judgement:
Civil Appeals Nos. 702 and 840 843 of 1975.
Appeals by special leave from the judgment and order dated the 18 3 1975 of the Bombay High Court (Nagpur Bench) Nagpur in special civil applications Nos. 1668, 1893, 1895 to 1897 of 1974.
section T. Desai, section C. Mandia and Shri Narain for the appellants 'in C.A. 702/75.
section P. Mehta, section C. Mandia and Shri Narain for the appellants in C.A. 840 843/75.
V. section Desai and J. Ramamurthi and section P. Nayar for the respondents in all the appeals.
The Judgment of the Court was delivered by BHAGWATI, J.
These five appeals by special leave raise a short but interesting question of law relating to the applicability of section 171, sub section
(6) of the Income Tax Act, 1961 (hereinafter referred to as the new Act).
The facts giving rise to these appeals are few and may be briefly stated as follows: There was at all material times a Hindu Undivided Family consisting of one Gulabdas, his wife and five sons.
The Hindu Undivided Family had considerable movable properties consisting of shares in limited companies and jewellery and it was also a partner through its manager and Karta in two firms which may for the sake of convenience be referred to as the 'Export Firm ' and the 'Mining Firm '.
lt appears that besides these movable properties, the Hindu Undivided Family also owned some irremovable properties.
On 15th November, 1955 there was a partial partition among the members of the Hindu Undivided Family and the movable properties were divided including the credit balances after taking into account the debit balances on the Export Firm and the Mining Firm.
These movable properties which formed the subject matter of partial partition, were of the value of Rs. 4,87,054/ and they were divided amongst the members of the Hindu Undivided Family in such a manner that Gulabdas got properties worth Rs. 53,442/ , his wife got properties worth Rs. 50,000/ , while each of the five sons got properties worth Rs. 76,722/ .
The consequence of this partial partition was that the Hindu Undivided Family ceased to be a partner in the Export Firm and the Mining Firm and thereafter Gulabdas and his son Govinddas continued as partners in these two firms in their individual capacity.
When the Hindu Undivided Family was sought to be assessed for the assessment year 1957 58, for which the relevant previous year was Samvat Year commencing from 16th November, 1955 a claim was 47 made on behalf of the members of the Hindu Undivided Family that they had effected a partial partition of their movable properties on 15th November, 1955.
This claim was accepted by the Income Tax officer after due inquiry and a finding was recorded by him in the order of assessment that there was a partial partition of the movable properties of the Hindu Undivided Family on 15th November, 1955.
The result was that from and after the assessment year 1957 58 no part of the income of the Export Firm or the Mining Firm was included in the assessment of the Hindu Undivided Family.
Now it appears that the assessments of the Export Firm and the Mining Firm relating to the assessment years 1950 51 to 1956 57 were reopened after the new Act came into force and reassessments were made enhancing the assessable income of the two firms in accordance with the procedure provided in the new Act.
Consequent upon the reassessments of the income of the two firms for the assessment years 1950 Sl to 1956 57, notices were issued to the Hindu Undivided Family for reassessments of its income for those years, since the Hindu Undivided Family was a partner in these two firms during those years.
The Income Tax officer, after following the requisite procedure.
passed an order of reassessment dated 26th March, 1970 for each of the assessment years 1950 Sl to 1956 57 enhancing the assessable income of the Hindu Undivided Family.
The appeals filed by the two firms against the orders of reassessment made on them partially succeeded before the Appellate Assistant Cornmissioner and consequently, orders were passed by the Income Tax officer on 25th March, 1971 rectifying the orders of reassessment dated 26th March, 1970 made against the Hindu Undivided Family.
The two firms obtained some further relief as a result of appeals filed by them before the Tribunal and in consequence, further rectification orders dated 3rd September, 1974 were passed by the Income Tax officer rectifying the reassessments of the Hindu Undivided Family.
The net effect of these orders of rectification passed by the Income Tax officer was that ultimately a much larger amount of tax was determined as payable by the Hindu Undivided Family than what was found due when the original assessments were made for the assessment years 1950 51 to 1956 57.
So far the members of the Hindu Undivided Family had no grievance because what was done by the Income Tax officer was merely to carry out reassessment or rectification of assessment of the income of the Hindu Undivided Family consequent upon enhancement of the assessable income of the two firms in which the Hindu Undivided Family was a partner during the assessment years 1950 Sl to 1956 57.
But on 25th January, 1974, the Income Tax officer made certain orders in respect of the assessment years 1950 Sl to 1954 55 and 1956 57 which prejudicially affected the interest of the petitioners.
The Income Tax officer, by these orders, determined the several liability of the members of the Hindu Undivided Family under section 171, sub section
(7) of the new Act by apportioning the assessed on the Hindu Undivided Family for the assessment years 1950 51 to 1954 55 and 1956 57 amongst the members in the proportion of 2/7th share to Gulabdas this perhaps also included the share of his wife and l/7th share to each of the five sons.
These orders were subsequently rectified by 48 orders dated 3rd September, 1974 revising the allocation of the liability, consequent upon the rectification made in the orders of assessment against the Hindu Undivided Family as a result of the relief granted to the two firms by the Tribunal.
The orders dated 3rd September, 1974 also proceeded on the same lines and allocated the tax liability of the Hindu Undivided Family amongst the members in the same shares as the earlier orders.
The Income Tax officer also passed an order dated 13th August, 1974 allocating the tax liability of the Hindu Undivided Family for the assessment year 1955 56 among the members in the same shares under section 171, sub section
(7) of the new Act.
This led to the filing of a petition by each of the five sons of Gulab das in the High Court of Bombay challenging the validity of the orders dated 13th August and 3rd September, 1974 which had the effect of imposing personal liability on each of the members of the Hindu Undivided Family for the tax liability allocated to him.
The petitioners in these petitions did not object to the recovery of the tax liability of the Hindu Undivided Family from out of the joint Family properties come to their hands on partial partition, but their argument was that they were not jointly and severally liable for the tax liability nor was the Income Tax officer entitled to proceed against them personally or recovery of any share of the tax liability.
That raised the question as to the applicability of sub section
(6) read with sub section
(7) of section 171 of the.
new Act, for, it was under this provision that the Income Tax officer claimed to allocate the tax liability amongst the members of the Hindu Undivided Family and to recover from the petitioners personally the share of the tax liability allocated to them.
