M/S. MODERN HOTELversusCOMMISSIONER OF EXCISE & ORS.

                     [2015) 9 S.C.R. 789


                   MIS. MODERN HOTEL                               A
                               v.
           COMMISSIONER OF EXCISE & ORS.
               (Civil Appeal No. 2508 of 2008)
                     AUGUST 19, 2015                               B

   [VIKRAMAJIT SEN AND SHIV~ KIRTI SINGH, JJ.]
      Foreign Liquor Rules: Rule 13A(5), proviso - Excise
Licence - Renewal of licence subject to payment of abkari          C
arrears due to Government - Firm having FL-3 licence to
run a bar in its hotel- Reconstitution of firm on entry of a new
partner - Subsequent request of appellant firm for renewal
of its FL-3 licence - Rejected on the ground that one of the
partners had conducted abkari business earlier and incurred
                                                                   0
dues to the Government which had further grown on account
of interest and until 50% of abkan· arrears pending at the time
of renewal of licence was cleared, the licence could not be
renewed -Appellant filed writ petition - High Court from time
to time granted renewal of licence on condition of part            E
payment of arrears totalling Rs.50 lacs in addition to licence
fees - Writ petition was ultimately dismissed on the ground
that one of the partners had suffered disqualification - In the
instant appeal, I.A. filed seeking return of Rs. 50 lacs in view
of the fact that the Government declared an Amnesty Scheme         F
wherein if the other conditions were satisfied, a lump sum
payment of 75% of pnnc~oai dues could be sufficient to waive
the remaining principal as well as penalty and interest -
Taking advantage of scheme, the defaulting partner paid
75% of the principal amount- On the basis of such payment,         G
this Court ordered refund of Rs. 50 Lacs from the concerned
authority but on furnishing of required security - Held:
Appellant is not entitled to receive refund of Rs. 50 Lacs on

                             789                                   H
790       SUPREME COURT REPORTS                [2015] 9 S.C.R.


A account of subsequent deposit of required percentage of
  principal dues under the Amnesty Scheme of 2008 - The
  amnesty earned in 2008 must be confined to the arrears of
  interest outstanding at the relevant time in 2008 and by that
  date the earlier deposits of Rs. 50 Lacs had already been
B appropriated towards interest - No fault can be found in
  appropriating that amount because there is no dispute
  regarding the actual outstanding amounts of principal and
  interest - Exercise of writ jurisdiction to help the defaulter
  would be inappropriate.
c
        Dismissing the appeal, the Court

       HELD: 1. Appellant is not entitled to receive refund
  of Rs.50 Lacs on account of subsequent deposit of
o required percentage of principal dues under the
  Amnesty Scheme of 2008. The amnesty earned in 2008
  must be confined to the arrears of interest outstanding
  at the relevant time in 2008 and by that date the earlier
  deposits of Rs.50 Lacs had already been appropriated
E towards interest. No fault can be found in appropriating
  that amount because there is no dispute regarding the
  actual outstanding amounts of principal and interest
  which clearly find mention in the certificate dated
  10.11.2008 (Annexure P-6) to I.A. No.1 on which appellant
F itself has placed reliance. [Para 9] [796-8-D]

      2. Since there was no challenge to the proviso to
  Rule 13A(5) of the Foreign Liquor Rules, the respondents
  were well within their legal rights to insist that at least
G 50% of the excise dues agai!lst the partners of the
  appellant was required to be paid in accordance with
  the proviso, to get the desired renewal. Such decision
  of the High Court does not require any interference.
  Section 5 of the Indian Partnership Act, 1932 (the Act)
H provides unequivocally that the relation of partnership
        MODERN HOTEL V.'COMMISSIONER OF EXCISE                     791


    arises from contract and not from status. Such contracts A
    clearly cannot override provisions in a statute or
    statutory rules. Section 49 of the Act stipulates for
    payment of firm debts and also of separate debts of any
    partner by use of firm's property and ifthere is no surplus
    then separate property shall be applied for payment of a B
    partner's separate debts. Other than the defaulting
    partner can always claim their loss, if any, from the latter.
    [Para 1O] [796-D-G]

