STATE OF U.P. THR. SECRETARY AND ORS. versus PREM CHOPRA on 25 March 2022

(1) Leave granted.

(2) This appeal is directed against the order dated 10.05.2018passed by the High Court of Judicature at Allahabad (Lucknow Bench)in Misc. Single No. 2582 of 2003 whereby the High Court has set asidethe demand made by the appellants for a sum of Rs.10,08,210.51 towardsinterest on arrears of excise revenue.

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A(3) Brief facts necessary for disposal of this case are as under:

On 14.03.2002, the Government of Uttar Pradesh declared theExcise Policy for the year 2002-03. On the basis of the Excise Policyand under the provisions of U.P. Excise (Settlement of License for RetailSale of Country Liquor) Rules, 2002 (for short ‘the Rules’), the DistrictBMagistrate/Collector, Lakhimpur Kheri issued an advertisement for thesettlement of the excise shops for the year 2002-03.

(4) The respondent submitted an application in the prescribed formfor grant of license for the retail sale of country liquor shop, MohammadiNo.1, Lakhimpur Kheri. A license was granted to the respondents forCthe year 2002-03 (from 01.04.2002 to 31.03.2003) for an annual licensefee of Rs.29,52,000/-.

(5) In the month of December 2002, the respondent submitted anapplication for surrendering the excise shop/license.

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(6) As per the terms and conditions of the settlement, the respondentwas liable to pay license fee for the shop for the aforesaid period i.e.from 01.04.2002 to 31.03.2003. The respondent had lifted quota ofRs.20,35,212/- by the month ending 31.12.2002.

(7) The appellants vide notice dated 06.01.2003 apprised to theErespondent that the application filed by him for surrender of excise shopcan be entertained only after deposit of balance of Rs.9,16,788/- towardslicense fee. On 25.01.2003 the appellants again issued notice to therespondent to pay the outstanding license fee amounting to Rs.9,16,788/- within a week.

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(8) The respondent preferred Writ Petition No.855 (MB) of 2003wherein the High Court directed the respondent to file an appeal beforethe Additional Commissioner Excise (Licensing and IndustrialDevelopment) U.P. Accordingly, the respondent filed an appeal on19.02.2003 before the Excise Commissioner, U.P., Allahabad.GSubsequently on 08.03.2003, the license of the respondent was cancelled.The Excise Commissioner, while dismissing the appeal vide order dated23.04.2003, held that under Rule 19 and Section 36 of the U.P. ExciseAct, 1910 (for short, ‘the Act’), the respondent is liable to pay entiredues. The revision filed by the respondent was also dismissed by theSecretary, Excise Department by order dated 18.07.2003.

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(9) After cancellation of the license, the District Excise Officerrecalculated the total amount due against the respondent and adjustedthe amount of security of Rs.2,95,200/- out of total amount of Rs.9,38,762/- and found the respondent was still liable to pay Rs.6,43,562/- to theDepartment.

(10) Aggrieved by the order dated 18.07.2003, the respondentfiled the writ petition, Misc. Single No.2582 of 2003, before the HighCourt of Judicature at Allahabad (Lucknow Bench). The High Court,vide order dated 01.08.2003, stayed the said recovery proceedings subjectto deposit of Rs.2,75,000/- by the respondent before the District ExciseOfficer.

(11) The appellants filed counter affidavit in the writ petition on13.02.2004. On 21.12.2015, the writ petition was dismissed by the HighCourt for non-prosecution. In the year 2017, the respondent depositedthe remaining amount of Rs.3,68,562/- with the Department. Thus, theamount which was due in 2003 was paid in the year 2017 but therespondent failed to make payment of interest to the Department. Theorder dated 21.12.2015 was recalled by the High Court on 19.01.2018.

(12) Further, on 10.01.2018, the Department issued notice to therespondent for payment of Rs.10,08,210.51 due towards interest. On10.05.2018 the High Court passed the impugned order holding that thedemand of Rs. 10,08,210.51 towards interest was not justified as therespondent was under the protection of an interim order.

