K. N. GURUSWAMY v. THE STATE OF MYSORE & Ors.

1954 E. }{. Gur11swamy v. Th• Slatt of Mysou and Olkers. Bese J. 308 SUPREME COURT REPORTS [1955} No grantee of any privilege under this section shall received a licence in this exercise the same until he has behalf from the Deputy Commissioner. " the purpose of carrying out The notification containing the Rules Section 29 authorises Government to make rules for the provisions of the Act. is headed- " ...... the Government of His Highness the to frame the following the disposal of the privilege of retail Maharaja of Mysore are pleased rules to regulate 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 It says- is also relevant. Rule I. 2. "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 in tliree successive lished by the Excise Commissioner 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 to formal confirma the Deputy Commissioner, who shall be at reject any bid at his discretion. to an revised by the Excise bidder, but the sale will be subject tion by liberty Such acceptance of Commissioner for special reasons .......... ". formal confirmation will be tantamount the bid unless to accept or Finally, we come to Rule II. 10. It is as follows : "Shops remaining unsold at the first auction or the sales of which have not been confirmed but shops, cancelled, will ordinarily be disposed of by re-auction the discretion of the or by Deputy Commissioner later on. " tender or otherwise at This Court had occasion to observe in State of Assam v. Ke1h1Zb Prasad Singh and Othlr1(• )-a fisheries case -that the sale of these licences forms such a lucrative ·(t) Civil Appeal Ne. or 176 of 195•. • .. ·""'- .... • --, ..... - • S.C.R. SUPREME COURT REPORTS 309 source of revenue that State Legislatures have deemed it wise not to leave the matter to unfettered executive discretion ; accordingly legislation has been enacted in most parts of India to regulate and control the licens trades ; Acts are passed and elaborate ing of It is evident that Rules are drawn up under there is a policy and a purpose behind it all and it is the fetters imposed by legislation equally evident that cannot be brushed -aside at the pleasure of either Government or its officers.

The Rules bind State and subject alike. them. 1954- K. N. Guruswsmy.· v. Thi Stal' of Alyson ana Othm. Bose J. The Act and the Rules make it plain that liquor the State of Mysore can only be done in strictly controlled by Statute and licensing certain specified ways and such discretion as is the authorities Rule. as may be desired by Government or thought · 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 fit by it but by such other method as may be notified. The notification is of the essence, and for good reason : importance these are matters of public concern and of It is that all and sundry should know necessary in the Gazette this should not be left to o:rbitrary executive pleasure. the State because of therefore is what by public notification is important revenue reaped. the many shapes Rule I. 2 indicates one of "otherwise" can take : one of the "otherwise" methods can be by calling for tenders.

But if that is selected, is forged. There must be a public then a further fetter call for the tenders by publication in. no 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. less than But the authorities are not tied down to the method of auction and tender ; that may be undesirable for a the urgency of the situation being variety of reasons, 1954 .K. N. Guruswami v. Tht State ef Mysore and Others. Bose J. 310 ~ SUPREME COURT REPORTS [1955] is essential the "otherwise" method one of them ; nor are they bound to follow Rule I. 2 as an alternative. They have a discretion under Rule I. 1 and can act "otherwise". But if they wish to do that, that due notice and publicity be given of in a Government 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 there is a departure from the methods that whenever of auction and departure must be sanctioned by Government and must be "notified". The matter cannot be left to arbitrary discretion of some lesser authority. tender provided for in the Rules, 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 the only way which Rule I. 2 permits. We are the normal mode of sale contem therefore plated by the Rules, namely public auction. left with it is also admitted the contract was auctioned on · It is admitted 27th April, 1953 ; it is admitted that the appellant bid up to Rs.

