TMI Blog2017 (3) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... hey get similar marks and therefore it amounts to further classification or mini-classification and was held to be impermissible and violative of Article 14 of the Constitution. The original petitioners namely Federation through its Secretary cannot be said to be a third party to the impugned legislation when they are in the business of selling of liquor in the State of Karnataka. Further more when the constitutional validity of a subordinate legislation is challenged which infringes the rights of the citizen of trade in the sale of liquor, it is not possible for us to accept the contention that the petitioner cannot be said to have any locus standi to prefer the main writ petition and hence said contention fails. Appeal dismissed - decided against appellant. - WRIT APPEAL NO.3374/2016 (EXCISE) C/W WRIT APPEAL NO.3368/2016, 3211/2016, 4048/2016 AND 4402/2016 - - - Dated:- 20-1-2017 - MR. JAYANT PATEL AND MR. ARAVIND KUMAR JJ. APPELLANTS: (BY SRI ADITYA SONDHI, ADDL. ADVOCATE GENERAL A/W SMT.B.P.RADHA, HCGP), (SRI C.H.JADHAV, SR. COUNSEL FOR SRI G K BHAT, ADVOCATE), (BY SRI ARUNA SHYAM M, ADVOCATE), (BY SRI M S BHAGWAT, ADVOCATE) RESPONDENTS: (BY SRI MOHAN BHAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment to insert Sub-rule (7-D) in Rule 3 of the Rules which for ready reference is extracted hereunder: 3 The relevant final Notification published on 9.6.2014 is quoted in extenso for ready reference: FINANCE SECRETARIAT NOTIFICATION No.FD 14 PES 2013, Bangalore, Dated:09.06.2014 Whereas the draft of the following rules further to amend the Karnataka Excise (Sale of Indian and Foreign liquor) Rules, 1968, was published as required by sub-section (1) of section 71 of the Karnataka Excise Act, 1965 (Karnataka Act 21 of 1966) in Notification No. FD 14 PES 2013 dated 20-01-2014 in Part-IV-A of the Karnataka Gazette (Extra Ordinary) No. FD 41 dated 20-01-2014 inviting objections and suggestions from all persons likely to be affected thereby within thirty days from the date of its publication in the Official Gazette. And whereas the said Gazette was made available to the public on 20th January 2014. And whereas, objections and suggestions received in respect of the said draft have been considered by the State Government. Now, therefore, in exercise of the powers conferred by Section 71 of the Karnataka Excise Act, 1965 (Karnataka Act 21 of 1966), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person belonging to Scheduled Castes and Scheduled Tribes. Register No. Name of the License holder Name of the Agent or Vendor Town . Locality Street Door No. I, the Deputy Commissioner of District in consideration of the payment of the prescribed license fee of Rs. . Do hereby authorize Sri. son of Sri. residing in . to sell Indian liquor (other than arrack) or Foreign liquor or both at Premises No. situated in subject to the conditions prescribed below:- CONDITIONS 1. The license shall be bound by the provisions of the Karnataka Excise Act, 1965, and any general specific rules prescribed or which may from time to time be prescribed there under. 2. The privilege under this license extends to the sale of Indian liquor (other than arrack) or Foreign liquors of the brands furnished by the licensee. Any alterations and additions to the lists furnished shall be approved by the Commissioner. No liquors below the strength of 25 UP (under proof) in case of Brandy, Whisky and Rum and 35 UP (under proof) in case of Gin and not more than 8 percent of alcohol by volume in case of Beer will or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before this Court. 9. We may record that the State of Karnataka has preferred W.A.No.3374/2016, whereas W.A.No.3368/2016 has been preferred by the person affected by the order of the learned Single Judge and not a party in the writ petition, W.A.No.3211/2016 has been preferred by original third respondent before the learned Single Judge, W.A.No.4048/2016 has been preferred by the original petitioner before the learned Single Judge, W.A.No.4402/2016 has been preferred by the original respondent No.4 before the learned Single Judge. 10. However as recorded earlier, since the order passed by the learned Single Judge is one which is impugned in all the writ appeals, we have heard all the respective learned Counsel for the appellants and the respondents. We have heard Mr. Aditya Sondhi, learned Additional Advocate General appearing with Ms.B.P.Radha, learned HCGP for the State, Mr. C.H. Jadhav, learned Senior Counsel for Mr. G.K. Bhat, learned Counsel appearing for the persons affected by the order of the learned Single Judge, (they are not party before the learned Single Judge), Mr. Mohan Bhat, learned Counsel appearing for original petitioner, Mr. Jayakumar S. Patil, learned Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 10 double rooms is nothing but a relaxation in comparison to a Hotel having 30 double rooms in Corporation and 20 double rooms in other areas respectively and said Rule is incorporated to give opportunity to persons belonging to reserved class for carrying on the business of liquor. It was submitted that, if the State for the benefit of reserved class makes relaxation and makes the rule for such purpose, the action cannot be said to be unconstitutional or ultravires to the power of the State since such action even otherwise is in accordance with the directive principles of State policy apart from the aspect that it is permissible to make law as per the provisions of Article 15, 16 read with Article 19(1)(g) of the Constitution. 