The principal contention.
of the petitioners was that the provision in section 171, sub section
(63 and (7).
had no application, where the assessment of a Hindu Undivided Family was made under the provisions of the Indian Income Tax Act, 1922 (hereinafter referred to as, the old Act) and at the time when the tax was sought to be recovered, it was found that the family had effected a partial partition, since this provision had the effect of imposing one the members of the Hindu Undivided Family a new liability which did not exist before and it could not be construed so as to have retrospective operation.
This contention was, however, rejected by the High Court and it was held that sub section
(6) read with sub section
(7) of section 171 was applicable in the present case and since the Income Tax Officer found at the time when he sought to recover the tax liability assessed on the Hindu Undivided Family, that the family had already effected a partial partition on 15th November, 1955, he was entitled to recover the tax from every member of the Hindu Undivided Family and each member was severally liable for his share of the tax computed; according to the portion of the joint family property allotted to him at the partial partition.
The High Court also rejected the other contentions advanced on behalf of the petitioners and dismissed each of the petitions with costs.
The petitioners thereupon preferred the present appeals with special leave obtained from this Court.
Though several contentions were raised in the petitions and also argued before the High Court, the petitioners at the hearing of the appeals before us confined their attack against the validity of the 49 orders dated 13th August, 1974 and 3rd September, 1974 to only one contention and that related to the applicability of sub section
(6) read with sub section
(7) of section 171 of the new Act.
The petitioners sought to repel the applicability of sub section
(6) of section 171 of the new Act by a two fold argument.
In the first place, the petitioners contended that section 25A of the old Act did not impose any personal liability on the members for the tax assessed on the Hindu Undivided Family in case of partial partition.
This liability was created for the first time by sub section
(6) of section 171 of the new Act and this sub section could not, therefore, be construed to have retrospective effect so as to apply to assessments made on the Hindu Undivided Family for any assessment year prior to 1st April, 1962 when the new Act came into force.
The present L case, which related to the assessment years 1950 51 to 1956 5 /, was in the circumstances governed by section 25A of the old Act in so far as the question of personal liability of the members was concerned and sub section
(6) of section 171 of the new Act had no application to it.
Secondly, it was urged on behalf of the petitioners that even if section 171, sub section
(6) of the new Act were applicable in a case like the present, the conditions of this sub section were not satisfied, as there was no finding of partial partition recorded by the Income Tax officer after making due inquiry as contemplated in sub section
(3) of section 171 of the new Act.
Of these two arguments, the first is, in our opinion, well founded and hence it is not necessary to consider the second.
We may first look at section 25A of the old Act.
The position which obtained before this section was introduced in the old Act was that though a Hindu Undivided Family was a unit of assessment, there was no machinery provided in the Act for levying tax and enforcing liability to tax in cases where a Hindu Undivided Family had received income in the year of ac`count but was no longer in existence as such at the time of assessment.
This difficulty was the more acute by reason of the provision contained in section 14(1) which said that tax shall not be payable by an assessee in respect of any sum which he received as a member of a Hindu Undivided Family.
` The result was that the income of a Hindu Undivided Family could not be assessed and the tax could not be collected from the members of the family, if at the time of making the assessment the family was divided.
This was obviously a lacuna and the legislature, therefore, introduced section 25A in the old Act for assessment of the income of a Hindu Undivided Family and enforcement of the liability to tax, where the Hindu Undivided Family was no longer in existence at the date of assessment.
But, as pointed out by this Court in Additional Income Tax Officer vs Thimmayya(1) this section went very much beyond what was required for rectifying the defect.
It made two substantive provisions, namely, (1) a Hindu undivided family which has been assessed to tax shall be deem ed, for the purposes of the Act, to continue to be treated as undivided and therefore liable to be taxed in that status, unless an order is passed in respect of that family recording partition of its property as contemplated by sub sections
(1) and (2) if at the time of making an assessment, it is claimed by or on behalf of the members of the family that (1) 50 the property of the joint family has been partitioned among the members or groups of members in definite portions, i.e., a complete partition of the entire estate is made, as distinct from a partial partition, the Income Tax Officer shall hold an inquiry and if he is satisfied that the partition has taken place, he shall record an order to that effect.
Where such order has been passed, the Income Tax officer would be entitled to make an assessment of the total income received by or on behalf of the Hindu Undivided Family as if no partition had taken place.
Now, ordinarily when tax is assessed on a Hindu undivided family, it would be payable out of the properties of the joint family, even after they are partitioned amongst the members and no member would be personally liable for discharging the liability to tax.
But J sub section
(2) made a radical departure and provided that when upon a total partition, an order under.
sub section
(1) has been recorded, the Income Tax officer shall apportion the tax assessed on the total income of the Hindu undivided family and assess each member or group of members in accordance with the provisions of section 23 by adding to the tax for which such member of group of members may be separately liable, tax proportionate to the portion of the undivided family property allotted to him or ' to the group and all members or groups of members shall be "liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family".
The liability which, so long as an order is not recorded under sub section
(1), would be restricted to the assets of the Hindu undivided family, was thus, by virtue of sub section
(2), transformed, when the order is recorded, into personal liability of the members for the amount of tax due by the Hindu undivided family.
But the order could be recorded only if there was total partition, as contra distinguished from partial partition, and on a claim made by or on behalf of the members of the family, the Income Tax officer, after holding an inquiry, was satisfied that such total partition had taken place.
Now, in the present case, the partition which took place between the members of 15th November, 1955 was partial as regards the properties of the joint family and there was no total partition effected amongst the members at any time.
Hence the liability of the Hindu Undivided Family to tax for the assessment years 1950 51 to 1956 57 could be recovered only out of the assets of the joint family and it could not be apportioned amongst the members nor could the members be held jointly and severally liable for payment of such tax liability under section 25A of the old Act.
The question is whether the enactment of sub sections
(6) and (7) of section 171 of the new Act has made any difference in this position.
Section 171 of the new Act corresponds to section 25A of the old Act and provides for assessment of a Hindu undivided family after partition.
But it has made various changes in the law.
The principal change is that the new section applies not only to cases of total partition, but also to cases of Partial Partition.
Sub section
(1) of this section reproduces the same fiction as in section 25A and deems a Hindu family to continue to be a Hindu undivided family "except where and in so far as a finding of partition has been given in respect of the Hindu undivided family".
