Holding

Substantial compliance with the procedural requirements of Section 31(1‑A) suffices, and the demand under Section 31(4)(b) is valid; therefore the writ petition must be dismissed.

Summary

The appellant, a licensee of several liquor shops under the Madhya Pradesh Excise Act, failed to pay licence fees for July and August 1994. The authorities issued a show‑cause notice, gave him a date to appear, and later published a notification of cancellation and re‑auction, which was subsequently held. The appellant filed a writ petition alleging denial of a reasonable hearing, absence of a specific cancellation order, inadequate publicity of the re‑auction and an unfair low price, and the single judge allowed the petition. On appeal, the High Court Division Bench held that the statutory requirements of Section 31(1‑A) were substantially complied with and that the demand under Section 31(4)(b) was valid, dismissing the writ. The Supreme Court affirmed the Division Bench, emphasizing that directory provisions require only substantial compliance and that a reasonable, not leisurely, opportunity of hearing suffices, thereby dismissing the appeal.

Issues considered

Whether the failure to provide a reasonable opportunity of hearing before licence cancellation under Section 31(1‑A) warrants judicial interference.
Whether the absence of a specific order of cancellation and alleged inadequate publicity invalidate the re‑auction of the licence.
Whether the demand for loss of revenue under Section 31(4)(b) of the Madhya Pradesh Excise Act is legally enforceable.
How the distinction between directory and mandatory statutory provisions affects the court's power to intervene.

Legislation cited

Constitution of Indias. Article 19(6)(g), s. Article 226
Madhya Pradesh Excise Act, 1915s. 31(1-A), s. 31(4)(b)

Subjects

Excise lawLicence cancellationDue processStatutory interpretationDirectory provisionMandatory provisionRe‑auctionRevenue recoveryWrit jurisdictionArticle 226

Judgment

RAJENDRA SINGH A
v.
THE STATE OF MADHYA PRADESH AND ORS.

AUGUST 8, 1996

[B.P. JEEVAN REDDY AND SUHAS C. SEN, JJ.]
B

M.P. Excise Act, 1915: Section 31(1-A) and 31(4)(b).

Liquor shops-Auction-Grant of licenc<>-f'ai/ure to pay licence
fe&-Show-cause notice to licensee-Licensee not availing opportunity of C
personal heaiing-Notification by Depaitmellt that on licensee's failure to pay
aJTeUIJ shops would be put to reauction-Notification sent to licensee a11d
published in daily 11ewspape1-An-ears 11ot paid by license&-Reauction of
shops-Loss of reve11ue resulting from reauction-Recove1y from licensee held
valid.
D
Constitution of India, 1950 : Article 22~Wiit jurisdiction-Power to
i11te1fere writ co11tractua/ obligations-Scope of

Article 19(J)(g)-Right to carry on trade and business-17iere is no
fundamental right to trade in liquor. E
Statutory provisions-Violation of-Power of Court to intelfer,,-Test
lvhetlter provision is directo1y or 111andatory.

Excise Laws-Object of
F
The appellant, a licensee for a number of liquor shops, failed to pay
the monthly rental for two consecutive months. A show cause notice was
issued to him but he failed to avail of the opportunity of personal hearing
afforded to him. Thereafter a notification was issued to a number of Excise
and other Departments stating that on appellant's failure to pay the
arrears by the specified date the shops would be sold by reauction~ The G
said notification was not only sent to the appellant but was also published
in the daily newspaper. On his failure to pay the licence fee the shops were
sold by reauction and a demand notice was issued to him under Section
31(4)(b) of the Madhyd Pradesh Excise Act 1915 for the loss of revenue
resulting from r.eauction. H
393
394 SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A The appellant challenged the demand by filing a writ petition in the
High Court contending that (i) he was not given due opportunity before
cancelling the licence as re11uired by section 31(1-A); (ii) there was no
l!rder of cancellation of licence; and (iii) there was no proper publicity for
the reauction conducted as a result of which only one bidder was present
at the reauction and therefore the shops were sold at a low price.
B
A single Judge of the High Court allowed the writ petition. State of
Madhya Pradesh preferred appeal before a Division Bench of the High
Court which dismissed the appellant's petition and rejected all his conten-
tions. Hence this appeal.
c Dismissing the appeal, this Court

