Hon'ble Mr. Justice Navin Sinha
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9533 OF 2018
INTERNATIONAL SPIRITS AND WINES
ASSOCIATION OF INDIA ....APPELLANT(S)
VERSUS
STATE OF HARYANA AND OTHERS ...RESPONDENT(S)
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,
2
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 Rs. 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
acknowledges that it would lead to serious distortions in the
market, yet erroneously declines interference holding that once the
matter moves from State control into the hands of private
enterprise, the restrictions applicable to the State cease to apply.
Reliance was placed on Akadasi Padhan vs. State of Orissa, AIR
1963 SC 1047, to contend that if a monopoly is created by the State
in its favour, the same cannot be constitutionally permitted if the
private agents appointed pursuant thereto, act as independent
entities. Sri Subramanium also relied on Khoday Distilleries Ltd.
vs. State of Karnataka (I), (1995)1 SCC 574, to submit that once
the State parts with its privilege to trade in liquor, in favour of
private individuals, the rigours of Article 14 will continue to apply
to provide equal opportunity to all desirous to do so. Alternatively,
it was submitted that the absence of sufficient checks and balances
3
gives untrammeled and uncanalised powers to the sole licensee
which again is constitutionally impermissible. Sri Subramanium
further relied on Khoday Distilleries Ltd. vs. State of
Karnataka (II) (1996) 10 SCC 304, to submit that the
interpretation of Section 58 (2)(e) and 59(a) of the Act by the High
Court was flawed. Rule 24 (i-eeee) was ultra vires the Act. The
interpretation put by the High Court grants wider powers to the
Financial Commissioner, than the State Government itself. The
single monopolistic L-1BF license was also discriminatory and
violative of Article 14 of the Constitution in so far as no such
requirement was stipulated for wholesale trade in Indian made
foreign liquor or country liquor in the State. There was no rational
or reasonable classification for this distinction between licensees,
having any rationale or nexus with any object to be achieved.
3. Ms. Pinky Anand, learned Additional Solicitor General,
submitted that the appellant never participated in the bidding
process for the L-1BF license. A mere apprehension that a single
L-1BF license for the entire State may affect market dynamics,
when the reality was otherwise, resulting in rise of revenue, negates
the challenge laid out by the appellant. The issue of monopoly in
the hands of a private entity is devoid of merit as the process is
4
through public auction, open to participation by all, and not
tailored to suit any particular person or activated by malafides,
relying on Association 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 considered the submissions on behalf of parties. The
appellant assails the amended Rule 24(i-eeee) as ultra vires the
provisions of the Act. Integral to the issue is whether the state
government is competent to issue licences for a local area alone
under Section 58(2)(e) of the Act, while the Excise Commissioner,
a sub-delegate of the Financial Commissioner is competent under
Section 13(b) read with Section 59(a) to issue L-1BF licence for the
entire state under the amended rule, notwithstanding the
prohibition in Section 13(a) to the delegation of powers under
Section 58 by the State Government. The amended Rule 24(i-eeee)
relevant to the controversy reads as follows:
“ (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 Rs.50,00,00,000/-.
(b)The license in form L-1BF shall be allotted
through e-bidding to the highest bidder.
(c) There shall be only one L-1BF license in the
State.”
6. Under Section 8 of the Act, the State government exercises
general superintendence and control of Excise Administration and
Excise Officers. Section 9 provides for vesting powers of the
6
Financial Commissioner in the Excise Commissioner by the State
Government. Section 13 dealing with delegation of powers
provides:
“Delegation:
(a) The State Government may by notification
delegate to the Financial Commissioner or
Commissioners all or any of its powers under
this Act, except the powers conferred by sections
14, 21,22, 31, 56 and 58 of this Act.
(b) The State Government may by notification
permit the delegation by the Financial
Commissioner, Commissioner or Collector to
any person or class of persons specified in such
notification of any powers conferred by this Act
or exercised in respect of excise revenue under
any Act for the time being in force.”
The Financial Commissioner is therefore competent to delegate
only such powers to the Excise Commissioner which the State
Government can delegate to the former under the Act, in view of
the prohibition contained in Section 13(a) of the Act.
7. Section 58 of the Act, in its relevant extract reads as follows:
“Power of State Government to make Rules:
(1) The State Government may by notification
make rules for the purpose of carrying out the
provisions of this Act or any other 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:
……
7
(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 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 be granted in
any local area, and to such reservations from the
general superintendence of the Financial
Commissioner as the State Government may
notify under Section 8 of the Punjab Excise Act,
1914.
