State of Kerala v. K. Jayachandran and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:-** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN &** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **THURSDAY, THE 14TH DAY OF JUNE 2018 / 24TH JYAISHTA, 1940** ## **W.A.No.1241 of 2016** ## **------------------------------** **AGAINST THE JUDGMENT IN W.P(C) No.33736/2008-N DATED 10.02.2016 OF HIGH COURT OF KERALA.** **---------------** ## **APPELLANT(S)/ RESPONDENTS 1 TO 9 IN WP(C):-** **-------------------------------------------------------------------------** - **1 STATE OF KERALA, REPRESENTED BY SECRETARY, TAXES (A) DEPARTMENT, GOVT. SECRETARIAT,** - **THIRUVANANTHAPURAM-695001.** - **2 THE SECRETARY (REVENUE),** - **GOVT. SECRETARIAT, THIRUVANANTHAPURAM.** - **3 THE EXCISE COMMISSIONER,** - **COMMISSIONERATE OF EXCISE, THIRUVANANATHAPURAM-695001.** - **4 THE ASST. EXCISE COMMISSIONER, EAST FORT, THIRUVANANTHAPURAM.** - **5 THE TAHSILDAR, NEDUMANGADU, THRIUVANANATHAPURAM DISTRICT-695541.** - **6 THE CIRCLE INSPECTOR OF EXCISE, NEDUMGADU, THRIRUVANANTHAPURAM-695541.** - **7 THE VILLAGE OFFICER, NEDUMANGADU, THRIUVANANTHAPURAM-695541.** - **8 THE TAHSILDAR,** - **CHIRAYINKEEZHU, THIRUVANANTHAPURAM DISTRICT-695304.** - **9 THE VILLAGE OFFICER, SHARKKARA VILLAGE,** - **CHIRAYINKEEZHU TALUK, THIRUVANANTHAPURAM DISTRICT-695304.** ## **BY GOVERNMENT PLEADER SRI.V.MANU.** **- 2 -** **W.A.No.1241 OF 2016** ## **RESPONDENT(S)/ PETITIONER & RESPONDENTS 10 TO 12 IN WP(C):-** - **-----------------------------------------------------------------------------------------------------** **1. K.JAYACHANDRAN, S/O.KRISHNAN (LATE), ANJALI HOUSE, MUKKOLACKAL, NEDUMANGADU, THIRUVANANTHAPURAM DISTRICT-695541.** **2. SMT.USHA, D/O.LALITHA,** - **PATTARUMADAM HOUSE, KOONTHALLOOR VILLAGE,** - **CHIRAYINKEEZHU TALUK, THIRUVANTHAPURAM DISTRICT-695304.** **3. SITHU S.JAYAN, S/O.JAYAN,** - **RESIDING AT NANDANAM HOUSE, 55F M.G. NAGAR, VAZHAVILA, PERROORKKADA, THIRUVNANTHAPURAM DISTRICT-695001.** **4. MOHANDAS, S/O.K.ACHUTHA PANICKER, RESIDING AT VALIYAKATTEKKAL VEEDU, PZHAKUTTI P.O., NEDUMANGADU, THIRUVANANTHAPURAM DISTRICT-695561.** - **R1 BY ADVS. SRI.C.C.THOMAS (SENIOR ADVOCATE) SRI.M.G.KARTHIKEYAN SRI.NIREESH MATHEW** - **R2 BY ADVS. SRI.O.RAMACHANDRAN NAMBIAR SRI.GEEN T.MATHEW** - **R BY SRI.T.C.SURESH MENON** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 14-06-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:-** ## **W.A.No.1241 OF 2016** ## **APPENDIX** **APPELLANT(S)' ANNEXURES:--------------------------------------------NIL.** ## **RESPONDENT(S)' ANNEXURES:-** **------------------------------------------------** **ANNEXURE R1(a) A PHOTOCOPY OF THE I.A.NO.3014 OF 2010 IN W.P.(C) NO.33736 OF 2008 FILED BEFORE THIS HON'BLE COURT.** **ANNEXURE R1(b) PHOTOCOPY OF THE ORDER DATED 19.12.2008 IN R.P.NO.1232 OF 2008 IN W.P.(CRL.) NO.354/2008 PASSED BY THIS HON'BLE COURT.** **VKU/-** **[ TRUE COPY ]** ## K. Vinod Chandran & Ashok Menon, JJ. ------------------------------------------------------- W.A.No.1241 of 2016 ------------------------------------------------------Dated, this the 14[th] day of June, 2018 **JUDGMENT** ## Vinod Chandran, J: The Writ Appeal is filed by the State against the judgment of the learned Single Judge, which followed the common judgment in WP(C) No.13570/2010 and connected cases dated 10.12.2015. The order passed by the Deputy Commissioner of Excise dated 24.11.2011, during the pendency of the writ petition, produced along with an I.A, was also set aside by the impugned judgment. 2. The learned Counsel for the 1[st] respondent points out that the judgment which was relied on, was affirmed by a Division Bench in an appeal filed by the State. Special Leave Petition was filed and is pending consideration before the Hon'ble Supreme Court with an order of stay. In such circumstances, it was prayed that the Writ Appeal itself may be adjourned to another date awaiting the result of the proceedings before the Hon'ble Supreme Court. The submission was made on the premise that the judgment relied on by the learned Single Judge was on identical set of facts. Hence, we were of the opinion that the Writ Appeal could be - 2 - W.A.No.1241 of 2016 rejected following the judgment of the Division Bench as of now and to avoid a further litigation by the State; permit the State to proceed against the petitioner if the Hon'ble Supreme Court held in favour of the State in the pending SLP. However, the learned Senior Government Pleader pointed out that there is a distinction on facts with the pending matter and even the decision of the Hon'ble Supreme Court followed by this Court is on totally different facts. In the circumstances, we heard the matter in its entirety. 