(13) Learned counsel for the appellants submits that as per theterms and conditions of the settlement, the respondent was liable to paythe license fee for the shop for the year 2002-03. He did not pay thelicense fee from January 2003 to March 2003. He went on challengingthe demand made by the Department for payment of balance of licensefee and remained unsuccessful in his challenge. Finally, he filed the writpetition before the High Court i.e. Misc. Single No.2582 of 2003 whereinan interim order was granted. On account of this order, the appellantswere restrained from collecting license fee. The writ petition wasdismissed for non-prosecution. The respondent had deposited theremaining license fee in the year 2017 but failed to pay the interest to theDepartment. It is argued that when the writ petition was dismissed, therespondent ought to have paid the interest accrued on the license fee. Itis further argued that the High Court was not justified in denying interest A

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Aon the ground that the appellant had the protection of an interim ordergranted by the court.

(14) On the other hand, learned counsel for the respondentsubmitted that the High Court had restrained the appellants fromrecovering the license fee by an interim order. The respondent has paidBthe license fee in the year 2017. Therefore, the appellants are not justifiedin demanding interest for the period during which a stay on recovery oflicense fee was granted by the High Court.

(15) Having regard to the contentions urged, the question whichfalls for consideration is whether the respondent is liable to pay interestCfor the period during which recovery of license fee under Section 36 ofthe Act was stayed by the High Court and eventually when the writpetition was dismissed.

(16) Section 38-A of the Act specifically provides for payment ofinterest on arrears of excise revenue which is as under:D“38-A. Interest on arrears of excise revenue –

(1) Where any excise revenue has not been paid within threemonths from the date on which it become payable, interestat such rate not exceeding twenty-four per cent per annum,as may be prescribed, shall be payable from the date suchEexcise revenue becomes payable till the date of actualpayment:

Provided that until a higher rate is prescribed, the rate ofinterest will be eighteen per cent per annum.”

(17) It is not disputed that the respondent was liable to pay licenseFfee under Section 36 of the Act for the year 2002-03, even on surrenderof the license. The High Court had granted an interim order restrainingthe appellants from recovery of the license fee for three months, subjectto the respondent depositing a sum of Rs.2,75,000/- within a period ofsix weeks. Admittedly, the writ petition was dismissed on 21.12.2015 forGnon-prosecution, which was restored later.

(18) When the interim order was in force, the recovery of licensefee was temporarily suspended. The restraint was only against theDepartment not to recover the license fee. There was no prohibition forthe respondent to deposit the balance of license fee. It is to be statedHhere that the High Court has not quashed the demand of license fee made by the appellants. There is a difference between stay of operationof an order and quashing of an order which has been explained by thisCourt in Shree Chamundi Mopeds Ltd. V. Church of South IndiaTrust Association CSI CINOD Secretariat, Madras[1]as under:

“While considering the effect of an interim order staying theoperation of the order under challenge, a distinction has to bemade between quashing of an order and stay of operation of anorder. Quashing of an order results in the restoration of the positionas it stood on the date of the passing of the order which has beenquashed. The stay of operation of an order does not, however,lead to such a result. It only means that the order which has beenstayed would not be operative from the date of the passing of thestay order and it does not mean that the said order has been wipedout from existence.”

(19) Following the said decision, this Court in Kanoria Chemicalsand Industries Ltd. and Others v. U.P. State Electricity Boardand Others,[2] has held that an order of stay which is granted during thependency of a writ petition/suit or other proceeding comes to an endwith the dismissal of the substantive proceedings and it is the duty of thecourt in such cases to put the parties in the same position that theywould have been in but for the interim order of the court. In that case,this Court rejected the contention that when the operation of the notificationitself was stayed, no surcharge could be demanded upon the amountwithheld. It was held thus:

“11. …. Holding otherwise would mean that even though theElectricity Board, who was the respondent in the writ petitionssucceeded therein, yet deprived of the late payment surchargewhich was due to it under the tariff rules/regulations. It would bea case where the Board suffers prejudice on account of the ordersof the court and for no fault of its. It succeeds in the writ petitionand yet loses. The consumer files the writ petition, obtains stay ofoperation of the notification revising the rates and fails in his attackupon the validity of the notification and yet he is relieved of theobligation to pay the late payment surcharge for the period ofstay, which he is liable to pay according to the statutory terms and 1 (1992) 3 SCC 1

2 (1997) 5 SCC 772

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conditions of supply — which terms and conditions indeed formpart of the contract of supply entered into by him with the Board.We do not think that any such unfair and inequitable propositioncan be sustained in law.

