Pankaj Bhatia, J.

1. Both the petitions involve the interpretation of provisions of law which is similar, as such, they are being decided by means of the common judgment.

2. Facts of Writ – C No.9330 of 2016:

i. The petitioner was granted a license for retail sale of foreign liquor at Mohammadabad, District Gazipur for the excise year 2009 – 10 under the Uttar Pradesh Excise (Settlement of License for Model Shop of Foreign Liquor) Rules, 2003 (hereinafter referred to as ‘the 2003 Rules’) and the said license was renewed up to the year 2015-16. It is alleged that an FIR was lodged against the petitioner, which was registered as Case Crime No.67 of 2015 at P.S. Mardaha, District Gazipur under Section 60 of the U.P. Excise Act read with Section 392, 411 & 120B IPC. In pursuance to the said FIR, the joint residential premises of the petitioner as well as his brother Krishna Gopal Rai was searched and a seizure memo was prepared on 17.4.2015 (Annexure – 6 to the petition). In the said seizure memo, it was averred that in the house, which is jointly owned by the petitioner as well as his brother, at the instance of the informer, a raid was carried out and in the boundary wall inside the house at the North West corner 14 crates of liquor were recovered and a sample was drawn from each of the said crates.

ii. Based upon the said recovery, the petitioner was issued with a show-cause notice dated 23.4.2015 calling upon the petitioner to show-cause as to why, in exercise of powers under Section 34(3) of the United Provinces Excise Act (hereinafter referred to as ‘the Act’) read with Rule 17(3) of the 2003 Rules, steps may not be taken for cancellation of the license and entire amounts such as renewal fee, license fee and security etc. may not be confiscated.

iii. The petitioner submitted a reply to the said show-cause notice, which did not find favour with the Collector, Gazipur who proceeded to pass an order on 1.6.2015 cancelling the license and directed for confiscation of the entire fees etc., as well as the goods which were kept in the licensed premises of the petitioner.

iv. The petitioner preferred an appeal against the order dated 1.6.2015, which too was dismissed on 27.7.2015 and the revision preferred was also dismissed on 17.3.2016. The said orders are under challenge.

3. Learned counsel for the petitioner fairly states that the shop cannot be restituted to the petitioner and confines his submissions to the illegal confiscation of the renewal fees, license fees and the security deposit as well as the confiscation of goods which were lying at the licensed premises of the petitioner and have been subsequently auctioned.

4. Facts leading to filing of Writ – C No.9388 of 2016 is as follows:

i. The petitioner was granted license for retail sale of country liquor shops at Dubiha and Bathor, District Gazipur for the Excise Year 2009-10 and 2011-12 in terms of the provisions of Uttar Pradesh Excise (Settlement of Licenses for Retail Shop of Country Liquor) Rules, 2002 (hereinafter referred to as ‘the 2002 Rules’). The said two licenses granted to the petitioner were renewed up to 2015- 16 and subsequently on the basis of an FIR lodged against the petitioner, a search was carried out at the premises which was being used as a residence by the petitioner alongwith his brother Ramesh Chandra Rai. In the said seizure memo prepared on 17.4.2015 (Annexure – 6), 14 crates of liquor were recovered from the North West portion of the house. In view of the said recovery, a show-cause notice was issued to the petitioner on 23.4.2015 (Annexure – 7) calling upon the petitioner to show-cause as to why steps may not be taken in purported exercise of powers under Section 34(3) of the Act read with Rule 21(3) of the Rules for cancellation of the license and for confiscation of the entire amounts deposited by the petitioner.

ii. The petitioner gave a reply to the said show-cause notice on 5.5.2015, however, the same did not find favour with the District Magistrate who proceeded to cancel the license of the petitioner vide order dated 1.6.2015 (Annexure – 3) and also directed that the entire amounts deposited by the petitioner, including the basic license fee, the renewal fee and the security deposit be forfeited and steps be taken for auction of the goods lying in the license premises of the petitioner.

iii. Aggrieved against the said order, the petitioner preferred an appeal which was dismissed on 27.7.2015. The petitioner preferred a revision which too has been dismissed on 3.2.2016. The said orders are under challenge in the present petition.

