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Amarjit Singh Sidhu Versus State of Punjab and others

2016 (6) TMI 603 - PUNJAB AND HARYANA HIGH COURT

Liquor licences - power/authority to add, delete or cancel any kind of category of licence in the Excise policy without amending the relevant Acts and the Rules where there is a chart of liquor licences - Held that:- (i) The respondent is empowered to incorporate sub clause (ii) of clause 2.14 in the Excise Policy 2016-17 but the same is held to be invalid and inoperative to the extent it does not prescribe the manner and the method of its issuance by the manufacturers or the distilleries. It sh .....

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ications/offers, in case no fresh offer or application comes forth, the allotments, if any, already made shall continue for the rest of the period. - CWP No.5593 of 2016 (O&M) - Dated:- 9-6-2016 - MR. AJAY KUMAR MITTAL AND MRS. RAJ RAHUL GARG, JJ. For The Petitoner : Mr. Mohan Jain, Sr. Advocate with Mr. Vikram Jain, Mr. Arastu Chopra, Mr. Fateh Saini, Advocates, Mr. Ashish Aggarwal, Sr. Advocate with Ms. Ritu Pathak, Advocate, Mr. Sandeep Goyal, Advocate For The Respondent : Mr. Ashok Aggarwal, .....

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Policy dated 13.3.2016 for the year 2016-17, Annexure P.1 being arbitrary, illegal and against the provisions of the Punjab Excise Act, 1914 (in short, the Act ) and the Punjab Liquor Licence Rules, 1956 (for brevity, the Rules ) as Excise department has no power/authority to add, delete or cancel any kind of category of licence in the Excise policy without amending the relevant Acts and the Rules where there is a chart of liquor licences. Further prayer has been made for a direction to the resp .....

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r trade for the past so many years in the State of Punjab. In the month of March 2016, the State of Punjab announced its Excise policy for the year 2016-17 under the Act and the Rules. In the previous excise policy for the last year, there were different classes of licences mentioned in the Rules. The controversy arose when the State Government announced its excise policy for the year 2016-17 in which excise department has added a new dimension to the category namely L-1A licence which is above .....

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hority/consent letter to more than one person/company/firm/organization. iii) The manufacturing company will give this consent letter to that person/company/firm/organization who is at Arms Length Distance from the manufacturing company provided there is no promoter, director, partner in the manufacturing company or there is no holding, subsidiary, closely held company, fully/partially owned/financed/managed firm/company. iv) L-1A licensee will purchase IMFL (except Beer) wine, RTD from the Stat .....

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who was licensee of L-1 wholesale licence shall take the liquor directly from the manufacturing company. After adding L-1A licence, it has been specified that a person who is holder of L-1 licence will now have to take the liquor for sale from the L- 1A licensee i.e. newly created category of licence in the excise policy for the year 2016-17. It has been further claimed that the new licence has been created to monopolize the liquor trade and extend the same to the particular group of persons nam .....

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who is the competent authority to grant the L-1A licence and who is responsible to legally monitor or scrutinize the application for grant of L- 1A licence. No criteria has been prescribed for the manufacturer to give letter of consent if more than one person shows interest for its L-1A licence. The projected number of IMFL L-1A licensees in the State of Punjab is fixed at three and there will be just two L-1A liquor licence for Beer in the entire State of Punjab which would lead to monopolizati .....

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Punjab for and on behalf of respondents No.1 to 3, wherein it has been inter alia stated that L-1A licence is in existence since the year 2011 and is part of the 1956 rules. The only amendment which has been done for the year 2016-17 is that earlier L-1 licencee could purchase the liquor from manufacturer also but it was matter of practice that L-1 licencee used to purchase liquor from L-1A licensee. This practice has been made as a rule now and the manufacturer is not eligible for the grant of .....

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e the liquor business. Thus, the policy in question is in consonance with the Act and the Rules. On these premises, prayer for dismissal of the writ petition has been made. 5. A short affidavit by Additional Excise and Taxation Commissioner, Punjab dated 5.4.2016 has also been filed justifying the addition of L-1A licence in the excise policy for the year 2016-17. 6. We have heard learned counsel for the parties. 7. The controversy in these petitions relates to the following contentions:- a) Whe .....

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he marathon submissions made with vehemence by learned counsel for both the parties requires issue (c) to be sub-categorized as under:- (i) Whether the action of the respondents in creating Licence L-1A category in the Excise Policy for the year 2016-17 is legal and valid as the policy was issued on 13.3.2016 whereas Punjab Liquor Excise Rules, 1956 were amended incorporating Licence 1-A in modified form on 23.3.2016? ii) Whether the sub clause (ii) of Clause 2.14 of the Excise Policy 2016-17 is .....

