TMI Blog2019 (2) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... CJI. Ranjan Gogoi, J. K.M. Joseph And J. Navin Sinha JUDGMENT NAVIN SINHA, J. The appellant having been unsuccessful in its challenge to Rule 24(i-eeee) of the Haryana Liquor License Rules 1970 (as amended by the Haryana Liquor License (Amendment) Rules 2017), (hereinafter referred to as the Rules ) as being ultra vires the Punjab Excise Act, 1914 (hereinafter referred to as the Act ), is in appeal before this Court. The amended Rule provides for a single L-1BF license for the entire State to deal in imported foreign liquor, bottled outside India and imported into the country in a bottled form (i.e. bottled in original). Under challenge is also clause 9.5.1.2 of the State Excise Policy for the year 2017-2018 to that extent, carried forward to the year 2018-2019 also. The procedure for grant of the single license under the amended Rule is through tender by e-bidding, with a reserve price of ₹ 50 crores. 2. Sri Gopal Subramanium, learned senior counsel for the appellant, submitted that the creation of a monopoly by the State in favour of a private entity, to trade in liquor, is contrary to Article 19(6) of the Constitution of India. The impugned order acknowle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Registration Plates vs. Union of India, (2005) 1 SCC 679. Trade in original bottled foreign liquor was only a fraction of the entire liquor trade in the State, ranging between 0.64 percent to 1.98 per cent. The aim and object of the amendment was to increase revenue, curb pilferage, control illicit trade in the State of Indian made foreign liquor and bottled in original bottled foreign liquor. The Financial Commissioner was competent under Section 59(a) read with Section 13 to amend Rule 24 by incorporation of Rule 24 (i-eeee) providing for a single L-1BF license for the entire State, as the competence of the State for issuance of license under Section 58(2)(e) was limited to a local area only. 4. Sri M.K. Dutta, learned counsel for the sole L-1BF licensee for 2017-2018, submitted that the appellant was not even a bidder. The question of any apprehension on its part simply does not arise. There are sufficient checks and balances in the excise license providing for cancellation also if the conditions of the license were not followed. The grant of a monopolistic license as the agent of the State Government was permissible in the law for trade in liquor. 5 5. We have con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r law for the time being in force relating to excise revenue. (2) In particular and without prejudice to the generality of the foregoing provisions, the State Government may make rules: (e) Regulating the period and localities for which, and, the persons or classes of persons, to whom licenses, permits and passes for the vend by wholesale or by retail of any intoxicant may be granted and regulating the number of such licenses which may be granted in any local area; (3) Previous publication of rules: - The power conferred by this section of making rules is subject to the condition that the rules be made after previous publication; Provided that any such rules may be made without previous publication if State Government consider that they should be brought into force at once. Under Section 58(2)(e) of the Act, the State Government alone has the power to regulate the number of licenses which may be granted in any local area for wholesale or retail sale. 8. Relevant to the discussion are also Rules 3 and 4 which provide as follows : 3. The authority given by these rules to grant and renew licenses is, in each case, subject to the restricti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the authority by which, the form in which and the terms and conditions on and subject to which any license or permit shall be granted, and may, by such Rules, among other matters. This Court held as follows :- 11. .The Act itself provides that the number of licenses can be regulated by the State. If the State chooses to regulate licenses by providing that the license shall be granted only to a company owned by the State, it cannot be said that such a license is something which is outside the purview of the Act or the rule-making authority of the State under the Act. 12. The Act maintains a clear distinction between a local area as the unit for grant of licence, and the entire State for other purposes. The State government is the sole repository of these other powers with regard to the entire State evident from Sections 5 and 6 which read: 5. Power of State Government to declare limit of sale by retail and by wholesale- The State Government may by notification declare with respect either to the whole of Punjab or to any local area comprised therein, and as regards purchasers generally or any specified class of purchasers, and generally or for any specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e admixture with any intoxicant of any substance deemed to be noxious or objectionable; (ii) the regulation or prohibition of the reduction of liquor by a licensed manufacturer or licensed vendor from a higher to a lower strength; (iii) the strength at which intoxicant shall be sold, supplied or possessed; (iii-a) the fixing of the price