1. This petition under Article 226 of the Constitution impugns the proceedings for realisation of the fees due under the excise contracts.
2. In a public auction held on 18-11-1951 the petitioner's bids for the liquor shops in villages Baskepi, Nawadih Kalan and Chando, tahsil Samri, district Surguja, were accepted by the Deputy Commissioner, Surguja, respondent 2, and he was granted the necessary licenses in Form No. C.S 1. The licenses were for the year 1952 and were taken respectively for Rs. 6,000/-, Rs. 7,300/- and Rs. 7,950/-, total Rs. 21,250/-. Out of these amounts the petitioner paid Rs. 6,400/- in advance. At the time of the grant of the licenses the petitioner was not informed that there was any likelihood of the temperance movement being started in the areas covered by the shops. However, soon after wards a vigorous temperance movement was started by one Shrimati Rajmohni Debi which considerably affected the sale of liquor in the said areas. Accordingly, the petitioner made several representations to the Deputy Commissioner, respondent 2, and the State Government, respondent 1, to reduce the license fees or alternatively to accept the surrender of the licenses.
3. It is alleged by the petitioner that, according to his information, the Excise Commissioner, Madhya Pradesh, respondent 4, sanctioned the remission of the license fees, but his orders were cancelled by the State Government which directed the termination of the contracts and reauctioning of the shops. In the meantime proceedings for recovery of the balance of the license fees were started against the petitioner by the Tahsildar of Samri tahsil, respondent 3, who realised an amount of Rs. 11,489/- in all through coercive processes. Ultimately the State Government agreed to remit a sum of Rs. 2,000/- on condition that the petitioner paid the balance by 31-3-1954. The validity of the coercive measures taken by the Tahsildar is impugned in the instant proceedings.
4. The grounds urged by the petitioner are summarised below:
(i) That the provisions in the C.P and Berar Excise Act, 1915, authorising the recovery of the License fee as an arrear of land revenue are repugnant to Article 14 of the Constitution.
(ii) That the contracts in question became void on the doctrine of frustration and could not accordingly be enforced.
(iii) That the contracts were broken by the State Government in that it sponsored the temperance movement which affected the sales, and consequently no coercive measures could be taken to realise the license fees.
(iv) That the State Government acted illegally in setting aside the orders of the Excise Commissioner and directing payment of the license fees by 31-3-1954.
(v) That the Deputy Commissioner failed to exercise the jurisdiction vested in him under Section 32 of the C.P and Berar Excise Act to make the necessary remission.
5. Point (i): Article 14 of the Constitution is in these terms:
“The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.”
6. The term ‘the State’ has been defined in Article 12 and includes the Government and the Legislature of each of the States. Article 14, therefore, in effect, enjoins on the Legislature of each of the States not to pass laws which discriminate between one person and another without any reasonable classification, and prohibits the Government of the State from enforcing such laws. However, the article makes a distinction between ‘the State’ and ‘person’ & whereas the duty to guarantee equal protection of the laws is cast on the State, the discrimination which it inhibits is between persons ‘inter se’ Where, therefore, the State, acting as such, reserves to itself certain rights which are denied to other persons in similar circumstances, Article 14 of the Constitution is not infringed. See — ‘Amraoti Electric Supply Co. Ltd. v. N.H Mujumdar’, AIR 1953 Nag 35 (A). It, therefore, follows that Article 14 can be availed of only when the State enters on a commercial venture not pertaining to its ordinary functions of government and thereby places itself in the position of a ‘person’.
7. This question has been elaborately discussed by the Full Bench of the Allahabad High Court in — ‘Moti Lal v. Government of the State of Uttar Pradesh’, AIR 1951 All 257 (FB) (B). While holding that the word ‘person’ is wider in import than the word ‘citizen’ and includes bodies corporate, their Lordships have made their own observations as to when the activities of the State are hit by Article 14. Commenting on this question Malik, C.J, has observed:
“Where a business is carried on by the Government as incidental to its ordinary functions as such, there can be no doubt that Article 14 cannot be relied on in support of the argument that the State should be put on the same footing ‘qua’ that business as any private citizen. It cannot be seriously urged that a citizen can claim that he must be given the same rights, as the State has to be given for carrying on its functions as such.” (P. 271).