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ner of Hills Division and Appeals, Assam and others, (1958) 1 SCR 1240 and Amar Chandra Chakraborty vs. Collector of Excise, Government of Tripura and others, (1973) 1 SCR 533, emphasized that the trades which were injurious to health and welfare of the public could be restricted by the State and that elimination and exclusion from the business was inherent in the nature of liquor business as it was treated as a class by themselves by all civilized societies. The plea that citizen either had a n .....

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ings in intoxicants is as stated and reflected in the Constitution Bench decisions of this Court in Balsara's case, Cooveriee's case, Kidwai's case, Nagendra Nath's case, Amar Chakraborty's case and the R.M.D.C. case, as interpreted in Harinarayan Jaiswal's case and Nashirwar's case, There is no fundamental right to do trade or business in intoxicants. The State, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to in .....

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control is' an incident of the society's right to self-protection and it rests upon the right of the State to care for the health, morals and welfare of the people. Liquor traffic is a source of pauperism and crime. (pp. 539, 540, 541). 11. Subsequently, another Constitution Bench in Khoday Distilleries Limited and others vs. State of Karnataka and others, (1995) 1 SCC 574 delving into the issue, whether the citizen has a fundamental right to carry on trade in liquor, upon referring to .....

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eed under the Constitutions of the other civilized countries are not absolute but are read subject to the implied limitations on them. Those implied limitations are made explicit by clauses (2) to (6) of Article 19 of our Constitution. (b) The right to practise any profession or to carry on any occupation, trade or business does not extend to practising a profession or carrying on an occupation, trade or business which is inherently vicious and pernicious, and is condemned by all civilised socie .....

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ful. A citizen has, therefore, no fundamental right to do trade or business in liquor. Hence the trade or business in liquor can be completely prohibited. (d) Article 47 of the Constitution considers intoxicating drinks and drugs as injurious to health and impeding the raising of level of nutrition and the standard of living of the people and improvement of the public health. It, therefore, ordains the State to bring about prohibition of the consumption of intoxicating drinks which obviously inc .....

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or the same reason, the State can create a monopoly either in itself or in the agency created by it for the manufacture, possession, sale and distribution of the liquor as a beverage and also sell the licences to the citizens for the said purpose by charging fees. This can be done under Article 19(6) or even otherwise. (f) For the same reason, again, the State can impose limitations and restrictions on the trade or business in potable liquor as a beverage which restrictions are in nature differe .....

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(g) When the State permits trade or business in the potable liquor with or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make discrimination between the citizens who are qualified to carry on the trade or business. (h) The State can adopt any mode of selling the licences for trade or business with a view to maximise its revenue so long as the method adopted is not discriminatory. (i) The State can carry on tr .....

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n, sale and income derived from potable liquor whether the production, sale or income is legitimate or illegitimate, does not make the State a party to the said activities. The power of the State to raise revenue by levying taxes and fees should not be confused with the power of the State to prohibit or regulate the trade or business in question. The State exercises its two different powers on such occasions. Hence the mere fact that the State levies taxes and fees on trade or business in liquor .....

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trade or business in industrial alcohol which is not used as a beverage but used legitimately for industrial purposes. The State, however, can place reasonable restrictions on the said trade or business in the interests of the general public under Article 19(6) of the Constitution. (m) The restrictions placed on the trade or business in industrial alcohol or in medicinal and toilet preparations containing liquor or alcohol may also be for the purposes of preventing their abuse or diversion for u .....

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er it was violative of Articles 14, 16 and 19(1)(g) of the Constitution of India. Considering the law on the issue, it was again expressed that there is no fundamental right to trade in intoxicants like liquor and the plea of the petitioner therein to the contrary was emphatically repelled with the following observations:- "The contention that a citizen of this country has a fundamental right to trade in intoxicating liquors refuses to die in spite of the recent Constitution Bench decision .....

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ion, it pointed out, requires the State to endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and all drugs which are injurious to health. For the same reason, the Bench held, the State can treat a monopoly either in itself or in an agency created by it for the manufacture, possession, sale and distribution of liquor as a beverage. The holding is emphatic and unambiguous. Yet an argument is sought to be built upon certain words occurring .....

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it were not so, asked the learned counsel, reference to Article 19(6) has no meaning. We do not think that any such argument can be built upon the said observations. In clause (e), the Bench held, a monopoly in the State or its agency can be created "under Article 19(6) or even otherwise". Similarly, in clause (f), while speaking of imposition of restrictions and limitations on this business, it held that they can be imposed "both under Article 19(6) or otherwise". The said w .....

