K. N. Guruswamy v. The State of Mysore and Others.

Bese J. The notification containing the Rules is headed- " ...... the Government of His Highness the Maharaja of Mysore are pleased to frame the following rules to regulate the disposal of the privilege of retail vend of intoxicating liquors ...... "

Then comes Rules I. I. lt runs- "The privilege of retail vend of excisable articles shall be disposed of either by auctio11 or by such other method as may be notified by Government."

J Rule I. 2. is also relevant. It says- "In cases where the right of retail vend is permit-ted by Government to be disposed of by calling for tenders, a notification calling for the same shall be pub-lished by the Excise Commissioner in tliree successive issues of the Mysore Gazette, after obtaining the pre-vious approval of the Government therefor."

Then follow a series of rules about auctions. Out of .them, Rule U. 8 is all we need note. It runs- "The shops will be knocked down to the highest bidder, but the sale will be subject to formal confirma-tion by the Deputy Commissioner, who shall be at liberty to accept or reject any bid at his discretion. Such formal confirmation will be tantamount to an acceptance of the bid unless revised by the Excise Commissioner for special reasons .......... ".

Finally, we come to Rule II. 10. It is as follows : "Shops remaining unsold at the first auction or shops, the sales of which have not been confirmed but cancelled, will ordinarily be disposed of by re-auction or by tender or otherwise at the discretion of the Deputy Commissioner later on."

This Court had occasion to observe in State of Assam ·""'- v. Othlr1(• )-a fisheries case ....

Ke1h1Zb Prasad Singh and -that the sale of these licences forms such a lucrative

·(t) Civil Appeal Ne. or 176 of 195•.

source of revenue that State Legislatures have deemed 1954-it wise not to leave the matter to unfettered executive K. N. Guruswsmy.· discretion ; accordingly legislation has been enacted in v. most parts of India to regulate and control the licens-Thi Stal' of Alyson ana ing of these trades ; Acts are passed and elaborate Othm. Rules are drawn up under them. It is evident that Bose J. there is a policy and a purpose behind it all and it is equally evident that the fetters imposed by legislation cannot be brushed -aside at the pleasure of either Government or its officers. The Rules bind State and ..... subject alike.

The Act and the Rules make it plain that liquor licensing in the State of Mysore can only be done in certain specified ways and such discretion as is left to the authorities is strictly controlled by Statute and Rule.

Rule I. 1 gives two options : the licences must either be sold by auction or "by such other method as may be notified by Government". It is not by such other method as may be desired by Government or thought · fit by it but by such other method as may be notified.

The notification is of the essence, and for good reason :

these are matters of public concern and of importance to the State because of the revenue reaped. It is necessary therefore that all and sundry should know what is what by public notification in the Gazette and it is important that this should not be left to o:rbitrary executive pleasure.

Rule I. 2 indicates one of the many shapes the "otherwise" can take : one of the "otherwise" methods can be by calling for tenders. But if that is selected, then a further fetter is forged. There must be a public call for the tenders by publication in. no less than three successive issues of the Mysore Gazette, and more, the approval of the Government must first be obtained.

The careful elaboration of this Rl.Jle precludes us from holding that it can be by-passed or ignored at the will and pleasure of an executive officer.

But the authorities are not tied down to the method of auction and tender ; that may be undesirable for a variety of reasons, the urgency of the situation being 1954 one of them ; nor are they bound to follow Rule I. 2 as .K. N. Guruswami an alternative. They have a discretion under Rule I. 1

v. and can act "otherwise". But if they wish to do that, Tht State ef Mysore and then it is essential that due notice and publicity be

Others. given of the "otherwise" method in a Government Bose J. notification as Rule I. 1 directs. The Gazette is issued

every week and where necessary a special edition of the Gazette can be issued at a day's notice, so the urgency of the matter is no real reason for by-passing the Rules. What the Legislature has insisted on is that whenever there is a departure from the methods of auction and tender provided for in the Rules, the departure must be sanctioned by Government and must be "notified". The matter cannot be left to the arbitrary discretion of some lesser authority.

In the present case, there has not been any notifo:a-tion in the Gazette to bring the "otherwise" portion of Rule I. 1 into play, nor have tenders been called for in the only way which Rule I. 2 permits. We are therefore left with the normal mode of sale contem-plated by the Rules, namely public auction.

· It is admitted that the contract was auctioned on 27th April, 1953 ; it is admitted that the appellant bid up to Rs. 1,80,000 and it is admitted that that was the highest bid ; it is also admitted that the contract was knocked ·down in his favour. But that was not final because under Rule IL 8 the sale was expressly subject to the formal confirmation of the Deputy Commissioner who is given a discretion to accept or reiect a bid. The Deputy Commissioner did not give his sanction but equally he did not exercise .his discretion. But that can be treated as an irregularity in this case because even if sanction had been given it was subject to revision by the Excise Commissioner "for special reasons". That fact distinguishes this case from Com-missioner of Police, Bombay v. Gordhandas Bhanji( 1 ). · Now the· Excise Commissioner exercised his autho-rity : a little irregularly it is true because the matter did not reach him through the proper channel ; but that -would not call for interference by way of a writ.

