Hon'ble Mr. Justice L. Nageswara Rao
Non -Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 1701 of 2019
[ Arising out of S.L.P. (Civil) No. 30428 of 2018 ]
GWALIOR DISTILLERIES PVT. LTD.
.... Appellant
Versus
THE STATE OF MADHYA PRADESH & ORS.
….Respondents
J U D G M E N T
L. NAGESWARA RAO, J.
Leave granted.
1. The Appellant is a manufacturer of spirits and holds a
licence in the form of D-1 granted in the year 2017. A
tender notice was issued for supply of country spirit in
sealed bottles, in the State of Madhya Pradesh for the year
2018-2019. The condition imposed for participating in the
tender was that the tenderer must have a licence for
manufacturing, bottling and wholesale supply of country
spirit in the State of Madhya Pradesh, issued in the form of
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CS-1 licence. Clause 2(i) of the tender notice dated
03.02.2018 was challenged by the Appellant on the ground
that the stipulation pertaining to possession of
CS-1 licence was contrary to Rule 3 of the Madhya Pradesh
Country Spirit Rules, 1995 (hereinafter referred to as ‘the
Rules’) since such licence could not be granted unless the
distiller has participated in the tender process. That
according to Rule 3, a successful tenderer is granted an
area for supply of country spirit which would enable him to
claim a CS-1 licence and CS-1-1B licence. The Writ Petition
filed by the Appellant was dismissed. However, the High
Court observed that the contention of the Appellant that
he could not be granted a licence under the Rules unless
an area was allotted to him was not borne out from Section
18 of the Excise Act, 1915 (hereinafter referred to as ‘the
Act’) or the Rules.
2. Thereafter, the Appellant submitted an application for
grant of CS-1 licence on 09.04.2018. By an order dated
26.07.2018, the application filed by the Appellant for grant
of CS-1 licence was rejected. Aggrieved by the said
rejection, the Appellant filed a Writ Petition which was
dismissed by the High Court. Hence, this appeal.
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3. The order by which the request for issuance of CS-1
licence was rejected by the Respondent No.2 was
challenged by the Appellant as being in violation of Articles
14 and 19 (1) (g) of the Constitution of India. The
Appellant alleged discrimination since eight other distillers
in the State of Madhya Pradesh who were similarly situated
to the Appellant, not possessing CS-1 and CS-1-1B licence
were allowed to participate in the tender process. The
Appellant relied upon the observations of the High Court in
its judgment dated 21.03.2018, in Writ Petition No.6525 of
2018 filed by the Appellant, that neither the Act nor the
Rules made thereunder required allotment of an area for
grant of CS-1 licence.
4. The High Court dismissed the Writ Petition by
observing that allotment of an area was an imperative precondition for grant of CS-1 licence. The High Court further
held that there was no fundamental right to trade in liquor
and opined that the Appellant was not entitled to any
relief. Clause 2 (i) of the tender notice dated 03.02.2018
issued by the Respondents provides that a distiller having
a proper licence for manufacturing, bottling and wholesale
supply of country spirit shall be eligible to participate in
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the tender process. The validity of the said condition was
challenged by the Appellant in Writ Petition No.6525 of
2018 in the High Court of Madhya Pradesh. The Appellant
contended in said Writ Petition that according to the
scheme of the Rules, a CS-1 licence will not be granted
unless the area is allotted. A Division Bench of the High
Court dismissed the Writ Petition finding no substance in
the challenge to Clause 2 (i) of the tender notice. While
dismissing the Writ Petition, the High Court observed that
the allotment of an area was not a pre-requisite for grant
of CS-1 licence. Subsequently, the Appellant submitted an
application to the Excise Commissioner, Gwalior on
09.04.2018, requesting issuance of a CS-1 licence. The
application for granting CS-1 licence was rejected on
26.07.2018 on the ground that the Appellant did not
participate in the tender process, published on 20.02.2018
for the year 2018-19. There is no doubt that the Appellant
has a D-1 licence. A perusal of Rule 3 would show that
manufacturing, bottling and wholesale supply of country
spirit can be only undertaken by persons who possess a
CS-1 licence. CS-1 licence is granted by the Excise
Commissioner after the approval of the State Government.