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ning the policy decision of the State Government, as reflected in the impugned notification, based upon Article 19(l)(g) is totally out of place and merits outright rejection and we have no hesitation in doing so most emphatically. 13. Further, this issue has been subject matter of discussion and consideration in numerous other pronouncements of different courts and the view expressed therein has been repetition and in consonance with the authoritative enunciation of law by the Apex Court. One o .....

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sidered it and expressed as under:- 25. The Constitution Bench of the Supreme Court in Har Shankar and Others etc. v. The Deputy Excise and Taxation Commissioner and others, etc., AIR 1975 SC 1121 while dealing with right to deal in the business of intoxicants approved the ratio of earlier decisions, namely, decision of the Constitution Bench in the State of Bombay vs. F.N. Balsara, AIR 1951 SC 318 and Cooverjee B. Bharucha v. Excise Commr. And the Chief Commr. , Ajmer, AIR 1954 SC 220, State of .....

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nstitution Bench of the Supreme Court in Khoday Distilleries Ltd. And Others v. State of Karnataka and Others, (1995)1 SCC 574 after taking note of all previous decisions on the nature of right to deal in business of liquor summarized the law on the subject as follows: "60. We may now summarise the law on the subject as culled from the aforesaid decisions. (a) The rights protected by Article 19(1) are not absolute but qualified. The qualifications are stated in clauses (2) to (6) of Article .....

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cticing a profession or carrying on an occupation, trade or business which is inherently vicious and pernicious, and is condemned by all civilized societies. It does not entitle citizens to carry on trade or business in activities which are immoral and criminal and in articles or goods which are obnoxious and injurious to health, safety and welfare of the general public, i.e., res extra commercium, (outside commerce). There cannot be business in crime. (c) Potable liquor as a beverage is an into .....

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and are circumscribed by conditions contained in clauses (2) to (6) of Article 19 thereof. In other words, the fundamental rights guaranteed under Article 19(1)(a) to (g) of the Constitution of India have certain restrictions as enumerated in clauses (2) to (6) of the said Article 19. Further, the State is empowered to restrict or prohibit trades which are injurious to health and welfare of the public. Thus, citizens cannot claim fundamental right to trade or carry on business in such activities .....

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liquor but where the State decides to grant the right or privilege to carry on this trade, in such a situation, the State cannot escape the rigour of Article 14. The relevant observations are quoted as under:- "The State under its regulatory power has the power to prohibit absolutely every form of activity in relation to intoxicants, its manufacture, storage, export, import, sale and possession. No one can claim as against the State the right to carry on trade or business in liquor and the .....

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to 11 that Article 14 can have no application in a case where the licence to manufacture or sell liquor is being granted by the State Government. The State cannot ride roughshod over the requirement of that article." In In Khoday Distilleries Ltd. and Others v. State of Karnataka and Others [(1995) 1 SCC 574], a Constitution Bench of this Court upon referring to a large number of decisions summed up its findings in the following terms: 60.(g) When the State permits trade or business in the .....

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onsidering relevant decisions on the subject, it was held that every action of the State must be fully transparent on the public records satisfying the tests of Article 14 of the Constitution of India. If there is no transparency and fairness in the action of the State, the same cannot be sustained in the eye of law and such an action is clearly violative of Article 14 of the Constitution of India. The relevant observations read thus:- 16. Before proceeding further, we may notice the law on the .....

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eview its policy in public interest. It is well settled that if decision making process is vitiated by arbitrariness, unfairness, illegality or irrationality, this court could strike down the same as well as consequential actions, in exercise of its power of judicial review. 17. In Har Shankar and others etc. v. The Deputy Excise and Taxation Commissioner and others etc, AIR 1975 SC 1121, it was observed:- "53.In our opinion, the true position governing dealings in intoxicants is as stated .....

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irwar's case (AIR 1975 SC 360). There is no fundamental right to do trade or business in intoxicants. The State, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to intoxicants its manufacture, storage, export, import, sale and possession. In all their manifestations, these rights are vested in the state and indeed without such vesting these can be no effective regulation of various forms of activities in relation to intoxicants...." I .....

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ivity in relation to intoxicants its manufacturer, storage, export, import, sale and possession. No one can claim as against the State the right to carry on trade or business in liquor and the state cannot be compelled to part with its exclusive right or privilege of manufacturing and selling liquor. But when the State decides to grant such right or privilege to others, the state cannot escape the rigour of Article 14. It cannot act arbitrarily or at its sweet will. It must comply with the equal .....