         3. The factum of excise dues of one of the partners c
    of the appellant and its subsequent payment under the
    Amnesty Scheme is not in dispute or controversy.
    Though large part of the interest amounting to several
    crores could not be recovered but that was on account
    of grace shown by the Government itself by formulating D
    the Amnesty Scheme of 2008. In such circumstances
    exercise of writ jurisdiction to help the defaulter would
    be inappropriate. It would be unjust to direct for refund
    of Rs.50 Lacs on the premise that its recovery in the
    manner made is being questio!led by the appellant~ E
    Appellant is now required to redeposit Rs.50 Lacs to
    meet its liability under the security furnished as per
    interim order of this Court dated 18.1.2010. [Paras 11, 12]
    [796-H; 797-A-D]
                                                                .. F
         CIVIL APPELLATE JURISDICTION: Civil Appeal No.
    2508 of 2008.

        From the Judgment and Order dated 09.01.2008 of the
    High Court of Kera la at Ernakulam in W.A. No. 1055 of 2002. G

          Jayant Muth raj, Roy Abraham, Seema Jain, Himinder Lal
•   for the Appellant.

       Bina Madhavan, M.P. Vinod Jogy Scaria for the
                                                                    H
    Respondents.
792          SUPREME COURT REPORTS                   [2015] 9 S.C.R.


A      The Judgment of the Court was delivered by

           SHIVA KIRTI SINGH, J. 1. The appellant is a partnership
       firm and is aggrieved by dismissal of its Writ Appeal No.1055
       of 2002 by an order dated 091h January 2008 wherein the
 B     Division Bench has chosen to place complete reliance on an
       earlier Division Bench judgment dated 241h June 2005 in
       W.A.No.1151 of2005 (M/s. Hotel Highway &Anr. v. N.K. Subhin
       & Ors.).

 c         2. The issue falling for consideration is mainly one of law
   relating to scope and interpretation of a proviso to Rule 13A(5)
   of the Foreign Liquor Rules as in force at the relevant time in
   the State of Kerala. Subsequently it appears that Rule 13A,
   dealing with grant of different kinds of excise licence, along
 D with proviso has been renumbered as Rule 13B w.e.f.
   1.4.2003. The relevant proviso needs to be noticed :

            "Providec;l further that no defaulter of abkari arrears due
            to the Government shall be permitted to renew the licence
 E          unless he produces from the Excise Department a
            certificate to the effect that he has cleared 50% of the
            abkari arrears pending at the time of renewal of the
            licence,"

           3. The facts of the case need not detain us for long except
 F..
   noting that the appellant firm was having a FL-3 licence to run
   a bar attached to a hotel at Kundara in Kollam District. The
   partnership firm was re-constituted on 01.10.1995 and one
   Shri J. Sasikumar was admitted as one of the partners. On
 G 11.05.2001 the request of the appellant firm for renewal of its
   FL-3 licence was rejected by the Excise Commissioner on
   the ground that one of the partners had conducted abkari
   business in the year 1981-1982 and had incurred dues to the            •
   Government of Rs. 70 Lacs which had further grown on account
 H of interest and until 50% of the abkari ;::irrears pending at the ·
         MODERN HOTEL v. COMMISSIONER OF EXCISE                          793
                  [SHIVAKIRTI SINGH, J.]