1,80,000 and it is admitted that that was highest bid ; the contract was knocked ·down in his favour. But that was not 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 can be treated as an irregularity in this case because even if sanction had been given revision by special reasons". That fact distinguishes this case from Com missioner of Police, Bombay v. Gordhandas Bhanji( 1 the Excise Commissioner "for .his discretion. But it was subject ). • .. -· • · Now the· Excise Commissioner exercised his autho true because the matter rity : a little irregularly it is did not reach him through the proper channel ; but that -would not call for interference by way of a writ. , [1952] S:C. R, 135, (IJ 0 S.C.R. SUPREME COURT REPORTS 311 to correct a mere The substance of the thing there and as the High Court was not a Court of appeal it could not have been called upon technical error in the exercise of a jurisdiction which was otherwise valid.

It must be remembered that the Excise Commissioner was not a Court of law whose seisin was dependent upon the filing of a regular appeal. The sale was can called and a reason was given ; and 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 licence by the mere fact that in his favour (the the contract had been knocked down the appellant's acceptance being subject first relief asking for a mandamus to confirm his to the licence for 1953-54 cannot be granted. to sanction) to the 195-i, K. N. Guruswamy "· The State of A:{:ysore and Others. Bose]. the "otherwise". is cancelled under Rule II. 8, then giving It was contended that We now pass on to the subsequent action of the contract Deputy Commissioner Thi!Timappa. the Deputy Com missioner acted within the ambit of his powers because Rule II. 10 gives him an absolute discretion either re-auction or act "otherwise" and no fetters are placed that the Rules It was argued initial stages ; which precede Rule II. 10 deal with the 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 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 the same section of the same set of Rules must be there is anything to the contrary. The full content of the "other indicate It must be construed in Rule I. 1. wise" in the same sense in Rule II. 10. But that apart, would, in our opinion, run counter to the policy of 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 same meaning unless is specified - , 312 SUPREME COURT REPORTS [1955] 1954 I(. N. Guruswamy v. Tiu Stau of MJ1sor1 and Othtrs. Bost J. the people at like publicity and have like force, which would receive and of which large would have like notice. Arbitrary improvisation of an ad hoc procedure to meet the exigencies of a particular case is ruled out.

The grant of the contract therefore , wrong. to Thimmappa was interested and anxious The next qu~stion is whether in these contracts and has a 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 right under is interested the laws of the State 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 the appellant. If he had done no attempt to outbid so it is evident the appellant would haye raised his own bid. The procedure of tender was not open here because furtive there was no notification and method adopted of setting a matter of this moment behind the backs of 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 that we suggest and nepotism and corruption : not that that occurred here, but to permit what has occurred in this case would leave the door wide open to the very in its wisdom has endea evils which the Legislature that is part and parcel of the voured policy of the Legislature. None of it can be ignored. in the ordinary course have given we would the appellant to the this matter has taken to reach us (a con time which is in no way to blame, sequence for which the appellant for he has done all he could to have an early hearing), there is fortnight of the contract left to go. ·barely a for this contract We were told the excise year (1953-54) expires early in June. A writ would it is not our practice to issue fore be ineffective and as the writ he seeks. But, owing to avoid. All therefore ·- - _.f - - S.C.R. SUPREME COURT REPORTS 313 from reaping meaningless writs we must dismiss this appeal and leave the appellant con~ent with an enunciation of the law.

But as he has m reality won his case and is the full fruits of his victory prevented is not respon because of circumstances for which he sible, we direct the State of respondent, Thim_mappa, pay Mysore, and the fourth the appellant his costs . here and in the High Court. The other respondents will bear their own costs . the first respondent, • Appeal dismissed. 1954 K. N. Guruswamy v. The Stat• of Mysor1 and Others. Bose]. 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," received" -Meaning of-" Earned" -Mean ~'accrues", "arises", in g of-s. 10(1)-"Carried on by him"-Connotation of-Managing Agency Agreement-Transfer of rights thereunder-Apportionment between assignors and assignees. 11 is 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. respective The question for determination was whether the circum stances of the case the Managing Agency commission was liable to be apportioned between the Sassoons and their 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 the com pany had been passed by the shareholders. immediately after the annual accounts of Held per S. R. DAs and BHAGWATI JJ. (JAGANNADHADAS J. dissenting).-answering the question in the negative, that on, the