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mind that, having regard to the nature of the trade or business, the Court would be slow to interfere with the policy laid down by the State Government for grant of licences for manufacture and sale of liquor. The Court would, in view of the inherently pernicious nature of the commodity allow a large measure of latitude to the State Government in determining its policy of regulating, manufacture and trade in liquor. Moreover, the grant of licences for manufacture and sale of liquor would essent .....

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ith greater latitude than laws touching civil rights such as freedom of speech, religion, etc. We observed that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowe .....

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he liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events self limitation can be seen to be the path to judicial wisdom and institutional prestige and stability." What we said in that case in regard to legislation relating to economic matters must apply equally in regard to executive action in the field of economic activities, though the executive decision may not be placed on as high a pedestal as legislative judgment i .....

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reedom or play' in the "joints" to the executive. "The problem of Government" as pointed out by the Supreme Court of the United States in Metropolis Theatre Company v. State of Chicago, (1912) 57 L Ed 730 "are practical ones and may justify, if they do not require, rough accommodations, illogical, it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not discernible, the wisdom of any choice may be disputed or condemned .....

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entific or logical. The Court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide. It is against the background of these observations and keeping them in mind that we must now proceed to deal with the contention of the petitioners based on Article 14 of the Constitution." The above principles were reiterated in Khoday Distilleries Ltd. And others v. State of Karnataka and others, (1995) 1 SCC 574, wherein para 62, it was observed:- "62. We, ther .....

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his court in K.K.Narula case as well as in the second Synthetics and Chemicals Ltd. Case is not contrary to the aforesaid view which has been consistently taken by this court so far." This was also reiterated by majority of Judges in State of Punjab and another v. Devans Modern Breweries Ltd. And another, (2004) 11 SCC 26. It was observed in para 113:- "In my opinion, Articles 301 and 304(a) of the Constitution are not attracted to the present case as the imposition of import fee does .....

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75 (2) SCC 633). As noticed earlier, dealing in liquor is neither a right nor is the levy a tax or a fee. Articles 301-304 will be rendered inapplicable at the threshold to the activity in question. Further, there is not even a single judgment which upholds the applicability of Articles 301-304 to the liquor trade. On the contrary, numerous judgments expressly hold these articles to be inapplicable to trade, commence and intercourse in liquor. We can beneficially refer to the judgments in State .....

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by the Hon'ble Supreme Court that in a given set of facts, it may be open to the Government to evolve a new scheme and the court will not bind the Government to the policy which existed on the date of the application if the change in policy was necessary in public interest, which is as under:- "5. It would, therefore, be clear that grant of licence depends upon the policy prevailing as on the date of the grant of the license. The court, therefore, would not bind the Government with a po .....

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ne priorities in the matters of allocations or allotments or utilisation of its finances in the public interest. It is equally entitled, therefore, to issue or withdraw or modify the export or import policy in accordance with the scheme evolved. We, therefore, hold that the petitioners have no vested or accrued right for the issuance of permits on the MEE or NQE, nor is the Government bound by its previous policy. It would be open to the Government to evolve the new schemes and the petitioners w .....

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d of contracts are also open to judicial review and if the decisionmaking process is shown to be vitiated by arbitrariness, unfairness, illegality and irrationality, then the Court can strike down the decision- making process as also the award of contract based on such decision. This was so laid down by this Court in Tata Cellular v. Union of India, (1994) 6 SCC 651 : AIR 1996 SC 11 : (1994 AIR SCW 3344). Initially the Supreme Court was of the opinion that while the decision-making process for a .....

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unreasonable decisions of the government authorities while acting in pursuance of a contract would also be amenable to writ jurisdiction. This principle was laid down in Gujarat State Financial Corpn. v. Lotus Hotels (P) Ltd, (1983) 3 SCC 379 : AIR 1983 SC 848. This Court even went to the extent of saying that the terms of contract cannot be altered in the garb of the duty to act fairly. (See: Asstt. Excise Commr. v. Issac Peter, (1994) 4 SCC 104 : (1994) 2 SCR 67 : (1994 AIR SCW 2616). Duty to .....

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v. International Airport Authority of India, AIR 1979 SC 1628 as also Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay, (1989) 3 SCC 293 : (1989) 2 SCR 751 : AIR 1989 SC 1642." 17. As recorded by Division Bench of this Court in Ram Chander s case (supra), the issue is answered in the affirmative. Article 14 of the Constitution of India would be clearly attracted wherever State decides to grant contracts or licences in the trade and business of liquor to be carried o .....

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ion 59 of the Act empowers the Financial Commissioner to make rules by notification in respect of the subject covered therein. Section 59 of the Act is in following terms:- 59. Powers of Financial Commissioner to make rules.- The Financial Commissioner may, by notification, makes rules. (a) regulating the manufacture, supply, storage or sale of any intoxicant, including :- (i) the character, erection, alteration, repair inspection, supervision, management and control of any place for the manufac .....