    time of renewal of the licence was cleared, the licence of the           A
    appellant could not be renewed. Appellant preferred writ
     petition in the High Court of Kerala wherein by an interim order
    the respondent authorities were directed to grant renewal for
    the year 2001-2002 on the condition of payment of Rs.20 Lacs
    towards the arrears in addition to the licence fee. On such              B
     payment the licence was renewed for that year. But the writ
     petition came to be dismissed on 02.04.2002 on a finding
    that a partnership firm could not claim a separate juristic identity
     as it is only a totality of every partner and so long one or more
     partner suffers from liability or disqualification, the licence could   C
     not be renewed till the statutory requirement of the relevant
     rule was satisfied. The appellant filed appeal bearing
     W.A.No.1055 of 2002 before the Division Bench. By an interim
     order dated 15.04.2002 appellant's licence was ordered to               D
     be renewed for the year 2002-2003 on similar condition
     re~iring payment of additional amount of Rs.20 Lacs over
     and above the licence fee. On compliance, the licence was
     renewed accordingly. On account of another interim order
     dated 13.05.2003 appellant's licence was renewed forthe ye~r            E
     2003-2004 also on its paying Rs.10 Lacs in addition to the
     licence fee. The appellant's licence got further renewal upto
     the year 2007-2008 only on the strength of earlier additional
     deposits of Rs.50 Lacs in total. The writ appeal itself was
    .heard on merits and dismissed by the impugned judgment                  F
     dated 09.01.2008 following earlier Division Bench judgment
     dated 24.06.2005.

         4. On behalf of appellant our attention was drawn to a ·
    subsequent development mentioned in l.A.No.1 of 2009 filed G
    in this appeal. Paragraphs 9, 10 and 11 of the I.A. disclose
    that the Government of Kera la declared an Amnesty Scheme
•   (One Time Settlement Scheme) on 26.05.2008 wherein, ifthe
    other conditions were satisfied, a lump sum payment of 75%
    of the principal dues could be sufficient to waive the remaining H
794         SUPREME COURT REPORTS                   [2015) 9 S.C.R.


A  principal as well as all the penalty and interest. Ta.king
   advantage of that scheme the defaulting partner Mr. J.
   Sasikumar along with his partners of the other partnership paid
   75% of the principal amount, i.e., Rs.53,09,440/-and as a result
   the Excise Department on 10.11.2008 issued a certificate that
 B no amount was now outstanding from said Mr. Sasikumar. The
   certificate is an enclosure to the I.A. and discloses that on
   payment of earlier noted amount the defaulters including J.
   Sasikumar got amnesty from paying not only the remaining
   25% of the principal amount but also from liability to pay
c  Rs.2,73,47,650/- towards interest upto 31.05.2008. On the
   strength of such payment and subsequent development, in the
   I.A. the appellant sought an order from this Court for
   unconditional return of Rs.SO Lacs in total deposited by the
   appellant for getting several renewal of its licence as per interim
 D
   orders of the High Court.

           5. This Court on 18.01.2010 heard the parties in respect
      of l.A.No.1 and passed the following order;

 E         "We have heard learned counsel for the parties in the
           I.A. We direct that, as an interim measure, the amount
           of Rs.50,00,000/-, which is claimed by the appellants by
           way of this I.A., be refunded to them subject to the
           outcome of the result of the main appeal, on furnishing of
 F         security to the satisfaction of the Commissioner of
           Excise."

        6. In terms of that order the appellant has obtained refund
    of Rs.SO Lacs from the concerned authority but Qn furnishing
 G of required security to the satisfaction of the Commissioner of
   'Excise.

        · 7. When this appeal was taken up for hearing learned           •
      counsel for the appellant initially took the stand that due to
 H    passage of time and other reasons the appellant was not keen
          MODERN HOTEL v. COMMISSIONER OF EXCISE                           795
                   [SHIVAKIRTI SINGH, J.]

     to press the appeal provided the appellant was absolved of                A
      (ts liability created by furnishing of security for Rs.50 Lac~. In
      other words, he wanted this Court to order for discharge of
      security furnished by him to the Commissioner of Excise. This
     prayer of the appellant was strongly contested by Ms. Bina
      Mad.havan, learned counsel appearing forthe respondents by               B
     placing reliance upon averments made in the counter affidavit
      (additional) filed in response to I.A. No.1 of 2009. In paragraph
      6 of the counter affidavit the respondents have relied upon
     .relevant proviso to Rule 13A(5) of the Foreign Liquor Rules
      and have taken the stand that the liability or disqualification of       C
      each of the partner in the defaulting firm shall be distributed
      but if such liability continues then for the purpose of the proviso
      the liability of one of the partners will be liability of the firm for
     the purpose of abkari arrears disentitling renewa·1 as provided
                                                                               0
      in the proviso. According to respondents the Hi9h Cpurt has
      correctly decided the law that a partnership firm is a totality of
      every partner and that the default of one of the partners can be
      taken into consideration for treating the firm as a defaulter even
      if only one of its partners continues to be in arrE'.ars of abkari       E
      dues.

