State Of Madhya Pradesh v. Board Of Revenue, M.P.And Another

Dixit C. J.:-

This is an application under Articles 226 and 227 of the Constitution by the State of Madhya Pradesh for quashing a decision, dated 27th April 1963 of the Board of Revenue setting aside an order of the Excise Commissioner by which he refused to confirm the bid of Rs. 35,001 offered by the respondent No. 2, Mishrilal, at an auction sale of a liquor shop at Shivpuri, and directed a re-auction of the shop. While setting aside the order of the Excise Commissioner, the Board of Revenue directed the Commissioner to give an opportunity of hearing to the respondent Mishrilal before taking any decision whether the sale in favour of the respondent Mishrilal should or should not be confirmed.

2. The material facts are that the auction of liquor shops of Shivpuri city was held by the Collector and the District Excise Officer on 4th and 5th February 1963. The auction sale was subject to the conditions which were actually read out at the time of the auction and made known to all the bidders present at the auction. In the notification, which was issued by the Excise Commissioner publicising the dates of the auction of the shops for the year 1963-64 at Shivpuri, it was specifically mentioned that the auction would be subject to the sanction of the Excise Commissioner if the bid offered in respect of a shop exceeded Rs. 30,000 or if a shop fetched in the previous year a licence fee exceeding that amount. As the bid made by Mishrilal exceeded Rs. 30,000, the auction sale papers were submitted to the Excise Commissioner by the District Excise Officer, Shivptiri, along with the recommendation of the Collector. The Collector gave the opinion that the respondent Mishrilal's bid should not be accepted as his conduct as excise contractor in 1962-63 was not satisfactory and his bid, though highest at the auction held on 4th-5th February 1963, was low and that if the liquor shop were to be re-auctioned it was bound to fetch a higher price. The Excise Commissioner, in the light of the report made by the Collector and after comparing the sale price obtained for the shop in question during the previous years, came to the conclusion that the respondent Mishrilal's bid should not be accepted and that the shop should be re-auctioned. Mishrilal then preferred an appeal before the Board of Revenue against the order of the Excise Commissioner refusing to confirm the sale in his favour.

3. The learned President of the Board of Revenue, relying on Nanhibai v. Excise Commr., 1963 MPLJ 526=AIR 1963 M P 352 held that the auction sale was subject to the sanction of the Excise Commissioner when the petitioner's bid exceeded Rs. 30,000, and that it was no doubt within the power of the Excise Commissioner to accept or refuse to accept the bid offered by Mishrilal. He, however, held that the order of the Excise Commissioner refusing to confirm the sale in favour of the respondent No. 2 and directing a fresh auction was vitiated for the reason that the said respondent had not been heard by the Excise Commissioner before making the order that he did. In support of this conclusion, the learned President relied on the decisions of the Supreme Court in Board of High School v, Ghanshyam, AIR 1962 S C 1110 and Union of India v. T. R. Verma, AIR 1957 S C 882 and a decision of this Court in Dattatraya v. J. S. Burhanpur, 1961 MPLJ 915.

4. Shri Bhave, learned Government Advocate for the State, contended that in considering the question whether an excise auction sale which required sanction should or should not be confirmed, the Excise Commissioner was not under any obligation to act judicially or quasi-judicially at any stage; that the question of confirmation of sale or refusal to confirm an order of auction of a liquor shop was purely an administrative matter; that the order of the Excise Commissioner refusing to accept the bid offered by the respondent Mishrilal and directing re-auction of the liquor shop was thus an administrative order; and that being so, the Excise Commissioner was not bound to give a hearing to the respondent No. 2 before passing an order rejecting his bid and directing a re-auction of the excise shop. On the other hand, Shri Deoras, learned counsel appearing for the respondent Mishrilal, relying on certain observations of the Supreme Court in Roshanlal v. Ishwar Dass, AIR 1962 S C 646. Udit Narain Singh v. Board of Revenue, AIR 1963 S C 786 and the decision in Board of High School v. Ghanshyam, AIR 1962 S C 1110 submitted that in deciding the question of acceptance or refusal of a bid made at an auction, exceeding the limit of Rs. 30,000 the Excise Commissioner discharged a quasi-judicial function and that, therefore, on the principles of natural justice the respondent Mishrilal was entitled to be heard before the Excise Commissioner made the order of rejecting his bid.