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house or from any distillery or brewery. (d) prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass or in respect of the storing of any intoxicant; (e) regulating the time, place and manner of payment of any duty or fee; (f) prescribing the authority by, the restrictions under, and the conditions on, which any licence, permit or pass may be granted including provision for the following matters :- (i) the prohibition of the admixture with .....

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days and hours during which any licensed premises may or may not be kept open, and the closure of such premises on special occasions; (vi) the specification of the nature of the premises in which any intoxicant may be sold, and the notice to be exposed at such premises ; (vii) the form of the accounts to be maintained and the return to be submitted by license holders; and (viii) the prohibition or regulation of the transfer of licenses; (g) (i) declaring the process by which spirit shall be dena .....

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) of Section 59 of the Act, the Financial Commissioner is authorized to make rules prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass etc. in respect of the storing of any intoxicant. In pursuance of Section 59(d) of the Act, the Excise and Taxation Commissioner on whom the powers of the Financial Commissioner are conferred by the State Government, framed the Punjab Liquor Licence Rules, 1956 (for brevity, the Rules ). Rule 1 thereof .....

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category of licences that may be granted on fixed fee by inviting applications for a licencing unit has been prescribed under Rule 35 of the Rules. Rule 36 of the Rules prescribes the procedure for the grant of licences. Special conditions for grant of licences have been enumerated in Rule 38 of the Rules. The relevant portion of these rules is quoted below:- Rule 24. The fees payable in respect of licences under these rules are of the following kind:- a) fixed fee; b) assessed fees; and c) fee .....

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o 1000 cases 2,00,000 15000 (ii) sale from 1001 to 50000 cases 5,00,000 15000 Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 35. (1) The following licences may be grrated on fixed fee by inviting applications for a Licencing Unit, namely :- (2) xxxxxxxxxxxxx A person shall not be allowed to submit more than 50 applications per licencing unit or group or zone in Corporation areas. However, in other urban areas and Nagar Panchayat areas, a person shall not be allowed to file more than 100 applications irr .....

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Commissioner (hereinafter referred to as AETC), In-charge of the district. The application Forms can also be downloaded from the website of the department (www.pextax.com). In addition, these application forms shall also be available in various bank branches authorized by the department for receipt of application forms. The applicant can submit his application for any Licensing Unit/Group/Zone of any district in any of the bank branches. The cost of application forms shall be as under:- (i) A l .....

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be refundable or adjustable. If the first or any subsequent allotment procedure is cancelled by the department or, any application form is rejected by the department being invalid and not put to draw of lots, then the amount of application fee shall be refunded to the concerned applicant, after deducting two thousand rupees per application as processing fee. Out of the total proceeds from the sale of application form, fifty percent shall be deposited in Development Fund constituted under the Pun .....

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Beer, Wine and Ready to Drink Beverages (Indian and Imported) from L-1A licensee." "(1-A) (i) A license in Form L-1A(IMFL) for the wholesale vend of Indian Made Foreign Liquor (except Beer), Wine and Ready to drink beverages to the L-1 licensee only, authorized to purchase liquor from distilleries, bottling plants and Wineries (Manufacturing units of IMFL, Wine and RTD) from both within and outside the State: (a) The licensee shall purchase Indian Made Foreign Liquor (except Beer), Win .....

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o such person/company/firm/institution who/which is at arms length distance from the manufacturing unit/company i.e. he should not be the promoter/Director/partner etc. in the liquor manufacturing unit/company or not its holding, subsidiary, closely held company fully/partially owned/financed / managed firm/company; (Emphasis supplied). (e) Licensee shall maintain accounts of receipts and supply of liquor; (f) No breakage shall be allowed to a licensee; (g) The licensee shall provide separate ex .....

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om breweries both within and outside the State; (a) The conditions applicable to license L-1A (IMFL) shall apply to this license." 20. In the year 2011, the State Government made amendment in the Punjab Liquor License Rules, 1956, whereby, for the first time, L-1A category of Licence was notified. The relevant portion of the Rules as notified in 2011 is as under:- L-1A. A wholesale vend of Indian Made Foreign Liquor, Imported Foreign Liquor including BIO Brands, Beer, Ready to drink beverag .....