15. Per contra, the learned counsel appearing for the original petitioner contended that such relaxation is impermissible even as per the constitutional provision. He submitted that, when the State had put up the criteria as per the Sub-rules for (7-C) Licence that a Hotel and Boarding House should have 30 double rooms in the Corporation area and 20 double rooms in the other areas, it must be uniform for all and any relaxation given would result into d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the matter pertaining to employment or in the matter pertaining to reasonable restriction but such reasonable restriction has to be in the interest of general public. It was submitted that the State can provide for a particular requirement for carrying on any trade or business may be of liquor but, it should be for all the citizens and there cannot be any relaxation in the requirement more particularly when it has no object to be achieved. The learned counsel also contended that, if the State on account of less number of persons holding the licence of the reserved class has brought about the amendment, then the same is also contrary to the record inasmuch as, it has been considered by the State that total number of CL-7 licences granted are 921, out of which 28 belonged to reserved class were holding such licences but if considered in context to CL-9 licence, total number of licences granted were 3583 whereas the persons belonging to reserved class holding CL-9 licence were only 57. If the comparative ratio is considered, there were less number of persons belonging to Reserved class in CL-9 licence. The contention put forward to give more opportunity to the persons belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt that Article 14 condemns discrimination not only by a substantive law but also by a law of procedure. 107. The aforesaid principles have been consistently adopted and applied in subsequent cases. In Ram Krishna Dalmia, this Court reiterated the principles which would help in testing the legislation on the touchstone of Article 14 in the following words : (a) that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself; (b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles; (c) that it must he presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; (d) that the legislature is free to recognise degrees of harm and may confine its restrictions to those cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stification for such abridgment. Once the respondents had given prima facie proof of the arbitrary classification of the establishments under Sections 33-A and 33-B, it was the duty of the State to justify the reasonableness of the classification. This conclusion of ours is fortified by the observations in Laxmi Khandsari, wherein this Court observed as follows: (SCC pp. 609-10, para 14) 14. We, therefore, fully agree with the contention advanced by the petitioners that where there is a clear violation of Article 19(1)(g), the State has to justify by acceptable evidence, inevitable consequences or sufficient materials that the restriction, whether partial or complete, is in public interest and contains the quality of reasonableness. This proposition has not been disputed by the counsel for the respondents, who have, however, submitted that from the circumstances and materials produced by them the onus of proving that the restrictions are in public interest and are reasonable has been amply discharged by them. (Emphasis Supplied) The aforesaid shows that, when there is violation of Article 19(1)(g) of the Constitution, the State has to justify by acceptable evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight 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. (Emphasis Supplied) The aforesaid shows that the State has the power to completely prohibit the manufacture, sale, possession, distribution and consumption of potable liquor as a beverage, because it is inherently a dangerous article of consumption and also because of the Directive Principle contained in Article 47, except when it is used and consumed for medicinal purposes. 