8. Mootham and Wanchoo, JJ., discussing this point, have stated their opinion in these terms:
‘It appears to us that when the State engages in business or commerce such as is carried on by a private individual or corporation it must subject itself to the same obligations as are imposed on, and place itself in the same position as a private individual or corporation except in the matter of taxation. In our opinion the State cannot, when it engages in business or commerce deny equality before the law or the equal protection of the laws to other persons as against itself.” (P. 282).
9. Speaking on this point Sapru, J. has expressed himself thus:
“……the position of the State as a ‘great juristic person’ is not identical with that of a juristic person in all respects. At the same time it is further clear that when the State engages itself in a commercial undertaking, trade or business, or enters into a contract, it is acting, to use the language of Prof. Holland, as a ‘quasi-private juristic person’, who should have in that sphere of business no more rights than any other private citizens.” (P. 305).
10. So far as Agarwala, J. is concerned, although he begins by saying categorically:
“That the State itself is a ‘person’ can admit of no doubt. The State is a juristic corporation having a personality of its own.” (P. 326).
11. He has ultimately summarised his opinion as below:
“In my judgment when the State itself descends-into the arena of competition with private persons, it must compete with them on equal terms, and not claim preferential treatment.” (P. 326).
12. The import and scope of the above observations, strictly speaking, are not the same. There is even difference of opinion among their Lordships, regarding the scope of the word ‘person’ in Article 14, and, as would appear from the observations of Agarwala, J. quoted above, even the State, in his opinion is included within that expression. If this view is carried to its logical conclusion, any activities of the State, whether pertaining to its ordinary functions of government or not, would have to be thrown open equally to all, which would militate-against Article 12 of the Constitution. Nor does it appear that the definition of the State as a ‘great juristic person’ can take it out of the ambit of Article 14 which does not distinguish between the different categories of persons. It appears to us that the word ‘the State’ is used in Article 14 in the special sense understood in Article 12, which takes it out of the category of the word ‘person’. It is only when the State engages in any activity which is outside the scope of its ordinary functions of government that the question of its being categorised as a ‘person’ for purposes of Article 14 can arise.
13. Clause (2) of Article 289 of the Constitution contemplates that the State may engage in any trade or business. When it does so, the Union may impose or authorise the imposition of any tax to such extent as Parliament may by law provide. Clause (3) contemplates that any trade or business may be incidental to the ordinary functions of government. When the State engages in any such trade or business, the income or profits thereof are immune from taxation. This clause does not mean that the State cannot engage in such trade or business unless sanctioned by an Act of Parliament. All that it means is that if Parliament by law declares any such trade or business to be incidental to the ordinary functions of government, it shall not be liable to be taxed by the Union. It appears to us evident that any trade or-business or any class of trade or business, which the State undertakes as incidental to the ordinary functions of government, cannot be dissociated from those functions and would not, therefore, constitute the State a ‘person’ as understood in Article 14. In a case of this kind the State does not lose its character as such for it is in furtherance of its functions of government that it engages in any such commercial enterprise. With respect, therefore, we think that the observations of Malik, C.J, quoted above, correctly represent the position obtaining under Article 14.
14. Nor do we think that the State would be subject to Article 14 solely because it enters into a contract. Contracts are incidental to a trade or business. If, therefore, by engaging in a trade or business the State does not come within the mischief of Article 14, the mere fact that it has entered into a contract as an incidence of such trade or business would not bring the matter within its scope. In respect of contracts also, therefore, the test is that they would be excluded from the operation of Article 14 if they are incidental to the ordinary functions of government.
15. There can be no doubt that regulation of sale of excisable articles and realisation of fees in respect thereof is one of the normal functions of the State. The Government of India Act, 1935, Sch. 7, Item 40 of List II, i.e Provincial Legislative List, relates to duty on goods including alcoholic liquors for human consumption and Item 54 relates to fees in respect of these goods. Corresponding items in the State List, List II of Sch. 7 of the Constitution of India are 51 and 66. These lists provide the subjects on which the Legislature of the State is free to enact laws and indicate the ordinary functions of government that the State can exercise. It is, therefore, clear that when the State gives a licence for sale of liquor for consideration under the provisions of a statute, it is only performing its ordinary function of government and cannot be said to be a ‘person’ within the meaning of Article 14. The only question that arises in this connection is whether on account of the State reserving certain rights which are denied to the other party to the contract, the matter is brought within the mischief of Article 19(5) of the Constitution.