, (IJ 0[1952] S:C. R, 135,

The substance of the thing is there and as the High 195-i, Court was not a Court of appeal it could not have been K. N. Guruswamy called upon to correct a mere technical error in the "· exercise of a jurisdiction which was otherwise valid. The State of A:{:ysore and It must be remembered that the Excise Commissioner Others. was not a Court of law whose seisin was dependent Bose]. upon the filing of a regular appeal. The sale was can-called and a reason was given ; and the fact that Government would be able to get an extra Rs. 5,000 a month as revenue is certainly a good reason. The cancellation was therefore proper and as the appellant obtained no right to the licence by the mere fact that the contract had been knocked down in his favour (the acceptance being subject to sanction) the appellant's first relief asking for a mandamus to confirm his right to the licence for 1953-54 cannot be granted.

We now pass on to the subsequent action of the Deputy Commissioner in giving the contract to Thi!Timappa. It was contended that the Deputy Com-missioner acted within the ambit of his powers because Rule II. 10 gives him an absolute discretion either to re-auction or act "otherwise" and no fetters are placed upon the "otherwise". It was argued that the Rules which precede Rule II. 10 deal with the initial stages ;

they require either an auction or the calling for tenders by notification under Rule I. 2, or such other method as may have been duly notified ; but once there is an auction and it is cancelled under Rule II. 8, then the authorities are no longer bound by any rules and have an absolute and unfettered discretion. The urgency of the situation at that stage is advanced as a reason.

We are unable to agree. The same word appearing in the same section of the same set of Rules must be given the same meaning unless there is anything to indicate the contrary. The full content of the "other-wise" is specified in Rule I. 1. It must be construed in the same sense in Rule II. 10. But that apart, this would, in our opinion, run counter to the policy of the Legislature which is that matters of such cansequence to the State revenue cannot be dealt with arbitrarily and in the secrecy of an office. Whatever is done must be done either under the Rules or under a notification 1954 which would receive like publicity and have like force, I(. N. Guruswamy and of which the people at large would have like

v. notice. Arbitrary improvisation of an ad hoc procedure Tiu Stau of MJ1sor1 and to meet the exigencies of a particular case is ruled out.

Othtrs. The grant of the contract to Thimmappa was therefore Bost J. wrong. , The next qu~stion is whether the appellant can com-plain of this by way of a writ. In our opinion, he could have done so in an ordinary case. The appellant is interested in these contracts and has a right under the laws of the State to receive the same treatment and be given the same chance as anybody else. Here we have Thimmappa who was present at the auction and who did not bid-not that it would make any difference if he had, for the fact remains that he made no attempt to outbid the appellant. If he had done so it is evident that the appellant would haye raised his own bid. The procedure of tender was not open here because there was no notification and the furtive method adopted of setting a matter of this moment behind the backs of those interested and anxious to compete is unjustified. Apart from all else, that in itself would in this case have resulted in a loss to the State because, as we have said, the mere fact that the appel-lant has pursued this writ with such vigour shows that he would have bid higher. But deeper considerations are also at stake, namely, the elimination of favouritism and nepotism and corruption : not that we suggest that that occurred here, but to permit what has occurred in this case would leave the door wide open to the very evils which the Legislature in its wisdom has endea-_.f voured to avoid. All that is part and parcel of the policy of the Legislature. None of it can be ignored. we would therefore in the ordinary course have given the appellant the writ he seeks. But, owing to the time which this matter has taken to reach us (a con-sequence for which the appellant is in no way to blame, for he has done all he could to have an early hearing), there is ·barely a fortnight of the contract left to go. We were told that the excise year for this contract (1953-54) expires early in June. A writ would there-fore be ineffective and as it is not our practice to issue meaningless writs we must dismiss this appeal and 1954 leave the appellant con~ent with an enunciation of the K. N. Guruswamy law. But as he has m reality won his case and is v. The Stat• of prevented from reaping the full fruits of his victory Mysor1 and Others. because of circumstances for which he is not respon-Bose]. sible, we direct that the first respondent, the State of Mysore, and the fourth respondent, Thim_mappa, pay the appellant his costs . here and in the High Court.

The other respondents will bear their own costs .

• Appeal dismissed.

E. D. SASSOON AND COMPANY LTD.

v.

THE COMMISSIONER OF INCOME-TAX,

BOMBAY CITY.

(With connected Appeals) [S. R. DAs, BHAGWATI and ]AGANNADHADAs JJ.) Indian Income-tax Act (XI of 1922), s. 4(1)(a)(b)-"lncome,"

~'accrues", "arises", 11 is received" -Meaning of-" Earned" -Mean-in g of-s. 10(1)-"Carried on by him"-Connotation of-Managing Agency Agreement-Transfer of rights thereunder-Apportionment between assignors and assignees.

The Sassoons had entered into three Managing Agency agree-ments as the Managing Agents of three different companies. They transferred their Managing Agencies to three other companies by formal deeds of assignment and transfer on several dates during the accounting year.

The question for determination was whether in the circum-stances of the case the Managing Agency commission was liable to be apportioned between the Sassoons and their respective transferees in the proportion of the services rendered as Managing Agents by each of them for the respective portions of the accounting year and the decision turned upon the question whether any income had accrued to the Sassoons for the purpose of income-tax on the dates of the respective transfers of the Managing Agencies to the trans-ferees. Under clause 2(d) of the Managing Agency agreements, the commission to the Sassoons as Managing Agents was to be due to them yearly on the 31st of March in each and every year and was to be payable immediately after the annual accounts of the com-pany had been passed by the shareholders.

Held per S. R. DAs and BHAGWATI JJ. (JAGANNADHADAS J.

dissenting).-answering the question in the negative, that on, the