TMI Blog1984 (3) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... the grant of a licence for the manufacturing and supplying of bottled arrack to the wholesale and retail licensees for the Chingleput district under r. 7 of the Tamil Nadu Arrack (Manufacture) Rules, 1981 ('Rules', for short) framed under the Tamil Nadu Prohibition Act, 1937 ('Act' for short). These appeals raise separate and distinct questions and must therefore receive separate consideration. Put very shortly, the essential facts are these. On May 28, 1982 one O.H. Kumar carrying on business under the name and style of Messrs Three Star Bottling Company surrendered his licence for the manufacture and supply of bottled arrack for the Chingleput district for the financial year 1 982.83. The Commissioner of Prohibition Excise, Madras called for applications from intending persons for the grant of the licence. In response to the notice issued by the Commissioner under r. 3(2) of the Rules, there were two applications filed under r. 5 in Form 1, namely, by J. Balaji. managing partner of Messrs Majestic Bottling Company on June 9, 1982 and by V. Ramabadran, managing partner of Messrs Chingleput Bottlers on June 14, 1982. The Commissioner issued a questionnaire and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led separate petitions under Art. 226 of the Constitution before the High Court questioning the validity of the order passed by the Commissioner. By his judgment dated June 13, 1983 a learned Single Judge held that the Commissioner was not justified in rejecting the application of Messrs Majestic Bottling Company on a wrongful assumption that they did not satisfy the requirement of r. 5(a) and (e) of the Rules. He held that the order was vitiated by an error apparent on the face of the record inasmuch as J. Balaji, managing partner of Messrs Majestic Bottling Company had produced record with regard to the availability of water. The Learned Single Judge however set aside the finding of the Commissioner that the application made by Messrs Chingleput Bottlers was not in order because it was not accompanied by a solvency certificate holding that non-production of a solvency certificate would not entail a dismissal of the application on that ground alone, as also the finding with regard to non-availability of water at the proposed site since the blending unit of Messrs Three Star Bottling Company was already functioning there. The learned single Judge rejected the contention of Messr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company had misused the large quantity of rectified spirit by diverting alcohol from industries to arrack production and therefore they were persons not likely to abide by the provisions of the Act and the Rules farmed thereunder within the meaning of r. 5(b), and this would have been a relevant point to be taken into consideration by the State Government in the matter of grant or refusal of prior approval under r. 7(1). It was alleged that these two persons were directors during the aforesaid period of misuse. At the conclusion of the hearing of the appeals before the High Court, the State Government filed a supplementary affidavit of S. Ranganathan, Deputy Secretary to the State Government of Tamil Nadu, Department of Prohibition Excise furnishing further and better particulars of the alleged misuse of rectified spirit by Messrs Dhanalakshmi Chemical Industries Private Limited which had put the State Government to a loss of revenue to the tune of ₹ 2 crores. It was averred that investigation into the case was almost complete and a prosecution was about to be launched against the Company and its directors, including J. Balaji and Smt. Shanthi, the two partners of Messrs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no jurisdiction to issue a writ of mandamus ordaining the Commissioner to grant a licence to Messrs Chingleput Bottlers under r. 7 of the Rules without the prior approval of the State Government. It is said that although a writ of mandamus may be a necessary adjunct to a writ of certiorari the proper course for the High Court to have adopted was, if it was satisfied that the impugned order of the Commissioner was liable to be quashed insofar as he rejected the application made by Messrs Majestic Bottling Company on the ground that there was an error apparent on the face of the record, to have issued a writ of mandamus Commissioner to redetermine the question as to the grant of such privilege. Reliance is placed on de Smith's Judicial Review of Administrative Action, 4th edn. at pp.341 and 544. The contention must, in our opinion. prevail. In order that a writ of mandamus may issue to compel the Commissioner to grant the licence, it must be shown that under the Act and the Rules framed thereunder there was a legal duty imposed on the Commissioner to issue a licence under r. 7 of the Rules without the prior approval of the State Government and that Messrs Majestic Bottling Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is true that sometimes it is prudent to couple a writ of certiorari with a writ of mandamus to control the exercise of discretionary power. The following illuminating passages from de Smith's Judicial Review of Administrative Action; 4th edn. at pp.341 and 544 pithily sum up the function of a writ of mandamus; It is now open to a court when granting certiorari to remit the matter to the authority with a direction to reconsider and to decide in accordance with the findings of the court. Apart from this, the role of the courts is limited to ensuring that direction has been exercised according to law. If, therefore, a party aggrieved by the exercise of discretionary power seeks an order of mandamus to compel the authority to determine the matter on the basis legally relevant considerations, the proper form of the mandamus will be one to hear and determine according to law; though by holding inadmissible the considerations on which the original decision was based the court may indirectly indicate the particular manner in which the discretion ought to be exercised. In practice the frontier between control of legality and control of the actual exercise of discretion