8
4. Every license shall be granted to a particular
licensee in respect of particular premises/area.”
9. Chapter D of the Punjab Intoxicants License and Sales
Orders, 1956 (hereinafter referred to as ‘the Order’) provides for the
number of licences and reads as under :
“6. The number of liquor vends except vends
licenced in form L-2 for the wholesale and retail
sale of foreign liquor to the public only and drug
shops, which may be licenced in any local area,
shall be the number which the Financial
Commissioner, subject to the control of the
State government considers necessary. The
number of L-2 vends, which may be licenced in
any local area, shall be the number of such
licences granted by the Collector under the
rules.”
10. In the scheme of the Act, the Rules and the Order read
together it is apparent that a liquor license is to be granted for a
local area only. The power to determine the number of licences
that may be granted in any category in a local area is exclusively
vested in the State Government under Section 58(2)(e) of the Act.
The delegation of this power by the State Government to the
Financial Commissioner is prohibited by Section 13(a). This is only
in consonance with the general power of superintendence vested in
the State Government under Section 8.
9
11. In Khoday Distilleries vs. State of Karnataka (II) (supra),
a similar provision under the Karnataka Excise Act 1965 fell for
consideration therein:
“71(1): The State Government may, by
notification and after previous publication,
make Rules to carry out the purposes of this Act.
(2) In particular and without prejudice to the
generality of the foregoing provision, the State
Government may make Rules –
…..
(e) regulating the periods and localities in
which and the persons or classes of persons to
whom, licenses for the wholesale or retail sale of
any intoxicant may be granted and regulating
the number of such licenses which may be
granted in any local area:
(f) ……
(g) ……
(h) prescribing 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.”
10
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
occasion, the maximum or minimum quantity or
both of any intoxicant which for the purposes of
this Act may be sold by retail and by wholesale.
6. Power to limit application of
notifications, permits, etc., made under this
Act.- Where under this Act any notification is
made, any power conferred, any appointment
made or any license, pass or permit granted, it
shall be lawful to direct –
(a)That it shall apply to the whole of Punjab or
to any specified local area or areas;
xxxxx"
The power to declare by notification that a licence granted shall be
applicable to the entire State is exclusively vested in the State
Government under Section 6(a) of the Act.
11
13. The High Court has held that in contradistinction to Section
58(2)(e) of the Act, which limits the powers of the State Government
to grant of licence for a local area, the Excise Commissioner, as the
delegatee of the Financial Commissioner, was competent under
Section 59(a) to grant a single L-1BF licence for the entire State.
“59. Powers of Financial Commissioner to
make rules:-
The Financial Commissioner may, by notification,
make 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 manufacture,
supply, storage or sale of such article and
the fittings, implements, apparatus and
registers to be maintained therein;
(ii) the cultivation of the hemp plant and the
collection of spontaneous growth of such
plant and the preparation of any
intoxicating drug;
(iii) the tapping or drawing of tari from any tari
producting tree;
(b) regulating the bottling of liquor for purposes of
sale;
(c) regulating the deposit of any intoxicant in a
warehouse and the removal of any intoxicant
from any warehouse or from any distillery or
brewery;
(d) prescribing the scale of fees or the manner of
fixing the fees payable in respect of any license,
permit or pass or in respect of the storing of any
intoxicant;
12
(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 license,
permit or pass may be granted, including
provisions for the following matters-
(i) the prohibition of the 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 licenseholders; 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;
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(iii) for ascertaining whether such spirit has
been denatured;
(h) providing for the destruction or other disposal of
any intoxicant deemed to be unfit for use;
(i) regulating the disposal of confiscated articles;
(j) prescribing the amount of security to be
deposited by holders of leases, licenses, permits
or passes for the performance of the conditions of
the same.”
14. The nature of powers conferred under Section 59 of the Act,
make it manifest that it is but a regulatory power available only
after a license is granted to the licensee for a local area, to ensure
supply, storage, sale or otherwise that the conditions of the license
are adhered to and necessary directions can also be given for the
purpose.