20. The aforesaid dicta of the Hon ble Apex Court also shows that State can create a monopoly either in itself or in the agency created by it for the manufacture, possession, sale and distribution of liquor and it can also sell the licences to the citizens for the said purpose by charging fees. The State can impose limitations and restrictions on the trade or business in potable liquor under Article 19(6) or otherwise. The State can also carry on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Class legislation is that which makes an improper discrimination by conferring particular privileges upon a class of persons, arbitrarily selected from a large number of persons, all of whom stand in the same relation to the privilege granted and between whom and the persons not so favoured no reasonable distinction or substantial difference can be found justifying the inclusion of one and the exclusion of the other from such privilege. A classification must not be arbitrary, artificial or evasive and there must be a reasonable, natural and substantial distinction in the nature of the class or classes upon which the law operates. (See Weaver's Constitutional Law, Page 397) 25. The purported classification only on the basis of language without anything more and in particular having regard to the difference in the rate of tax, in our opinion is ex-facie arbitrary. The burden was, therefore, on the State to show that the imposition was justified. Different rates of entertainment tax had not been levied having regard to the nature of theatre, the area where they were situated or extent of occupancy etc. It has not been explained as to whether cinema theatres exhibiting T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred decision at paragraph-19 observed thus: 19. Even the impugned Rules, examined from any angle, will not stand to judicial scrutiny. The reservation for the Scheduled Castes, Scheduled Tribes and other Backward Classes is provided as per the mandate of Article 16 of the Constitution of India and by virtue of Section 4 of the Karnataka State Civil Services Act. As per Rules, reservation is provided for Scheduled Castes, Scheduled Tribes and Backward Classes. The reserved candidates who appear in the qualifying examination or interview obtain marks and a merit list is prepared. If they come according to merit in the open quota, they are appointed in the open quota itself. If according to merit, they are not able to come in the open quota, then they will be accommodated in the reserved quota irrespective of whether they are from rural area or non-rural area. But, by adding 10% of marks to the rural candidates, the urban backward classes, Scheduled Castes and Scheduled Tribes are deprived to get the appointment though they got similar marks or more marks and merit is given a go by. This, in other words, amounts to further classification or mini-classification, which is impermis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Discriminatory treatment is not permissible in a matter where conditions are to be imposed in the interest of the general public while regulating the trade or business or any profession or occupation by any citizen under Article 19(1)(g). Of course it is open to the State to retain certain percentage of the share with itself or it is open to the State to provide quota in the matter of grant of licence for such trade or business but the conditions so prescribed in the interest of general public in exercise of the power under Article 19(6) of the Constitution should be adhered to. (iii) Article 15(4) of the Constitution enables the State to make any special provision for advancement of any socially and educationally backward classes of the citizens or for the Scheduled Castes or Scheduled Tribes for giving separate treatment, but then again such should be based on intelligible differentia and it should also achieve the object with which a subordinate class legislation is made by the State. However before embarking upon making of class legislation, it is required for the State to undertake some study for bringing about such change in the law or the Rules. In any case, the burd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that the State may make Rule for the licences for wholesale or retail sale in a local area by providing the periods and the localities and in the manner of grant of licences the State may provide for persons or the classes of persons. The Rules are framed in exercise of the power under Section 71 of the Act and Rule 3 of the Rules provides for various licences for vending of Indian liquor or foreign liquor and such licences inter alia include retail shop, licences to the Clubs, Occasional licences, Special licences, Star Hotel Licences, Hotel and Boarding House Licences, Tourist Hotel licences, Tourist Hotel Beer Bar Licences, Licences to supply liquor on board of Train engaged by Tourism Development Corporation of the State Government or Central Government and various other licences. As we are not required to consider in the present appeals the other licences, we do not find it appropriate to discuss in detail in the present appeals. 