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Judgment
P. Shanmugam, J.—Petitioner Association seeks for a declaration to declare the provisos of the amended Rule 144 and Rule 156(A) of the Pondicherry Excise Rules, 1970 as amended by the Pondicherry Excise (Second Amendment) Rules, 2000 as illegal, null and void.
Petitioner is an Association established for the welfare of its members and the employees engaged in the business of selling arrack and toddy. The total toddy and arrack shops in the Union Territory of Pondicherry is 82 and 86 respectively and they were leased out in public auction in the past as per the Pondicherry Excise Rules, 1970. While so, the Government has introduced an amendment to these rules by introducing renewal of lease for two years by inserting a proviso to Rule 144 of the Rules under the Second Amendment, 2000. According to Rule 2 of the Amendment Rules 2000, the Excise Commissioner is given the power to renew the lease period of one year, but not exceeding three years from the date of commencement of the first year of the lease, subject to the conditions that the lessee agrees to pay an enhanced kist for the shop at 10% of the rental amount paid for the preceding year. The amendment further provides that where the lease is terminated either at the end of the first year or as the case may be, the second year on account of non-compliance by the lessee, the shop shall be auctioned afresh fixing the rental amount of the previous year as the minimum upset price. The newly inserted Rule 156(A) under Rule 3 of the Second Amendment Rules, 2000 thus contemplates the procedure for renewal of lease. The said amendment was brought about without informing its reasons and objects. Some of the members of the Petitioner Association, who were the successful bidders of the various arrack and toddy shops for the lease year 2001-2002, did not know about the impact of the amended rules 2000 at the time of previous year of lease. Now, after realizing that the public interest and in order to protect the loss of revenue to the State, when particularly the profitable shops are renewed for 10% of increase when they can actually fetch much more revenue to the Government and to safeguard the rights of the citizens to participate in the public auction to do business guaranteed under Article 19(1)(g) of the Constitution of India, the above writ petition has been filed.
On behalf of the State of Pondicherry, a counter affidavit has been filed. They have questioned the locus standi of the Petitioner since according to them, they cannot be an aggrieved person. It is argued by the Additional Government Pleader that even according to their own averment, members of the Petitioner Association participated in the auction for the lease year 2001-2002 as per the amended rules and therefore, they cannot be permitted to question the amendment after having participated in the auction last year. It is pleaded that it is the policy decision of the Government to regulate the trade in liquor. Section 16 of the Pondicherry Act, 1970 enables the Government to exploit its rights in liquor trade and earn revenue. Section 70 of the Act empowers the Government to frame rules. In exercise of the power vested, the Government has framed the rules called the Pondicherry Excise Rules, 1970. The Government has been making amendments from time to time. Rules 144 and 156(A) of the Pondicherry Excise Rules, 1970 were gazetted dated 12.6.2000 and the amendment relating to Rules 144 and 156(A) was called the Pondicherry Excise (Second Amendment) Rules, 2000. Before'' the notification of these rules, the Government had framed the draft rules highlighting its proposed policies to the notice of the public by calling for objections, if any, from them. This process was done by the Government on 30.5.2000 and gazetted on 30.5.2000. No one including the Petitioners have raised any objection to the proposed amendment to the Rules 144 and 156(A). It is only after considering the objections, the amended rules were notified. The auction was notified in the gazette dated 13.6.2000, well in advance before the process of commencing the auction. The period was also notified in the said auction notification, which is subject to renewal for two subsequent years as per the amended rules. It is only based on this notification the intending bidders participated in the auction. There were 883 bidders who participated in the auction for the toddy shops numbering 86 for the Pondicherry Region. For the Karaikal Region, there were 64 bidders who participated for 29 arrack shops and there were 66 bidders who participated for the 31 toddy shops. The successful bids were confirmed for conducting retail-vending business in arrack and toddy for the period commencing from 1.7.2000 to 30.6.2001 with renewable clauses for two years. The licensees were given option to seek for renewal after expiry of the lease period namely 30.6.2001. Inasmuch as the amended rules came into force from 12.6.2000 and that leases were granted, the Government is bound by the statutory contract. The members of the Petitioner Association had participated in the auction in the year 2000 and it is not open to them to question the legality and correctness of the Second Amendment Rules, 2000 made in respect of Rules 144 and 156(A) of the Pondicherry Excise Rules. They deny the contention that there were no reasons or objects for the amendment and that there was loss of revenue and that public interest suffers in the light of the amendment.
The writ Petitioners question the amendments to the Pondicherry Excise Rules, 1970 whereby a proviso to Rule 144 was added and Rule 156(A) was inserted. Section 70 of the Pondicherry Excise Act enables the Government to make rules. The Pondicherry Excise Rules, 1970 were framed regulating the periods and localities in which and the persons or class of persons to whom licences for wholesale or retail sale of any intoxicant may be granted and prescribed the procedure to be followed etc. Rule 143 of the said Rules deals with the lease of rights of retail vend of liquor. The lease of right may be disposed of by tender or by auction or by tender-cum-auction or in any other manner as the Government may, by order, specify. Rule 144 provides for notification by the Excise Commissioner. A proviso is added by way of an amendment to Rule 144, which is as follows:
Amendment of Rule 144 - In the Pondicherry Excise Rules, 1970 (hereinafter referred to as the said rules), after Clause (v) of Rule 144, the following proviso shall be added, namely:
Provided that unless otherwise decided by the Excise Commissioner the period of lease shall be one year at a time renewable for the like period up to a period not exceeding three years from the date of commencement of the first year of the lease period, subject to the conditions that the lessee agrees to pay for the second and, as the case may be, for the third year an enhanced kist for the shop at ten per cent. Of the rental amount paid for the year immediately preceding the year of renewal of the average of the annual percentage of overall increase/decrease in revenue from kist the arrack/toddy shops during the ten years preceding the year of renewal, whichever is higher:
Provided further that where the lease is terminated either at the end of the first year or as the case may be, the second year on account of non-compliance by the lessee of the provisions of these rules, the shop shall be auctioned afresh fixing the rental amount of the previous year as the minimum upset price and the lessee to whom the shop is disposed off in such auction shall hold the lease for the second year renewable for one more year under the foregoing proviso or, as the case may be, for the third year.