15. The Excise Commissioner, a sub-delegate of the Financial
Commissioner, in exercise of the powers conferred under section
59 of the Act by virtue of the Haryana Government Excise and
Taxation notification dated 01.04.2016, made the impugned
amendment to the Haryana Liquor License Rules, 1970. The same
were notified on 29.03.2017. These rules were called the Haryana
Liquor License (Amendment) Rules, 2017. Rule 1(2) stated that
they shall come into force with effect from 01.04.2017. Rule 3 of
14
the amendment substituted Rule 24 (i-eeee) which provided that
there shall be only one L-1BF license in the State. The amendment
with regard to the number of licenses that could be issued for the
entire State is in teeth of Sections 6 and 58(2)(e), delegation of
which by the State Government is expressly prohibited by Section
13(a).
16. The distinction sought to be drawn by the High Court with
regard to the term ‘local area’ under Section 58(2)(e) of the Act as
being confined to small compact area only and that the Financial
Commissioner by virtue of the power to regulate supply, storage
or sale of any intoxicant had the power to determine the number
of licenses to be granted for the entire State in a particular
category, in our view, is not only unreasonable but also in teeth of
the statutory Scheme and its provisions. To hold that the power of
Financial Commissioner under Section 59(a) of the Act to regulate
sale of liquor, and that sale could be regulated through grant of
licence, the Financial Commissioner was vested with the power to
determine the number of licences, to our mind is not only
unreasonable but also unsustainable. Such an interpretation
amounts to reading words into the statute which the legislature
itself never intended. The amendment notified by the Excise
15
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 frame such
rule. The court further held that fixing limit of
rate of admission was an absolute necessity
in the interest of the general public and the
restriction so placed was reasonable and in
public interest….”
16
18. The Financial Commissioner was therefore not competent to
amend the Rules with regard to grant of number of licences for the
entire state, and which power was exclusive to the State
Government under Section 6 read with Section 13(a) and 58(2)(e)
of the Act. In conclusion, we hold that Rule 24(i-eeee) as amended
by the Financial Commissioner in exercise of powers under Section
59(a) of the Act is ultra vires the powers of the Financial
Commissioner under the Act and is therefore struck down. In view
of Rule 24(i-eeee) itself having been struck down, it is not
considered necessary to discuss or consider the other grounds of
challenge raised.
19. The appeal is allowed.
………............................CJI.
[RANJAN GOGOI]
…………............................J.
[NAVIN SINHA]
NEW DELHI
FEBRUARY 12, 2019.
1
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.9533 OF 2018
INTERNATIONAL SPIRITS AND WINES
ASSOCIATION OF INDIA ..APPELLANT(S)
VERSUS
STATE OF HARYANA AND ORS. ..RESPONDENT(S)
JUDGMENT
K.M. JOSEPH,J.
1. Having perused the judgment authored by
brother Justice Navin Sinha notwithstanding the
highest respect that I maintain for him, I express my
inability to accept the reasoning given in support of
the conclusion on the point which has been dealt with
by him and the consequent verdict.
2. The appellant is the writ petitioner before
the High Court in writ petition No.6870 of 2017 which
came to be decided along with another writ petition.
Appellant is a company registered under Section 25 of
the Companies Act. It claims to be a representative
body of International spirits and wines companies
2
doing business in India. On 06.03.2017, the excise
policy for the State of Haryana came to be announced
for the period 01.04.2017 to 31.03.2018. Under clause
9.5.1.1, a wholesale licence in the form of L-1BF for
imported foreign liquor (BIO) was prescribed. The
licensee was authorized to import IFL (BIO) including
beer from other countries and supply it to L-1s, L-4
and L-5s, L-12Cs and L-12Gs of the State. Clause
9.5.12, however, provided that there will be only one
wholesale licence in the form of L-1BF in the State.
It was contemplated that licence was to be settled by
e-tenders through the Departmental Portal in a
completely secure and transparent manner. The reserve
price was fixed at Rs.50 crores. Under the general
conditions provisions for L-1BF it was provided as
follows:
“(vi) The licensee will 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
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, -
…....
(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 Rs. 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.
(d) In case no eligible bid equal to or above
the reserve price is received for the lone L1BF license, the same shall be allotted
exclusively to a Government owned entity on
the terms and conditions as decided by the
Government. The permit and brand label fee
shall be levied as under to procure Stock of
liquor by the L-1BF licensee.”
4. The ground which failed to persuade the
Division Bench of the High Court but which has found
acceptance at the hands of my learned Brother Sinha J.