below and above which any intoxicant shall not be sold or supplied by the licenced vendor. (iv) the prohibition of sale of any intoxicant except for cash; (v) the fixing of the 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 returns 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 denatured; (ii) for causing spirit to be denatured through the agency or under the supervision of its own officers; (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation amounts to reading words into the statute which the legislature itself never intended. The amendment notified by the Excise Commissioner as a delegate of the Financial Commissioner was per se ultra vires the powers of the latter under Section 6 and 13(a) read with Section 58(2)(e) of the Act. The unreasonableness and incongruity in the reasoning by the High Court would vest wider powers in the Excise Commissioner than the State Government itself. While the State Government would have the power to determine the number of licences and to issue licence for a local area only, the Excise Commissioner would have a superior power to determine the number of licences and issue licences for the entire State. 17. The meaning and scope of a regulatory power fell for consideration in Deepak Theatre vs. State of Punjab, 1992 Supp (1) SCC 684, 4. The power to regulate includes the power to restrain, which embraces limitations and restrictions on all incidental matters connected with the right to trade or business under the existing licence. Rule 12(3) regulated entry to different classes to the cinema hall and it was within the rule making power of the State Government to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll have to submit pricing of each brands at the time of approval of the brand and department will approve his maximum sale price factoring in the landing price, expenses, profit margin, prevalent rates of same or equivalent brands in the neighboring States and the Government levies. The licensee shall do this preferably in the first quarter of the financial year. 3.Originally Clause 9.5.1.2 was challenged. The third respondent had been appointed as exclusive licensee and declaration was sought that the appointment was invalid. While the Writ Petition was pending, the Haryana Liquor License (Amendment) Rules, 2017 was introduced. The rules came into effect on 01.4.2017. Thereupon the appellant challenged Rule 24 (i-eeee) of the 1970 Rules introduced by the amending Rules. The said Rule reads as follows: 3. In the said rules, in rule 24, - i (xiv) for clause (i-eeee), the following clause shall be substituted, namely:- (i-eeee) For a license in form L-1BF - (a) Reserve price shall be ₹ 50,00,00,000/- (b) The license in form L-1BF shall be allotted through e-bidding to the highest bidder (b) There shall be only one L-1BF license in the State. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertained before any license is granted for the retail vend of liquor for consumption on the premises; (g) for the prohibition of the sale of any intoxicant to any person or class of persons; (h) regulating the power of excise officers to summon witnesses form a distance; (I) regulating the grant of expenses to witnesses and compensation to persons charged with offences under this Act and subsequently released, discharged or acquitted. (j) for the prohibition of the employment by a license holder of any person or class of persons to assist in his business in any capacity what so ever; (k) for the prevention of drunkness, gambling and disorderly conduct in or near any licensed premises and the meeting or remaining of persons of bad character in such premises; (l) prohibiting the printing, publishing or otherwise displaying or distributing any advertisement or other matter commending or soliciting the use of, or offering any intoxicant calculated to encourage or incite any individual or class of individuals or the public generally to commit an offence under this Act, or to commit a breach or evade the provisions of any rule or order made there under, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he regulation or prohibition of the reduction of liquor by a licensed manufacture or licensed vendor from a higher to a lower strength; (iii) [the strength at which intoxicant shall be sold], supplied or possessed; (iii-a) the fixing of the price below and above which any intoxicant shall not be sold or supplied by the licensed vendors; (iv) The prohibition of sale of any intoxicant except for cash; (v) The fixing of the 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 sole, 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 denatured; (ii) for causing spirits to be denatured through the agency or under the supervision of its own officers; (iii) for causing spirits to be denatured through the agency or under the supervision of its own officers; (h) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence and administration of all matters relating to excise shall vest in the Financial Commissioner. (b) . (c) . (emphasis supplied) 8.Section 9 of the said Act provides for appointment of an Excise commissioner and it reads as follows: 9.Excise Commissioner. -The State Government may by notification appoint an Excise Commissioner, and, subject to such conditions