2013 (10) TMI 529 - SC - Indian Laws

Granting Licence for establishing Distilleries under the Foreign Liquor (Compounding Blending and Bottling) Rules 1975 r.w Section 14 of the Abkari Act Right to carry on trade or business in liquor Held that - Article 47 is one of the Directive Principles of State Policy which is fundamental in the governance of the country and the State has the power to completely prohibit the manufacture sale possession distribution and consumption of liquor as a beverage because it is inherently dangerous to the human health - A citizen has no fundamental right to trade or business in liquor as a beverage and the activities which are res extra commercium cannot be carried on by any citizen and the State can prohibit completely trade or business in portable liquor and the State can also create a monopoly in itself for the trade or business in such liquor. LIQUOR POLICY - Liquor policy of State is synonymous or always closely associated with the policy of the Statute dealing with liquor or such obnoxious subjects - Monopoly in the trade of liquor is with the State and it is only a privilege that a licensee has in the matter of manufacturing and vending in liquor - It is trite law that a Court of Law is not expected to propel into the unchartered ocean of State s Policies - State has the power to frame and reframe change and re-change adjust and readjust policy which cannot be declared as illegal or arbitrary on the ground that the earlier policy was a better and suited to the prevailing situations. Situation which exited in the year 1998 had its natural death and cannot be revised in the year 2013 when there is total ban. DISCRETION AND DUTY - The powers conferred on the Commissioner as well as the Government have to be understood in the light of the Constitutional scheme bearing in mind the fact that the trade or business which is inherently harmful can always be restricted curtailed or prohibited by the State since it is the exclusive privilege of the State - State can always adopt a restrictive policy even in cases where the applicants have satisfied all the conditions stipulated in the rules and the policy permits granting of licences - the satisfaction of the conditions laid down in 1975 Rules would not entitle an applicant as a matter of right to claim a distillery licence which is within the exclusive privilege of the State. MANDAMUS TO ISSUE LICENCE - The High Court cannot direct the State Government to part with its exclusive privilege Granting liquor licence is not like granting licence to drive a cab or parking a vehicle or issuing a municipal licence to set up a grocery or a fruit shop - Before issuing a writ of mandamus the High Court should have at the back of its mind the legislative scheme its object and purpose the subject matter the evil sought to be remedied State s exclusive privilege etc. and not to be carried away by the idiosyncrasies or the ipse dixit of an officer who authored the order challenged - applicant has failed to establish a legal right or to show that there is a legal duty on the Commissioner or the Government to issue a distillery licence. DISCRETIONARY ORDER ARTICLE 14 Held that - The Respondent could lay a claim only if it establishes that a preferential treatment has been meted out to M/s Amrut Distilleries Bangalore and M/s. Empee Distilleries Madras while granting licences for establishing the respective distillery units in the Palakkad District on the ground of discrimination violating Article 14 of the Constitution of India - Respondent has prayed for another licence for it as well which cannot be claimed as a matter of right - Citizens cannot have a fundamental right to trade or carry on business in the properties or rights belonging to the State nor can there be any infringement of Article 14 if the State prefers other applicants for the grant of licence during the pendency of some other applications unless an applicant establishes a better claim over others - The learned single Judge as well as the Division Bench of the High Court was not justified in issuing a Writ of Mandamus directing the issuance of a distillery licence to the respondent order set aside Decided in favour of Petitioner.

Summary

The core legal questions considered in this appeal revolve around the scope and exercise of discretionary power vested in the State Government and the Commissioner of Excise under the Foreign Liquor (Compounding, Blending and Bottling) Rules, 1975 ("1975 Rules") read with Section 14 of the Abkari Act ("the Act"), specifically:

1. Whether the High Court can issue a Writ of Mandamus under Article 226 of the Constitution of India directing the State Government to grant a licence for establishing a distillery unit, thereby compelling the State to part with its exclusive privilege in the liquor trade.

2. The nature and extent of the discretion conferred on the Commissioner and the State Government under Section 14 of the Act and the 1975 Rules in granting licences for distilleries.

3. Whether a citizen has a fundamental or legal right to carry on trade or business in liquor or to claim a distillery licence as a matter of right.

4. The applicability of Article 14 of the Constitution concerning arbitrariness and discrimination in the grant or refusal of licences.

5. The legal effect and limits of State liquor policy changes, especially the 1998 and 1999 policies, on pending and future licence applications.

Issue-wise Detailed Analysis:

1. Power of the High Court to issue Writ of Mandamus directing grant of licence

Legal framework and precedents: Article 226 of the Constitution empowers the High Court to issue writs including Mandamus to enforce legal rights or public duties. However, a writ of Mandamus can only be issued where there is a legal right in the applicant and a corresponding legal duty on the authority to perform a public or statutory function.

Precedents establish that where the power conferred is discretionary and not coupled with a duty to grant a licence, courts cannot compel the grant of licence by Mandamus. (See State of Madhya Pradesh v. Nandlal Jaiswal; Vithal Dattatraya Kulkarni v. Shamrao Tukaram Power SMT; Khoday Distilleries Ltd. v. State of Karnataka).

Court's interpretation and reasoning: The Court emphasized that the power to grant licences under Section 14 of the Act and Rule 4 of the 1975 Rules is discretionary, not mandatory. The language "may" and "if he is satisfied" indicates that the Commissioner and Government have freedom to decide whether or not to grant licences, subject to policy and eligibility.

The Court held that the High Court cannot direct the State Government to part with its exclusive privilege by issuing a Mandamus to grant a distillery licence. At best, the High Court can direct consideration of an application, but cannot compel grant of licence.