5. In our judgment, the contention advanced on behalf of the petitioner-State must be given effect to. It is well settled that the rule of natural justice that a person whose rights are sought to be affected by any action is entitled to a notice and a hearing is attracted only where the authority making the order acts judicially or quasi-judicially. There is no obligation to hear the party unless the function is first held to be judicial or quasi-judicial. Again, this rule about hearing does not apply where the power to make the order is exercised sub­jectively. In Kishan Chand v. Commr. of Police, AIR 1961 S C 705 the Supreme Court referred to Express Newspaper Ltd. v. Union of India, AIR 1968 S C 578 and pointed out that-

"The compulsion of hearing before passing the order implied in the maxim 'audi alteram partem' applies only to judicial or quasi-judicial proceedings."

In the same case, it was also held that no hearing was required to be given to a party before the making of an order if the making of the order depended upon the exercise of the discretion of the authority and on its subjective satisfaction.

6. The sole question, therefore, that arises for determination is whether in discharging his function of according or refusing sanction to a bid at an auction sale of a liquor shop which required his sanction, the Excise Commissioner acts in a judicial or quasi-judicial capacity or only functions as an administrative authority. That in that capacity he does not function judicially is clear enough-Now, the Supreme Court indicated in Board of High School v. Ghanshyam, AIR 1962 S C 1110 the test to be applied and the matters to be taken into consideration in determining whether in taking a certain action the authority discharges judicial or quasi-judicial duties or merely administrative functions. In that case, a reference was first made to the following principles summarised by Das J. (as he then was) in Province of Bombay v. Khushaldas, AIR 1950 S C 222 = 1950 SC R 621 at page 725- "The principles, as I apprehend them are:

(i) that if a statute empowers an authority, not being a Court in the ordinary sense, to decide disputes arising out of a claim made by one party under the statute which claim is opposed by another party and to determine the respective rights of the contesting parties who are opposed to each other, there is a lit and prima facie and in the absence of anything in the statute to the contrary it is the duty of the authority to act judicially and the decision of the authority is a quasi-judicial act; and

(ii) that if a statutory authority has power to do any act which will prejudicially affect the subject, then, although there are not two parties apart from the authority and the contest is between the authority proposing to do the act and the subject opposing it, the final determination of the authority will yet be a quasi-judicial act provided the authority is required by the statute to act judicially.

In other words, while the presence of two parties besides the deciding authority will prima facie and in the absence of any other factor impose upon the authority the duty to act judicially, the absence of two such parties is not decisive in taking the act of the authority out of the category of quasi-judicial act if the authority is nevertheless required by the statute to act judicially."

It was then observed that-

"These principles have been acted upon by this Court in later cases; see Nagendra Nath v. Commissioner of Hills Division, AIR 1958 S C 398= 1958 SCR 1240. Radheshyam Khare v. State of Madhya Pradesh, 1959 MPLJ 185= AIR 1959 S C 107= 1959 SCR 1440. O. Nageswara Rao v. Andhra Pradesh State Road Transport Corporation, AIR 1959 S C 308 = 1959 Supp. (1) S C R 319 and Shivji Nattmbhai v. Union of India, 1960 MPLJ 516= AIR 1960 S C 606= 1960 (2) S C R 775. Now it may be mentioned that the statute is not likely to provide in so many words that the authority passing the order is required to act judicially; that can only be inferred from the express provisions of the statute in the first instance in each case and no one circumstance alone will be determinative of the question whether the authority set up by the statute has the duty to act judicially or not. The inference whether the authority acting under a statute where it is silent has the duty to act judicially will depend on the express provisions of the statute read along with the nature of the rights affected, the manner of the disposal provided, the objective criterion if any to be adopted, the effect of the decision on the person affected and other indicia afforded by the statute. A duty to act judicially may arise in widely different circum­stances which it will be impossible and indeed inadvisable to attempt to define exhaustively; [vide observations of Parker J., in R. v. Manchester Legal Aid Committee, (1952) 2 Q B 413.]."

The same, principles were reiterated in Board of Revenue v. Vidyaivati, AIR 1962 S C 1217. It is plain from the observations made by the Supreme Court in these two cases -decided in 1962, and the case of Khushaldas, AIR 1950 S C 222=1950 SCR 621 that the question whether the authority concerned is required to act judicially or quasi-judicially must in the first instance be determined from the express provisions of the Act under which it functions; that if the provisions of the Act are silent, then the question whether the authority is required to act judicially must be determined on a consideration of the provisions of the Act and the cumulative effect of the nature of the rights affected, manner of disposal provided and the objective criterion to be adopted. The final determination of the authority, as pointed out in Khushaldas' case, AIR 1950 S C 222=1950 SCR 621 cannot be regarded as a quasi-judicial act unless the authority is required by the statute to act judicially or quasi-judicially. The Supreme Court cases also make it clear that if the authority is not required to decide the matter before it objectively on the basis of the material before it, but subjectively, then it cannot be held to be a quasi-judicial authority.

