to 1986 to the A
respondent became final and expired by efflux of time. It was also
contended by Sri Nariman that the valuation made at Rs.10,53,016.45
was not proper and contrary to the tender's conditions which stipu-
lated deposit of a minimum of Rs.19 lacs by the respondent as a condi-
tion to grant licence, and that, therefore, the appellant is entitled to
valuation of at least Rs.19 lacs. We decline to go into that question B
also since the relief of valuation was given up in the High Court. It is
also clear from the record that the appellant had not cooperated in
estimating the value and the Committee of designated officers, namely
the Addi. C_ollector, the District Excise Officer, Astt. Commissioner
of Excise and Accounts Officers was compelled to go into the question
and made an assessment of the value on January 5, 1984. That valua- C
tion was also not questioned in the writ petition.

To find whether it is a condition precedent to fix the valuation of
the plants and machinery of the distillery and the warehouses and the
stock in trade and payment thereof before taking over possession and
handing over the same to the incoming licencee, the material clause 50 D
to be looked into reads thus:

"All the materials like buidings, still, machinery, drums,
wood fuel, coal, mahua, bottling, machinery, bottles,
spices, red sealing wax, coaltar, pilfer proof seals, crown
corks, alongwith alu capsules, etc. belonging to the outgo- E
ing licensee purchased for the use of distillery and ware-
houses attached thereto, shall be valued before the expiry
of the old contract and the commencement of the new one
by a committee appointed by the Excise Department in this
behalf. The committee aforesaid shall be appointed by the
Excise Commissioner under the previous sanction of the F
Government (Separate Revenue Department) and it shall
consist of five members, namely (1) Collector or Addi-
tional Collector-convenor, (2) Assistant Commissioner of
Excise of the Division concerned member (3) Executive
Engineer-Technical member, (4) Accounts Officer of the
• i Excise Department-Member, and (5) Representative of G
the licensee-Member. If the representative of the licensee
remains absent in the committee at the appointed time, the
remaining four members shall begin their work in his
absence and no objection of the licensee in this respect
shall be heard. The valuation made and agreed upon by the
Committee shall be sanctioned by the Excise Commis- H
486 SUPREME COURT REPORTS (1991] 3 S.C.R.

sioner with such necessary changes as he deems fit and in
A
case of dirference of opinion amongst the members, the
Excise Commissioner shall pass orders relating to disputed
valuation. The orders of Excise Commissioner shall be
final and binding upon the licensee.

B Note: The valuation of sanctioned plant at the
warehouses may be done by a committee consisting of
some of the members of the above referred committee,
subject to the orders of the Excise Commissioner, which
shall be final and binding on the licensee. .
Prima facie, if the clause by itself is read in isolation, it would
c indicate that prior fixation of the value and payment is a condition
precedent. But in our view all the conditions of the licence, policy of
the Act and Rule of the possession, manufacture, supply, sale and
distribution of the rectifiecl spirit or denatured spirit or liquor from the
stage of manufacture in Distillery till retail sale to the consumer be
D viewed as an integrated whole and the human behaviour of the outgo-
ing licensee also has to be kept in view. Any other view would disrupt
smooth transition from the outgoing to the incoming licensee; hampers ' .
the continuity of supply and sale of intoxicants and cause collosal loss
of public revenue. So let us consider the relevant propositions from
this background.
E
Section 13 of the Act requires a licensee to manufacture
intoxicants:
....
(a) Licence is required for manufacture, etc. of intoxicants;

F (b) No intoxicant shall be manufactured or collected

(f) No person shall induce, keep in his possession any
material ............ for the purpose of manufacture of intoxi-
cants, other than tari, except under the authority and subject to
G the terms and conditions of the licence granted in that behalf.

Section 14 provides that:

(a) establish a distillery in which spirit may be manufac-
tured under licence granted under s. 13 on such conditions as the
H Govt. may impose ..... .
DOONGAJI v. STATE OF M.P. [RAMASWAMY, J.J 487

\c) license on such conditions as the State Govt. may A
impose the construction and working of the distillery and
brewery;

(c) establish or licence warehouses wherein any intoxicant
may be deposited and kept without payment of duty, subject to
B
payment of such fee as the State Govt. may direct .....

Section 17 provides inter alia that no intoxicant shall be sold
except under the authority and subject to the terms and conditions of
licence granted in that behalf.

Thus it is clear that establishment of a distillery or a warehouse; C
manufacture of intoxicants, spirit (country made liquor), the posses-
sion and distribution and sale thereof are regulated under the Act.

