BHUPENDRA SINGH BHATIAversusSTATE OF M.P. AND ORS

                             BHUPENDRA SINGH BHATIA                                       A
                                        v.
..                            STATE OF M.P. AND ORS

                                   DECEMBER 6, 2006

                     [S.B. SINHA AND MARKANDEY KA TJU, JJ.]                               B


           Contract Act, 1872/Sale of Goods Act, 1930 :

            Sale/purchase offoreign liquor-Fixation and payment of price-Held:
      Seller and purchaser both should know sale/purchase price at the time or            C
      before the sale-Jn a sale of a commodity if seller agrees to f rxlinform the
     purchase price after the sale, it would be open to purchaser to reduce the
     price but to a negligible amount and vice-versa-State Government/Purchase
     Committee fixing lower rate of commodity than the rate as fixed earlier under
     an ad hoc purchase agreement-Payment made-Demand ofdifferential amount               D
     from Seller-Such an action by the State Government is arbitra1y and
      unreasonable-Hence, the rates fixed by the State Purchase Committee earlier
      would be applicable for entire financial year 1996-1997-Directions issued-
     Constitution of India, 1950-Article 14.

            In terms of a new Excise Policy introduced by the State of Madhya             E
      Pradesh, it was decided that sale of foreign liquor in tribal sub-plan area would
      be exclusively done by the State Government through retail outlets. In
     connection thereof, a purchase committee was constituted for purchasing
     foreign liquor. The Purch~se Committee was to dec.ide about the purchase
      price of the foreign liquor on the basis of the lowest quotations, and as it was    F
     likely to take time, a stop-gap arrangement was made and the Purchase
     Committees were constituted at the District Level headed by the Collector to
     purchase the foreign liquor from the whole-sellers as an ad hoc arrangement
     till the rate was finally decided by the State Level Committee. This
     arrangement was allowed to continue till the matter was decided by State Level
     Committee. The Quotations of the appellant-supplier were accepted by the             G
     Purchase Committee for supply of foreign liquor to Government liquor shops
     and the payments were made to the appellant for supply of foreign liquor at
     the approved rates. However, the rates were ultimately decided in December,
     1996 by the State Level Committee and the excess amount paid to the appellant
                                           277                                            H
    278                    SUPREME COURT REPORTS (2006] SUPP. IO S.C.R.

A   for supply of foreign liquor was sought to be recovered from him. Aggrieved,
    the seller filed the petition before the High Court, which was dismissed by
    the High Court. Hence the present appeal.

          Appellant-seller contended that the rate fixed by the Purchase
    Committee in April-May, 1996 was applicable for the entire financial year of
B   1996-97 and the same cannot be changed before the expiry of the financial
    year and it cannot be made effective retrospectively from 1.4.1996; and that
    no reasons have been assigned for the said change and the common rate fixed
    now for the entire region is not justified, as the transportation charges would
    be different in different areas.
c         Allowing the appeal, the Court

           HELD: When a sale of any commodity is made, the seller and the
    purchaser both have to know the sale/purchase price at the time of or before
    the sale. A sale/purchase price to be fixed subsequent to the sale is unknown
D   in the world. If a sale of a commodity is made today and if the purchaser
    informs the seller that he will inform the purchase price subsequently, then
    it can always be open to the purchaser to .reduce the purchase price
    subsequently to a negligible amount. Similarly, if the sale price can be fixed
    subsequent to the sale at the option of the seller it can be increased by the
    seller at his option, and the seller can later on while demanding the sale price
E   increase it to an exorbitant amount. Such a view is not clearly contemplated
    by any sensible person or by any stretch of imagination. In fact, such an action
    by the State Government has to be treated as arbitrary and unreasonable, and
    it is well settled in Maneka Gandhi v. Union of India and another that any
    State action which is arbitrary and unreasonable is violative of Article 14 of
F   the Constitution. Hence, the rates fixed by the Purchase Committee in April/
    May, 1996 are applicable for the entire financial year 1996-1997.
                                                            [281-F-G-H; 282-A-BJ

          Maneka Gandhi v. Union of India and another AIR (1978) SC 597,
    relied on.
G
          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 445 of2000.