7. This Court also pointed out the distinction between a quasi-judicial and administrative decision in Moti Miyan v. Commissioner, Indore Division, 1960 MPLJ 100. It was held in that case that -

"......a quasi-judicial decision is nothing but an administrative decision, some stage or some element of which possesses judicial characteristics. The decision, whether quasi-judicial or administrative, is taken by the competent authority in the exercise of its discretion. But the distinguishing feature of the two kinds of acts is the mode or manner in which the opinion on the basis of which the act is done by the authority in the exercise of its discretion is formed. The decision would be quasi-judicial if in reaching that decision the authority is required first to ascertain certain facts by means of evidence and is then free to take such action as it may think fit on the facts so ascertained. In such a case the authority must consider the representations and objections of the parties affected and give them an opportunity to adduce and examine the evidence. On the other hand, the decision would be purely administrative if in taking that decision the authority is free to base its opinion on whatever material it thinks fit and howsoever obtained in the course of its executive functions or derived from the evidence at an enquiry, if there is any. One must, therefore, look to the particular provisions of the statute in order to determine the question whether the authority acting under those provisions acts in an administrative or a quasi-judicial capacity."

8. Applying these tests here, it is evident that the decision of the Excise Commissioner about the confirmation or refusal to confirm an auction sale is purely an administrative decision. There is no indication either in the Madhya Pradesh Excise Act, 1915, or the Rules made thereunder that the Excise Commissioner should base his decision to confirm or refuse to confirm an auction sale on the material or evidence obtained in a particular manner and after hearing the representation of the person concerned. In considering the question of the confirmation of the auction bid, the Excise Commissioner can base his decision on whatever material he thinks fit and howsoever obtained in the course of his executive functions. In its very nature, the question whether a bid made by a person at an auction sale exceeding the limit of Rs. 30,000 should or should not be accepted has to be determined from the point of view of policy and expediency, and on considerations such as whether the person making the bid will be able to fulfil the contract and whether there was a likelihood of a higher price still being obtained at a re-auction. The order of the Excise Commissioner refusing to confirm sale may be appealable to the Board of Revenue. But from the mere fact that an appeal from an order of the Excise Commissioner refusing to confirm a sale is permissible, it does not follow that in making the order refusing to confirm the sale the Excise Commissioner discharged a quasi-judicial function. As pointed out in the case of Moti Miyan, 1960 MPLJ 100

"It is entirely erroneous to think that an order is quasi-judicial because it can be reviewed or is appealable. An administrative order can be subject to review or appeal by an administrative authority in much the same way as a judicial order is by the judicial authorities. The nature of an order, which is purely administrative, and of the proceeding leading to it, is not changed when it comes up before the reviewing or the appellate authority. It is well settled that the functions and powers of the reviewing or the appellate authority can at the most be only those which the authority passing the order sought to be reviewed or appealed from would have itself exercised. The reviewing or the appellate authority would generally be guided by principles which should in its opinion have governed the proceedings under review or appeal"

. This view is fully supported by the decision in R. v. Archbishop of Canterbury, 1943 (2) All ER 791 which was affirmed in appeal in R. v. Archbishop of Canterbury, 1944 (1) All E R 179. The Excise Commissioner has to decide the question of confirmation of a sale in his discretion. No doubt, he has to exercise his discretion reasonably. But that does not mean that there is a duty cast on him to act judicially. In Kishan Chand v. Commr. of Police, AIR 1961 SC 705 while consider­ing the question whether in making an order under section 39 of the Calcutta Police Act, 1866, refusing to grant a licence for running an eating house the Commissioner of Police acted quasi-judicially, it was held by the Supreme Court-

The section appears in the Police Act, which deals generally with matters of law and order and the two objects specified in the section are also for the same purpose. The dis­cretion is vested in a high police officer who, one would expect, would use it reasonably. There is no provision for appeal and there is no lis as between the person applying for a licence and the Commissioner; the exercise of the discretion depends upon the subjective satisfaction of the Commissioner as to whether the person applying for a licence satisfies the three conditions mentioned above. It is true that the order when made one way or the other affects the fundamental right of carrying on trade, but in the circumstances it cannot but be an administrative order [see, Nogendra Nath Bora v. The Commissioner of Hills Division and Appeals, Assam, AIR 1958 S C 398 at p. 406= 1958 SCR 1240 at p. 1253.], and though the Commissioner is expected to act reasonably there is no duty cast on him to act judicially. In Nakkuda Ali v. M. F. De S. Jayaratne, 1951 A C 66 the Privy Council pointed out that it was quite possible to act reasonably without necessarily acting judicially and that it was a long step in the argument to say that because a man is expected to act reasonably he cannot do so without a course of conduct analogous to the judicial process. "The compulsion of hearing before passing the order implied in the maxim 'audi alteram partem' applies only to judicial or quasi-judicial proceedings."