Sub section
(2) provides that where, at the time of making 51 an assessment under section 143 or section 144, it is claimed by or on behalf of any member of a Hindu family that a partition, whether total or partial, has taken place among the members of such family, the Income Tax officer shall make an inquiry after giving notice to all the members of the family and sub section
(3) proceeds to say that on the completion of the inquiry, the Income Tax officer shall record a finding as to whether there has been a total or partial partition of the family property and if there has been such a partition, the date on which it has taken place.
Where an order has been made recording the partition, the assessment of the total income received by or on behalf of the joint family as such is required to be made in accordance with the procedure laid down in sub section 4(a) and (S), which is the same as that under section 25A, although the relevant provisions are differently cast.
The procedure is to compute the total income of the joint family upto the date of the partition and also determine the tax payable by the joint family as such as if no partition had taken place and as if the joint family was still in existence.
Sub section
4(b) makes each member or group of members jointly and severally liable for the whole amount of the tax determined as payable by the joint family.
Then follows sub section
(6) which is material and reads as follows: "notwithstanding anything contained in this section, if the Income tax officer finds after completion of the assessment of a Hindu undivided family that the family has already effected a partition, whether total or partial, the Income tax officer shall proceed to recover the tax from every person who, was a member of the family before the partition, and every such person shall be jointly and severally liable for the tax on the income so assessed.
" Sub section
(7) provides that "for the purposes of this section", that is, for the purposes of sub sections 4(b) and (6), "the several liability of any member or group of members shall be computed according to the portion of the joint family property allotted to him or it at the partition, whether total or partial".
Now it is clear on a plain grammatical construction of the language of sub section
(2) to (5) of section 171 that these sub sections contemplate a case where at the time of making assessment under sections 143 or 144, a claim is made by or on behalf of any member of a Hindu family that a total or partial partition has taken place among its members.
Then the claim would be investigated by the Income tax officer and if satisfied, the Income Tax Officer would record a finding that there has been such partition of the pint family property and the assessment of the total income of the joint family would then be made as if no such partition had taken place.
And in such a case all the members would be Jointly and severally liable for the tax assessed as payable by the joint family and for determining their several liability, the assessed on the joint family would be apportioned among the members "according to the portion of the joint family property allotted to" each of them.
But it may happen that at the time of making assessment under sections 143 or 144 no claim of partition, total or partial, is put forward on behalf of any member of a Hindu family, either because 52 no such partition has taken place or because of inadvertent or deliberate omission on the part of the members of the Hindu family and where that happens, the Hindu family would continue to be assessed as a Hindu undivided family and the tax determined as payable by it would be recoverable only out of the joint family properties and no member would be personally liable for any part of the lax, even though an order recording partition may have been passed after the assessment, since sub section
(4)(b) of section 171 would have no application in such a case.
That was also the position under section 25A of the old Act with this difference that under that section the only partition which could be recorded was total partition and not partial partition.
The legislature, while enacting s 17.1 in the new Act, decided to introduce another radical departure from the old Act by providing in sub s (6) that even where no claim of total or partial partition is made at the time of making assessment under section 143 or section 144 and hence no order recording partition is made in the course of assessment as contemplated under sub sections
(2) to (5), if it is found? after the completion of the assessment, that the family has already effected.
a partition, total or partial, all the members shall be jointly and severally liable for the tax assessed as payable by the joint family and the tax liability shall be apportioned among the members according to the portion of the joint family property allotted to each of them.
Sub section
(6) of section 171 thus for the first time imposed, in cases of this kind, joint and several liability on the members for the tax assessed on the Hindu undivided family and this was a personal liability as distinct from liability limited to the joint family property received on partition.
Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair a existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure.
The general rule as stated by Halsbury in ol. 36 of the Laws of England (3rd Ed.) and reiterated in several decisions of this Court as well as English Courts is that "all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective" and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment.
If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.
If we apply this principle of interpretation, it is clear that sub section (6) of section 171 applies only to a situation where the assessment of a Hindu undivided family is completed under section 143 or section 144 of the new Act.
It can have no application where the assessment of a Hindu undivided family is completed under the corresponding provisions of the old Act.
Such a case would be governed by section 25A of the old Act which does not impose any personal liability on the members in case of partial partition and to construe sub section
(6) of section 171 as applicable in such a case with 53 consequential effect of casting on the members personal liability which did not exist under section 25A, would be to give retrospective operation to sub section
(6) of section 171 which is not warranted either by the express language of that provision or by necessary implication.
Sub section
(6) of section 171 can be given full effect by interpreting it as applicable only in a case where the assessment of a Hindu undivided family is made under section 143 or section 144 of the new Act.
We cannot, therefore, consistently with the rule of interpretation which denied retrospective operation to a statute which has the effect of creating or imposing a new obligation or liability, construe sub section
(6) of section 171 as embracing a case where assessment of a Hindu undivided family is made under the provisions of the old Act.
Here in the present case, the assessments of the Hindu Undivided Family for the assessment year 1950 Sl to 1956 57 were completed in accordance with the provisions of the old Act which included section 25A and the Income tax officer was, therefore, not entitled to avail of the provision enacted in sub section
(6) read with sub section
(7) of section 171 of the new Act for the purpose of recovering the tax or any part thereof personally from any members of the joint family including the petitioners.
But the Revenue Authorities then fell back on another contention, namely, that since the assessments of the Hindu Undivided Family for the assessment years 1950 51 to 1956 57 were reopened by the Income Tax Officer by issuing notices under section 148 and the reassessments were completed by orders dated 26th March, 1970 under section 147, in virtue or section 297(2)(d) of the new Act, sub section
(6) of s 171 was, on the plain terms of section 297(e)(d), applicable and the Income Tax officer was entitled to recover personally from the members, the tax reassessed on the Hindu Undivided Family, as it was found by him that the family had already effected a partial partition.
This contention requires an examination of the true meaning and effect of section 297(2) (d) That subsection has two clauses and it reads as follows: "(d) Where in respect of any assessment year after the year ending on the 31st day of March, 1940, (i) a notice under section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed; (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under section 148 may, subject to the provisions contained in section 149 or section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly. ' Admittedly, in the present case, cl.
(ii) of section 297(2)(d) applied since no proceedings under section 34 OF the old Act in respect of escaped 54 income of the Hindu Undivided Family were pending at the time of the commencement of the new Act and it was for this reason that notices under section 148 were issued by the Income Tax officer for Reopening the assessments of the Hindu Undivided Family for the assessment years 1950 51 to 1956 57.
Now clause (ii) of section 297(2) (d) provides that when a notice under section 148 is issued for reopening an assessment "all the provisions of this Act shall apply accordingly".