and restrictions as it may deem fit, may invest him with all or any of the powers conferred on the Financial Commissioner by this Act. 9.In terms of the notification vesting powers of the finance Commissioner apparently under Section 59 it is that the Excise Commissioner has made the rules Haryana Liquor Licence Rules 1970. It is undoubtedly true that Section 13 forbids delegation of power under Section 58 inter aliaon the Financial Commissioner or Commissioner. Section 34 comes under Chapter VI and is relevant. It reads as follows: 34.Fee for terms, conditions and form of, and duration of licenses, permits and passes. (1) Every licence, permit or pass granted under this Act shall be granted, - (a) On payment of such fees, if any; (b) Subject to such restrictions and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Brooms Legal Maxims Omne Majus Continet in Se Minus) but I do not think that the converse namely the part would include the whole could hold good. Thus, the expression local area as used in Section 58(2)(e) would appear to convey the impression that the legislature intended to confer power on the State to place restrictions on the number of licences which are to be given qua any local area. In fact, in the written submission given by the State of Haryana, a definite case is set up that the State in its wisdom can conclude that a particular local area owing to the special conditions should be protected from the harmful effects of alcohol consumption. An example of tribal sub plan area is enlisted where the State may be carrying on a special programme. I would think that this view finds support also from another circumstance in the form of Rule 3 of Haryana Liquor Licence Rules, 1970. The said Rule reads as under: 3. The authority given by these rules to grant and renew licenses is, in each case, subject to the restrictions contained in the Punjab Intoxicants License and Sale Order as to the localities in which licenses may be granted and the number of licenses which may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes connected therewith in the case of Section 13(1)and the grant of quarry leases, mining leases and other mineral concessions in respect of minor minerals and for purposes connected therewith in the case of Section 15(1)and to subject such grant to restrictions and to adapt them tothe circumstances of the case and the surroundings with reference to which such power is exercised. It is pertinent to bear in mind that the power to regulate conferred by Sections 13(1)and15(1)is not only with respect to the grant of licences and leases mentioned in those sub-sections but is also with respect to purposes connected therewith , that is, purposes connected with such grant. 16.No doubt it is true that Section 13 of the Mines and Minerals (Regulation Development) Act, 1957 which was considered by the Court inter aliaread as follows: 13. Power of Central Government to make rules in respect of minerals. - (1) The Central Government may, by notification in the Official Gazette, make rules for regulation the grant of prospecting licences and mining leases in respect of minerals and for purposes connected therewith. (2) In particular, and without prejudice to the gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the number of licenses. 21.Having expressed my disagreement with regard to the finding of the sole issue which has been dealt with in the majority judgment I must necessarily proceed to consider the two other contentions which has been raised by the appellant. The appellant has contended that the rule leads to the creation of a monopoly and what is really objectionable, in favour of a private party and it is contrary to the guarantee embedded under Article 19(1)(g) of the Constitution. The High Court has repelled this argument also. It relied upon the judgment of this Court reported in Khoday Distilleries Ltd. and Others Vs. State of Karnataka and Others; 1995(1) SCC 574 wherein this Court in paragraph 22 held as follows : 22. In Cooverjee B. Bharucha v. Excise Commissioner and the Chief Commissioner AIR 1954 SC 220, where the vires of Excise Regulation I of 1915 was under challenge on the ground of violation of Article 19(1)(g), the Constitution Bench of five learned Judges, among other things, held that: (a)In order to determine the reasonableness of restrictions, envisaged by Article 19(6), regard must be had to the nature of the business and the conditions prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The provisions of the law cannot be attacked merely on the ground that they create a monopoly. Properly speaking, there can be a monopoly 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. The Court for this purpose relied upon the following observations of Lord Porter in Commonwealth of Australia v. Bank of New South Wales; 1950 AC 235 : (1949) 2 AII ER 755: Yet about this, as about every other proposition in this field, a reservation must be made, for their Lordships do not intend to lay it down that in no circumstances could the exclusion of competition so as to create a monopoly either in a State or Commonwealth agency, or in some other body, be justified. Every case must be judged on its own facts and its own setting of time. (c)When the contract is thrown open to