HELD: I. The Division Bench rightly held that the Single Judge was
in error in allo\\ing the \vrit petition. In this case the Court is dealing nith
parties to a contract, \vhich is a business transaction, no doubt governed
D by statutory provisions. While examining complaints of violation of
statutory rules and conditions, it must be remembered that violation of
each and every provision does not furnish a ground for the Court to
interfere. The provision may be a directory one or a mandatory one. In the
case of directory provisions, sulistantial compliance would lie enough. Un-
less it is estalilished that violation of a directory provision has resulted in
E
loss and/or prejudice to the party, no interference is warranted. Even in the
case of violation of a mandatory provision interference does not follow as
a matter of course. A mandatory provision conceived in the interest of a
party can be waived by that party, \\ hereas a mandatory provision con-
1

ceived in the interest of pulilic cannot lie waived by him. [398-A-E]
F
2. It is true that before cancelling the licence, an opportunity of
hearing should lie given as pravided liy section 31(1-A). While the oppor-
tunity to be given· should be reasonable, the reasonableness or othenvise
of the opportunity given must be judged keeping in view the time-frame
available. In this case, the default was for h.\'o consecutive months. The
G authorities evidently did not act in haste. Even after one month's default,
they waited hoping that the licensee would pay. But when he defaulted for
the next month also, they issued the notice proposing cancellation. The
opportunity contempated by sub-section (1-A) cannot be operated in a
leisurely manner. A realistic view has to be taken while determining
H whether the opportunity given was reasonalile or not. The oliject of all
RATENDRASINGH v. STATE[B.l'.JEEVAN REDDY.J.] 395

excise law is two-fold yiz. to raise revenue and to regulate the trade in A
liquors which is a noxious substance. There is no fundamental right to
trade in lil(uor. The only right of the licensee is to seek to enforce the terms
of contract which is statutory in nature and the statutory provisions
governing the contract. The considerations aforementioned should be kept
in mind while examining complaints of violation of statutory rules, condi-
B
tions and terms of contract as well as complaints of lack of reasonable
opportunity. [399-B-F]

Har Shankar & Ors. Etc. Etc. v. Deputy Excise and Taxation Commis-
sioner & 01s. Etc., AIR (1975) SC 1121; Assi.ltant Excise Commissioner v.
Issac Pctei; [1994] 4 SCC 104; Bank of Patia/a v. S.K. Shanna, [1996] 3 c
SCC 364 and Krishanlal v. State of Jammu & Kashmi1; [1994] 4 SCC 422,
referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 10226-
10227 of 1996.
D
From the Judgment and Order dated 4.8.95 of the Madhya Pradesh
High Court in L.P.A. Nos. 15 and 39 of 1995.

Harish N. Salve and Ms. Rani Chhabra for the Appellants.
E
U.N. Bhachawat B.S. Banthia and S.K. Agnihotri for the Respon-
dents.

A.K. Sanghi for the Respondent No. 5.

The Judgment of the Court was delivered by F

B.P. JEEVAN REDDY, J. Leave granted.

These appeals are preferred against the judgment of a Division
Bench of the Madhya Pradesh High Court allowing the Letters Patent
Appeal preferred by the State of Madhya Pradesh against the judgment of G
a learned Single Judge who had allowed the writ petition filed by the
appellant. While we agree fully with the reasoning and conclusion of the
Division Bench, we think it necessary at the same time to emphasise a few
aspects relevant in the case of such contracts. First, the relevant facts
briefly. H
396 SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A For the excise year 1994-95, the appellant was the highest bidder for
certain number of liquor shops. His bid in a sum of Rs. 11,67,00,000 was
accepted, payable in monthly instalments of Rs. 97,25,000 each. After
making the necessary deposits and after complying with other conditions,
licences were granted to him and he commenced the business with effect
from 1.4.1995. He failed to pay the monthly rental (licence fee) for the
B months of July and August, 1994. Thereupon a notice dated 9.8.94 (exhibit
R-3) was issued by the authorities intimating him that he was in arrears of
the licence fee for the months of July and August and that he does not pay
the same, the shops would be reauctioned. The appellant was asked to be
present personally on 23.8.1994 for showing cause. Though the appellant
C received the said notice, he did not appear before the specified authority.
He .thus failed to avail of the opportunity of personal hearing afforded to
him. (Though the appellant disputed this fact, the Division Bench has
accepted ,_the respondent's contention and has found as a fact that the
appella'nt did fail lo appear on that date of hearing. We accept the said
finding.) On 2.9.94, a notification was issued - communicated to a large
D number of excise officers and other departments and a copy of which was
also sent to the appellant - slating that if the appellant did not clear the
arrears on or before 12.9.94, the shops would be sold by reauction to be
held at 2.00 p.m. on 12.9.94. The said notification is marked exhibit R-12.
It was also published in the daily newspaper, Nav Bharat Times. The
Notification mentioned the precise amount of arrears due from the appel-
E lant the on and slated that reauction being held, the existing licence in
favour of the appellant shall stand cancelled. Since the appellant failed to
pay, reauction was held on 12.9.94, whereafter, a demand was made upon
the appellant for the loss of revenue resulting from reauction, as provided
by sub-section (4)(b) of Section 31 of the Madhya Pradesh Excise Act. We
may set out sub-section (4) of Section 31 at this stage :
F
"(4) Where a licence is cancelled or suspended under Clause (a),
Clause (b), clause (c) or clause (e) of sub-section (i), -