4
is that the impugned rule is ultra vires, the power
of the Finance Commissioner under Section 59 of the
Punjab Excise Act, 1914 (hereinafter referred to as
“the Act”). The argument of the appellant is that the
power to make a rule regarding number of licenses is
with the State Government and it is said power which
has been usurped by the Financial Commissioner in
purported exercise of the power under Section 59 of
the Act. To put it differently, the question would be
whether the power is vested with the State Government
under Section 58 or with the Financial Commissioner
under Section 59 of the Act. It is but natural that
I set out the provisions of Section 58 and 59 of the
Act.
“58. Power of State Government to make Rules
– (1) The State Government may by notification
make rules for the purpose of carrying out the
provisions of this Act or any other law for the
time being in force relating to excise revenue.
(2)In particular and without prejudice to the
generally of the foregoing provisions, the
State Government may make rules: -
(a) prescribing the duties of excise officers;
(b) regulating the delegation of any power by
the Financial Commissioner, Commissioner or
Collector, under Section 13, Clause (b);
(c) prescribing the time and manner of
presenting and the procedure for dealing
5
with appeals from orders of excise
officers;
(d) regulating the import, export, transport or
possession of any intoxicant or Excise bottle
and the transfer, price or use of any type of
description of such bottle.
(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
intoxicants may be granted and regulating the
number of such licenses which may be granted in
any local area;
(f) prescribing the procedure to be followed
and the matters to be ascertained 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,
6
or the conditions of any license, permit or pass
obtained there under:-
(m) prohibiting within the State the
circulation, distribution or sale of any
newspaper, book, leaflet, booklet, or other
publication printed and published outside the
State which contains any advertisement or
matter of the nature described in clause (1);
(n) declaring any newspaper, book, leaflet,
booklet or other publication, wherever printed
or published, containing any advertisement or
matter [of the nature described in clause (1)]
to be forefeited to the State Government; and
(o) implementing generally the policy of
prohibition.
(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.
59. Powers of Financial Commissioner to make
rules – The Financial Commission may, by
notification, make 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 manufacture,
supply storage or sale of such article and
the fittings, implements apparatus and
registers to be maintained therein;
(ii) the cultivation of the hemp plant and
the collection of spontaneous growth of such
plant and the preparation of any intoxicating
drug.
(iii) the tapping of drawing of tari from any
tari producting tree.
7
(b) regulating the bottling of liquor for
purposes of sale.
(d) regulating the deposit of any intoxicant in
a warehouse and the removal of any
intoxicant from any warehouse or from any
distillery or brewery.
(e) prescribing the scale of fees or the manner
of fixing the fees payable in respect of any
license, permit or pass or in respect of the
storing of any intoxicant;
(f) regulating the time, place and manner of
payment of any duty or fee;
(g) prescribing the authority by, the
restrictions under, and the conditions on
which any license, permit or pass may be
granted including provision for the
following matters: -
(i)The prohibition of the 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 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;
8
(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) providing for the destruction or other
disposal of any intoxicant deemed to be
unfit for use;
(i) regulating the disposal of confiscated
articles;
(j) prescribing the amount of security to be
deposited by holders of leases, licenses,
permits or passes for the performance of the
conditions of the same.”
5. The case of the appellant is built around the
provisions contained in Section 58(2)(e) of the Act.
6. The Punjab Excise Act, 1914 as extended to
the State of Haryana contains the following provisions
inter alia:
Section 5 of the said Act reads as follows:
“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 [Haryana] or
to any local area comprised therein, and as regards
9
purchasers generally or any specified class of
purchasers, and generally or for any specified
occasion, the maximum or minimum quantity or both
of any [intoxicant] which for the purposes of this
Act may be sold by retail and by wholesale.”
(emphasis supplied)
The expression “any local area” stands out in the said
statutory provision as distinct from the whole of
Haryana. It is to be noted that Section 5 does not
deal with the rule making power of the State. In
fact, it relates to the maximum and minimum quantity
or both of any intoxicants which may be sold by retail
and by wholesale. Similarly, Section 6(a) reads as
follows:
“6. Power to limit application of
notifications, permits, etc., made under this Act.-
Where under this Act any notification is made, any
power conferred, any appointment made or any
license, pass or permit granted, it shall be lawful
to direct –
(a) that it shall apply to the whole of [Haryana] or to any specified local area or
areas;
(b) …..
(c) …..
(d) …..”
(emphasis supplied)
Equally Section 6 also does not deal with the power
to make rules.