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A CS-1 licensee shall operate in such area or areas as may
be determined by the Excise Commissioner from time to
time. The apprehension of the Appellant that a CS-1
licence would not be granted unless an area was allotted
pursuant to a tender process was addressed by the High
Court in the earlier round of litigation. The High Court held
that the Act and the Rules do not provide for allotment of
an area as a condition for issuance of CS-1 licence. The
application filed by the Appellant for issuance of CS-1
licence was rejected by the Respondents on the ground
that the Appellant did not participate in the tender
process.
5. Section 18 of the Act which confers power on the
State Government to grant lease of right to manufacture,
etc. and Rule 3 of the Rules read as follows:
“18. Power to grant lease of right to
manufacture, etc. — (1) The State Government may
lease to any person, on such conditions and for such
period as it may think fit, the right—
(a) of manufacturing, or of supplying by wholesale or of
both; or
(b) of selling by wholesale or by retail; or
(c) of manufacturing or of supplying by wholesale, or of
both, and selling by retail; and liquor or intoxicating
within any specified area.”
*** *** *** ***
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“3. Grant of Licence. - (1) (a) A licence in Form C.S.1
for manufacture, bottling and wholesale supply of
country spirit may be granted by the Excise
Commissioner after approval of the State Government.
It shall commence on such date as may be specified
therein and be in force for such period as the State
Government may decide and shall be for such area or
areas as may be determined by the Excise
Commissioner from time to time.
(b) [Licence in Form C.S. 1 shall be granted by the
Excise Commissioner as aforesaid on payment of fee in
advance at the rate of one lakh rupees for a period of
one year’s licence or such proportional amount of fees
for the period of licence to be granted.]
The licensee shall be required to deposit additional
amount of Rs.5 lacs as security in cash or in any other
form as may be directed by the Excise Commissioner for
the due observance of conditions of licence, provisions
of the Act and the rules made thereunder and orders
issued by State Government or Excise Commissioner.
The Excise Commissioner may ask for additional sum as
security amount not exceeding Rs.10 lacs as and when
he deems it necessary in circumstances of repeated
breaches of conditions of increase in area of supply and
the licencee shall comply with such order within 15 days
of its communication to him.”
6. There is no condition either in Section 18 or Rule 3
that CS-1 licence will be granted only to a person who
participated in the tender process. The order passed by
the Respondent No.2 is arbitrary and contrary to Section
18 of the Act and Rule 3 of the Rules. By the impugned
judgment the High Court held that allotment of an area is a
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pre-condition for issuance of the CS-1 licence without
examining the judgment in Writ Petition No.6525 of 2018.
Reference made to Writ Petition No. 6525 of 2018 was
restricted to recording a finding that the said Writ Petition
was dismissed and the contentions raised by the Appellant
in the said Writ Petition were negatived. To our
understanding, Rule 3 (1) provides for allotment of an area
to a person who is given a CS-1 licence. Participation in
the process of tender as a condition for applying for a CS-1
licence is not found in the Rules. The High Court dismissed
the Writ Petition by holding that there is no fundamental
right to trade of liquor. However, the other contention
raised by the Appellant that there is hostile discrimination
against the Appellant as other similarly situated distillers
were permitted to participate in the tender, has not been
dealt with by the High Court. This Court in State of M.P.
& others v. Nandlal Jaiswal & others
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has held that no
one can claim as against the State the right to carry on
trade or business in liquor and the State cannot be
compelled to part with its exclusive right or privilege of
manufacturing and selling liquor. But when the State
decides to grant such right or privilege to others the State
1 (1986) 4 SCC 566
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cannot escape the rigour of Article 14. It cannot act
arbitrarily or at its sweet will. It must comply with the
equality clause while granting the exclusive right or
privilege of manufacturing or selling liquor. The Appellant’s
request for grant of a CS-1 license requires to be
considered strictly in accordance with law.
7. The Respondents are directed to consider the
application of the Appellant for issuance of CS-1 licence in
accordance with the Act and the Rules made thereunder.
It is needless to mention that the Respondents should not
insist on the condition that the Appellant should have
participated in a tender and should have been allotted an
area of operation.
8. For the aforementioned reasons, the judgment of the
High Court is set aside and the appeal is allowed.
.................................J.
[L.
NAGESWARA RAO]
……..........................J.
[M.R. SHAH]
New Delhi,
February 15, 2019.
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