The argument of the Revenue Authorities, therefore, was that when notices under section 14 were issued for reopening the assessments of the Hindu Undivided Family, all the provisions of the new Act became applicable and they included sub section
(6) of section 171 and, therefore, that sub section was applicable for recovery of the tax reassessed on the Hindu Undivided Family pursuant to the notices under section 148.
This argument is without force.
It is based on a misconstruction of the words "all the provisions of this Act shall apply accordingly" in cl.
(ii) of s 297(2) (d).
These words merely refer to the machinery provided in the new Act for the assessment of the escaped income.
They do not import any substantive provisions of the new Act which create rights or liabilities.
The word 'accordingly ' in the context means nothing more than 'for the purpose of assessment" and it clearly suggests that the provisions of the new Act which are made applicable are those relating to the machinery of assessment.
The substantive law to be applied for determining the liability to tax must necessarily be the law under the old Act, for that is the law which applied during the relevant assessment years and it is that law which must govern the liability of the parties.
Though sub sections
(1) to (S) of section 171 merely lay down the machinery for assessment of a Hindu undivided family after partition, sub section
(6) of section 171 is clearly a substantive provision imposing new liability on the members for the tax determined as payable by the joint family.
The words "all the provisions of this Act shall apply accordingly" cannot therefore be consumed as incorporating by reference subs.
(6) of section 171 so as to make it applicable for recovery of the tax reassessed on the Hindu Undivided Family in cases falling within cl.
(ii) of section 297(2) (d).
This contention of the Revenue Authorities must accordingly be rejected.
In the circumstances we allow these appeals and issue a writ in each appeal quashing and setting aside the orders dated 13th August, 1974 and 3rd September, 1974.
The respondents will pay the costs of the petitioners throughout.

summary:
Under section 25A, Income Tax Act, 1922, a Hindu undivided family which has been assessed to tax shall be deemed, for the purpose of that Act, to continue to be treated as undivided and, therefore, liable to be taxed in that status, unless an order is passed in respect of the family recording a partition of its property.
Under section 25A(1), if at the time of making an assessment, it is claimed by or on behalf of the members of the family that the property of the joint family has been partitioned among the members or groups of members in definite proportions, the Income Tax officer shall hold an enquiry and record an order to that effect, if satisfied.
Under section 25A(2) when, such an order has been recorded, the Income Tax officer shall apportion the tax assessed on the total income of the undivided family and assess each member or group of members in accordance with the provisions of section 23 and add to the tax for which such member or group of members may be separately liable, tax proportionate to the portion of the undivided family property allotted to him or to the group, and all members or groups of members, shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family.
Thus a liability, which, so long as an order is not recorded under section 25A(I), would be restricted to the assets of the Hindu undivided family is by virtue of section 25A(2) transformed, when the order of partition is recorded, into the personal liability of the members for the amount of tax due by the Hindu undivided family.
But, the order could be recorded only if there was total partition as contra distinguished from partial partition.
[49 G 50 E] Section 171 of the Income Tax Act, 1961, corresponds to section 25A of the 1922 Act.
Sub sections 2 to 5 of section 171 contemplate a case where at the time of making assessment under section 143 or 144, a claim is made by or on behalf of any member of a Hindu family that a total or partial partition has taken place among its members and the Income Tax officer has recorded a finding.
In such a case, all the members would be jointly and severally liable for the tax assessed 17 as payable by the joint family and for determining their several liability, the tax assessed on the joint family would be apportioned among the members according to the portion of the joint family property allotted to each of them.
In section 171(6) it is provided that even where no claim of total or partial partition is made at the time of making the assessment under section 143 or section 144 and hence no order recording partition is made in the course of assessment as contemplated under sub sections 2 to 5, if it is found, after the completion of the assessment, that the family has already effected a partition, total or partial, all the members shall be jointly and severally liable for the tax assessed as payable by the joint family and the tax liability shall be apportioned among the members according to the portion of the joint family property allotted to each of them.
Section 171(6), thus, for the first time imposes, in cases of this kind, joint and several liability on the members for the tax assessed on the Hindu undivided family and this is personal liability as distinct from liability limited to the joint family property received on partition.
Section 171(7) provides that the several liability of any member or group of members shall be computed according to the portion of the joint family property allotted to him or it at the partition whether total or partial.
[50 G 51 F; 52 C E] Section 297(2)(d)(ii) of the 1961 Act provides that when a notice under section 148 of the 1961 Act is issued for the reopening an assessment 'all the provisions of this Act shall apply accordingly '.
45 There was a partial partition among the members of a Hindu undivided A family in 1955.
For the assessment years 1950 51 to 1956 57, the assessment on the family were reopened after the 1961 Act had come into force by issuing notices under section 148 and! were completed by orders under section 147 of the 1961 Act.
A much larger amount of tax was determined as payable by the Hindu undivided family than what was found due when the original assessments were made for those assessment years.
Thereafter, the Income Tax officer determined the several liability of the members of the Hindu undivided family under section 171(7) of the 1961 Act.
They filed petitions in the High Court challenging the validity of the orders, which had the effect of imposing personal liability on the members L of the family, on the ground, inter alia, that section 171(6) and (7) do not apply, where the assessment of a Hindu undivided family was made under the 1922 Act, and at the time when the tax was sought to be recovered, it was found that the family had effected a partial partition, since these provisions of the 1961 Act had the effect of imposing on the members of the family a new liability, (namely a personal liability) which did not exist before and they could not be construed so as to have retrospective effect.
The High Court dismissed the petitions.
Allowing the appeals to this Court, ^ HELD: The assessments of the Hindu Undivided Family for the assessment years 1950 51 to 1956 57, were completed in accordance with the provisions of the 1922 Act which included section 25A, and the Income Tax officer was, therefore, not entitled to avail himself of the provisions enacted in section 171(6) and (7) of the 1961 Act, for the purpose of recovering the tax or any part thereof personally from any members of the joint family.
[53 B D] (1) It is a well settled rule of interpretation that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure, the general rule being "all statutes other than those which are merely declaratory or which related only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment.
If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.
[52 E G] (2) On this principle, section 171(6) applies only to a situation where the assessment of a Hindu Undivided Family is completed under section 143 or section 144 of the 1961 Act.
It can have no application where the assessment of Hindu Undivided Family was completed under the corresponding provisions of the old Act.