7. It is apparent that the legislature has
maintained a distinction between the whole and a part
10
and the part is what is captured in the expression
“local area”. Further Section 8 of the said Act reads
as follows:
“8. Superintendence and control of excise
administration and excise officers. -
(a) Subject to the control of the [State] Government and unless the [State] Government
shall by notification otherwise direct,
the general superintendence 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
11
of power under Section 58 inter alia on 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 on such
conditions;
(c) In such form and containing such particulars;
(d) For such period;
as the Financial Commissioner may direct.
(2) …..
(3) …..”
10. Section 35 speaks about grant of licences for
sale. Sub-section (1) of the said provision reads as
follows:
“35. (1) Grant of lincenses for sale. - Subject to
the rules made by the Financial Commissioner under
the powers conferred by this Act, the Collector may
grant licenses for the sale of any [intoxicant]
within his district.”
(emphasis supplied)
12
11. Coming to Section 58 undoubtedly what is
pressed before us by the appellant is a specific
provision contained in Section 58(2)(e). Breaking down
the said sub-section, in my view produces the
following inevitable result. The State Government has
the power to frame rules.
1)To regulate the periods of licences, permits and
passes either wholesale or retail;
2)To regulate the localities for which wholesale or
retail licences, permits or passes may be granted.
3)To regulate the persons or classes of persons to
whom the licences, permits or passes may be
granted either by way of a wholesale or retail
licence;
12. The latter part of Section 58(2)(e) on the
other hand also permits the Government to regulate by
rules, the number of such licences which may be
granted in any local area. Therefore, it is clear
that it is in respect of the licences which are
referred, be it wholesale or retail mentioned earlier
13
in the provision which can be regulated but however
limited to any local area. As against this and
immediately following Section 58 in Section 59,
legislature has also empowered the financial
Commissioner to make rules inter alia to regulate the
manufacture, supply, storage or sale or any
intoxicant.
13. It is relevant to notice that the High Court
in the impugned judgment has specifically dealt with
the expression “local area” by adverting to a judgment
of this Court reported in 1995 (1) SCC 351. The
expression “local area” has been designedly employed
and it has to be given full play. It certainly cannot
mean the whole of the State. Any other interpretation
would render the word ‘local area’ in Section 58(2)(e)
meaningless and, in fact, it would involve doing
complete violence to the plain meaning of the words
“local area”. It may be true that the whole may
include the part (see in this regard the maxim 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
14
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
be granted in any local area, and to such
reservations from the general superintendence
of the financial commissioner as the State
government may notify under Section 8 of the
Punjab Excise Act, 1914.
(emphasis supplied)
15
14. Thus, the said rule reinforces the view that
the expression “number of licences” which may be
granted in the local area is within the exclusive
domain of the State Government and reliance placed by
the appellant on the number of licences which may be
granted in Section 58(2)(e) to strike at the impugned
rule which is otherwise sourced under Section 59 is
without any basis. In other words going through both
the Act and the Rules, a distinction is made between
the whole of the State and the local area. In regard
to rule making power, undoubtedly, the legislature has
specifically conferred rule making power qua the
number of licences in any local area upon the State.
Unless it can be reasoned that the powers to regulate
sale of liquor within the meaning of Section 59 which
is undoubtedly placed on the shoulders of the
financial Commissioner would not include the power to
make rules in regard to the number of licences for the
State as a whole, the argument of the appellant must
fail.
16
15. The word `regulate’ in fact came to be
considered by the decision of this Court in D.K.
Trivedi and Sons v. State of Gujarat 1986 (Suppl.)
SCC 20. The matter arose under Section 13 inter alia
of the Mines and Minerals (Regulation & Development)
Act, 1957. This Court went on to hold inter alia as
follows :
“30. Bearing this in mind, we now turn to
examine the nature of the rule-making power
conferred upon the State Governments by Section
15(1). Although under Section 14, Section 13 is one
of the sections which does not apply to minor
minerals, the language of Section 13(1) is in
pari materia with the language of Section 15(1).