3. The respondents who were the licensees had taken on license toddy shops from 18 to 38 of Vamanapuram Excise Range for the year 2000-01. A security deposit of Rs.1,05,60,000/was also remitted in lieu of three monthly installments of kisth. The kisth payable for the entire period of one year of license was permitted to be remitted, even as per the terms of the license, in ten monthly installments. Licensee remitted five installments, but defaulted the sixth installment. The State adjusted the sixth installment from the security deposit and the licensee was asked to replenish the security deposit to the extent adjusted. On the failure of the licensee to replenish the security deposit, the license was canceled on 29.11.2000. In the context of the cancellation, the adjustment was not given effect to and forfeiture of entire security - 3 - W.A.No.1241 of 2016 deposit was made. There was then raised a claim for the balance five installments. On 22.12.2000, the Commissioner confirmed the order of cancellation. So far, the facts are identical to that in the reported judgment, as agreed to by both parties. 4. We will now look at the earlier litigation before the Hon'ble Supreme Court which was followed by this Court, the latter of which is now pending in SLP. The relevant case law is reported in _**(2009) 14 SCC 85 [V.K.Ashokan and Others v. Assistant Excise Commissioner].**_ As was the then prevalent practice auction was conducted for three years and agreement with the successful bidders were also for that period. But the license was granted only for an year; renewable in the next two. Therein cancellation of license was with respect to an offense of mixing of 'Diazepam” with toddy and criminal cases were registered. When the matter was heard by the Supreme Court, the criminal cases had ended in acquittal. The offense alleged was under Rule 6 (30) & (28) of the Kerala Abkari Shops (Disposal in Auction) Rules, 1974. Cancellation under Rule 6 (28) had to be and were confirmed by the Commissioner of Excise and in cases under Rule 6 (30) the consequence under Rule 6 (28) was found, by the State, to be automatic. W.A.No.1241 of 2016 - 4 - 5. The Apex Court noticed the distinction between Rule 6(28) & (30), the former of which sanctions cancellation of license in the event of default in payment of kisth, with a provision for forfeiture of security deposit. Rule 6(30) was in the contingency of infraction of a rule or the conditions of license; which earlier contained a provision for forfeiture, which was not retained in the sub-rule substituted in the year 1996. The Court noticed that the consequence of forfeiture of security deposit as permissible under Rule 6(28) was not available under Rule 6(30) in the relevant year. Heydon's Rule was applied and looking at the legislative history, the substitution of the sub-rule in 1996, specifically deleting the provision which permitted forfeiture of security deposit; it was held that the intention was clearly to avoid forfeiture under Rule 6(30). Rule 6 (30) & (28) were held to operate in two different fields; the former on a more wider spectrum without any automatic consequence under the latter being enabled. The declaration of the Court regarding the consequences of Rule 6(28) being not automatically attracted in cases where the cancellation is effected under Rule 6(30) does not apply in the instant case since here, the infraction is of Rule 6(28) which retains the provision for forfeiture. - 5 - W.A.No.1241 of 2016 6. Even with respect to the cases in which Rule 6(28) was invoked the Supreme Court noticed that the proceedings commenced with the raids conducted in the business premises and the closing down of business by reason of the sealing of shops effected by the Excise Department. The loss claimed and demanded was the kisth for the three year period while the license was only for one year. It was in these peculiar circumstances that it was held that the kisth for the months starting from July, in which month the raids were conducted and shops closed, would have fallen due only in October and