(a) the fee payable for the balance of the period for which
G such licence would have been current but for such cancella-
tion or suspension, may be recovered from the ex-licensee as
excise-revenue;

(b) the Collector may lake the grant under management or
H resell it at the risk and loss of the ex-licensee, but any profit
RAJENDRASINGHv. STATE [B.l'.JEEVAN REDDY,J.] 397

realised by such management or resale which is not in excess A
of the amount recovered under clause (a) for such period
shall be paid to the ex-licensee."

The appellant questioned the said demand by way of a writ petition
in the Madhya Pradesh High Court. He submitted that he was not given
due opportunity before cancelling the licence as required by sub-section B
(1-A) of Section 31, that there was no order of cancellation of licence as
such and that there was no proper publicity for the reauction conducted.
He submitted that on account of lack of due publicity, only one bidder was
present at the reauction and that the shops were sold al a low price. The
learned Single Judge was impressed by the said contentions and allowed
the writ petition. On appeal, however, the Division Bench rejected all of
c
them. Before we set out the reasoning of the Division Bench, it would be
appropriate to set out sub-section (1-A) of Section 31. It reads :

"(1-A) Before making an order cancelling or suspending a licence,
permit or pass under sub-section (1 ), the authority aforesaid shall D
record in writing the reasons for the proposed action, furnish to
the holder thereof a brief statement of the same and afford him a
reasonable opportunity of being heard."

The Division Bench held that as held by that Court in an earlier
decision, '1the court cannot take a hyper-technical view of the provisions E
and must understand the same in a reasonable manner. Substantial com-
pliance with the requirements of the provisions would meet the ends of the
justice. Were a specific order of cancellation of licence is not passed but
if the requirements are substantially complied with, the court under Article
226 of the Constitution would not ordinarily interfere." The Division Bench
referred to the notice exhibit R-3 and found as a fact that it was received F
by the appellant. The Bench also found that the notification (R-12) was
duly communicated to all the Excise Officers, other departments, and to
the appellant besides being published in the newspaper, Na-, Bharat Times.
After referring to the contents of exhibit R-12, the Bench held that the said
notification was both an order of cancellation of the appellant's licence as G
well as notice of reauction. It also found that there was adequate publicity
of the said notification and the fact that only one bidder appeared at the
reauction was no ground for holding that there was no proper publicity. It
gave reasons why bidders generally do not attend reauction. The Division
Bench also found as a fact that the appellant failed to appear on the date
of hearing specified in notice (R-3). In the light of the said findings, the H
398 SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A Division Bench held, and in our opinion rightly, that the learned Single
Judge was in error in allowing the writ petition. We fully approve the
reasoning of the Division Bench.