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.S.R.19/P.A.1/1914/5.59/Amd.(127)/2016 dated 23.3.2016 has been issued assigning new terminology to licence L-1A which is in the following terms:- L-1A (IMFL) Whole sale vend of Indian Made Foreign Liquor (except Beer), Wine and Ready to Drink beverages to the L-1 licensee only, authorized to purchase liquor from distilleries, bottling plants and wineries (manufacturing units of IMFL, Wine and RTD) from both, within and outside the State. Fixed fee Collector with the prior approval of Excise com .....

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val of Excise Commissioner Collector. 22. The change/amendment which has been brought about by virtue of it, is that now L-1A licencee shall purchase the liquor from the breweries/distilleries whereas L-1 licencee is mandatorily required to purchase the liquor from L-1A licencee only. According to the procedure before the amendment, L-1 licencee was directly purchasing the liquor from the manufacturing company. This has caused grievance to the petitioners. 23. Adverting to the judicial precedent .....

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se by charging fees. The State is also empowered to impose limitations and restrictions on the trade or business in potable liquor as a beverage which restrictions are in nature different from those imposed on the trade or business in legitimate activities and goods and articles which are res commercium. The extent of restrictions and limitations can extend to the State carrying on the trade or business itself to the exclusion and elimination of others and/or to preserving to itself the right to .....

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ll settled by a catena of decisions. In T.N. Education Deptt., Ministerial and General Subordinate Services Assn. v. State of T.N., (1980) 3 SCC 97 the Supreme Court while noticing the jurisdictional limitation to analyse and to find fault with the policy held that the Court in exercise of its power of judicial review cannot sit in judgment over the policy matters except on limited grounds., namely, whether the policy is arbitrary, mala fide, unreasonable or irrational. Each State is empowered t .....

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uld hesitate to intervene and strike down what the Government has done unless it appears to be plainly arbitrary, irrational or mala fide. It was fur ther observed that the Court must while adjudging the Constitutional validity of an executive decision relating to economic matter grant a certain measure of freedom or "play in the joint" to the executive. The Court cannot strike down a policy decision taken by the State Government merely because it feels that another policy decision wou .....

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ursuant to Government policy of privatization and telecommunication, observed that since parting of privilege exclusively vested with the Government it can be questioned only on the ground of bad faith, based on irrelevant or irrational consideration, noncompliance with prescribed procedure or violation of any constitutional or statutory provisions. 39. In State of Punjab and Ors. V. Ram Lubhaya Bagga and Others, (1998)4 SCC 117 It was held by Supreme Court that it is not normally within the dom .....

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rs, the Court should be very circumspect in conducting any enquiry and investigation and must be most reluctant to impugn the judgment of the experts who may have arrived at a conclusion. In Federation of the Railway Officers' Association and Others v. Union of India, (2003) 4 SCC 298, it was once again reiterated by the Supreme Court that unless policy or action is inconsistent with the Constitution and the laws, or arbitrary or irrational the Court will not interfere with such matter. 40. .....

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cannot strike down a policy merely on the ground that another policy would have been fairer and better. Wisdom and advisability of economic policy are ordinarily not amenable to judicial review. It was further held that in matters relating to economic issues, the Government while taking the decision has right to 'trial and error' so long it is bona fide and within the limits of the authority. For testing the correctness of a policy the appropriate forum is Parliament and not the Courts. .....

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grant of licence for manufacture and sale of liquor is a matter of economic policy where the Court would be slow to interfere unless the policy is plainly arbitrary, irrational or malafide. (ii) The court must while adjudging the constitutional validity of an executive decision relating to economic matters grant certain measure of freedom or 'play in joint' to the executive. (iii) The court cannot strike down a policy merely because it feels that another policy would have been fairer or .....

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of experts who have arrived at a conclusion. (vi) Court cannot examine relative merits of different economic policy. In a democracy it is a prerogative of each elected Government to formulate its policy. Wisdom and advisability of economic policy are ordinarily not amenable to judicial review. (vii) In matters relating to economic issues, the Government has while taking a decision right to "trial and error" as long as both trial and error are bona fide and within limits of the authori .....

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Article 14 was reiterated by the Full bench in the following words:- 42. Let us now examine the challenge to the new policy on the ground that same is discriminatory or arbitrary and violative of Article 14 of the Constitution of India. In order to deal with question of infringement of constitutional guarantee contained in Article 14 it would be expedient to notice case law on the subject. 43. In Cooverjee B. Bharucha (supra) the Constitution Bench of the Supreme Court while dealing with the pr .....

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only when a trade which could be carried on by all persons is entrusted by law to one or more persons to the exclusion of the general public. Such, however, is not the case with the business of liquor."44. Another Constitution Bench of the Supreme Court in Amar Chandra Chakraborty (supra) while considering the question whether Section 43 of the Bengal Excise Act under which a licence of a liquor contractor was withdrawn violated Article 14 and 19 (1) (g) of the Constitution, repelled the c .....