           8. So far as deposit of Rs.50 Lacs made by the appellant
      towards abkari dues as per interim orders is concerned, it is
      respondents' clear stand that as per Rule 6(25) of Abkari F
      Shops (Disposal in Auction) Rules, 1974 the whole of Rs.50
      Lacs had to be and was appropriated towards interest existing
     ·at the time the remittance was made and only the remaining
      dues of interest along with permissible 25% of the principal
      amount was subsequently written off as per Amnesty Scheme G
      of 2008. The claim of the appellant that the amount of Rs.50
••    Lacs was required to be or had been kept in a suspense
      account has been strongly refuted as false with a positive
      statement that the said amount was appropriated towards
      interest in accordance with the relevant rules.               H
796        SUPREME COURT REPORTS                   [2015) 9 S.C.R.


A       9. Having heard the parties and applied our mind to the
   relevant facts and the rules we find ourselves in agreement
   with the submission on behalf of the respondents that appellant
   is not entitled to receive refund of Rs.50 Lacs on account of
   subsequent deposit of required percentage of principal dues
 B under the Amnesty Scheme of 2008. The amnesty earned in
   2008 must be confined to the arrears of interest outstanding
   at the relevant time in 2Q08 and by that date the earlier deposits
   of Rs.50 Lacs had already been appropriated towards interest.
   No fault can be found in appropriating that amount because
 C there is no dispute regarding the actual outstanding amounts
   of principal and interest which clearly find mention in the
   certificate dated 10.11.2008 (Annexure P-6) to I.A. No.1 on
   which appellant itself has placed reliance.

 D       10. We are also of the considered view that since there
   was no challenge to the proviso to Rule 13A(5) of the Foreign
   Liquor Rules, the respondents were well within their legal rights
   to insist that at least 50% of the excise dues against the
   partners of the appellant was required to be paid in accordance
 E with the proviso, to get the desired renewal. Such decision of
   the High Court in our considered view does not require any
   interference. Section 5 of the Indian Partnership Act, 1932
   (the Act) provides unequivocally that the relation of partnership
 F arises from contract and not from status. Such contracts clearly
   ca.nnot override provisions in a statute or statutory rules.
   Section 49 of the Act stipulates for payment of firm debts and
   also of separate debts of any partner by use of firm's property
   and if there is no surplus then separate property shall be applied
 G for payment of a partner's separate debts. Other than the
   defaulting partner can always claim their loss, if any, from the
   latter.                              ·
                                                                        ••
        11. We have taken the aforesaid view for an additional
 H reason that the factum of excise dues of one of the partners of
   the appellant and its subsequent payment under the Amnesty
           MODERN HOTEL v. COMMISSIONER OF EXCISE                       797
                    [SHIVAKIRTI SINGH, J.]

      Scheme is not in dispute or controversy. This is apparent from A
      the certificate dated 10.1.:1 .2008. Though large part of the
      interest amounting to several crores could not be recovered
      but that was on account of grace shown by the Government
      itself by formulating the Amnesty Scheme of 2008. In such
      circumstances exercise of writ jurisdiction to help the defaulter B
      would be inappropriate. It would be unjust to direct for refund
      of Rs.50 Lacs on the premise that its recovery in the manner
      made is being questioned by the appellant.
...         12. For the aforesaid reasons we find no merit in this          C
      appeal and it is dismissed accordingly. It is clarified that
      appellant is now required to redeposit Rs.50 Lacs to meet its
      liability under the security furnished as per interim order of this
      Court dated 18.1.2010. It is directed to do so within six weeks
      along with interest at the rate of 6% per annum from the date         D
      of receipt of that amount till its redeposit. There shall be no
      order as to costs.

      Devika Gujral                                     Appeal dismissed.