        From the Judgment and Order dated 20.4.1999 of the High Court of
    Madhya Pradesh at Jabalpur in LPA 35/1999.

          Prakash Shrivastava for the Appellant.
H
          BHUPENDRASINGHBHATIAv.STATEOFM.P.[MARKANDEYKATJU,J.]                 279

       Sidharth Dave and Vibha Datta Makhija for the Respondents.                     A
       The Judgment of the Court was delivered by

     MARKANDEY KATJU, J. This appeal has been filed against the
impugned judgment of the Madhya Pradesh High Court dated 20.4.1999 in
LPA No. 35of1999.                                                                     B
      Heard learned counsel for the parties and perused the record.

       The facts of the case are that appellant challenged the order of the
Additional Commissioner dated 27 .12.1996, whereby the rates to be paid by
the Government to the whole-sellers of foreign liquor to the State Government         C
for sale of liquor through F.L.10 licence through its retail outlets in the tribal
sub-plan area, were fixed on the basis of the decision taken in the meeting
held on 23.12.1996 under the Chairmanship of the Additional Excise
Commissioner, Gwalior. The appellant further challenged the order dated
 12.2.1997 of the Additional Commissioner, Excise, as contained in Annexurc           D
P/8 filed with the petition, directing the District Excise Officer that the rates
decided by the Committee are being made effective from 1.4.1996 and the
difference of the amount between the rates at which the whole-sellers were
paid from 1.4.1996 till the decision of the Committee and the rates now decided
by the Committee should be recovered/adjusted from the whole-sellers.
                                                                                      E
      The main contention of the appellant was that the rate fixed by the
Purchase Committee in April-May, 1996 are applicable for the entire financial
year of 1996-97 and the same cannot be changed before the expiry of the
financial year and it cannot be made effective from l.4.1996. It is also urged
that no reasons liave been assigned for the· said change and the common rate
fixed now for the entire region is not justified, as the transportation charges       F
will be different in different areas.

       A new Excise Policy was introduced in the State of Madhya Pradesh
w.e.f. 1.4.1996, by which it was inter-alia, provided that in tribal sub-plan area,
sale of foreign liquor through retail outlets will be done exclusively by the
State Government with the purpose to save the tribals from being exploited            G
by the private contractors, and the earlier policy of auctioning the foreign
liquor shops to private individuals was abandoned in tribal areas. By virtue
of the new Policy, the State was to sell the foreign liquor from the Government
retail outlets in the tribal dominated areas. Therefore, a State Level Purchase
Committee was constituted for purchase of foreign liquor to be sold to the            H
    280                     SUPREME COURT REPORTS (2006) SUPP. 10 S.C.R.

A State Government through its retail outlets in the tribal areas. The Purchase
    Committee was to decide about the purchase price of the foreign liquor on
    the basis of the lowest quotations. However, as the constitution of the
    Purchase Committee and inviting tenders at State Level was likely to take time,
    a stop-gap arrangement was made an~ the Purchase Committees were
    constituted at the District Level headed by the Collector to purchase the
B   foreign liquor from the whole-sellers as an ad hoc arrangements till the rates
    were finally decided by the State Level Committee. This arrangement was
    allowed to continue from time to time till the matter was decided by State
    Level Committee.

C         The case of the appellant was that the appellant's quotations were
    accepted for supply of foreign liquor to Government liquor shops in pursuance
    of the quotations and the rates quoted by the appellant which were duly
    approved by the Purchase Committee, and the payments were made to the
    appellant for supply of foreign liquor at the approved rates. However, the
    rates were ultimately decided in December, 1996 by the State Level Committee
D   and the excess amount paid to the appellant for supply of foreign liquor was
    sought to be recovered from him. Hence, the appellant filed the petition
    before the High Court.