Such a case would be governed by section 25A of 1922 Act which does not impose any personal liability on the members in case of partial partition.
Since, in the present case, there was only a partial partition, tho liability of the undivided family to tax for the various years could be recovered only out of the assets of the joint family are it could not be apportioned among the members nor could the members be held jointly and severally liable for payment of such tax liability under section 25A. To construe section 171(6) of the 1961 Act as applicable in such a case with the consequential effect of casting on the members personal liability which did not exist under section 25A, would be to give retrospective operation to the sub section which is not warranted either by the express language of that provision or by necessary implication.
Section 171(6) can be given full effect by interpreting it as applicable only in a case where the assessment of a Hindu Undivided Family is made under section 143 or section 144 of the 1961 Act.
[52 G 53 B] (3) The words "all the provisions of this Act shall apply accordingly in section 297(2)(d)(ii), merely refer to the machinery provided in the 1961 Act for the assessment of escaped income.
They do not import any substantive provisions of the 1961 Act which create rights or liabilities.
The word "accordingly", in 'the context, means nothing more than "for the purpose of assessment" and it clearly suggests that the provisions of the 1961 Act which are made applicable arc those relating to the machinery of assessment.
Though sub sections (1) to 46 (5) of section 171 merely lay down the machinery for assessment of a Hindu undivided family after partition, section 171(6) is clearly a substantive provision imposing a new liability on the members for the tax determined as payable by the joint family.
The words "all the provisions of this Act shall apply accordingly" cannot, therefore, be construed as incorporating, by reference, section 171(6), so as to make it applicable for the recovery of tax re assessed on the Hindu Undivided Family in cases falling within section 297(2)(d)(ii).
[54 C F]


judgement:
Civil Appeals Nos.
819 823 of 1975.
From the Judgment and order dated 15 3 1975 of the Patna High Court in Civil Writ Nos. 1184 of 1974.
AND CIVIL APPEALS Nos. 824 827 and 1105 of 1975.
From the Judgment and order dated 2 1 1973 of the Patna High Court in Civil Writ P.C. Nos.
1239 to 1242 of 1971 and 1532/73 respectively.
Basudeo Prasad (In CAs.
819 827/75) for the Appellants (in all the appeals).
Balbhadra Prasad, A. G. Bihar (In Cas. 819 823), U. P. Singh for Respondents (In all the appeals) The Judgment of the Court was delivered by SHINGHAL, J.
, These ten appeals against two judgments of the High Court of Judicature at Patna raise some common questions of law.
They have been argued together, and we shall examine them in this common judgment.
Civil Appeals Nos 824 827 of 1975 arise out of a common judgment dated January 2, 1975 in a bunch of civil writ petitions; Civil Appeals Nos.
819 823 of 1975 arise out of a common judgment dated March 15, 1975 in another bunch of civil writ petitions; while Civil Appeal No. 1105 of 1975 is directed against the aforesaid judgment dated January 2, 1975 by which the civil writ petition giving rise to it was also disposed of by the High Court along with the other petitions.
Certificates of fitness have been granted for all the appeals.
There is no controversy in regard to some of the basic facts and they are quite sufficient for the disposal of the appeals.
36 A sale notice was published by the authorities concerned for the auction of licences to open country liquor shops in Singhbhum district with effect from April 1, 1966, including an outstill shop at Bhirbhania.
Appellant Ayodhya Prasad gave the highest bid which was knock ed down in his favour, and he deposited two months ' licence fee in advance at the rate of Rs. 3,650/ per month.
He applied on March 22, 1966 to the Kolhan Superintendent of Singhbhum to settle a piece of land for establishing an outstill shop at Bharbharia, but the application was rejected on September 27, 1966 because of the objection raised by some members of the District Consultative Committee.
The villagers of Bharbharia also opposed the opening of the outstill shop.
The shop could not therefore be established there.
`The appellant how ever obtained a piece of land in village Chittimitti and applied on July 30, 1966 for permission to open the outstill shop there.
This was allowed and the appellant claimed that he began to collect the necessary material but a mob forcibly removed the building and the distillation material.
He filed a report with the Police about the incident.
The approval for opening the outstill shop at Chittimitti was however withdrawn on October 6, 1966 and the appellant was asked to pay the monthly licence fee for the period April 1, 1966 to January, 1967.
He denied his liability to pay the fee and claimed a refund of the money which had been deposited by him.
His case was recommended by the Collector for remittance of the licence fee amounting to Rs. 43,800/ for the entire year 1966 67.
He also made an application to the Commissioner of Excise for refund of the deposit of Rs. 7,300/ and for payment of compensation for loss of anticipated profits and dam ages, but the application was rejected.
It appears that the appellant went on bidding at the bids for the subsequent three years, and laid similar claims for refund and damages, but to no avail.
He then filed the bunch of writ petitions referred to above for quashing the demand notices, but they have been dismissed as aforesaid by the High Court 's judgment dated January 2, 1975.
Civil Appeal No. 825 relates to the bid for 1966 67, Civil Appeal No. 824 relates to the bid for 1967 68, while Civil Appeals Nos. 826 and 827 relate to the bids for 1968 69 and 1969 70.
These may be said to be group 'A ' appeals.
Civil Appeals Nos.
819 823 of 1975 relate to the applications of appellants Thakur Prasad Sao and others for reduction of the licence fees for outstill liquor shops at Gua, Noamandi, Kiriburu, Andheri, Goiekara, Patajai and Dangusposi for 1974 75.
In these cases the licensees were T. P. Sao or his relations or employees.
They claimed that they incurred a loss of Rs. 55,874.79 at Gua, of Rs. 26,651.45 at Noamandi, of Rs. 39,389.53 at Kiriburu of Rs. 35,169.40 at Andheri, of Rs. 11,649.87 at Goekera, of Rs. 11,705.95 at Patajai and of Rs. 11,657.21 at Dengusposi.
The appellants claimed that there was rivalry and enmity with Bishwanath Prasad and his brother who made speculative bids at the auction, as a result of which the outstill shops were settled for uneconomic amounts.
Their grievance was that the Deputy Commissioner did not discharge his duty of refusing to allow the manifestly speculative bids although the percentage of increase in the licence fees ranged between 37 24 to 130 per cent when for other shops the increase was below 12 percent.
The appellants filed application under section 39 of the Bihar and Orissa Excise Act, 1915, hereinafter referred to as the Act, for reduction of the fees for the year 1974 75, but they were rejected by he Board of Revenue.