5. Learned counsel for the petitioner fairly states that the license cannot be restituted to the petitioner and confines the present writ petition to the refund of the amounts illegally confiscated as well as for refund of the amounts lying with the government on account of auction of goods lying in the licensed premises of the petitioner in pursuance to the order dated 1.6.2015.

6. Submission of learned counsel for the petitioners is that neither Section 34(3) of the Act nor Rule 17(1)(C) and Rule 17(3) of the 2003 Rules (in respect of Ramesh Chandra Rai – petitioner of Writ – C No.9330 of 2016) entitle the respondents to confiscate the amounts as has been done nor does it authorize them to sell the goods which were lying in the licensed premises.

7. Similarly, in Writ – C No.9388 of 2016 it is argued that neither under Section 34 of the Act nor under the 2002 Rules, the respondents were authorized to confiscate the amounts and the goods lying in the petitioner’s premises and thus, the orders to that extent are bad in law.

8. To appreciate the controversy as raised it is essential to refer to Section 34 of the United Provinces Excise Act, 1910, which reads as under:

“34. Power to cancel or suspend licences, etc. - (1) Subject to such restrictions, as the State Government may prescribe, the authority granting any licence, permit or pass under this Act may cancel or suspend it-

(a) if any duty or fee payable by the holder thereof be not duly paid; or

(b) in the event of any breach by the holder of such licence, permit or pass or by his servants, or by any one acting on his behalf with his express or implied permission of any of the terms or conditions of such licence, permit or pass; or

(c) if the holder thereof is convicted of any offence punishable under this Act or any other law for the time being in force relating to revenue, or of any cognizable and non-bailable offence, or of any offence punishable under the Dangerous Drugs Act, 1930 or under the Merchandise Marks Act, 1889, or of any offence punishable under Sections 482 to 489 (both inclusive) of the Indian Penal Code; or

(d) where a licence, permit or pass has been granted on the application of the grantee of an exclusive privilege under this Act, on the requisition in writing of such grantee; or

(e) if the conditions of the licence or permit provide for such cancellations or suspension at will.

(2) When a licence, permit and pass held by any person is cancelled under clauses (a), (b) or (c) of sub-section (1), the authority aforesaid may cancel any other licence, permit or pass granted to such person by, or by the authority of the State Government under this Act or under any other law for the time being in force relating to excise revenue or under the Opium Act, 1878.

(3) The holder shall not be entitled to any compensation for the cancellation or suspension of his licence, permit or pass under this section nor to a refund of any fee paid or deposit made in respect thereof.”

9. Rule 17(1)(C) and Rule 17(3) of the 2003 Rules are as under:

“17. Suspension or cancellation of the license.- (1) Licensing Authority may suspend or cancel the licence-

(a)…

(b)…

(c) If any liquor or intoxicating drug is found in the possession of the licensee against the provisions of the Act or rules.

…..

(2)……

(3) The licensee shall not be entitled to claim any compensation or refund for suspension or cancellation of license under this rule.

…..”

10. Rule 21 of the 2002 Rules reads as under:

"21. Suspension and cancellation of the licence and penalties –

(1) Licensing Authority may suspend or cancel the license -

(a) if any bottle or container of country liquor is found in the licensed premises on which duty has not been paid and which does not carry security hologram duly approved by the Excise Commissioner as a proof of payment of duty;

(b) if any bottle or container of any other kind of liquor or intoxicating drug (for which licence is not granted) is found in the licensed premises;

(c) if any liquor or intoxicating drug is found in the possession of the licensee against the provisions of the Act or rules;

(d) if the affidavit submitted by the licensee at the time of application is found incorrect and assertions made therein are found to be false;

(e) if it is found that the licence has been obtained in a false name or the licensee is holding the licence on behalf of some other person.