there was sufficient security to ensure no default being occasioned. While considering the matter finally, the Court also noticed the fact that the case charged against the appellants therein for offenses under the Abkari Act had ended in acquittal of all the licensees. It is the submission of the learned Senior Government Pleader that it was in the peculiar facts of the said case that the Hon'ble Supreme Court held Rule 6(28) to have no application. The learned Judges in _**V.K.Ashokan**_ also recorded that directions issued was on a consideration of all the aspects of the matter, on the fact situation, _“...to do complete justice to the parties”(sic)._ - 6 - W.A.No.1241 of 2016 7. A later appeal before the Hon'ble Supreme Court, in cases of loss determined, computing the kisth payable for three years, was also disposed of by judgment dated 27.11.2009. It was following this order that W.P.(C) No.13570 of 2010 was disposed of. The order passed by the Hon'ble Supreme Court, as extracted in the judgment, is as follows: “Leave granted. These appeals have been filed against the impugned common order of the High Court of Kerala at Ernakulam dated 12[th] September, 2007. The facts have been set out in the impugned order and hence we are not repeating the same here. In our opinion, the facts of the case are covered by a judgment of this Court rendered in Civil Appeal No.1541 of 2009 dated March 05, 2009, titled _V.K.Ashokan vs. Assistant Commissioner & Others_ . In paragraph 36 of the said judgment, it has been stated that if the licence is granted for one year, then there cannot be a recovery of rent for three years. Following the said judgment, these appeals are allowed and the impugned order of the High Court is set aside and it is directed that recovery of rent will be only for one year and not for three years. No costs”. ## 8. We notice that _**V.K. Ashokan,**_ dealt with the issue of forfeiture and loss on cancellation under Rule 6 (28) & (30); _inter alia_ directing adjustment of the security deposit forfeited, finding the peculiar facts coming out there to be not capable of resort to - 7 - W.A.No.1241 of 2016 Rule 6(28); to do complete justice. The order of the Supreme Court as extracted herein above deals only with the question of determination of loss. The recovery permitted in the subsequent case was only the rent payable for one year following the dictum in _**V.K. Ashokan;**_ that the auction though was for three years the license was only granted for one year. This question does not arise here and the issue is only of forfeiture. We cannot but notice that the Hon'ble Supreme Court in the order dated 27.11.2009 did not find the issue to be under Rule 6(28) nor was the question dealt with as to the forfeiture or adjustment of security deposit. We notice that W.P.(C) No.13570 of 2010 was allowed following _**V.K. Ashokan**_ and _**Civil Appeal Nos.7844-46 of 2009**_ directing that the security deposit said to have been forfeited could be adjusted against the dues and only the balance could be recovered. As to the demand, it was held that the claim could only subsist for the year in which the license was canceled. The declaration in _**V.K. Ashokan**_ was only with respect to the State being not entitled to demand rent for three years as loss occasioned, since the license was only for a single year. In the context of the license granted for one year; the auction for three years cannot entitle a claim for loss for the three years. The interference with forfeiture under Rule - 8 - W.A.No.1241 of 2016 6(28) was only on account of the peculiar facts and to do complete justice. In the present case, the Department has not sought recovery of any amounts not relatable to the year in which the license was canceled. However another Division Bench of this Court had followed _**V.K.Ashokan**_ in another set of cases; which decision is pending before the Supreme Court. It does not well behove us to take a different view at this juncture despite our conviction otherwise. 9. But, the learned Senior Government Pleader again points out yet another distinction on facts. Primarily, the learned Government Pleader submits that there is no challenge to the forfeiture and in the present case there is an amnesty applied for by the licensee; which also was not satisfied. There are quite complex facts involved; which we have to necessarily notice. The licensees/respondents 1 and 2 were issued with a notice for recovery, as seen from Exhibit P3. The cancellation of the license is seen at Exhibit P4. The licensee approached this Court with a writ petition [W.P.