They then filed the aforesaid writ petitions in the High Court and have now filed the present appeals because the petitions have been dismissed by the High Court 's impugned judgment dated March 15, 1975.
These will be referred to as group 'B ' appeals.
As has been stated, the remaining Civil Appeal No. 1105 of 1975 is also directed against the High Court 's common judgment dated January 2, 1975.
It relates to the grant of a licence to the appellant for establishing outstill shops at Mahuadom, Barahi, Asnair, Aksi and Kabri, in Palamau district.
The appellant applied for a direction for the refund of Rs. 2,71,340/ which had already been realised from him, and for restraining the realisation of a further sum of Rs. 1,40,680/ on the ground that there was no quid pro quo for the fee, but without success.
The High Court has taken the view that the amounts in question were not due on account of fees, but were payable for leases of the exclusive privileges which had been granted to the appellant in respect of the outstills.
It is in these circumstances that these appeals have come up for consideration before us.
As has been stated, the controversy in these appeals relates to the grant of licences for establishing outstill shops which are also known as "jalti bhattis".
That system has been described in paragraph 253 of the Bihar and Orissa Excise Manual, Volume III, hereinafter refer red to as the Manual, as follows: "By this system a certain number of stills for the manufacture of country spirit are allowed within a certain area.
The holder of an outstill licence pays a certain sum per men sem for manufacturing country spirit in his outstill and selling it by retail on his premises.
No attempt is made to regulate the strengths or the prices at which spirit is manufactured or It has been stated in paragraphs 254 and 255 of the Manual that no .
definite area is fixed within which each outstill has the "monopoly of supply of country spirit", but their number is regulated according to rules, and five miles is taken roughly as the minimum distance of one outstill from another.
It has been argued on behalf of the appellants, that what was granted to them was not the exclusive privilege of manufacturing and selling country liquor in retail, in the areas for which the licences were granted, and that the High Court erred in holding that such an exclusive privilege had been granted under section 22 of the Act.
It has been urged that the licences in question fell within the purview of section 30 of the Act 38 We have described the essential features of the outstill system, and there can be no doubt that the holder of a licence under the system acquires the right to manufacture country spirit in his outstill and sell it by retail "in his premises" without any restriction on the strength or price at which the spirit is manufactured or sold.
Moreover he has the monopoly of manufacturing and supplying country liquor within his area.
The right is therefore clearly an exclusive privilege within the meaning of section 22(1) (d) of the Act and it is futile to contend that the licences in question were merely licences for the retail sale o f spirit for consumption on the vendor 's premises within the meaning of section 30 of the Act.
The High Court was therefore quite correct in taking that view.
It may be mentioned that the appellants have not produced their licences in support of the contention that exclusive privilege of the nature referred to above was not granted to them even though the licences were for establishing outstills in the area covered by them.
It is however not disputed that the licences were granted in Form 30 (Volume II, Part I, Bihar and Orissa, Excise Manual) on the condition that the appellants would pay to the government, in advance.
the monthly fee mentioned therein.
It is nobody 's case that the licences were cancelled or suspended under section 42 of the Act for any of the reasons mentioned in the section, or that the licences were withdrawn under section 43 so as to entitle the appellants to remission of the fee payable in respect of them or to payment of compensation in addition to such remission, or to refund of the fee paid in advance.
It is also not the case of the appellants that they surrendered their licences within the meaning of sub section (1) of section 44 so as to justify the remittance of the fee payable by them, or paid by them in advance.
In fact it has clearly been provided in sub section (2) of section 44 that the provisions of sub section (1) 'shall not apply in the case of a licence for the sale of any country liquor in the exercise of an exclusive privilege granted under section 22.
It is true that in its judgment under appeal (in Civil Appeals Nos. 824 827 of 1975) the High Court has observed that the petitioner before it was at liberty to surrender the license, but it appears that in taking that view it did not notice sub section (2) of section 44 even though it had held that what was granted was an exclusive privilege under section 22.
The licences of the appellants therefore remained in force for the periods for which they were granted and, by virtue of the express provisions of section 45, they could have no claim to compensation.
In such a situation, counsel for the appellants have placed considerable reliance on paragraph 121 of the Manual and have argued that the High Court erred in taking the view that the instructions contained in it had no statutory force and its benefit was not available to the appellants.
Reliance in this connection has been placed on Sukhdev Singh and others vs Bhagatram Sardar Singh Raghuvanshi and another(1), Laljee Dubey and others vs Union of India and others(2) Union of India vs K. P. Joseph and others(3).
(1) ; (2) (3) 39 Paragraph 121 of the Manual states, inter alia, that a person whose bid has been accepted by the presiding officer at the auction must pay the sum required on account of advance fee immediately.
It states further that the purchaser would be liable for any loss that may accrue to government in case it becomes necessary to resell the shops for a lower sum in consequence of his failure to pay the sum at the time of the sale.
Then there is the following subparagraph on which reliance has been placed by counsel for the appellants: "Deposits will be returned to a person to whom a licence may be subsequently refused because the Magistrate declines to grant him a certificate, or because he is unable to obtain suitable premises and satisfies the Collector that he has made bona fide endeavor to secure such or if a licence be refused for any other adequate reason.
" It would thus appear that the sub paragraph deals with the "deposits" made immediately on account of advance fees, the consequences of the failures to make such payment and the return of those "deposits" to the person to whom the licence may subsequently be refused because (1) the Magistrate declines to grant him a certificate or because he is unable to obtain suitable premises in spite of his bona fide endeavors or (ii) for any other adequate reason.
But it was not the case of the appellants that the licences were "subsequently refused" to them for any reason whatsoever.
So even if it were assumed, for the sake of argument, that the instructions contained in paragraph 121 were binding on the authorities concerned, that would not matter for purposes of the present controversy as it does not relate to refund of the deposits referred to in paragraph 121.
In this view of the matter, it is not necessary for us to examine here the larger question whether the instructions contained in the Manual were made under any provision of the law and created any rights in favour of persons whose bids were accepted at public auctions of the shops.
It may be mentioned that counsel for the appellants have not been able to refer to any other provision of the law under which the appellants could claim remission , of the price or the consideration for the exclusive privilege of manufacturing and selling country liquor.
It has however.
been argued that as appellant Ayodhya Prasad did not succeed in locating the outstill shop at Bharbharia in spite of his best efforts, and he was also not successful in locating it at Chittimitti, he was not liable to pay the fee.