It has been held by a Constitution Bench of this Court in Har Shankar
& Others Etc. Etc. v. Deputy E.rcise and Taxation Conunissioner and Others
B
Etc., A.LR. (1975) S.C. 1121 that "(T)he writ jurisdiction of High Court
under Article 226 of the Constitution is not intended to facilitate avoidance
of obligations voluntarily incurred." At the time, it was observed that the
licencees are not precluded from seeking to enforce the statutory
provisions governing the contract. It must, ho\vever, be remembered that
c \Ve are dealing \Vith purties to a contract, \Vhich is a business transaction,
no doubt governed by statutory provisions.* While exa1nining con1plaints
of violation of statutory rules and conditions, it must be remembered that
violation of each and every provision does not furnish a ground for the
Court to interfere. The provision may be a directory one or a mandatory
one. In the case of directory provisions, substantial compliance would be
D enough. Unless it is established that violation of a directory provision has
resulted in loss an<l/or p1cjudicc to the party, no interference is \Varranted.
Even in the case of violation of a 1nandatory provision, interference does
not follow as a matter of course. A mandatory provision conceived in the
interest of a party can be \Vaived by the party, \Vhereas a mandatory
provision conceived in the interest of public cannot be waived by him. In
E other \Vords, wherever a complaint of violation of a mandatory provision is
made, the Court should enquire - in whose interest is the provision con-
ceived. If it' is not conceived in the interest of public, question of waiver
and/or acquiscence may arise - subject, of course, to the pleadings of the
parties. This aspect has been dealt with elaborately by this Court in State
Bank of Patiala v. S.K. Shanna, [1996] 3 S.C.C. 364 and in !Vishanlal v.
F State of Jammu and Kashmir, [1994] 4 S.C.C. 422 on the basis of a large
number of decisions on the subject. Though the said decisions were
rendered with reference to the statutory Rules and statutory provistons
(besides t11e principles of naturnl justice) governing the disciplinary en-
quiries involving government servants and employees of statutory corpora-
G lions, the principles adumbrated therein are of general application. It is
necessary to keep these considerations in mind while deciding whether any
interference is called for by the Court - whether under Article 226 or in a
suit. The function of the Court is not a mechanical one. It is always a
considered course of action.
Reference may also be made to the decision of this Court in Assisrant Ercise Co1n1n1:..;-
H sioner v. lssac Pete1~ [1994) 4 S.C.C. 104.
RAJENDRASINGHv. STA1E[B.P.JEEVAN REDDY,J.] 399

There is yet another fact. The contract provides for payment of A
monthly rental on or before a particular date. If the amount of monthly
rental is not paid before the due date, the licence is liable to be cancelled
as provided by sub-section (1) of Section 31. It is true that before cancelling
the licence, an opportunity of hearing should be given as provided by
sub-section (1-A). While the opportunity to be given should be reasonable,
the reasonabicness or otherwise of the opportunity given must be judged B
keeping in view the time-frame available. It is a case of contract stipulating
monthly payments. If there is a default in paying a month's rental, notice
proposing cancellation may follow. The time given to the licencee to show
cause would naturally be a short one for the reason that soon thereafter
the next month's rental (licence fee) falls due and if that is not paid,
another show cause notice may have lo follow. (It must be remembered
c
that in this case, the default was for two consecutive months, July and
August. The authorities evidently did not act in haste. Even after one
month's default, they waited hoping that he would pay. But when he
defaulted for the next month also, they issued the noticed proposing
cancellation.) What we wish to emphasise is that the opportunity eon- D
templated by sub-section (1-A) cannot be operated in a leisurely manner.
A realistic view has lo be taken while determining whether the opportunity
given was reasonable or not. The object of all excise laws is two-fold viz.,
to raise revenue an<l to regulate the trade in liquors which is a noxious
substance. There is no fundamental right to trade in liquor (Khoday
Distilloies Ltd. v. Stale of Kama/aka, [1995] l S.C.C. 574. The only right of E
the licencee is to seek to enforce the terms of contract (which is statutory
in nature) and the statutory provisions governing the contract. The con-
siderations aforementioned should be kept in mind while examining com-
plaints of violation of statutory Rules, conditions and terms of contract as
well as complaints of lack of reasonable opportunity.
F
Lastly, it is urged that before forfeiting the advance amount or the
security deposit, a fresh opportunity of hearing ought to have been provided.
From a perusal of the judgment under appeal, however, we do not find that
any such contention was urged before it. For this reason, we decline to
entertain this pica, which may involve investigation of factmtl aspects. G
The appeals accordingly fail and are dismissed with costs. Advocate's
fee Rs. 5, 000.

T.N.A. Appeals dismissed.