Each of these provisions confers the power
to make rules for "regulating". The Shorter
Oxford English Dictionary, Third Edition,
defines the word "regulate" as meaning "to
control, govern, or direct by rule or
regulations; to subject to guidance or
restrictions; to adapt to circumstances or
surroundings". Thus, the power to regulate
by rules given by Sections 13(1) and 15(1) is a
power to control, govern and direct by rules
the grant of prospecting licences and mining
leases in respect of minerals other than
minor minerals and for 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 to the 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
17
conferred by Sections 13(1) and 15(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 alia read
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 generality of the foregoing power, such
rules may provide for all or any of the
following matters, namely :-
* * * *
(i) the fixing and collection of dead rent
fines, fees or other charges and the
collection of royalties in respect of -
(i) prospecting licences,
(ii) mining leases,
(iii) minerals mined, quarried, excavated or
collected;
* * * *
(r) any other matter which is to be, or may
be, prescribed under this Act."
18
17. However, having regard to the connotation of
the word ‘regulate’ it would include power to control
the sale of liquor under the Act. Control of sale is
possible by providing for licences as it is through
licencing that the authority can provide for
conditions under which the sale could be best
controlled. If the power to regulate include the
power to stipulate licences it undoubtedly also would
include power to provide for number of licences qua
the State as a whole a matter which I have reasoned
does not fall under Section 58(2)(e) of the Act.
18. In the judgment of this court in Khoday
Distilleries Ltd. and Others v. State of Karnataka and
Others reported in 1996 (10) SCC 304, the issue arose
under the Karnataka Excise Act, 1965. Undoubtedly,
there is a provision therein which is pari materia
with Section 58(2)(e) of the Punjab Excise Act in the
Karnataka Excise Act, 1965 which has been extracted
at para 8 of the said judgment. The case in fact
related to a distributor licence and not wholesale or
retail licence which is what the provision speaks of.
19
19. The Court was not dealing with the specific
question which is posed before us as is clear from the
judgement. I have in fact, gone through the Karnataka
Excise Act and I find that while Section 71 confers
power on the State Government to make rules there is
no provision akin to Section 59 of the Punjab Excise
Act which confers power on any other authority in
which case it could not possibly be contended that
sub-section (2) of Section 71 would in any manner cut
down the width of the general power of Section 71(1)
for the State Government to make rules for the purpose
of the Act.
20. In such circumstances, I would respectfully
disagree with the majority view as expressed in the
judgment of my learned Brother Justice Navin Sinha.
I would confirm the finding by the learned Division
Bench of the High Court that the Financial
Commissioner has power to decide upon 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
20
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 prevailing in that trade. These
factors would differ from trade to trade and no
hard and fast rule concerning all trades can be
laid down. It cannot also be denied that the
State has the power to prohibit trades which are
illegal or immoral or injurious to the health
and welfare of the public. Laws prohibiting
trades in noxious or dangerous goods or
trafficking in women cannot be held to be illegal
as enacting a prohibition and not a mere
regulation. The nature of the business is,
therefore, an important element in deciding the
reasonableness of the restrictions. The right of
every citizen to pursue any lawful trade or
21
business is obviously subject to such reasonable
conditions as may be deemed by the governing
authority of the country essential to the safety,
health, peace, order and morals of the community.
Some occupations by the noise made in their
pursuit, some by the odours they engender, and
some by the dangers accompanying them require
regulation as to the locality in which they may
be conducted. Some, by the dangerous character
of the articles used, manufactured or sold,
require also special qualification in the
parties permitted to use them, manufacture or
sell them. The Court in this connection referred
to the observations of Field, J. in P. Crowley
v. Henry Christensen; 34 L ED 620 : 137 US 86
(1890) a part of which is as follows:
"The sale of such liquors in this way has,
therefore been, at all times, by the courts
of every State, considered as the proper
subject of legislative regulation. ... Their
sale in that form may be absolutely
prohibited. It is a question of public
expediency and public morality and not of
federal law. The police power of the State
is fully competent to regulate the business
to mitigate its evils or to suppress it
entirely. There is no inherent right in a
citizen to thus sell intoxicating liquors by
retail; it is not a privilege of a citizen
of the State or of a citizen of the United
States. As it is a business attended with
danger to the community, it may, as already
said, be entirely prohibited, or be
permitted under such conditions as will
limit to the utmost its evils. ... It is a
matter of legislative will only."
(b)The elimination and exclusion from business
is inherent in the nature of liquor business and
it will hardly be proper to apply to such a
business principles applicable to trade which
all could carry 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.
22
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 2005(1)SCC 679. In this case
undoubtedly the rule provided that there will be only
one license of the nature concerned. However, the
right to the license was settled by way of e-tender.