Provided also that where the Government so directs in the public interest, the Excise Commissioner, without renewing the lease, may conduct auction at the end of first lease year or as the case may be, the second lease year
By the same notification, a new rule namely Rule 156(A) was inserted. By this amendment, the lease of right of retail vend was brought about by a combination of auction and renewal.
The sum and substance of the case of the Petitioner-Association is that the privilege should be granted only by public auction and not by a renewal. Insofar as the power of the Government to prescribe these rules, it has not been questioned. The only objection of the Petitioners is that the renewal deprives the right of the members of the Petitioner-Association to participate and that it would be a revenue loss to the State and public interest. While opposing this, it is submitted that the amendment was brought about only after a notification of the draft rules was made as early as on 30.5.2000 and that no one including the Petitioner has raised any such objection. On the contrary, they participated in the public auction, which contained a clause for renewal in the year 2000. It is also pointed out that in view of the formation of the syndicate, there is a gradual reduction of revenue and loss to the State. From the records furnished by the A.G.P. and the Note put up by the Excise Department, it is noted that there have been ups and downs in the percentage of increase / decrease of revenue ranging between -26.66% and +44.31% in respect of arrack shops and between -14.84% and +13.98% in respect of toddy shops. There is more than one reason attributable to this. Firstly, during every auction, there used to be heavy competition among the bidders owing to various reasons like business rivalry, attempt to inflict heavy loss on the rival bidders, attempts to deprive a bidder of the shop held by him during the previous year lease etc. Secondly and admittedly, non-payment of monthly kist in time was not dealt with severally, which enabled bidders to indulge in heavy competition unmindful of consequential arrears. This incidence of decrease in revenue for certain years was mainly due to fixation of the previous year''s upset price as the upset price for that year also, instead of previous year''s knocking down price. They have also given the particulars of the kist amount received from the auction of toddy and arrack shops during the last three years, which is as follows:
REGION 1996-97 1997-98 1998-99
(Rs. IN CRORES)
Pondicherry 18.40 13.33 12.50
Karaikal 3.87 3.37 4.00
TOTAL 22.27 16.70 16.50
Thus, the stand of the Government that there is a downward trend in the collection of revenue is revealed from the facts furnished. Even the Petitioner, in their representations dated 3.1.2001, 15.2.2001 and 25.5.2001, have conceded that there is a syndicate formed to cause loss to the revenue. The objection of the Government was not only to increase the revenue, but also to avoid syndicate, and to provide a better infrastructural facility to the licensees so that they can develop their business with the guaranteed renewal for two years. Therefore, it cannot be stated that the Government has no object and reasons for bringing the amendment and that the public was not told about the proposals of the amendment.
The further contention of the Petitioners that there will be a revenue loss to the State also is factually found to be incorrect and in any event, the Petitioner cannot be permitted to be heard on the said aspect. In a recent judgment, the Supreme Court, in M/s. Ugar Sugar Works Ltd. Vs. Delhi Administration and Others, , held the policy of the State, if uniformly applied, as not reasonable irrational, arbitrary or unfair. Their lordships held that it is well settled that the Courts in exercise of their power of judicial review, do not ordinarily interfere with the policy decision of the Executive unless the policy can be faulted on grounds of mala fide, unreasonableness, arbitrariness or unfairness etc. Their Lordships also upheld the view that a citizen has no fundamental right to trade in intoxicating liquor and any argument based on Article 19(1)(g) of the Constitution is out of place. The Petitioners, having not raised their objection earlier when the draft notification was issued and having participated in the auction last year, may not be permitted to attack the policy decision on the basis of facts set out in their affidavit. In State of Punjab and Others Vs. Ram Lubhaya Bagga Etc. Etc., , it was held that it would be dangerous if Court is asked to trust the utility or the beneficial effect of the policy or its appraisal based on facts set out on affidavit. The Court would dissuade itself from entering into this realm, which belongs to the Executive.
It is for the Government of Pondicherry to decide about the method of granting lease of right for retail vending of liquor and on the basis of certain facts, they have chosen to adopt a public auction-cum-renewal method. I do not find any unreasonableness or arbitrariness in the said decision or the rules framed. The alleged loss of revenue to the Government on the basis of the amended rules is not substantiated. On the contrary, the amended rules are intended to protect the revenue of the State.
For all these reasons, I do not find any ground whatsoever to declare the amended rules as unlawful. The writ petition therefore fails and it is accordingly dismissed. No costs. Consequently, W.M.P. Nos. 16342 and 16343 of 2001 are closed.