(C) No.34040 of 2001], seeking adjustment of the security amounts forfeited, to the dues of the State. Exhibit P8 is the judgment, in which the Court recorded the submission of the learned Government Pleader that the security deposit had already - 9 - W.A.No.1241 of 2016 been adjusted and accordingly, dismissed the writ petition. A review was filed by the State noticing that the security deposit had in fact been forfeited. The review was allowed and the undertaking made by the learned Government Pleader was allowed to be withdrawn. On the submission of the respondent/writ petitioner that there was no forfeiture effected, the learned Single Judge who considered the review also observed that if the Government had the power to forfeit, the Government can proceed. In fact, the forfeiture order was passed earlier as revealed from Exhibit P4 dated 22.03.2001. 10. Thereafter another writ petition was filed by the 1[st] respondent herein in the year 2006 [W.P.(C) No.6558 of 2006], which was disposed of in 2008 by Exhibit P10 judgment. Exhibit P10 directed the Department to look into the grievances of the writ petitioner, if any. In the meanwhile, the State came out with an amnesty scheme and extended it from time to time, as is evident from Exhibits P11, P12 and P13 orders. The respondents applied under the scheme and was issued with a notice dated 30.09.2008. Exhibit P16 directed the 1[st] respondent to pay an amount of Rs.2,01,02,719/-, being the amounts due under the scheme as against the arrears due form the respondents as on 30.09.2008. The amounts were to be deposited within seven days or as per the - 10 - W.A.No.1241 of 2016 installments provided under the scheme. As per the scheme, the respondents were entitled to satisfy the amounts due under the amnesty scheme in four installments, i.e., on 28.10.2008, 28.11.2008, 28.12.2008 and 28.01.2009. The order at Exhibit P16 was affixed in the premises of the respondents. The scheme also provided that all steps taken for recovery has to be kept in abeyance insofar as the persons who have applied for the amnesty scheme. 11. Without noticing the application made, the District Collector issued orders detaining one of the respondents in civil prison under the Kerala Revenue Recovery Act, 1968. On the respondent's detention, a _habeas corpus_ petition was filed by his next friend, in which Exhibit P17 order was passed at the time of admission. The Court noticing that the detention was on account of the arrears, for settlement of which an application was filed under the amnesty scheme, directed release of the respondent. Since the 1[st] installment under the amnesty scheme was falling on 28.10.2008, the respondent was directed to make good that amount and appear before Court. The respondent deposited the first installment on 28.10.2008 and the _habeas corpus_ petition was disposed on 30.10.2008, leaving the 1[st] respondent herein to satisfy - 11 - W.A.No.1241 of 2016 the amounts as per the amnesty scheme. The second installment falling due on 28.11.2008 was also deposited. Later, the petitioner again approached the Division Bench which disposed of the _habeas corpus_ petition, with a review. The 1[st] respondent in the review claimed that in pursuance of the revenue recovery proceedings, properties of the respondents were put to auction sale and on no bids being received, were purchased by the State and is remaining as bought-in-land. The prayer in the review petition was to direct sale of the properties, which could settle the amounts under the amnesty scheme also. The Division Bench of this Court which considered the review [R.P.No.1232 of 2008 in W.P(Crl.)354 of 2008] on 19.12.2008 passed the following order: “Admit. Govt. Pleader takes notice. In view of the order passed by us in WP(C) No.33736/2008, directing the State to take steps to recover the dues by proceeding against K.Jayachandran (the detenue) and Smt.Usha (10[th] respondent in the writ petition) and sell the property in public auction for realising the dues, there will be a stay of the direction in the judgment dated 30.10.2008 regarding payment of 3[rd] and 4[th] installments. Post after a month”. Hence, there was a stay of 3[rd] and 4[th] installments as