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ther trades while considering Article 14. Principle applicable to trades which all persons carry on free from regulator y controls do not apply to trade or business in country liquor; this is so because of the impact of this trade on society due to its inherent nature." 45. In Harinarayan Jaiswal (supra) the Highest bidder in an auction held for granting the exclusive privilege for selling country liquor challenged the order rejecting its bid. It was argued that power retained by the Govern .....

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o trade or carry on business in the properties or rights belonging to the Government nor can there be any infringement of Article 14, if the Government tries to get the best available price for its valuable rights." 46. In view of the Constitution Bench decision of Supreme Court in Cooverjee B. Bharucha (supra) and in Amar Chandra Chakraborty (supra) following principles emerge: (i) In liquor business, elimination and exclusion from business is inherent, and the principles applicable to oth .....

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al as other trades while considering the applicability of Article 14. (iii) Where the State Government frames a policy with the object to secure or ensure maximum revenue for parting with its privilege to deal in liquor, action of the State Government cannot be assailed on the ground that it infringes Article 14. 26. In the backdrop of the settled legal principles noticed hereinabove, the question of challenge to creation of licence L-1A category in the Excise Policy 2016-17 may be dealt with. L .....

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The creation of category of license L-1A between the distilleries and L-1 licencee to augment the revenue and stop leakage thereof cannot be said to be arbitrary. Further, the Excise Policy for the year 2016-17 was formulated on 13.3.2016, though the notification in exercise of power under Section 59 of the Act was issued on 23.3.2016, the same having been issued before the enforcement date for Excise Policy 2016-17 to be effective, i.e. 1.4.2016, cannot, thus, be faulted. The plea of the petit .....

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Clause 2.14 as contained therein:- Clause 2.14 i) It is necessary for the applicant for this licence to have an authority/consent letter from the manufacturing unit. ii) Any manufacturing company cannot issue the authority/consent letter to more than one person/company/firm/organization. iii) The manufacturing company will give this consent letter to that person/company/firm/organization who is at Arms Length Distance from the manufacturing company provided there is no promoter, director, partn .....

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t ₹ 25 lacs. 28. The grievance of the petitioners is relating to sub clause (ii) as noticed above whereby any manufacturing company has been authorized to issue the authority/consent letter to one person/company/firm/organization for the issuance of license L-1A by the competent authority. According to the petitioners, sub clause (ii) of Clause 2.14 of the Excise Policy for the year 2016-17 prescribes that the manufacturing company cannot issue the consent letter to more than one person/co .....

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elections so that all the eligible persons/aspirants get a fair opportunity of competition. In other words, wherever issue of disposal of public property is concerned either by issuance of licence or otherwise, the State and its agencies/instrumentalities are required to adopt a rational method for its disposal and no attempt should be made to scuttle the claim of eligible applicants. This can be achieved either by holding public auction and where there are more applicants, then by draw of lots .....

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accident. In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-firstserved policy has inherently dangerous implications. Any person who has access to the power corridor at the highest or the lowest level may be able to obtain information from the government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be award .....

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s agencies/instrumentalities must always adopt a rational method for disposal of public property and no attempt should be made to scuttle the claim of worthy applicants. When it comes to alienation of scarce natural resources like spectrum, etc. it is the burden of the State to ensure that a nondiscriminatory method is adopted for distribution and alienation, which would necessarily result in protection of national/public interest. 96. In our view, a duly publicised auction conducted fairly and .....

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that all eligible persons can participate in the process. 30. Further, in Reliance Energy Ltd. v. Maharashtra State Road Development Corpn. Ltd., (2007) 8 SCC 1, following its earlier decision in Union of India (UOI) and another vs. International Trading Co. and another, (2003) 5 SCC 437, the Apex Court observed as under:- 36. We find merit in this civil appeal. Standards applied by courts in judicial review must be justified by constitutional principles which govern the proper exercise of publ .....

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chapter on fundamental rights. They cover various aspects of life. Level playing field is an important concept while construing Article 19(1)(g) of the Constitution. It is this doctrine which is invoked by REL/HDEC in the present case. When Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of level playing field . We may clarify that this doctrine is, however, subject to public interest. In the world of globalisation, compet .....

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sation . Decisions or acts which result in unequal and discriminatory treatment, would violate the doctrine of level playing field embodied in Article 19(1)(g). Time has come, therefore, to say that Article 14 which refers to the principle of equality should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine o .....

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f this Court speaking through Pasayat, J. had held: (SCC p. 445, paras 14-15) 14. It is trite law that Article 14 of the Constitution applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. 15. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and .....