The Govt. in exercise oUts power under s. 62 of the Act made
rules regulating the control of distilleries and warehouses by Officers
of the Excise Department, especially appointed by the Excise Com- D
missioner for that purpose. Therefore, any licensee, under the Act and
the Rules, be it incoming or outgoing, should have D-2 and D-1
licences for establishment of distillery and warehouses, possession of
raw materials, manufacture of liquor or rectified spirit or denatured
spirit and supply to the retail vendors of the area attached to the
distillery. Any infraction is an offence. E

It is settled law by several decisions of this court that there is no
fundamental right to a citizen to carry on trade or business in liquor.
The state under its regulatory power, has power to prohibit absolutely
any form of activity in relation to an intoxicant, its manufacture, pos-
session, import and export. No-one can claim, as against the state, the F
right to carry on trade or business in any intoxicants, nor the state be
compelled to part with its exclusive right or privilege of manufac-
ture, sale, stora5e of liquor. Further when the state has decided to part
with such right or privilege to the others, then state can regulate con-
sistent with the principles of equality enshrined under Art. 14 and any
infraction in this behalf at its pleasure are arbitrary violating Article G
14. Therefore, the exclusive right or privilege of manufacture, storage,
sale, import and export of the liquor through any agency other than
the state would be subject to rigour of Article 14. Vide Har Shankar &
Ors. v .. Dy. Excise & Taxation Commissioner & Ors., [1975] 2 SCR
254 and State of M.P. v. Nand/a!Jaiswa/., [1987] 1SCR1.
H
488 SUPREME COURT REPORTS [1991) 3 S.C.R.

A When the state was dealing with the grant of the privilege of
establishing or manufacturing intoxicants, rectified spirit or denatured
spirit, spirit (country made liquor) in a distillery owned or regulated by
it, and invites tenders in this regard it should conform to the rigour of
Art. 14 of the Constitution. Admittedly, the licence of the appellant
expired on March 31, 1981 and thereafter it had no right to manu-
B facture and store at distillery in U jjain and distribution as wholesaler
of the country made liquor from the attached warehouses to the retail
vendors within that area granted to the respondent. But for the stay
granted by the High Court the operation of the respondent's licence
was to begin on April 1, 1981. The outgoing licensee, the appellant,
had to hand it over to the respondent on that date. The conditions in
the licence P-2 postulate of mutual rights and obligations between the
C nutgoing licensee to sell and the incoming licensee to purchase the
plant and machinery of the distillery, stock in trade and also the
machinery in the warehouse including the apparatus, etc. enumerated
in the conditions either at the price fixed or agreed directly between
the parties or fixed by the committee of the designated officers. In case
D of any difference in the valuation between the members, the Commis-
sioner of the Excise or the State Govt. would fix the valuation, which
was made final. The Committee designated was to be constituted with
~ .
p~ior approval of the Govt. as per condition 50 to evaluate the plant
and machinery of the distillery and some of them of the warehouses.
Outgoing licensee also is entitled to represent in the Committee. On
E his non-cooperation the rest of the four members of the Committee are
empowered to determine the value.

Clause 23(iii) provides that any dispute relating to valuation of ...
the sanctioned plant shall be referred to the State Government and the
decision of the State Govt. shall be final and binding on the parties to
F the dispute. Clause 2 thereof refers that the licensee shall made over
the said distillery and warehouses buildings on the termination of the
licence in as good condition as they were at the commencement hereof
excluding reasonable wear and tear. Clause 36(4) provides that any
dispute relating to the sale of spirit or plant by the licensee or the
valuation of the plant shall be referred to the State Govt. and the
G decision of the State Govt. shall be final and binding. Clause 39(1) in
particular, mentions that at the commencement of the term of this
licence, the licensee shall buy all sanctioned plant at the Ujjain distillery
including spare parts, furnitur,e, motor trucks and fittings at a price to
be fixed by the State Government. Licensee shall pay the price thereof
within 30 days of the communication. Similarly, clause 41, 42(1) and
H clause 4·1 provide that the incoming licensee shall take on lease all
DOONGAJI v. STATE OF M.P. [RAMASWAMY, J.J 489

other bulidings structures attached to the distillery at Ujjain on such
A
conditions and terms as per Public Works Department Manual Vol. II
within a period of one month of the intimation of the acceptance of the
tender. Then comes clause 50 quoted hereinabove. The incoming
licensee shall make payment within 30 days from the date of.communi-
cation of the value.
B
Therefore, the courts should adopt realism, pragmatism, practi-
cality and the purpose envisaged under the Act and the rules in con-
struing the relevant clauses in the licence. The purpose of the Act and
the rules made therein is to regulate the manufacture, distribution,
sale of the intoxicants, rectified spirit or denatured spirit, liquor, sale
to consumers within the state of Madhya Pradesh. It is an on going
process conducted through the licensing system, an exclusive privilege
c
of the state through the licences granted under form D-1 and D-2 in
this behalf. The duration of the licence is fixed one. On expiry of the
licence the outgoing licensee shall be bound to handover the distillery,
plant and machinery therein, and warehouses attached thereto, the
stock in trade and other apparatus and goods used for the manufac- D
ture, storage and distribution. The outgoing contractor is entitled to
continue his business activity till the last date of the licence, namely
March 31, of the ending year. The succeeding licensee would take over
the business from the outgoing licensee on April 1 of the year of
licence. Thus there should be no hiatus between taking over and hanr: ·
ing over the manufacture, possession, storage of the wholesale busi- E
ness of the spirit (country made liquor) or rectified spirit or denatured
spirit. Under these circumstances it will well-nigh be impossible to assess
the valuation of the entire stock in trade or plant and machinery in the
distillery or the warehouses till the last date. In addition the coopera-
tion of the outgoing licensee is also necessary and expected as he
would be in possesssion of the records of the previous purchases of the F
materials, or plant or machinery if any new additions are made etc.
Unless they are made available, it is not possible to assess the value
after giving due rebate or depreciation, etc. to the incoming licensee.
The human nature and conduct would be such that the outgoing
licensee, being the unsuccessful tenderer, would not cooperate in
handing over possession of the distillery and stock in trade and would G
approach the High Court under Art. 226 of the Constitution as was
done in this case. The incoming licensee has time of thirty days in case
of stock in trade or three months in the case of plant and machinery
from the date of communication to him to pay the value to the outgo-
ing licensee. Keeping those circumstances at the back of our mind we
decline to adopt lexographic strict construction of clause 50 which H
490 SUPREME COURT REPORTS [1991) 3 S.C.R.