per the amnesty scheme. - 12 - W.A.No.1241 of 2016 12. The review petition in the _habeas corpus_ petition and an interlocutory application in the writ petition in which the impugned judgment in the instant appeal was passed, came up before the Division Bench, for final hearing. The Division Bench by Exhibit P21 order, noticed the facts which occurred after the interim order above extracted. The State, while the review was pending, was directed to put the properties for sale in auction; which was so done. Two persons had bid successfully, who also remitted the 15% initial deposit on auction confirmation. On the further amounts not being deposited in time, revenue recovery authorities canceled the sale. The petitioner in the _habeas corpus_ petition brought this fact to the notice of this Court. We see from Exhibit P21 that, the persons who had successfully bid in auction were also before this Court agreeing to pay the amounts for which they had successfully bid. The Division Bench directed the auction purchasers to pay the amounts and also directed the State to accept the same. Balance dues under the amnesty scheme, being about Rupees Thirty Lakhs, was directed to be paid by the 1[st] respondent. The amounts were paid as directed in the Division Bench order. 13. When the matter came up for final hearing on 16.06.2010, the Division Bench, noticing that there is no objection - 13 - W.A.No.1241 of 2016 from the Government Pleader, confirmed the sale in favour of the successful bidders. The 1[st] respondent herein had a contention that there is some excess amount paid. The 1[st] respondent was left to agitate the same before the appropriate authority. The question of forfeiture of security was left to be considered in W.P.(C) No.33736 of 2008; from which this appeal arise. Subsequent to that, the Deputy Commissioner of Excise passed Exhibit P24 order dated 24.11.2011. Exhibit P24 canceled the order passed under the amnesty scheme and the remittances made by the defaulter/respondent was directed to be adjusted as per Rule 6(25). The order was passed subject to the final decision in W.P.(C) No.33736 of 2008. The learned Single Judge, vide: the impugned judgment, set aside the order at Exhibit P24 dated 24.11.2011, aggrieved by which the State is before us. 14. As of now, it is the case of the respondents that the entire amounts as directed under the amnesty scheme have been paid. There was delay occasioned; which was due to the recalcitrant attitude of the officers of the State. The settlement effected was on intervention of this Court and in accordance with the directions issued by this Court. The dues demanded by the State having now been satisfied the respondents seeks refund of - 14 - W.A.No.1241 of 2016 the security deposit which stood forfeited. The State, however, as is seen from Exhibit P24, has taken a stand that the amnesty scheme having not been complied with in time, the 1[st] respondent cannot have a concession insofar as paying the amounts at his sweet will. The learned Government Pleader, from Exhibit P24, points out that when the two remaining installments had to be satisfied in December, 2008 and January, 2009, it was satisfied only on 19.11.2011 when it was brought to the account of the Excise Department. 15. We see from Ext.P24 order itself that the payment under the amnesty scheme was made to the State in the year 2009 itself. But, reading of the writ petition does not reveal any challenge to the forfeiture of the security deposit. Though it was submitted before the Bench hearing the _habeas corpus_ petition that the forfeiture is challenged in W.P.(C) No.33736 of 2008, it has not been so challenged. The pleading in the writ petition is to the effect that the decision in _**V.K.Ashokan,**_ as followed by the Hon'ble Supreme Court in Civil Appeal Nos.7844-46 of 2009 by order dated 27.11.2009, and later by a learned Single Judge and Division Bench of this Court, has to be applied in the case of the respondents also. - 15 - W.A.No.1241 of 2016 16. _**V.K.Ashokan**_ we are convinced was on the peculiar facts arising therein _**.