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t of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for a discernible reason, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualised than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether .....

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vs. state of Haryana and others, (2015) 4 RCR (Civil) 666, this court observed thus:- 26. The licences have been granted on the basis of first come first served basis. The principle of first come first served basis has been commented adversely in Centre for Public Interest Litigation and others v. Union of India and others, (2012)3 SCC 1. The Court examined inter-alia the following questions:- "(i) Whether the Government has the right to alienate, transfer or distribute natural resources/na .....

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d Information Technology'), without consulting TRAI, with a view to favour some of the applicants?" 27. The Court answered the said questions when it held to the following effect:- "94. There is a fundamental flaw in the first-come-firstserved policy inasmuch as it involves an element of pure chance or accident. In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-firstserved policy has inherently dangerous i .....

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have a better claim. 95. This Court has repeatedly held that wherever a contract is to be awarded or a licence is to be given, the public authority must adopt a transparent and fair method for making selections so that all eligible persons get a fair opportunity of competition. To put it differently, the State and its agencies/instrumentalities must always adopt a rational method for disposal of public property and no attempt should be made to scuttle the claim of worthy applicants. When it come .....

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ly to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. In other words, while transferring or alienating the natural resources, the State is duty bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process." 28. The issue of grant of state privileges by the process of auction alone came up for answer in the Presidential Ref .....

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n and equitable treatment. It should conform to the norms which are rational, informed with reasons and guided by public interest, etc. The Court held:- "107. From a scrutiny of the trend of decisions it is clearly perceivable that the action of the State, whether it relates to distribution of largesse, grant of contracts or allotment of land, is to be tested on the touchstone of Article 14 of the Constitution. A law may not be struck down for being arbitrary without the pointing out of a c .....

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terest, etc. All these principles are inherent in the fundamental conception of Article 14. This is the mandate of Article 14 of the Constitution of India. xx xx xx 129. Hence, it is manifest that there is no constitutional mandate in favour of auction under Article 14. The Government has repeatedly deviated from the course of auction and this Court has repeatedly upheld such actions. The judiciary tests such deviations on the limited scope of arbitrariness and fairness under Article 14 and its .....

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rtaking such exploration and incur heavy costs only if it was assured utilisation of the resource discovered: a prudent business venture would not like to incur the high costs involved in exploration activities and then compete for that resource in an open auction. The logic is similar to that applied in patents. Firms are given incentives to invest in research and development with the promise of exclusive access to the market for the sale of that invention. Such an approach is economically and .....

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pects the mandate and wisdom of the executive for such matters. The methodology pertaining to disposal of natural resources is clearly an economic policy. It entails intricate economic choices and the Court lacks the necessary expertise to make them. As has been repeatedly said, it cannot, and shall not, be the endeavour of this Court to evaluate the efficacy of auction vis-à-vis other methods of disposal of natural resources. The Court cannot mandate one method to be followed in all fact .....

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ompare which policy is fairer than the other, but, if a policy or law is patently unfair to the extent that it falls foul of the fairness requirement of Article 14 of the Constitution, the Court would not hesitate in striking it down. 32. In the present case, no doubt the Financial Commissioner in exercise of power conferred under Section 59(d) of the Act had amended the category of Licence L-1A by issuing notification dated 23.3.2016 in conformity with the Excise Policy for the year 2016-17. Ho .....

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nepotism in the award of authority/consent letter to an applicant. Thus, sub clause (ii) to that extent would not satisfy the mandate of reasonableness as enshrined under Articles 14 and 19(1)(g) of the Constitution of India. 33. In all fairness, we proceed to deal with two ancillary points raised by learned Advocate General. Firstly, the locus standi of the petitioners and maintainability of the petitions was questioned on the ground that the petitioners had never approached any distillery or t .....

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ngaged in the business of liquor trade for the past so many years in the State of Punjab and the newly added/created L-1A licence would deprive the rights of the petitioner in carrying out the liquor trade in the State of Punjab. Another factor needs mention is that the petitioner had filed the writ petition on 19.3.2016 which was heard by motion bench on 22.3.2016 challenging the very creation of amended L-1A category in the Excise Policy 2016-17 without amending the Punjab Liquor Licence Rules .....

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the learned Advocate General, Punjab, it was directed that allotment of licences L-1A shall be subject to the further orders to be passed by this Court in this writ petition. The order dated 12.4.2016 is reproduced for ready reference which reads thus:- Further submissions have been made by the learned Advocate General, Punjab. For remaining arguments, to come up on 26.4.2016. Learned counsel for the petitioner(s) made a prayer that the allotment of licences under category L-1A be made subject t .....

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