M/s Sutinder Singh Chandel vs Union Territory, Chandigarh & Ors.

ASHWANI KUMAR MISHRA, A.C.J. (Oral)

Petitioner is a licensee of liquor vend allotted by the Excise and Taxation Department, Union Territory, Chandigarh, situated at Open Space, Opposite Kala Gram, Chandigarh. He has approached this Court with the prayer to command 4^th respondent not to release the bank guarantee for the liquor vend in question amounting to Rs.18,09,641/- on the ground that the license fee and dues in relation to the liquor vend for the excise year 2025-2026, had been cleared.

It is the specific case of the petitioner that the premises on which the liquor vend of the petitioner situates, is owned by the Municipal Corporation, Union Territory Chandigarh (for short ‘the MC, Chandigarh’) and, therefore, for any dues payable to MC, Chandigarh, the bank guarantee executed by the petitioner in favour of the Excise Department, cannot be invoked. In support of such contention, counsel for the petitioner places reliance on the Division Bench judgment of this Court in M/s Kler Wines vs. Union Territory, Chandigarh Administration, Chandigarh and others CWP-9787-2025, decided on 10.02.2026, wherein, the Division Bench of this Court has taken a view that the Chandigarh Administration and Municipal Corporation are the distinct entities in law and for the dues of one, the bank guarantee executed in favour of other, cannot be invoked.

Undisputed facts of the case are that the petitioner, being the highest bidder, was allotted liquor vend for the excise year 2025-2026. The petitioner thereafter approached the Excise and Taxation Department, informing it that he had been declared the successful bidder for License Unit No.81 in the auction-cum-tender process held on 30.06.2025. The petitioner sought permission to use the premises constructed by the MC, Chandigarh at the concerned site. The communication sent by the petitioner to the Excise and Taxation Department dated 30.06.2025, is extracted hereinbelow:-

It further transpires from the record that pursuant to the intervention of the Excise and Taxation Department and communication sent to the MC, Chandigarh by the Excise Department, the petitioner came into possession of the premises in question. The petitioner admittedly paid rent for two months to the MC, Chandigarh, which was to the tune of Rs.6,11,954/- per month towards rent and Rs.1,10,152/- towards GST.

The principle plank of the petitioner’s case is that the premises belong to the MC, Chandigarh and that no formal agreement ever came to be executed between the petitioner and the MC, Chandigarh, acknowledging the liability of the petitioner to pay such rent. It is also the petitioner’s case that unless such an agreement was duly entered into between the parties, the amount of rent cannot be recovered and particularly it cannot be adjusted from the bank guarantee issued to the Excise Department.

The claim of the petitioner is opposed by the Excise Department, which relies upon the letter of the petitioner dated 30.06.2025, as being the basis on which the premises were actually given to the petitioner on rent by the MC, Chandigarh. The respondents have also placed on record a communication sent to the MC, Chandigarh, annexing the draft lease agreement to be executed between the MC, Chandigarh and Excise and Taxation Officer, for the purpose of realization of rent from the lessee of the liquor vend. This agreement was signed by the Additional Excise and Taxation Commissioner-cum-Collector (Excise), Chandigarh. As per the respondents, this document remained with the Municipal Commissioner without its signed copy ever having been sent to the Excise Department. It is the consistent case of the MC, Chandigarh and the Excise Department that the duly signed agreement was returned to the Excise Department only on 05.03.2026. According to the respondents, there was a contract entered into between the petitioner and the Excise Department for providing space to run the liquor vend pursuant to which the MC, Chandigarh, gave possession of the location to the petitioner and once such agreement between the parties was worked upon and was given effect to with deposit of rent by the petitioner for two months, the subsequent attempt of the petitioner to question his liability to pay the rent, is an afterthought only with an intent to defeat the claim of rent of the MC, Chandigarh. It is also submitted that the petitioner’s contention that the MC, Chandigarh be relegated to the remedy of filing a suit for recovery of rent and that such amount cannot be adjusted from the bank guarantee furnished by the petitioner, is only an indication of the petitioner’s intent to misuse the proceedings and to derive unfair advantage.

From the materials placed on record, we find that the petitioner was allotted the license to run liquor vend in question. The license clearly specifies the location at which vend was to be established. The petitioner has not disputed the fact that he had undertaken before the Excise and Taxation Department to utilize the location in question for establishment of his liquor vend and that he undertook to pay the rent on agreed terms. The petitioner had also undertaken to vacate the premises on 31.03.2026. The fact that the petitioner otherwise admits to having taken the same premises from MC, Chandigarh, is clearly indicative of the fact that it was pursuant to the letter of the petitioner addressed to the Excise and Taxation Department that the premises was let out to the petitioner.