(f) if the licensee fails to deposit monthly instalment of licence fee or replenish the deficit in security amount within prescribed period;

(g) if the licensee is convicted of an offence punishable under the Act or of any cognizable and nonbailable offence, or any offence punishable under Narcotics Drugs and Psychotropic Substances Act, 1985 or of any offence punishable under Sections 482 to 489 of the Indian Penal Code.

(2) The Licensing Authority shall immediately suspend the licence and issue a show cause notice for cancellation of licence and forfeiture of security. The licensee shall submit his explanation within 7 days of the receipt of notice. There after the Licensing Authority shall pass suitable orders after giving due opportunity of hearing to the licensee.

(3) In case the licence is cancelled the basic licence fee, licence fee deposited by him shall stand forfeited in favour of the Government and licensee shall not be entitled to claim any compensation or refund. Such licensee may also be blacklisted and debarred from holding any other exercise licence."

11. Learned counsel for the petitioners argues that for exercising the powers under the Rules, which are quoted herein above, it is essential that the licensing authority can pass an order of suspension or cancellation only if the ‘liquor is found in the licensed premises’ or in the ‘possession of the licensee’, which is not the case in the present case. He further argues that the possession of the licensee referred to under the 2003 Rules as well as the 2002 Rules has to be ‘conscious possession’ which is not recorded even in the seizure memo. He takes me to the seizure memo, which is on record, to argue that the seizure and recovery was not in accordance with the provisions of Section 42 of the Cr.P.C. and in any case there is no reference in the seizure memo that the recovery was from the ‘conscious possession’ of the petitioners.

12. To buttress his submissions, he places reliance on the judgment of the Hon’ble Supreme Court in the case of Patel Jethabhai Chatur v. State of Gujarat; (1976) 4 SCC 522 [LQ/SC/1976/386] wherein the Hon’ble Supreme Court had the occasion of interpreting Section 66(1) of the Bombay Prohibition Act, 1949 and the Hon’ble Supreme Court after interpreting the said provisions specifically with regard to the possession recorded as under:

“6. That takes us to the second limb of the contention directed against the order of retrial on the further charge of possession of liquor. It is true that originally when the case was tried before the learned Judicial Magistrate, there was no charge against the appellant and Accused 3 to 8 for the offence of consuming liquor and the appeal of the State was also directed only against their acquittal for the offence of consuming liquor. But there can be no doubt that if, while hearing the appeal, the High Court found that, on the material before him, the learned Judicial Magistrate should have framed a further charge against the appellant and Accused 3 to 8 but he failed to do so, the High Court could certainly direct the learned Judicial Magistrate to frame such further charge and try the appellant and Accused 3 to 8 on such further charge. The High Court could legitimately in the exercise of its jurisdiction, set right the error committed by the learned Judicial Magistrate in not framing a proper charge. Here, the High Court, on a consideration of the material which was before the learned Judicial Magistrate, came to the conclusion that this material warranted the framing of a further charge against the appellant and Accused 3 to 8 for possession of liquor and it, therefore, directed that the case should go back to the learned Judicial Magistrate and he should try the appellant and Accused 3 to 8 on such further charge. The High Court clearly had jurisdiction to make such an order. But then, the complaint made on behalf of the appellant was that the material before the learned Judicial Magistrate did not justify the framing of a charge against the appellant and Accused 3 to 8 for possession of liquor and hence the order directing their trial on such further charge was not justified. This is, however a complaint on facts and we do not see any reason why we should, in the exercise of our extraordinary jurisdiction under Article 136 of the Constitution, entertain such a complaint. It is true that there are certain observations made by the High Court which are a little too wide but it cannot be gainsaid that even a person who participates in a drinking party can in conceivable cases be guilty of the offence of possession of liquor. Suppose a person is found at a drinking party and he has a glass with him with liquor in it at the time when the raid is carried out, would it not be correct to say that he was at the relevant time in possession of liquor The liquor in his glass would be liquor in his possession. But at the same time it would not be correct to say that merely because a participant in a drinking party can stretch his hand and take liquor for his use and consumption, he can be held to be in possession of liquor. The question is not whether a participant in a drinking party can place himself in possession of liquor by stretching his hand and taking it but whether he is actually in possession of it. Possession again must be distinguished from custody and it must be conscious possession. If, for example, a bottle of liquor is kept by someone in the car or house of a person without his knowledge, he cannot be said to be in possession of the bottle of liquor. It cannot, therefore, be laid down as an absolute proposition that whoever is present at a drinking party must necessarily be guilty of the offence of possession of liquor and must be charged for such offence. Whether an accused is in possession of liquor or not must depend on the facts and circumstances of each case. Here in the present case, the prosecution will have to establish at the trial by leading satisfactory evidence that the appellant and the other accused were in possession of liquor or else the prosecution on the charge of possession of liquor will fail. The order directing trial of the appellant and the other accused for the offence of possession of liquor must, therefore, be maintained, but we think it would be desirable if this trial is taken up after the disposal of the appeal by the High Court in regard to the acquittal of the appellant for the offence of consuming liquor.