It was open to any person who is otherwise eligible
to participate in the e-tender. Undoubtedly the
guarantee of fairness of the State action and the
taboo against arbitrariness must inform the State
action once it decides to permit trade in liquor. It
is to be noticed that the introduction of the rule was
23
primarily to earn maximum profits. The case of the
state is that introduction of the rule has enabled
collection of greater amounts by way of revenue. This
cannot be said to be entirely an irrelevant
consideration. Going too far in these matters may
involve the court making a foray into the ordinarily
forbidden territory of policy.
23. No doubt, the appellant draws our attention
to the recent decision of this Court in The Kerala
Bar Hotels Association & Another v. State of Kerala
& Others AIR 2016 SC 163. In fact, one the
contentions of the appellants was that the state
had 3 options. The first is prohibition, the second
is State monopoly in manufacture or trade and the
third was to allow private players into the business
in which everyone has a right to partake in the
business. The court went on to hold inter alia as
follows:
“24. We disagree with the submissions of the
Respondents that there is no right to trade in
liquor because it is res extra commercium. The
interpretation of Khoday put forward by Mr.
Sundaram is, in our opinion, more acceptable. A
right under Article 19(1)(g) to trade in liquor
24
does exist provided the State permits any person
to undertake this business. It is further
qualified by Article 19(6) and Article 47. The
question, then, is whether the restrictions
imposed on the Appellants are reasonable.”
The Court found support from the judgment of this
Court in the Constitution Bench in Krishna Kumar
Narula v. State of Jammu & Kashmir AIR 1957 SC 1368
which took the view that dealing in liquor is a
legitimate business although the State could impose
reasonable restriction. The court however noted
that in Khoday’s case (supra), the concept of res
extra commercius came to be applied on the business
of manufacture and trade of potable liquor.
I may also notice paragraph 27 of The Kerala
Bar Hotels Association case (supra) which reads as
below:
“27. We now move to the arguments predicated
on Article 19 of 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)
25
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 noncitizens. 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 unfair or
violative of fundamental rights. Courts must be
loathe to venture into an evaluation of State
policy. I have noticed the principles enunciated
in paragraph 25 and also noted the view taken by
this Court in paragraph 27 of the Kerala Bar Hotel
Cases Supra. I may also notice that the question
26
which actually fell for consideration was in a
different factual matrix. I do not think that the
earlier view taken by this Court both in Cooverjee
B. Bharucha Vs. Excise Commissioner and the Chief
Commissioner, Ajmer and Others AIR 1954 SC 220 and
Khodays’ case (supra) in relation to the effect of
throwing open the right to obtain an exclusive
privilege not flowering into a monopoly has not been
overridden.
26. The third complaint of the appellant is
this. The assumption of the monopolistic position
by the licensee would lead to arbitrary and unfair
practices which would leave the members of the
appellant without redress. The High Court, it is
pointed out has rejected the contention by
essentially reasoning that the licensee as long as
it confirms to the conditions and law is a free
agent and shut out the prospect of judicial review.
This is what the High Court finds:-
“32. There may be some safeguards within the
policy which protect the rights of the upstream
licenses such as manufacturers as well as the
downstream licenses i.e. the purchasers, such as,
retailers and holders of licences for bars, clubs
and restaurants. There is no doubt, however,
that a sole wholesaler can pick and choose the
27
parties that he wishes to deal with and, in
effect, refuse to deal with those he does not
wish to deal with including by devising various
strategies. In doing so, the sole wholesaler can
also effectively promote and encourage a
particular brand or brands in preference to
others. For instance, he may grant a particular
dealer or a dealer in particular brands different
payment facilities and not grant the same to
others or others who deal in certain other
brands. There is nothing that stops him from
doing so. The question is whether that would
render the appointment of a sole wholesaler
illegal.
33. The State, we will presume, even in the
trade and business of liquor must act fairly and
impartially and not arbitrarily. We will presume
that in granting liquor licences and permits the
State cannot adopt a pick and choose policy and
must throw the field open to all those who 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 instrumentalities of the State into the
hands of private enterprises, the restrictions
applicable to the State and its
instrumentalities cease to be applicable. This
28
is invariably the case in auctions and tenders.
Take for instance, a case where the State decides
to construct a building or a group of buildings.
It can do so itself to the exclusion of all
others. It is also entitled to engage private
parties to do so. The State cannot pick and
choose who to deal with. Absent any special
circumstances, the State would be bound to
consider the claim of every party that is
otherwise eligible to undertake the work.