would thwart continuity; create hiatus in smooth operation of
A
manufacture, storage, distribution and sales of the intoxicants.
Moreover, after the assessment is made and in case of any difference I- •
of opinion in the valuation or the outgoing licensee claims higher value
the final arbiter would be in some cases like stock in trade, the Com-
missioner of Excise and in case of plant and machinery or warehouses
B the State Govt. After the decision of the Commissioner or the State
Government, it shall be communicated to the succeeding licensee, wh,,
has been given maximum period of three months to make payment tc
the outgoing licensee. In the light of the scheme of valuation of the
plant and machinery of the distillery, or the apparatus in the } .
warehouses and the stock in trade, we hold that strict construction
would lead to innumerable complications and loss of public revenue.
c We are inclined to hold that before the expiry of the licence, if the
outgoing licensee coopeates, the value can be fixed with consensus,
payment should also be made within the time stipulated. In all other
cases it could be done even after the expiry of the stipulated period. In
that perspective we have no hesitation to hold that prior valuation of
D plant and machinery in the distillery, stock in trade therein or the
value of the machinery in the warehouses and stock of the liquor
stored therein and payment thereof before taking possession and
.. '

handing them over to the incoming licensee is not a mandatory, nor a
condition precedent. Therefore, taking over possession from the
appellant on August 28, 1981 and handing over the plant and machi-
E nery, etc. to the respondent is not illegal.

Undoubtedly this court, in Godhra Electricity case held that it is
mandatory that a person who is deprived of his property, before its
taking over, the value should be estimated and the payment made or
•
else it is illegal. But the ratio would be considered in the light of the
f setting therein. The licence granted under s. 6 of the Indian Electricity
Act. 1910 as amended in 1959 to produce electrical energy was
acquired by the Electricity Board. Section 6(6) provides that where a.
notice exercising the option of purchasing the undertaking has been
served upon the licence, the licensee shall deliver the undertaking to
the State Electricity Board on expiry of the relevant period referred to
G in s. 6( 1). Jn that case the constitutional validity of s. 6(6) was
questioned which did not provide for payment before taking over of
the undertaking as offending Article 19( l)(f) and (g) and Art. 14 of the
constitution. While considering the constitutional validity of s. 6(6)
this court held that valuation and payment is a condition precedent
since the Act did not envisage any payl'1ent of interest subsequent
H thereto. Accordingly this court directed redelivery of the undertaking
DOONGAJI v. STATE OF M.P. !RAMASWAMY, J.] 491

to the licensee subject to follow the procedure as per law laid down A
therein. In this case admittedly the conditions of licence are not
questioned, but expressly given up in the High Court. Even before us
the validity of the valuation has not been questioned. It cannot cut the
branch on which the appellant sits to assail the constitutional validity
of the conditions of the licence. Accordingly we have no hesitation to
B
hold that the appellant is not entitled to the restitution of the plant and
machinery of the distillery at U jjain and the attached warehouses.

The appellant though claimed that the value of the plant and
machinery was too low, contrary ·to the specification in this behalf in
tender condition and though we decline to go into the question, the
appellant appeared to have smarted under apprehension that it had to c
face the plea of acquiescence, if it were to cooperate earlier. So it is
open to the appellant to make a representation to the Govt. and any
officer not below a Secretary preferably of the concerned Department
would go into the matter and decide the value as per the material on
record. It is open to the appellant to place all its material. It is also
open to the respondent to place its material and the authority would D
consider after giving an opportunity of hearing through counsel, if
asked for, and decide the value accordingly. As regards deposit now
made in the Registry of this Court, the Registry is directed to make
payment of a sum of Rs.53,016.45 and interest accrued thereon to the
appellant and the balance amount and the interest accrued on the
residual to the respondent and the respondent's liability would be E
subject to the decision by the Secretary as indicated in the j·udgment.
The appeal is accordingly allowed to the above extent and since the
.... appellant substantially failed there would be no order as to costs.

Y.L. Appeal partly allowed.