**_ Civil Appeal Nos.7844-46 of 2009 was only regarding the claim of loss for more than the period of license. Even then, as we noticed, considering the binding precedent of this Court, we would not at this stage, especially when an appeal is pending before the Hon'ble Supreme Court, express otherwise in the present case. We also do not feel the need to express otherwise on the dictum; for reason of the peculiar facts as seen in the present case. This is not a case in which there are pending dues from the respondents/licensee. The licensee had approached the Government under a scheme of amnesty, in which considerable deduction on interest was granted and the entire dues satisfied. The satisfaction of such dues was also not conditional. As we noticed initially, the forfeiture was communicated to the 1[st] respondent as early as in 2001, by Exhibit P4. A number of writ petitions were filed after that; none of which challenge the forfeiture as such. Though there was initially a claim for adjustment, as we have noticed, the said writ petition was disposed of recording the undertaking of the Government, which was later reviewed and the Government left to forfeit the amounts if the law so permitted, before which the actual forfeiture had come into effect. In the - 16 - W.A.No.1241 of 2016 present writ petition also we do not see any challenge against the forfeiture. The claim in the writ petition was for adjustment of the security deposit against the dues with respect to the kisth payable by the respondents under the terms of license. While the present writ petition was pending, the entire dues have been paid by the respondent under an amnesty scheme. The learned Counsel appearing for the respondents submits that there was an interim order in the writ petition making all payments subject to the result of the writ petition. Considering the fact that the entire dues under the amnesty scheme has been satisfied if we take note of the interim order and direct the security amount to be adjusted towards the dues, we will have to withdraw the amnesty scheme also, which would only mulct the respondents with further liability insofar as interest which was granted amnesty under the scheme. 17. We also notice that Exhibit P24 had set aside the benefit under the amnesty scheme. A reading of Exhibit P24 indicates that the sale proceeds from the two properties directed to be sold as per the directions of this Court and also the deposit of Rupees Thirty Lakhs was occasioned in July, 2009. The further delay was in the said amounts being transferred to the Excise Department, which culminated only by a remittance to the Head of - 17 - W.A.No.1241 of 2016 Account of the Excise Department on 19.11.2011. The two years when the Government dragged its feet to transfer the amount to the appropriate department cannot be a fault of the licensee. Noticing the fact that the last installment under the amnesty scheme was payable in January 2009, we cannot but observe that the same was paid to the State in July 2009. The delay again was due to the sale directed by this Court having been canceled without obtaining appropriate orders from the Court. On subsequent orders being issued by this Court, the successful bidders as also the licensee paid up the amounts in time. In such circumstance, we do not think that the State's action in having withdrawn the benefit of the amnesty scheme was proper. We see, Exhibit P24 was not challenged, but produced in the writ petition itself. The learned Single Judge had set aside Exhibit P24, which is only proper, especially since the order issued itself stated it to be subject to the final judgment in the writ petition. In the facts of the present case, we do not think that there could be any adjustment of the security deposit made. What has been forfeited to the State would remain forfeited. The dues to the State have already been settled under the amnesty scheme. The benefit under the amnesty scheme would also survive and in such circumstance, what the State could W.A.No.1241 of 2016 - 18 - ascertain is only whether the entire dues as shown in Exhibit P16 has been paid by the respondents. If such payment has not been made, the State could raise such a demand within two months and the respondents would pay the balance amounts within a month thereafter along with interest from the date of demand. The judgment of the learned Single Judge is set aside to the extent it follows the decision in W.P.(C)No.13570 of 2010. Exhibit P24 produced along with the I.A. as set aside by the learned Single Judge is affirmed. The Writ Appeal is partly allowed. Parties are left to suffer their respective costs. Sd/K.Vinod Chandran Judge Sd/Ashok Menon Judge jg/vku/- [ true copy ]