          The High Court in paragraph 7 of its judgment observed that at the time
    of the purchase of liquor from the appellant in pursuance of the order of the
E   Collector it was clearly mentioned that it is a temporary arrangement till a
    regular arrangement is made. It was stated in the Jetter dated 22.3.1996
    (Annexure P/2 to the writ petition) that since the State Level Committee is yet
    to decide the rates, hence a temporary arrangement of purchase of foreign
    liquor may be made as a stop-gap arrangement till the State Level Committee
p   decides the rates. This arrangement was allowed to continue upto 15.5.1995
    and even thereafter till the State Level Committee finally decided the rates.

           The stand of the State Government in its counter affidavit was that for
    fixing the rate for purchase of foreign liquor the State Level Committee took
    a long time as it had to correspond with various distributors from all over the
G   country and hence an ad hoc arrangement had to be made in the meantime.
    The appellant was clearly informed by the Collector vide letter dated I 0.4.1996
    that the appellant will be bound by the directions issued by the State Excise
    Commissioner in respect of rates of foreign liquor. Another letter was sent
    to him reiterating the same position vi de letter dated 20.9 .1996.

H
          BHUPENDRASINGHBHATIAv. STATEOFM.P. [MARKANDEYKATJU,J.]             281
       The appellant also supplied liquor at the rates fixed by the District Level   A
Committee as an ad hoc arrangement from April, 1996 to December, 1996 and
this rate which was fixed by the District Level Committee was higher than the
rate fixed by the State Level Committee in December, 1996. It is contended
by learned counsel for the State Government that the appellant was clearly
informed that this ad hoc rate was subject to the final decision of the State        B
Level Committee. When the State Level Committee fixed the rate it became
effective from 1.4.1996, i.e. retrospectively from that date. Hence, the appellant
and others who supplied liquor at the higher rate as per ad hoc arrangement
of the District Level Committee, had to refund the difference of rates between
that fixed by the State Level Committee and the District Level Committee.

      The High Court while dismissing the writ petition observed :
                                                                                     c
             "The appellant knew it well that the rates given by the appellant
        is a temporary arrangement till the State Level Committee decides the
        rates for supply of foreign liquor to the Government retail outlets.
        Since the State Level Committee has decided the various rates of             D
        foreign liquor and which was communicated by communication
        (Annexure P/5), the difference of rates supplied by •he petitioner were
        higher than the rates which has been accepted by the State Level
        Committee; therefore, the difference of rates charged by the petiti<:mer
        is sought to be adjusted. This action of the State Government, in our
        opinion, does not appear to be unjust or breach of principles of             E
        natural justice"

        With respect, we cannot agree with the reasoning of the High Court.

       In our opinion, when a sale of any commodity is made, the seller and
the purchasei both have to know the sale/purchase price at the time of or            F
before the sale. A sale/purchase price to be fixed subsequent to the sale is
unknown in the world. If a sale of a commodity is made today and if the
purchaser informs the seller that he will infonn the purchase price subsequently,
then it can always be open to the purchaser to reduce the purchase price
subsequently to a negligible amount. Similarly, ifthe sale price can be fixed        G
subsequent to the sale at the option of the seller it can be increased by the
seller at his option, and the seller can later on while demanding the sale price
increase it to an exorbitant am0unt. Such a view is not clearly contemplated
by any sensible person or by any stretch of imagination. In fact, such an
action by the State Government has to be treated as arbitrary and unreasonable,
                                                                                     H
    282                    SUPREME COURT REPORTS [2006] SUPP. IO S.C.R.

A and it is well settled in Mane/ca Gandhi v. Union of India and Anr., AIR
    (1978) SC 597, that any State action which is arbitrary and unreasonable is
    violative of Article 14 of the Constitution.

           For the reasons given above, this appeal is allowed. The impugned
    judgments of the Learned Single Judge as well as the Division Bench of the
B   High Court, and the orders of the Additional Excise Commissioner dated
    27.12.1996 and Excise Commissioner dated 12.2.1997 are set aside. It is held
    that the rates fixed by the Purchase Committee in April/May, 1996 are applicable
    for the entire financial year 1996-1997. The prayers in the writ petitions are
    allowed. No costs.

    S.K.S:                                                        Appeal allowed.