It has been pointed that even the approval for locating the shop at Chitimitti was withdrawn by the Superintendent of Excise on October 6, 1966, and Ayodhya Prasad 's case for remitting the sum of Rs. 43,800/ was recommended by the Deputy Commissioner of Singhbhum on May 3, 1967 on the ground that he could not open the shop for reasons beyond his control.
It has therefore been urged that there was no lack of bona fides on the part of the appellant and it was a matter of no consequence that he did not surrender his licence.
It will be recalled that it was an incident of the outstill system that the holder of an outstill licence was allowed to manufacture country 4 390SCI/76 40 spirit within a "certain area" and he paid a certain sum of money per mensem for manufacturing country spirit in his outstill and "selling it by retail on his premises".
It was therefore permissible for appellant Ayodhya Prasad to locate the shop at Bharbharia or at some other suitable place within his area, with the permission of the Collector.
The notice which had been issued for the public auction is on the record and condition No. 5 thereof expressly states that the department would not be responsible for providing the place for the location of the outstill.
Moreover it was expressly stated that the outstill at Bharbharia would be settled purely as a temporary measure on condition that an undisputed site was made available for it.
There is therefore nothing wrong with the view taken by the High Court that the responsibility for finding a suitable site was of the appellant, and there is no justification for the argument that nothing was payable by him because he could not locate the shop in spite of his best efforts.
It may be that the Deputy Commissioner recommended his case for remission, but that I would not matter when the appellant was liable to pay the money under the law governing his licence.
The appellant in fact retained the 1 licence all through and continued to make the highest bids at the subsequent public auctions for the years 1967 68, 1968 69 and 1969 70 and thereby prevented others from undertaking the responsibility of establishing the outstill and paying the price admissible to the department.
As has been stated, the approval for opening the outstill shop at Chittimitti, was withdrawn on October 6, 1966, and the demand for the licence fee was made on January 9, 1967.
Even so, the appellant did not take any action to save himself from any such liability in the future and, on the other hand, went on making the highest bids in the subsequent years and incurring similar liability to pay the price even though he was not able to establish his outstill anywhere in any year.
It is therefore difficult to reject the contention in the affidavit of the respondents that there must have been some other reason for him to do so, particularly as the location of his shop was to be on the border of l the State.
It has also been contended that the High Court erred in holding that the State Government had the power to require the appellants to pay the amounts under demand as they represented consideration for the contracts.
It has been argued that this Court 's decision in Nashirvar etc.
vs State of Madhya Pradesh and others(1) and Har Shankar and others etc.
vs The Deputy Excise and Taxation Commissioner and others etc.(2) related to the Excise laws of other States and did not bear on the present controversy.
The argument is however futile for we have given our reasons for holding that what was granted to the appellants was the exclusive privilege of manufacturing and selling country liquor within the meaning of section 22(1) (d) of the Act, and it has been expressly provided in section 29 that it would be permissible for the State Government to accept payment of a sum in "consideration" of the exclusive privilege under section 22.
The decisions of this Court in Nashirwar 's case and Har Shankar 's case have set any controversy in (1) ; (2) ; 41 this respect at rest, so that it is well settled that as the State has the exclusive right and privilege of manufacturing and selling liquor, it has the power to hold a public auction for the grant of such a right or privilege and to accept the payment of a sum therefor.
It was therefore permissible for the State to frame rules for the grant of licences on payment of fees fixed by auction, for that was only a mode or medium for ascertaining the best price for the grant of the exclusive privilege of manufacturing and selling liquor.
As has been stated, Group 'B ' appeals relate to the claim for reduction of the licence fees for the liquor shops concerned.
It has been argued by counsel for the appellants that as the Collector did not discharge his duty under the instructions contained in paragraph 130 read with paragraph 93 of the Regulations, the Board acted arbitrarily in refusing the order reduction of the amounts of the fees which were the subject matter of the demands under challenge.
It has been urged that the bids were highly speculative and should have been reduced.
It has been strenuously argued on behalf of the respondent State of Bihar that the instructions contained in the Regulations were not issued under any provision of the law and could not give rise to any right in favour of the appellants.
Reference in this connection has been made to M/s Raman and Raman Ltd. vs The State of Madras and others(1) and R. Abdulla Rowther vs The State Transport Appellate Tribunal, Madras and others(2).
It has been pointed out that there are three volumes of the Bihar and Orissa Excise Manual, 1919.
It has been stated in the preface to Volume I that it is complete in itself and contains the whole of the law and the rules which have the force of law "relating to excise opium." Volume II contains the "whole of the law and the rules which have the force of law relating to excisable articles other than opium.
" It has been stated in the preface to Volume III that it consists of the Board 's "instructions with regard to excisable articles other than opium" and that references have been made to the Government Rules and the Board 's Rules having the force of law.
There is however no such reference to any rule in regard to instructions Nos. 130 and 93.
But quite apart from the question whether these instructions were legally enforceable, we have examined the question whether they could justify the argument that the appellants were entitled to reduction of the amounts of the fees payable by them.
Instruction No. 93 mentions the circumstances when it would be advisable to accept bids other than the highest.
It states that it is not an absolute rule that the highest bids must, on every occasion, be accepted.
It states further that the presiding officer at an auction "may also refuse bids which he considers to be purely speculative or which are the outcome of private enmity", and that what is desired is not the highest fee obtainable, but a fee that can fairly be paid out of the profits of a shop without recourse to malpractices.
There is there fore nothing in the rule which could be said to give rise to a right in favour of the appellants for reduction of the amounts demanded from them.
Instruction No. 130 merely states that reduction of licence (1) [1959] Supp.
(2) S.C.R. 227.
(2) A.I.R. 1959 S.C. 896.
42 fees, during the currency of a licence, can be made by the Board under section 39 of the Act.
It does not therefore advance the case of the appellants for, under that section, the Board has been given that power, "if it thinks fit", to order a reduction of the amount of fees payable in respect of a licence, "during the unexpired portion of the grant" which is not the case of the appellants.
In fact all that has been argued on behalf of the appellants is that as the instructions contained in the note appended to paragraph 130 of the Regulations have not been complied with, their legal right to claim the benefit of the note has wrongly been denied to them.
The note reads as follows, "Note ordinarily it is not the policy of Government to allow reduction in excise settlements.
The licensees to a large extent, have only themselves to thank if they exceed in their bidding the figure which should return them a reasonable profit under normal conditions, and they are not therefore entitled to any reduction of fees as of right.