29. Sub-rule 7 and Sub-rule (7-D) of Rule 3 which is sought to be inserted by the impugned amendment needs to be considered. Sub-rule 7 is for all Hotel and Boarding House licences with the requirement that no licence shall be granted unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-D) provides for the person belonging to the hotel and boarding houses owned by the person belonging to Scheduled Caste and Scheduled Tribe whereas Sub-rule (7) is general and open for all. 31. The contention of the State is that such making of subordinate legislation by Sub-rule (7-D) is permissible under Article 15(4) of the Constitution. Whereas the contention of the learned Counsel for the original petitioner is that Sub-rule (7) is itself under the Act read with the Rules, a restriction provided by the State in the business of liquor by virtue of Article 19(1)(g) of the Constitution read with Article 19(6) of the Constitution and therefore the State cannot discriminate. 32. As such, as per the above referred decision of the Apex Court in the case of Khoday Distilleries Industries (supra) when the restriction has been provided in interest of the general public by virtue of Article 19(6) of the Constitution upon the rights of the citizen under Article 19(1) (g) of the Constitution, equal treatment deserves to be given to all citizens. The State cannot contend that the restriction can be relaxed if the person belonging to reserved class is to do sale of liquor in hotel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(1)(g) read with Article 19(6) of the Constitution and hence ultravires to the Constitution. 34. If the contention of the State is considered that the State can also provide for relaxation in the restriction imposed by Article 19(6) of the Constitution in the right of citizen under Article 19(1)(g) of the Constitution in view of the provisions of Article 15(4) of the Constitution, then we may have to further consider as to whether it is based on intelligible differentia and such intelligible differentia is made with the object to be achieved or not. As observed by us earlier if the object is to give more opportunity to the persons belonging to reserved class and the same is with a view to create more convenient atmosphere by relaxation of the requirement of number of double rooms, then it would necessarily require two aspects to be considered. One is the requirement of investment to be made for establishing hotel and boarding houses and the other is further special circumstances leading to necessity of differential treatment. As discussed earlier, if one is to apply for licence under Sub-rule (7) he need not have the ownership of a hotel and boarding house having minimum thirty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n even otherwise also, the investment will be much much less in comparison to licences of hotel and boarding house. This shows the arbitrariness in the decision making process of a subordinate legislation. 36. The learned Addl. Advocate General and the learned Counsel for the appellants did contend that the decision of the State would not be rendered illegal just on a mere ground that there could be better policy for the object to be achieved and hence the aforesaid ground may not be considered to hold the subordinate legislation as arbitrary. We may record that it is not a matter of mere arbitrariness or a better policy available but is a matter of burden to be discharged by the State for giving a separate treatment or making a class legislation with the object to be achieved. If the object of the State was to provide for more opportunity to the persons belonging to the reserved class in the business of sale of liquor, the State could consider the lowest ratio of the reserved class from amongst the persons holding different licences, which has not been opted for. In any case, there is no valid justification made at all to fall back upon the licencees of hotel and boarding house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t holding any CL-7 licences. Further the very association had filed objection when the objection were invited from the general public before bringing amendment to the Rules. In the objections (copy whereof is produced by the original petitioner at Annexure B ), it has been contended inter alia that the proposed rule is highly discriminatory and arbitrary and is not based on class criterion. In the very objection it has been also stated that the action by the State should not result into destroying the business and the mandate of Article 14 of the Constitution should be respected and the adverse effect on the lawful business of the licence holders by the proposed amendment is also pleaded. Under these circumstances, it is not possible to accept the contention that Federation of Wine Merchants Association of the Karnataka whose members are sellers of the liquor which would include the licence holder of hotel and boarding houses, if has preferred the original writ petition through its Secretary, it cannot be said that the original petitioners are not aggrieved by the impugned legislation. 40. In any case, the original petitioners namely Federation through its Secretary cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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