Licensee Who Enters Contract With Open Eyes Cannot Wriggle Out Of Contractual Obligations On Cancellation Of Liquor Licence: Himachal Pradesh High Court
The Bench held that accepted excise contracts are binding, and commercial hardship, losses or natural calamities cannot excuse licence fee defaults or statutory consequences.
The Himachal Pradesh High Court has held that a liquor licensee who voluntarily participates in an auction and accepts the terms of allotment cannot later resile from the contractual obligation to pay licence fee, even where non-payment is attributed to business losses caused by natural calamity or competitive pricing in a neighbouring state.
The Court affirmed the cancellation of a liquor licence for default in remitting monthly instalments, holding that Article 226 of the Constitution of India cannot be employed to rewrite or dilute the sanctity of a concluded contract.
The Bench further ruled that where the terms of a statutory contract expressly prescribe consequences for non-performance, doctrines of fairness, frustration or reasonableness cannot be invoked to create obligations upon the State that do not exist under the contract or to shield a defaulting party from the agreed consequences of default.
A Division Bench of Justice Vivek Singh Thakur and Justice Ranjan Sharma observed, “…the action of the petitioner in not adhering to the terms and conditions of contact in not remitting or not depositing license fee as per schedule, on account of hardships or unexpected developments or any other unfavourable conditions causing loss [lesser liquor rates in bordering State of Punjab] or recission in business cannot be a ground for the petitioner to wriggle out or resile from its contractual obligations and the plea of the petitioner that State Authorities were bound to act fairly and to consider these aspects is untenable…”.
Advocate H.S. Rana appeared for the petitioner and Anup Rattan, Advocate General, Sushant Keprate, Additional Advocate General and Senior Advocate Subhash Sharma appeared for the respondent.
As per the facts, M/s Kanda Wine, a partnership firm represented by its partner Arun Kumar, was allotted a liquor retail licence for Unit No. 3, Santoshgarh, District Una, for the year 2023-24 for Rs 9.20 crore.
While the firm remitted licence fee till June 2023, it defaulted from September 2023 onward, attributing this to business losses caused by a natural calamity and cheaper liquor rates across the Punjab border. Following repeated notices and personal hearings, the Collector (Excise)-cum-Joint Commissioner cancelled the licence on November 18, 2023 under Section 29 of the Himachal Pradesh Excise Act, 2011.
The appeal before the Financial Commissioner (Excise) was also dismissed. The cancelled unit was subsequently reallotted to another bidder, and the firm's bank account was frozen. A connected petition was filed by alleged partners of the firm challenging a final notice raising a recovery demand of Rs 2,80,60,881, disputing the authenticity of the partnership deed itself.
The Court relied extensively on the Constitution Bench ruling in Har Shankar and others v. The Deputy Excise and Taxation Commissioner and others, (1975) 1 SCC 737 and subsequent decisions in Panna Lal, Jageram, Issac Peter, Narain Prasad, K. Vinayagamurthy, Mary and Smitra Jain, holding that reciprocal contractual obligations do not depend on a party's convenience in performance, and that a "ranked defaulter" is not entitled to discretionary relief under Article 226 of the Constitution of India .
“…The plea of fairness cannot be invoked so as to modify or alter the stipulated conditions of contact. Accepting the plea of the petitioner shall lead to rewriting of contract or would tantamount to introducing new conditions is impermissible and same is outside the purview of this Court. The petitioner has no right to seek creation of an obligation, upon the State which does not exist in the contract. Once the petitioner has voluntarily, freely and with open eyes participated in an auction and acceptance of bid had culminated into a contract and the contract expressly spells out the consequences for non-performance [i.e. cancellation of license for not depositing the license fee]...”, the Bench said.
“…Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of contract and in case, such a test is applied, then, no contract could ever have a binding force. Going by the prudence of a party, contrary to express mandate of a contract shall certainly defeat the “sanctity attached to the terms and conditions of contract”, can “neither be put to a naught nor defeated on the mere pretext of some events or difficulties, falling outside the express conditions” mandated in a contract. In an executory contract, there is no guarantee for profits and no warranty against losses. A party, after having accepted the contract, cannot be permitted to blow “hot and cold” by enjoying the profits under the contract but in questioning the terms and conditions when it comes to suffering losses. This plea cannot sustain, in view of the principle of “approbation and reprobation”…the Bench further noted.
Accordingly, one writ petition was dismissed, upholding the cancellation order and appellate dismissal, with liberty to the State to recover unpaid dues under Section 71. The other was disposed of with directions to petitioners to pursue a statutory appeal within 30 days, during which the final notice was to remain in abeyance.
Cause Title: M/s Kanda Wine v. State of Himachal Pradesh & Others (Neutral Citation: 2026:HHC:26633)
Appearances:
Petitioner: H.S. Rana, Amrinder Singh, Advocates.
Respondent: Anup Rattan, Advocate General, Sushant Keprate, Additional Advocate General, Subhash Sharma, Senior Counsel, Prantap Sharma, Advocate.