13. He further places reliance on the judgment of the Hon’ble Supreme Court in the case of State of Punjab v. Balbir Singh; (1994) 3 SCC 299 [LQ/SC/1994/291] wherein the Hon’ble Supreme Court dealt with the manner of search and seizure and recorded as under:

“8. But if on a prior information leading to a reasonable belief that an offence under Chapter IV of the Act has been committed, then in such a case, the Magistrate or the officer empowered have to proceed and act under the provisions of Sections 41 and 42. Under Section 42, the empowered officer even without a warrant issued as provided under Section 41 will have the power to enter, search, seize and arrest between sunrise and sunset if he has reason to believe from personal knowledge or information given by any other person and taken down in writing that an offence under Chapter IV has been committed or any document or other article which may furnish the evidence of the commission of such offence is kept or concealed in any building or in any place. Under the proviso if such officer has reason to believe that search warrant or authorisation cannot be obtained without affording opportunity for the concealment of the evidence or facility for the escape of the offender, he can carry out the arrest or search between sunset and sunrise also after recording the grounds of his belief. Sub-section (2) of Section 42 further lays down that when such officer takes down any information in writing or records grounds for this belief under the proviso, he shall forthwith send a copy thereof to his immediate official superior.”

14. He further places reliance on the judgment of the Hon’ble Supreme Court in the case of Sanjay Dutt v. State Through C.B.I., Bombay (II); (1994) 5 SCC 410 [LQ/SC/1994/858] wherein the Hon’ble Supreme Court interpreted the word ‘possession’ and recorded as under:

“19. The meaning of the first ingredient of ‘possession’ of any such arms etc. is not disputed. Even though the word ‘possession’ is not preceded by any adjective like ‘knowingly’, yet it is common ground that in the context the word ‘possession’ must mean possession with the requisite mental element, that is, conscious possession and not mere custody without the awareness of the nature of such possession. There is a mental element in the concept of possession. Accordingly, the ingredient of ‘possession’ in Section 5 of the TADA Act means conscious possession. This is how the ingredient of possession in similar context of a statutory offence importing strict liability on account of mere possession of an unauthorised substance has been understood.”

15. He also places reliance on the judgment of this Court in Writ – C No. 5098 of 2017 (Ajay Pratap Singh v. State of U.P. & Ors.) decided on 6.7.2022 wherein this Court in similar circumstances had the occasion to interpret the scope of Section 21 of the 2002 Rules as well as Rule 18 of the Uttar Pradesh Excise [Settlement of Licenses for Retail Sale of Foreign Liquor (Excluding Beer and Wine Rules)] Rules, 2001 which are pari materia with Rule 17(1)(C) and Rule 21(3) of the 2003 Rules and held as under;