remains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regrettable that the High Court should have short- circuited the whole procedure upon a wrongful assumption of its own powers. The view taken by the High Court is manifestly erroneous. Otherwise, the statutory requirement of such prior approval of the State Government under r. 7 would be rendered wholly otiose. We should not be understood as laying down an inflexible rule that the High Courts cannot, under any circumstances, regulate or control the manner of grant of a liquor licence by the issue of a writ of mandamus. It would all depend upon the facts and circumstances as to whether the High Court should issue a writ of mandamus or not. The grant of a liquor licence is a matter of privilege. In the very nature of things, the grant of refusal of licence is in the discretion of the State Government. Normally, where the statute vests a discretionary power upon an administrative authority, the Court would not interfere with the exercise of such discretion unless it is made with oblique motives or extraneous purposes or upon extraneous considerations. The present case does not fall within the rule laid down in K. N. Guruswamy v. The State of Mysore or and P. Bhooma Reddy v. St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsiders it inexpedient to exercise their powers they should state their reasons and there must be.. material to show that they have considered all the relevant facts. This was not a case where it could be said that there was nothing for the State Government to consider as to whether should accord or refuse prior approval to the grant of a licence to Messrs Majestic Bottling Company under r. 7 of the Rules. The Commissioner by the impugned order rejected the applications for grant of a licence made by both Messrs Chingleput Bottlers and Messrs Majestic Bottling Company and therefore the stage was not reached. The stage for the State Government to reconsider the matter of grant of privilege under r. 7 would only arise when the commissioner makes a recommendation for the grant of a licence to Messrs Majestic Bottling Company. At that stage, the State Government would have to consider whether they should accord prior approval for the grant of such privilege to Messrs Majestic Bottling Company having regard to the matters specified in r. 5 of the Rules and the conditions set out in r. 6(c), in view of the further facts brought out in the supplementary counter affidavit of Deputy Secr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company moved Gujarat High Court by a petition under Act. 226 for the issue of a writ of mandamus to direct the Corporation to disburse the loan. A learned Single Judge of the High Court issued the writ as prayed for and it was confirmed by a Division Bench. on appeal by the Corporation, this writ Court held that the High Court was justified in issuing the writ of mandamus. The decision in Gujarat State Financial Corporation's case, (supra) turned on the doctrine of promissory estoppel and it does not justify the conclusion reached by the learned Judges in the present case for the issue of a writ of mandamus. It is needless to stress that if the requirement of law was that the advance of loan to be sanctioned by the Gujarat State Financial Corporation was to be subject to the prior approval of the Reserve Bank of India, the decision of the Court would have been otherwise: It is difficult to subscribe to the doctrine evolved by the High Court in Vadiappan's case, (supra) that the Commissioner is the 'sole arbiter' under r. 7 of the Rules. It relied upon the earlier decision of the High Court in K. Ramaswamy v. Government of Tamil Nadu ors laying down that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted. We regret to say, the High Court has tried to circumvent the whole procedure by issuing a writ of mandamus directing the Commissioner to grant a licence under r. 7 without the prior approval of the State Government. As already stated, the grant of a licence under r. 7 of the Rules is a privilege. There are no charges of mala fides on the part of the State Government. There is no suggestion that the State Government had already made up their mind. This is also not a case where the rules of necessity require recourse to a writ of mandamus to command the issue of a licence without conforming to the procedure prescribed under r. 7. In the premises, it was not a proper exercise of jurisdiction for the High Court to have issued a writ of mandamus under Art. 226 of the Constitution ordaining the Commissioner to grant a licence to Messrs Majestic Bottling Company under r. 7 of the rules without the prior approval of the State Government. In our opinion, the proper course for the High Court to adopt was to issue a writ of mandamus directing the Commissioner to redetermine the question after following the procedure of r. 7 and in case he came to a decision to grant the licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O.H. Kumar and Messrs Chingleput Bottlers was not based on any material at all. The Commissioner knew that O.H. Kumar, the previous licensee, was not in a position to advance rupees 10 lakhs and odd to Messrs Chingleput Bottlers. Again, no such inquiry was made as to the financial capacity of Messrs Majestic Bottling Company. Further, the Commissioner had wrongly assumed that Messrs Chingleput Bottlers and given their address as 'Ramabadran, c/o Messrs Three Star Bottling Company, Iyanchery' when no such address was ever furnished and therefore the impugned order is vitiated by an error apparent on the face of the record. In support of the contention that the Commissioner acted in violation of the rules of natural justice, the learned counsel contends that Messrs Chingleput Bottlers had a right to be heard. It is urged that there was clear breach of the principle of audi alteram partem in as much as neither a copy of the report of the Collector was furnished to Messrs Chingleput Bottlers nor a copy of the representation submitted by Messrs Majestic Bottling Company against the grant of licence to them. The argument is that a hearing where a party does not know the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tling