16. Section 64 of the C.P and Berar Excise Act, 1915 provides that all excise-revenue and all amounts I due to the Government by any person on account of any contract relating to the excise-revenue
“may be recovered from the person primarily liable to pay the same, or from his surety (if any), by distress and sale of his movable property, or by any there process for the recovery of land-revenue due from land-holders or from farmers of land or their sureties.”
17. Section 225 of the C.P Land Revenue Act, 1917, provides that
“all sums declared by this Act, or any other enactment for the time being in force to be recoverable in the same manner as an arrear of land-revenue” may be “recovered under this Act in the same manner as an arrear of land-revenue”. These provisions empower the State to realise the money due on a contract relating to the excise revenue, directly by the use of the coercive processes enumerated in Section 128 of the C.P Land Revenue Act. On the other hand, S. 155 gives a chance to the other party to make payment under protest and institute a civil suit for the recovery of the amount so paid on the ground that nothing was due or that the amount due was less than the amount for which the proceedings were taken. However, besides this express remedy provided in the C.P Land Revenue Act, there is no bar either in that Act or in the C.P and Berar Excise Act to the institution of a suit earlier to establish one's claim against the State in respect of any set-off or damages for breach of the contract, or for a declaration that the contract has, for any reason recognised by law, become void or unenforceable. The only disparity between the State and a private party in this regard is that whereas the former, in a case of dispute, is not liable to institute a suit for determination of the amount due before issuing coercive processes for its realisation, the latter is required to have recourse to a Court of law to establish his own rights as against the State. This discrimination, however, is not unreasonable, keeping in view the heavy responsibility of the State for carrying on administration for which purpose the revenues must be readily realisable. We are not, therefore, inclined to agree that the coercive processes issued against the petitioner offend against either Article 14 or Article 19(5) of the Constitution.
18. Points (ii) and (iii): The answer to these points would depend upon the determination of facts which form the basis of the cause of action. This is a matter within the province of the ordinary civil Courts. In the circumstances of the case, we are not prepared to hold that simply because the State Government has not filed a return, it should be deemed to have admitted all the facts alleged by the petitioner. The petitioner cannot turn this, Court acting under the extraordinary jurisdiction conferred by Article 226 of the Constitution into ordinary Court of the land to determine civil disputes. As already observed above, the door to civil litigation is open to the petitioner to enforce his legal claims, if any. These points do not, therefore, arise in these proceedings for determination.
19. Point (iv): Whether or not the Excise Commissioner had sanctioned the remission of the remaining amount of the license fees is not duly established in the case. The petitioner himself has no personal knowledge in the matter. It also appears that the orders, if actually passed, would have been duly communicated to him. As it is not established that action was taken by the Excise Commissioner in accordance with the proviso to sub-section (1), Section 33 of the C.P and Berar Excise Act, no question arises as to whether the State Government had the power under law to override his orders.
20. Point (v): The intimation that was given by the petitioner to the Deputy Commissioner was for reducing the amount of the license fees or to accept the surrender of the licenses. (See para. 8 of the petition). Section 32 of the C.P and Berar Excise Act does not contemplate an application to the Deputy Commissioner for this purpose. It provides for withdrawal of the license and consequent remission of the fee. That is, however, a different matter and does not cover the case of a surrender which the Excise Commissioner is entided to deal with under the proviso to sub-s. (1) of S. 33. For that purpose the petitioner is required to send one month's notice to the Collector of his intention to surrender the license and to pay the fee payable for the license for the remainder of the period for which it would have been current but for such surrender. It is not alleged in the petition that such an action was taken by the petitioner at any time. There is, therefore, no question of the Deputy Commissioner refusing to exercise the jurisdiction vesting in him under S. 32. The result is that the petition fails and is dismissed. In the circurnstances of the case, however, there shall be no order as to costs. The outstanding amount of the security shall be refunded to the petitioner.
21. Petition dismissed.