It was held by the Supreme Court that the order made by the Commissioner of Police under section 39 of the Calcutta Police Act was an administrative and not a judicial or quasi-judicial order. Here also, the Excise Commissioner, when he makes an order confirming or refusing to confirm an auction sale, acts in his dis­cretion and bases his decision on his subjective satisfaction. Therefore, when he refused to confirm the sale in favour of the respondent Mishrilal and ordered a fresh auction he discharged an administrative function. That being so, the respondent No. 2 could not claim a right of hearing by the Commissioner before the making of the order against him.

9. The cases relied on by the Board of Revenue are all cases in which the statutes under which the authorities in those cases functioned required them to act judicially. It was because they were required so to act, that it was held that the persons affected by the orders made by those authorities were entitled to a hearing. The learned President of the Board of Revenue thought that the rule of natural justice of giving a hearing was attracted as the Excise Commis­sioner's order affected the right of the respondent Mishrilal. But the fact that the order made by the Excise Commissioner affected the rights of the respondent No. 2 was in itself not sufficient for the acceptance of the claim of the said respondent that he was entitled to a hearing before the making of that order. The respondent could not claim any hearing unless the Excise Commissioner was held to be acting quasi-judicial in making the order that he did, and he clearly did not act in that manner when, as pointed out earlier, the excise act or the rules thereunder did not cast any duty on him to act quasi-judicial in the matter of confirmation or refusal of confirmation of the sale and when the decision to refuse to confirm the sale was one taken in his discretion and based on his subjective satisfaction as to the policy and expediency in accepting the bid offered by the respondent.

10. The decisions cited by the learned counsel for the respondent Mishrilal do not support his contention that the order passed by the Excise Commissioner refusing to confirm the sale and directing a fresh auction was a quasi-judicial order. In Udit Narain Singh v. Board of Revenue, AIR 1963 SC 786 the only question that was decided was with regard to the necessary parties in proceedings for the issue of a writ of certiorari. In that case, no observation is to be found supporting the contention put forward on behalf of the respondent Mishrilal. The case of Roshan lal v, Ishwar Dass, AIR 1962 SC 646 in which some observations with regard to the scope and applicability of the rules of natural justice were made, was again a case where the authority, namely, the Rent Controller, under the Delhi and Ajmer-Merwara Rent Control Act, 1947, was required by that statute to act judicially in making certain orders. That case has clearly no applicability here. In our opinion, the view of the Board of Revenue that the respondent Mishrilal was entitled to hearing by the Excise Commissioner before the making of an order refusing to confirm the sale in his favour cannot be upheld.

11. Learned counsel for the respondent Mishrilal also raised the objection that the State was not competent to file this petition assailing the decision of the Board of Revenue inasmuch as the decision of the Board was a decision of the State Government itself and that the Board of Revenue heard and decided the appeal which the respondent Mishrilal filed, under the powers delegated to it by the Government to hear appeals. The short answer to this contention is that the appeal which the said respondent filed was under rule II (c) of the Rules framed under section 62 (2) (c) of the Excise Act, 1915, to the Chief Revenue Authority and not to the Government. According to the definition of the expression "Chief Revenue Authority" given in section 2 (3) of the M. P. Excise Act, 1915, Chief Revenue Authority means the authority declared by the State Government to be the Chief Revenue Authority for the purposes of the Act. It is thus clear that the appeal which the Board of Revenue heard was not any appeal to the Government which the Board heard in the exercise of any powers delegated to it by the Government. It was also said that the State Government had no right to file this petition when after the impugned decision of the Board of Revenue the Excise Commissioner did issue a notice to the respondent Mishrilal to show cause why the sale in his favour should be confirmed. There is no force in this objection. The Excise Commissioner did issue a notice to the said respondent. But thereafter he did not make any order confirming the sale. It is difficult to see how the State lost its right of assailing the decision of the Board of Revenue merely because the Excise Commissioner issued a notice to the respondent Mishrilal. Indeed, if this contention of the respondent were to be accepted, it would mean that a party loses his right of questioning the correctness of a decision made by a Court, authority or tribunal the moment he chooses to obey it for the time being. There is no warrant for any such proposition.

12. For all these reasons, our conclusion is that the respondent No. 2, Mishrilal, was not entitled to a hearing by the Excise Commissioner before the making of an order by the Commissioner refusing to confirm the sale in his favour. The result is that this petition is allowed and the decision of the Board of Revenue, dated 27th April 1963, is quashed by the issue of writ of certiorari. In the circumstances of the case, we make no order as to costs. The outstanding amount of the security deposit shall be refunded to the petitioner.

Petition allowed.