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It is equally well settled that an order of stay granted pendingdisposal of a writ petition/suit or other proceeding, comes toan end with the dismissal of the substantive proceeding andthat it is the duty of the court in such a case to put the partiesin the same position they would have been but for the interimCorders of the court. Any other view would result in the act ororder of the court prejudicing a party (Board in this case) for nofault of its and would also mean rewarding a writ petitioner inspite of his failure. We do not think that any such unjustconsequence can be countenanced by the courts. As a matter offact, the contention of the consumers herein, extended logicallyDshould mean that even the enhanced rates are also not payablefor the period covered by the order of stay because the operationof the very notification revising/enhancing the tariff rates wasstayed. Mercifully, no such argument was urged by the appellants.It is ununderstandable how the enhanced rates can be said to beEpayable but not the late payment surcharge thereon, when boththe enhancement and the late payment surcharge are provided bythe same notification — the operation of which was stayed.”

(20) In Rajasthan Housing Board and Others v. KrishnaKumari,[3] this Court observed that Order 39 of the Civil Procedure Code,F1908 provides for grant of temporary injunction at the risk andresponsibility of the person who obtains it and, if ultimately case is decidedagainst such person, he would be liable to pay interest on the arrears ofany amount due which had been stayed by the injunction order. Thelegal maxim actus curiae neminem gravabit, which means that an actof the Court shall prejudice no man, becomes applicable in such a case.G

(21) In South Eastern Coalfields Ltd. V. State of M.P. andOthers,[4] the writ petitioner therein had argued that interest accrueddue to non-payment of enhanced amount of royalty was protected by a 3 (2005) 13 SCC 151H4 (2003) 8 SCC 648

judicial order of an interim nature and, therefore, merely because thewrit was finally dismissed, the writ petitioner should not be held liable forpayment of interest so long as money was withheld under the protectiveumbrella of the injunction order. This submission was rejected by thisCourt by holding as under:

“The principle of restitution has been statutorily recognized inSection 144 of the Code of Civil Procedure, 1908. Section 144CPC speaks not only of a decree being varied, reversed, set asideor modified but also includes an order on a par with a decree. Thescope of the provision is wide enough so as to include thereinalmost all the kinds of variation, reversal, setting aside ormodification of a decree or order. The interim order passed bythe court merges into a final decision. The validity of an interimorder, passed in favour of a party, stands reversed in the event ofa final decision going against the party successful at the interimstage. Unless otherwise ordered by the court, the successful partyat the end would be justified with all expediency in demandingcompensation and being placed in the same situation in which itwould have been if the interim order would not have been passedagainst it. The successful party can demand (a) the delivery ofbenefit earned by the opposite party under the interim order ofthe court, or (b) to make restitution for what it has lost; and it isthe duty of the court to do so unless it feels that in the facts and onthe circumstances of the case, the restitution far from meetingthe ends of justice, would rather defeat the same. Undoing theeffect of an interim order by resorting to principles of restitution isan obligation of the party, who has gained by the interim order ofthe court, so as to wipe out the effect of the interim order passedwhich, in view of the reasoning adopted by the court at the stageof final decision, the court earlier would not or ought not to havepassed. There is nothing wrong in an effort being made to restorethe parties to the same position in which they would have been ifthe interim order would not have existed.”

(22) In Nava Bharat Ferro Alloys Limited v. TransmissionCorporation of Andhra Pradesh Limited and Another,[5] the appellanttherein had challenged the revised tariff rates imposed by the respondenttherein and obtained an interim order of stay against collection of the 5 (2011) 1 SCC 216

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Adisputed amounts. The High Court subsequently upheld upward revisionof tariff. Thereafter, the respondent therein raised a demand for additionalcharges/interest on outstanding amounts from the date of tariff revisionand the High Court upheld such demand holding that there was nosubsisting relief once the demand was upheld. This Court further heldthat the principle of restitution entitles the successful party to be restoredBback to the position it would hold had there been no order/judgmentadverse to it. The appellant therein had obtained only an ad-interim orderof stay against enforcement of tariffs. A party who fails in the mainproceedings cannot take benefit from the interim order issued during the

pendency of such proceedings. Therefore, it was held in that case thatCthe amount became recoverable from the appellant therein no soonerthe judgment of the High Court was reversed and the revision of tariffswas upheld.