”15. The action as taken against the petitioner under the orders impugned herein was clearly an 'expropriatory action' and the provision in the Rules are also 'expropriatory'. It is well settled that expropriatory powers conferred on State through statutes are required to be interpreted strictly and the orders passed have to pass the 'strict scrutiny test'. On a plain reading of the provisions of the Rules 18 and 21 in the 2001 and 2002 Rules respectively, it is clear that the steps for suspension and cancellation of the licence can be taken only in the event that (i) any liquor is found in the licensed premises or (ii) it is found in the possession of the licensee. The other conditions specified in Rule 21 and Rule 18 need not detain this Court as the same do not arise in the present case. The words "licensed premises" has not been defined under the Act and the Rules referred above, however while granting of licence, the premises for which the licence has been granted is clearly delineated and specified in the licence itself and thus for the purposes of interpreting the word "licensed premises", reference has to be drawn to the premises referred to in the licence. Any infraction or possession of liquor or intoxicating drugs other than authorized in the 'licensed premises' would certainly empower the authority concerned to take action under Rules 18 or Rule 21 of the aforesaid Rules as the case may be. Similarly the possession of any liquor or intoxicating drugs other than the authorized in the possession of the licensee would also trigger the powers to be exercised under Rules 18 and 21 of the aforesaid Rules. In the absence of any allegation of any recovery from any place in the 'licensed premises' or in the 'possession of the licensee', the powers to suspend and cancel cannot be resorted to under the Act or the Rules referred above.”

16. The Court further allowing the writ petition passed the following order in Para – 22:

“22. As no direction for renewal of the licences can be issued in view of the change in the policy of the State Government, the writ petition is disposed off with a direction to refund the proportionate basic license fee, the proportionate license fee and the security deposit as forfeited by means of the order dated 24.02.2016 within a period of two months from the date of the petitioner moving an appropriate application before the District Magistrate, District Amethi.”

17. In the present case, admittedly the recovery was not from the licensed premises and the liquor was recovered from the residential premises jointly owned by both the petitioners. In the seizure memo on record, there is no mention that the petitioners were in ‘conscious possession’ of the said liquor crates, the seizure memo on record does not even record the presence of the petitioners; it nowhere records that the petitioners were conscious of the said liquor. There are no independent witness to the seizure which started on 16.4.2015 but was signed on 17.4.2015.

18. I have already held that the liquor was not seized from the licensed premises which is admitted case of the parties. Further, there being no material to come to an opinion that the liquor allegedly seized from the residential premises of the petitioners was in their conscious possession, in terms of the Rules, the cancellation of the license and the consequent seizure was clearly de hors the Rules.

19. Now coming to the second question as to whether the District Magistrate could have directed the sale of liquor seized from the licensed premises and legally under the custody of the petitioners by virtue of they being license holder, an interesting feature in the petition is that in the show-cause notice, the petitioners were never called upon to show-cause as to why the liquor legally under the custody of the petitioners and lying in the licensed premises may not be sold. The show-cause notice on record as Annexure – 7 only proposes to confiscate the amounts deposited by the petitioners and does not even proposes the punishment of sale of liquor which was in the legal custody of the petitioners. In view thereof, the District Magistrate could not have passed an order directing for sale of liquor which was legally under the custody of the petitioners in the licensed premises. Even otherwise, the sale could not have been directed as was done by the District Magistrate as there is no power under the rules for sale of the liquor kept legally in the licensed premises. Thus, on both grounds the order passed by the District Magistrate and as affirmed in appeal and revision are clearly not sustainable.

20. Accordingly, both the writ petitions are allowed.

21. Orders dated 17.03.2016, 27.07.2015 & 01.06.2015 (Annexures – 1, 2 and 3 respectively in Writ – C No.9330 of 2016) as well as Orders dated 03.02.2016, 27.07.2015 & 01.06.2015 (Annexures – 1, 2 & 3 respectively in Writ – C No.9388 of 2016) are set aside.

22. Respondents are directed to refund the proportionate basic license fee, proportionate license fee and the security deposit as forfeited vide order dated 1.6.2015 to the petitioners.

Respondents are further directed to refund the amount obtained by them through auction of the liquor which was directed to be sold from the licensed premise of the petitioner in Writ – C No.9330 of 2016 and that of the petitioner in Writ – C No.9338 of 2016.

23. The amounts as directed above, shall be paid to the petitioners within a period of four months from the date of them moving an appropriate application before respondent no.5.