Application of law to facts: The respondent's application for licence was considered and rejected by the State Government based on policy and other grounds. The High Court's order directing grant of licence by Mandamus was held to be beyond jurisdiction as no legal right or duty to grant licence was established by the respondent.

Treatment of competing arguments: The respondent argued that the High Court's directions were justified to prevent injustice and that the Court can mould relief under Article 226. The Court acknowledged the power to mould relief but held that it cannot override the statutory scheme and exclusive State privilege.

Conclusion: The Court concluded that the High Court erred in issuing a writ of Mandamus directing grant of licence and that such a direction is impermissible in law.

2. Nature and scope of discretion under Section 14 of the Act and 1975 Rules

Legal framework: Section 14 confers power on the Commissioner, with prior approval of the Government, to issue licences for distilleries. Rule 4 of the 1975 Rules requires the Commissioner to be "satisfied" before granting licence. The language used is permissive and discretionary.

Court's reasoning: The Court observed that these provisions confer discretionary power, not a duty to grant licence. The State has exclusive privilege over liquor trade and may adopt restrictive policies, including refusing licences even if conditions are met. The discretion must be exercised reasonably and not arbitrarily.

Application to facts: The Government had received numerous applications and had adopted a policy in 1999 to stop granting new licences. The respondent's application was rejected after due consideration under this policy and other relevant factors.

Competing arguments: The State argued that the discretion to grant or refuse licences is absolute and policy-based. The respondent contended that similarly situated applicants had been granted licences and that non-consideration was discriminatory.

Conclusion: The Court held that the discretion is broad but must not be exercised arbitrarily or discriminatorily. The State can refuse licences based on policy and other relevant considerations.

3. Right to carry on trade or business in liquor

Legal framework and precedents: Article 19(1)(g) guarantees the right to carry on any trade or business but this right is subject to reasonable restrictions. Liquor trade is considered inherently injurious to health and is subject to State monopoly and regulation under Article 47 (Directive Principles) and other constitutional provisions.

Precedents affirm that no citizen has a fundamental right to trade in liquor, which is res extra commercium, and the State can prohibit or regulate it exclusively (Vithal Dattatraya Kulkarni; P.N. Kaushal; Nashirwar; State of Maharashtra v. Nagpur Distilleries).

Court's reasoning: The Court reiterated that liquor trade is a State privilege, and citizens have no fundamental or legal right to demand licence as a matter of right. The State can impose restrictions, adopt policies, and grant or refuse licences at its discretion.

Application to facts: The respondent could not claim a right to licence merely because other licences were granted in the same district. The State's exclusive privilege and policy considerations prevail.

Conclusion: The Court confirmed the absence of any fundamental or legal right to carry on liquor trade or to claim licence as a matter of right.

4. Article 14 and arbitrariness in grant or refusal of licence

Legal framework: Article 14 prohibits arbitrary and discriminatory State action. While the State has discretion, it cannot act capriciously or discriminate between similarly situated persons without reasonable basis.

Precedents (Nandlal Jaiswal) establish that when the State grants privilege to some, it must not act arbitrarily or discriminate unjustifiably.

Court's reasoning: The Court held that while no right to licence exists, if the State grants licences to some applicants, it must not discriminate arbitrarily against others similarly situated. The burden is on the complainant to establish such discrimination.

Application to facts: The respondent did not challenge the licences granted to other applicants in the same district but sought a licence on its own. No evidence of discriminatory treatment was established.

Conclusion: No violation of Article 14 was found in the rejection of the respondent's application.

5. Effect of State liquor policy changes on licence applications

Legal framework: The State has the power to frame, amend, or rescind liquor policies as per changing circumstances. Courts will not interfere with policy decisions unless they violate constitutional principles or statutory mandates.

Court's reasoning: The Court noted that the 1998 policy had a limited life and was superseded by the 1999 policy which imposed a total ban on new licences. The respondent's application was considered in light of the prevailing policy and rejected accordingly.

Application to facts: The respondent's application dated 1987 was not considered timely or valid given the partnership deed date and the policy changes. The Government's refusal was consistent with the policy in force at the relevant time.

Conclusion: The Court held that an outdated policy cannot be resurrected by judicial mandate years later, and the State's policy decisions must be respected.

Significant Holdings:

"The High Court cannot direct the State Government to part with its exclusive privilege by issuing a Writ of Mandamus directing the grant of a distillery licence. At best, it can direct consideration of an application but cannot compel grant of licence."

"Section 14 of the Act and Rule 4 of the 1975 Rules confer discretionary powers on the Commissioner and the State Government, not a duty to grant licences."

"No citizen has a fundamental or legal right to carry on trade or business in liquor or to claim a distillery licence as a matter of right."

"While the State has discretion to grant or refuse licences, such discretion must not be exercised arbitrarily or discriminatorily in violation of Article 14."

"The State Government is entitled to frame, change, or rescind liquor policies and courts will not interfere with such policy decisions unless they are unconstitutional or illegal."

"The satisfaction of conditions laid down in the Rules does not entitle an applicant to claim a distillery licence as a matter of right."

"Granting liquor licence is not akin to granting licences for other trades or businesses; it involves the exercise of exclusive State privilege and discretion."

"The Court must uphold the majesty of law by strengthening the law, not by bending or breaking it through issuance of writs beyond the statutory scheme."

Final determinations:

The Court allowed the appeal, set aside the High Court's orders directing grant of licence, and held that the State Government's rejection of the respondent's application was lawful and within its discretion. No legal right to licence was established by the respondent, and the High Court erred in issuing a writ of Mandamus compelling grant of licence. The exclusive privilege of the State in liquor trade and the discretionary nature of the licence-granting power must be respected. The State's policy decisions on liquor licensing are binding unless shown to be unconstitutional or arbitrary.