(23) In State of Rajasthan and Another v. J.K. SyntheticsLimited and Another,[6] the interest for the period of which recovery ofDroyalty was to be paid under Section 9(2) of the Mines and Minerals(Development and Regulation) Act, 1957 remained stayed under theinterim orders of the court. However, eventually the writ petition wasdismissed. This Court held that whenever there is an interim order ofstay in regard to any revision in rate or tariff, unless the order grantinginterim stay or the final order dismissing the writ petition specifiesEotherwise, on the dismissal of the writ petition or vacation of the interimorder, the beneficiary of the interim order shall have to pay interest onthe amount withheld or not paid by virtue of the interim order. It washeld thus:

“23. It is therefore evident that whenever there is an interim orderFof stay in regard to any revision in rate or tariff, unless the ordergranting interim stay or the final order dismissing the writ petitionspecifies otherwise, on the dismissal of the writ petition or vacationof the interim order, the beneficiary of the interim order shall haveto pay interest on the amount withheld or not paid by virtue of theGinterim order. Where the statute or contract specifies the rate ofinterest, usually interest will have to be paid at such rate. Evenwhere there is no statutory or contractual provision for paymentof interest, the court will have to direct the payment of interest ata reasonable rate, by way of restitution, while vacating the order H6 (2011) 12 SCC 518

of interim stay, or dismissing the writ petition, unless there arespecial reasons for not doing so. Any other interpretation wouldencourage unscrupulous debtors to file writ petitions challengingthe revision in tariffs/rates and make attempts to obtain interimorders of stay. If the obligation to make restitution by payingappropriate interest on the withheld amount is not strictly enforced,the loser will end up with a financial benefit by resorting to unjustlitigation and the winner will end up as the loser financially for nofault of his. Be that as it may.”

(24) From the above discussion, it is clear that imposition of a stayon the operation of an order means that the order which has been stayedwould not be operative from the date of passing of the stay order.However, it does not mean that the stayed order is wiped out from theexistence, unless it is quashed. Once the proceedings, wherein a staywas granted, are dismissed, any interim order granted earlier mergeswith the final order. In other words, the interim order comes to an endwith the dismissal of the proceedings. In such a situation, it is the duty ofthe Court to put the parties in the same position they would have beenbut for the interim order of the court, unless the order granting interimstay or final order dismissing the proceedings specifies otherwise. Onthe dismissal of the proceedings or vacation of the interim order, thebeneficiary of the interim order shall have to pay interest on the amountwithheld or not paid by virtue of the interim order.

(25) Coming to the facts of the present case, the respondent wasnot successful in his challenge to the notice dated 06.01.2003 demandingthe balance of license fee before the Authorities under the Act. Therefore,he filed the writ petition bearing Misc. Single No.2582 of 2003 beforethe High Court wherein the High Court, by an interim order, stayed therecovery of the monthly instalment of license fee for the months January2003 to March 2003, subject to deposit of Rs.2,75,000/- within a periodof six weeks before the District Excise Officer. It is not disputed thatthis amount of Rs.2,75,000/- was deposited by the respondent. The saidwrit petition was dismissed by the High Court for non-prosecution videOrder dated 21.12.2015. On 23.12.2017, the respondent deposited theremaining amount of Rs.3,68,562/- towards license fee. However, therespondent did not make payment of interest to the Department. Thewrit petition was restored on 19.01.2018. In the meantime, the appellantsissued a notice calling upon the respondent to pay Rs.10,08,210.51/- A

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Atowards interest due. The High Court held that the respondent was notliable to pay interest as he was under the protection of the interim order.Given the settled position of law, in our view the High Court has erred inholding that the respondent was not liable to pay interest due to theprotection given under the interim order.

B(26) In the result, the appeal succeeds and it is accordingly allowed.The order of the High Court dated 10.05.2018 in Misc. Single No. 2582of 2003 is set aside.

(27) At this stage, learned counsel for the respondent submits thatthe respondent may be permitted to make an application under one-timeCsettlement scheme 2021 wherein certain concessions have been madefor payment of interest dues. The submission of the learned counsel isaccepted and the respondent is permitted to make an application in termsof the said scheme within a period of eight weeks from today. We makeit clear that if such an application is filed by the respondent, the authorityconcerned is directed to consider the same in accordance with law. NoDcosts.

Nidhi Jain

Appeal allowed.

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