However, once the State parts with its rights to
construct a building and hands it over to a
private enterprise, the matter ends there so far
as it concerns the work that it has contracted
to the private party. The contractor is not
bound to call for tenders in respect of every
item involved in the construction. The
contractor is not bound to consider the
application of every party for the supply of
material required for the construction of the
buildings. The contractor is entitled to obtain
the material from such parties as it desires and
on such terms and conditions that the contractor
desires. The suppliers of the material would
not be entitled to compel the contractor to
afford them an opportunity of supplying the
material. The rules of the game that apply to
a State or an instrumentality of the State do
not apply to such contractors.”
27. In this case, in fact, Mr. Gopal Subramanium,
learned senior counsel for the appellant drew our
attention to the fact that the figures would show that
the licensee has indeed being acting unfairly. It is
the case of the appellant that the sole licensee can
misuse his position in at least three ways. It is
contended that it is possible that the licensee
prefers certain brands to others inasmuch as it
concerns negotiation, longer credit period and other
29
terms and conditions. BIO suppliers would be at the
mercy of the licensee and they would have no option
but to reconcile with the terms and conditions which
would be laid down by the licensee. Secondly, it is
contended that failure to adhere with the terms and
conditions set out may result in a situation where a
particular brand would not be made available in the
State of Haryana. It is further contended that in
view of the monopolistic position enjoyed by the
licensee 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
30
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
matter relating to which authorities fall under
Article 12 has been the subject matter of a catena of
decisions of this Court. The principles have been
culled out with sufficient clarity and I do not see
any occasion or any reason to dwell more upon the same
as the appellant even does not have a case that the
licensee would be an instrumentality of the state
within the meaning of Article 12 of the Constitution.
It is a trite law that an effort at bringing a body
within Article 12 must originate specifically in the
pleadings.
31
29. Pleadings in this case on this point is
conspicuous by its absence.
30. The appellant would point out that in fact,
after the new regime has been put in place, 5 star
hotels were not being provided sufficient stocks of
BIO products being supplied by the members of the
appellant. Further it is pointed out that immediately
upon grant of the licence in 2017, there has been a
sudden decline in the sales of BIO prod8ucts supplied
by the members of the appellant. The reason for this
decline is sought to be placed at the door step of
the sole licensee. The appellant has pointed out that
there has been sudden decline of 25% in the supply of
BIO brands of United Spirits Ltd.. There is a
reference of 30% decline of BIO products of Pernod
Ricard as well. There has been significant rise of
the product of Pernod Ricard in the neighboring states
of Rajasthan and Delhi, it is pointed out.
31. I would notice that many of the contentions
of the appellant are in the form of apprehensions
about what may happen in future. In fact, there is
a case for the respondents that no complaint as such
32
was moved against the licensee during the period.
The licensee is duty bound under the terms and
conditions of licence to submit pricing of each
brand at the time of approval of the brand. The
department is bound to approve the maximum sales
price factoring in various elements. The licensee
must indicate among other things, the landing price,
expenses, profit margin. The price is also
determined based on the prevalent rates of the same
and equivalent rate at the neighboring states and
the Government levies.
32. Furthermore, the exclusive licensee is
under the condition required to keep sufficient
stock of all brands as are demanded by the procuring
licensees and all such brands as were registered
with the department in 2016-17. Thus at least two
restrictions exist 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
33
‘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 interest and 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 therefore, he
prefers it. I must remind myself that the complaint
of the individual company would be that brand which
it wishes to import and deal in is not made
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available. Quite clearly if there is any such
concrete incident which is pointed out, it would be
an infraction of the condition of the licence.
Certainly it would give rise to power with the
authorities to take suitable action as available in
law including in appropriate cases, cancellation of
the licence. If such provisions are not already
there I would observe that the State may devise
suitable provisions so that an individual who acts
as the licensee of the state would not do what the
State itself would be forbidden from doing under
the Constitution. I must also remind myself that
at the same time, the State has apparently gained
by way of enhanced collection of revenue by the new
regime put in place. The State’s power to
experiment in economic matters shall not suffer
invalidation at the hands of the Court. Such power
must be premised solely on State action falling foul
of the Constitution and the laws. State would
however do well to provide for a suitable mechanism
by which it can provide appropriate safeguards so
that there is fair dealing by the exclusive
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licensee. Subject to the above observations I would
dismiss the appeal with no order as to costs.
………………………………….J.
(K.M. Joseph)
New Delhi;
February 12, 2019