Company. This equally applies to the two-page note appearing in the file of Messrs Chingleput Bottlers. It was quite proper for the Commissioner to make secret and discreet inquiries from confidential sources. There was no duty cast on him to disclose to Messrs Chingleput Bottlers the sources of adverse information or to give them an opportunity to confront the informants. Rules of fairplay only 'enjoin- that Messrs Chingleput Bottlers should know the case against them. This apparently they did from the questionnaire issued by the Commissioner and the questions put by the Commissioner on July S, 1982 on the basis of the information gathered by him. p The Commissioner has relied upon the report of the Collector and the conclusions reached by the Collector are based on the statement of Ramabadran recorded by the Assistant Commissioner(Excise). Further, at the hearing on July 5, 1982, the Commissioner recorded the statement of Ramabadran, managing partner of Messrs Chingleput Bottlers. There was no occasion for the Commissioner to have recorded the statement of Ramabadran over again unless this was to give him an opportunity to explain the substance of the report of the Coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the light of the settled principles, we have to see whether the Commissioner acted in breach of the rules of natural justice or fairplay in passing the impugned order. There is authority for the proposition that an authority or body need not observe the rules of natural justice where its decision, although final, relates not to a 'right' but to a 'privilege or licence' In a number of recent decisions, the Courts have, while extending the protection of natural justice in the former category of claims, denied such protection to the latter category. All that is emphasized in such cases is that the applications must be considered fairly. In R.V. Gaming Board for Great Britain ex parte Bneaim Khaida the Court of Appeal held that in refusing a certificate for reasons concerning the character and suitability of the applicants, the Board must act fairly and obey the broad principles of natural justice. In fact, it was held that they had done so since they had given the applicants full opportunity to know and contest the case against them, even though they had not revealed the sources of their information or given their reasons. It follows that the right to know the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce has neither a right to such a grant nor a reasonable expectation that such grant would be made in his favour, but cancellation or forfeiture of an existing licence or refusal to renew a licences, involves a right to a hearing as the applicant has what may be called 'reasonable expectation'. Megarry, V.C. dealt with the question whether the grant or refusal of licence by the Board of Control is subject to any requirement of natural justice or fairness which would be enforced by the courts. In dealing with the nature of the right to claim a licence, he said that it was nothing but a privilege. The three distinct categories can best be discerned in his own words: First, there are what may be called the forfeiture cases. In these, there is a decision which takes away some existing right or position, as where a member of an organization is expelled or a licence is revoked. Second, at the other extreme there are what may be called the application cases. There are cases where the decision merely refuses to grant the applicant the right or position that he seeks, such as membership of the organization, or a licence to do certain acts. Third, there is an intermediate cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to act fairly' did not impose on the Board to give either oral hearing to the applicant or to disclose the case against him nor was . it under any obligation to give reasons for a decision. The learned Judge then went on to say that there was no obligation for the Board to give the applicant even the gist of the reasons while they refused his application, or proposed to do so, and added. The concepts of natural justice and the duty to be fair must not be allowed to discredit themselves while ranking unreasonable requirements and imposing undue burdens. In such cases; the right to hearing has been denied on the ground that the claim or interest or legitimate expectation is a more 'privilege or 'licence'. This is in consonance with the decision of a Constitution Bench of this Court in Kishan Chand Arora v. Commissioner of Police, Calcutta following the judgment of the Privy Council in Nakkuda Ali v. M.F.De S. Jayaratne's case. It is beyond the scope of the present judgment to enter into a discussion on the apparent conflict between the decision . Of the Privy Council in Nakkuda Ali's case and the observation of Lord Reid in Baldwin's case. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e report of the Collector and also on other material gathered by him during the course of the inquiry. There is no requirement under the Act for a confronted hearing like the hearing contemplated between rival claimants for the grant of a stage carriage permit under the Motor Vehicles Act, 1939 into their respective merits and demerits. The Commissioner separately heard both the parties and had their statements recorded with respect to all the relevant aspects It cannot be said that the Commissioner in dealing with the applications did not act fairly in not furnishing a copy of the report of the Collector or in taking a representation from Messrs Majestic Bottling Company., The High Court could not have in proceedings under Art. 226 of the Constitution interfered with the impugned order of the Commissioner merely because on a reappraisal of the evidence it might have come to a contrary conclusion. There was no error of jurisdiction on the part of the Commissioner nor was the impugned order vitiated by any error apparent on the face of the record. The finding reached by the Commissioner that the application made by Messrs Chingleput Bottlers was not made bona fide on their own accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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