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Orissa HC Sets Aside GO Mandating Furnishing Of Bank Guarantees, Instead Of Solvency Certificates, For Grant/Renewal Of Excise Licenses For Liquor Shops [Read Judgment]

12 Aug 2020 11:04 AM GMT
Orissa HC Sets Aside GO Mandating Furnishing Of Bank Guarantees, Instead Of Solvency Certificates, For Grant/Renewal Of Excise Licenses For Liquor Shops [Read Judgment]
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The Orissa High Court last week set aside a Government Order, mandating furnishing of Bank Guarantees, instead of Solvency certificates, for grant or renewal of Excise Licenses in respect of IMFL shops, Beer Parlours, etc.

The order has been passed by a division bench led by Chief Justice Mohammad Rafiq in a batch of petitions challenging the letter dated March 30, 2020, issued by the State Government, directing the Excise Department to substitute Solvency certificate by Bank Guarantee, for grant/ renewal of licenses.

The bench, also comprised of Justice KR Mohapatra observed that the order is in teeth of the statutory stipulations under Rule 51 and Rule 150 of the Odisha Excise Rule 2017. It therefore held that statutory provision of law or the Rules cannot be overridden by way of executive instructions.


Rule 51 provides that an application for grant of license of Foreign Liquor or IMFL or Beer "ON" shops shall be accompanied by attested copy of Solvency certificate indicating the solvency of the applicant to the extent of three lakhs rupees shall be furnished.

Similarly, Rule 150 provides for furnishing Solvency certificate for license of retail vend of IMFL, country spirit, fermented Tari, pachwai and Bhang.

The impugned letter was issued in view of the decision of the Revenue & Disaster Management Department to phase out issue of Solvency certificate by Revenue Authorities for grant or renewal of excise licenses and insist on producing for Bank Guarantee in lieu thereof for renewal and issuance of license.

The Petitioners had argued that the impugned letter cannot supersede or override the statutory provisions contained in Rule 51 and Rule 150.

The Government on the other hand submitted that a policy decision has been taken to phase out the practice of issuing the Solvency certificates as it consumes a significant amount of time of both of the citizens and the Revenue Officers.


The High Court concurred with the submission made by the Petitioner that "a statutory provision of law or the Rules cannot be overridden by the executive instructions and in the event of conflict, the former will prevail."

Reliance was placed on State of Orissa & Ors. v. Prasana Kumar Sahoo, (2007) 15 SCC 129, whereby the Supreme Court had observed,

"Even a policy decision taken by the State in exercise of its jurisdiction under Article 162 of the Constitution of India would be subservient to the recruitment rules framed by the State either in terms of a legislative act or the proviso appended to Article 309 of the Constitution of India. A purported policy decision issued by way of an executive instruction cannot override the statute or statutory rules far less the constitutional provisions."

Significantly, the State Counsel had assured the Court that the Government is in the process of incorporating the appropriate amendments in the Rules of 2017 to provide for Bank Guarantee in place of Solvency certificate.

However, the Court clarified that the proposed amendments, if any, shall not be applicable to the present writ petitioners in a retrospective manner.

"Even if the Government were to suitably amend the Rules now, in so far as the present batch of petitions is concerned, such amendment cannot completely omit the provision of producing the Solvency certificate and require the production of the Bank Guarantee. Even if such provision is brought in the Rules by way of amendment, it shall obviously be applicable only prospectively and not retrospectively," the bench observed.

In its judgment, the Court has also taken note of the classification between 'bidders from inside the State' and 'bidders from outside the State'.

It observed that Clause (e) of Rule 150(2) on manner of fixation and realization of license fees stipulates that the bidder from inside the State shall furnish Solvency certificate equivalent to six times of the monthly reserve price in respect of immovable property "or" the Bank Guarantee.

Whereas, Clause (f) of the said Rule does not give that option to the bidders from outside the State and requires them that they shall furnish Bank Guarantee equivalent to six times of the monthly reserve price "along with" local surety.

Case Details:

Case Title: Gopinath Sahu v. State of Orissa & Ors. (with other similar petitions)

Case No.: WP (C) No. 12518/2020

Quorum: Chief Justice Mohammad Rafiq and Justice KR Mohapatra

Appearance: Advocates Amar Kumar Mohanty, KA Guru and SK Mohapatra (for lead Petitioner); Advocate General AK Parija with AGA MS Sahoo (for Respondents)

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