The records further indicate that such an agreement was proposed to be finalized between the MC, Chandigarh and the Excise and Taxation Department for which the draft agreement was forwarded to MC, Chandigarh. This draft agreement contained specification of the premises on which the liquor vend was to be established. Clauses 3 to 6 of the agreement are reproduced as under:-

The MC, Chandigarh, as per the proposed lease deed was the lessor and the Excise and Taxation Department was the lessee. There is nothing on record to indicate that any independent application was moved by the petitioner before the MC, Chandigarh for allocation of the site in question to the petitioner or any independent contract between the MC, Chandigarh and the petitioner for utilizing the premises in question for running of the liquor vend, was executed. In the facts of the case, we, therefore, clearly find that an agreement in the nature of a tripartite agreement was worked out between the parties, pursuant to which, the premises in question were given to the petitioner.

The petitioner having paid rent for two months has now backtracked and is questioning the liability to pay admitted rent only on the ground that an agreement between the Excise and Taxation Department and MC, Chandigarh, had not been validly executed.

For coming to such conclusion, we rely upon the undisputed facts of the case as having been placed on record before the Court by the MC, Chandigarh. Along with its reply, MC, Chandigarh, has placed on record a communication sent by the Excise and Taxation Commissioner-cum-Collector (Excise), dated 30.03.2025, whereby the MC, Chandigarh, was requested to allot the site in question for setting up of liquor vend as per the excise policy 2025-2026. This letter is reproduced hereinafter:-

The aforesaid communication is followed by a reminder dated 02.04.2025 sent by the MC, Chandigarh, allowing utilization of the premises for establishment of the liquor vend. The rate of rent was also indicated in the aforesaid letter. The contents of letter dated 02.04.2025 read as follows:-

The aforesaid two communications conclusively establish that the allotment of space by the MC, Chandigarh, for establishment of liquor vend, was on the request of the Excise and Taxation Department. The rate of rent was also intimated by the MC, Chandigarh to the Excise and Taxation Department. These two communications coupled with the follow up correspondence would clearly indicate that there was an agreement arrived at between the Excise and Taxation Department and MC, Chandigarh for the premises in question to be let out for running of retail vend in favour of licensee of the Excise Department. It is pursuant to these communications that the proposed lease deed was also sent to MC, Chandigarh. The mere fact that the lease agreement was not signed till 05.03.2026, it would not mean that no such agreement ever came into existence pursuant to which the right came to be created in favour of the Excise and Taxation Department over the land on which the liquor vend itself was to be established. Law is otherwise settled that an agreement between the parties need not necessarily be in writing. The agreement can also be inferred from the express conduct of the parties.

In the facts of the present case, we find that such an agreement has been arrived at pursuant to which the possession over the premises in question was given to the petitioner by the MC, Chandigarh. The possession of the premises having been given to the petitioner through the intervention of the Excise Department pursuant to the aforesaid agreement, would clearly entitle the Excise Department to deduct the amount of admitted rent payable for the premises in question. The petitioner cannot be permitted to contend that the rent can only be recovered by the MC by filing of a suit.

So far as the judgment of the Division Bench of this Court in M/s Kler Wines (supra) is concerned, we find that no exception can be taken to the principles laid down therein by the Coordinate Bench. Para No.3 of the aforesaid judgment is reproduced hereunder:-

However, we find that the facts of the case in M/s Kler Wines (supra) are distinguishable inasmuch as no agreement between the Excise Department and MC, Chandigarh pursuant to which the space for establishment of liquor vend was given to the petitioner, had arisen. On facts, we, therefore, find that this case is clearly distinguishable.

We also take note of the fact that before the filing of the present writ petition, the petitioner has also filed a suit for permanent injunction against MC, Chandigarh in which, the Excise and Taxation Department, was impleaded as defendant No.1.

The conduct of the petitioner, therefore, would indicate that at no point in time, there was any lack of awareness on the part of the petitioner of the fact that he was given the premises by the MC, Chandigarh, pursuant to an agreement between the MC, Chandigarh and Excise and Taxation Department. Its subsequent attempt to make out a different case is only to object the recovery of admitted rent from the petitioner.

In that view of the matter, we are of the view that writ proceedings under Article 226 of the Constitution of India cannot be allowed to be invoked by such unscrupulous licensees. We also make it clear that the period during which the writ petition remained pending would not be construed against the respondents for encashing the bank guarantee.

In view of the aforesaid discussion, we find no merit in the present writ petition. Consequently, the same is dismissed. Registrar (Judicial) is directed to return the original record to the counsel for the respondent against proper receipt.

All pending miscellaneous application(s), if any, shall also stand disposed of.