The observance of this principle is the more important because it must be remembered that each remission is likely to aggravate the evil and encourage speculative bidding in the hope that should the speculation turn out a failure, Government will not insist on full payment.
A remission should not be granted merely because working at a dead loss has . been actually proved.
Each case should be dealt with on its own merits.
Where, for example, it is proved that the Collector has not fulfilled his duty in refusing to allow manifestly speculative bids and has failed to stop the bidding when a figure has been reached which, under normal conditions, might be expected to return a reasonable rate of profit to the vendor, the question would be whether the action of the Collector was so flagrantly opposed to the principles enunciated from time to time by Government as to necessitate remedial action.
Such action should not take the form of any promise of resettlement with the existing licensees.
It can only take the form of a reduction in the amount of the existing licensees.
It should not be very difficult for an officer in a contract supply area to realise the stage at which bidding becomes purely speculative.
He knows the issues of spirit during the previous year and the cost to the vendor including duty, carriage, establishment charges and the like, and should thus be able to estimate the figure beyond which a prudent man would not bid.
If after warning the bidder, that this point has been reached, the latter still wishes to take the risk no case for remission can arise.
The case is, however, different where exceptional reasons which would not at the time be.
foreseen, operate adversely to the interest of the licensee but at the same time it is not the duty of Government to safe guard licensees from the effects of their own imprudence or ignorance.
" 43 It would appear that there is nothing in the note to justify the argument that it gave rise to a right in favour of the appellants to obtain a reduction of the fees.
As has been pointed out, that was clearly a matter within the discretion of the Board of Revenue under section 39, and the wordings of the note appended to paragraph 130 could not overreach that provision of the law.
Moreover, the question whether the circumstances mentioned in the note were at all in existence in the case of the appeals under consideration, was a question of fact which could not be tried in these proceedings.
The decision in Rohtas Industries Ltd. vs section D. Agarwal and another(1) to which our attention has been invited on behalf of the appellants, can be of no avail to them.
As has been stated, the writ petition which has given rise to Civil Appeal No. 1105 of 1975 raised the question whether the refund of fees claimed by the appellant was permissible on the ground that there was no quid pro quo for the same.
The High Court has rightly rejected that contention for the reason that the amounts in question were payable for the licences which had been granted for the exclusive privilege in question and, as has been shown, that argument is no longer available to the appellant in view of this Court 's decisions in Nashirwar 's case (supra) and Har Shankar 's case (supra).
There is thus no force in all these appeals and they are hereby dismissed with costs.
It is however ordered that, as has been agreed by the Advocate General the authorities concerned would recover the amounts in question in instalments spreading over a period of three years in case of those appellants who are able to furnish security for payment within that period.
P.B.R. Appeals dismissed.

dataset_name: IN-Abs

summary:
Under the Bihar & Orissa Excise Act the holder of an outstill licence for country liquor pays a certain sum per mensem for manufacturing country spirit in his outstill and selling it by retail in his premises.
No definite area is fixed within which each outstill has the monopoly to supply country spirit but their number is regulated according to rules and five miles is taken as the minimum distance between one outstill and another.
The appellants in all the appeals were the holders of licences for the manufacturing and sale of country liquor.
In the first batch of cases the appellant could not open the outsill even after more than six months of its grant despite his best efforts.
The approval for opening the outstill was withdrawn and he was asked to pay the monthly licence fee according to the terms of licence.
The appellant 's claim for refund of the money deposited by him, together with compensation for loss of anticipated profits and damages, was rejected.
Despite this the appellant continued to bid for licences during the subsequent three years and claimed refund and damages, which claim was rejected by the authorities.
In the second batch of appeals the appellants claimed reduction of the licence fee for outstill liquor shops on the ground that they incurred losses because of the speculative bids at the auction should have been prevented by the authorities.
In the third batch of cases the appellants claimed refund of sums realised from them on the ground that there was no quid pro quo for the fees.
In all the cases the High Court dismissed their writ petitions.
On appeal it was contended that the High Court was wrong in holding that exclusive privilege had been granted under section 22 of the Bihar & Orissa Excise Act, 1915 but that the licences fell within the purview of section 30 of the Act.
Dismissing the appeals, ^ HELD: (1) It is futile to contend that the licences were merely licences for the retail sale of spirit for consumption on the vendor 's premises within the meaning of section 30 of the Act.
The essential feature of the outstill system is that the holder of a licence acquires the right to manufacture country spirit in his outstill and sell it by retail "in his premises" without any 'restriction on the strength or prices at which the spirit is manufactured or sold.
He has a monopoly of manufacturing and supplying country liquor within his area.
The right is, therefore, an exclusive privilege within the meaning of section 22(1)(d) of the Act.
[38A C] (2) The licences of the appellants remained in force for the purposes for which they were granted and by virtue of the express provisions of section 45 they could have no claim to compensation.
[38 G] (3) Even though the High Court has held that what was granted was an exclusive privilege under section 22, it did not notice section 44(2) while taking the view that the petitioner was at liberty to surrender the licence.
Section 44(2) clearly provides that sub section
(1) of that section shall not apply in the case of a licence for the sale of any country liquor in exercise of an exclusive privilege granted under section 22(c).
[38 F G] (4) There is nothing wrong in the view taken by the High Court that the responsibility for finding a suitable site was that of the appellant.
There is no 35 justification for the argument that nothing was payable by the appellant because he could not locate the shop in spite of his best efforts.
The appellants retained the licence all through and continued to make higher bids at the subsequent public auctions thereby preventing others from undertaking the responsibility of establishing the outstills.
[40 B D] (5) It was permissible for the State to frame rules for the grant of licences on payment of fees fixed by auction, for that was only a mode or medium for ascertaining the best price for the grant of exclusive privilege of manufacturing and selling liquor.
[41 A 13] Nashirwar etc.
vs State of Madhya Pradesh & Ors.
; and Har Shankar & ors.
vs The Deputy Excise & Taxation Commissioner & Ors. etc. ; explained.
(6) In the second group of appeals, there is nothing in the rules which could be said to give rise to a right in favour of the appellants for reduction of the amounts demanded from them.
[43 A B] (7) Id the third group of appeals the High Court was right in holding that the amounts in question were payable for the licence which had been granted for the exclusive privilege.
The argument that there should be refund of fees because there was no quid pro quo is no longer available to the appellants in view of this Court 's decision in Nashirwar 's case and Har Shankar 's case.
[43 C D]