public auction, it cannot be said that there is exclusion of competition and thereby monopoly is created. (Emphasis supplied) 22.I may also refer to the judgment of this Court in Maninderjit Singh Bitta v. Union of India and others reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now move to the arguments predicated onArticle 19of the Constitution. We have already noted that the business in potable liquor is in the nature of res extra commercium and would therefore be subject to more stringent restrictions than any other trade or business. Thus while the ground of Article 19(1)(g)can be raised, in light of the arguments discussed with regard to Article 14,it cannot be said that the qualification on that right is unreasonable. (Emphasis supplied) 24.I would not lose sight of in the facts of this case one dimension in this regard. The appellant is an association of companies. Article 19 provides for various fundamental freedoms. However, unlike Article 14 and 21, these freedoms are not conferred on non-citizens. In other words, Article 19 is confined to citizens. It is well settled that a company though a juristic person but not being a natural person is not a citizen within the meaning of Article 19. The writ petition is filed without joining any shareholder who is a citizen. I would also take the view that therefore reliance placed on Article 19 may not hold good. 25.Judicial review of policy is justified only if the policy is arbitrary or unf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho are otherwise eligible. In the present excise policy, the State has permitted every eligible party to bid. It has not discriminated against or in favour of any party. The essential criteria for the appointment of the wholesaler is the value of the bid. 34.The challenge to the policy and to the rule on the ground that the appointment of a sole wholesaler in respect of an L-1BF Licence would adversely affect the commercial interests of those who he deals with or those who must deal with him, such as, the petitioners is not well founded. As we noted earlier, theoretically it is possible that the commercial interests of certain dealers and manufacturers will be affected, in as much as, the sole wholesaler will have the choice of who it would deal with. The sole wholesaler would also be entitled to grant better facilities to some of the dealers. That, however, would not render the policy illegal. A private party is entitled to deal with any person or enterprise. The State, absent special circumstances, cannot do so. We will presume it cannot do so, even in so far as the trade and business of liquor is concerned. However, once a matter moves from the control of the State or the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsee it may choose to promote certain brands over others on account of unfair negotiating position made available to it by the license. There are no checks and balances to ensure that interest of other stake holders is taken care of. Though the conditions provide that the licensee will have to supply goods demanded there are no means by which the actual demand can be ascertained. It is further pointed out that it is open to the licensee to offer discounts to the retailers it seeks to favour. This results in neutralizing the condition relating to the maximum sale price being fixed by the excise authority. Onerous conditions can be placed upon purchasers as well as suppliers by the sole licensee and the lack of checks and balances renders the same violative of Article 14. 28.The guarantee of Article 14 against the State undoubtedly embraces all spheres of its activities. If the action falls foul of the mandate of Article 14 it is vulnerable, though different yardsticks may operate. Undoubtedly the expression state would also include within its sweep an instrumentality of the State as it would fall under the expression other authorities in Article 12 of the Constitution. The ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st as in built safeguards which operate against the exclusive licensee. The licensee is obliged to keep sufficient number of stock of all brands which are demanded by the procuring licensees. In this case, the members of the appellant would fall within the expression procuring licensees . Secondly, there is a regulation of the maximum price which the exclusive licensee can demand as the price is to be fixed by the State itself. A question however, no doubt, arises as to what would happen if the exclusive licensee himself also operates retail outlets and he promotes certain brands and/ or dampens the trade in others. In the first place I would think that ordinarily on the principle that a person would act in his own self interest there would be no reason for the licensee to deny himself the proceeds of the higher turnover based on more sales as by seeking to dampen the sale of certain brands it is the licensee who would suffer a loss. Let me assume however that he is placed in a situation where there is a conflict of interestand by suppressing the sale of certain brands and permitting the sale of other brands the exclusive licensee is placed in a more advantageous position, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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