Ranchi Wine Dealers Welfare Association and Others vs The State of Bihar and Others

These writ applications involving common questions of law and fact were heard together and are being disposed of by this judgment.

Whether clause 5 of the agreement as contained in Annexure-1 to the writ application, whereby and whereunder, minimum guaranteed quota required to be lifted by, the licensee has been fixed, and the amendment made in Rule 133 of the Bihar Excise Rules, an published in the Gazette on 28.3.1990 whereby and whereunder if was directed that retail vends may be kept open from 8 a.m. to 7 p.m. only, instead of Sunrise to 10 p.m. are valid or not, are the questions involved in these writ applications.

In C.W.J.C. No. 1303 of 1990(R), Petitioner No. 1 is an association of Ranchi Wine dealers and Petitioners Nos. 2 to 6 are licences under the Bihar and Orissa Excise Act, 1915 the Excise Act. They have challenged that part of the condition of licence by which they are to lift and sell very month minimum guaranteed quota of foreign liquor and also noting by which the Respondents have threatened teat if the Petitioners failed to comply the foresaid obligations, their licences would be terminated/cancelled.

They have sought the aforesaid relief on the ground that the condition fixing minimum Quantity of liquor to be sold each month was against the Directive Principles of State Policy m enshrined under Article 47 of the Constitution of India.

The Petitioners challenge the notification as contained in Annexure-4 reducing the period when the retail liquor shops may be kept open the ground of discrimination inasmuch as he same was not made applicable to bar and restaurant licenced to sell liquor. The Petitioner were also allowed to pray for this relief in view of the fact, that the Petitioner in C.W.J.C. No. 851 of 1990 (R), a retail liquor licensee, challenged the wireless message as contained in Annexure-4 to that writ petition Whereby all the concerned officers were directed to see that retail vends of foreign liquor remained open from 8 a.m. to 7 p.m. throughout the year. We may notice that Aunexure-4 to C.W.J.C. No. B51 of 1990 (R) is a follow up action of the notification issued by the Board of Revenue which is Annexure-4 to the writ application.

So far C.W.J.C. No. 1303 of 1990 (R) is concerned, admittedly the notification as contained in Annexure-1 was published in Which public in general were informed that liquor shops situate at the different places including the district of Ranchi for selling country made foreign liquor would be settled by public auction. In Annexure-1 the period for which the shops will be so settle And the minimum guaranteed quantity to be sold by each shop was also mentioned. In the auction, the Petitioners No. 2 to 6 succeeded, and five shops in the town of Ranchi were settled with them. The Petitioners agreed to soil the minimum quantity of liquor which was one of the terms and conditions of the bid. According to Rule 138 of the Excise Rules as it stood then, the Petitioners were entitled to keep their shops open from Sunrise to 10 P.M.

On 28th March, 1990, the Board of Revenue in exercise of its power u/s 90 of the Excise Act amended Rule 133 of the Excise Rules whereby the period during which the retail vend may be kept open was fixed from 8 A.M. to 7 P.M.

The Petitioners have challenged the condition by which minimum guaranteed quota was fixed for each of the Petitioners on the ground that the condition was in conflict with Article 47 of the Constitution which provides that the State shall make endeavour to bring about prohibition of consumption of intoxicating drinks. The condition, therefore, was bad in law. They challenged Annexure-4 i.e. amendment of Rule 138 of the Excise Rules on the ground that the same was not made applicable to bar and restaurant who are also licenced to soil loose country-made foreign liquor.

So far C.W.J.C. No. 851 of 1990 (R) was concerned, the Petitioner was a licensee for retail vend of Indian made foreign liquor and the terms and conditions applicable to the Petitioners of other case were also applicable to him. He has annexed in the writ petition a teleprinter message which has been marked as Arinexure-4 by which all the concerned authorities have been directed to implement Rule 138 as amended, The teleprompter message as contained in Annexure-4 in this petition is in fact a follow up action of Anoexure-4 to C.W.J.C. No. 1303 of 1990 (R) by which Rule 138 of the Rules was amended.

Separate counter-affidavits have been filed in both the writ petitions. According to the Respondents, as the Petitioners participated in the bid for settlement of retail liquor shops by accepting the terms and conditions that they will be required to sell minimum guaranteed quota, they cannot be allowed to challenge the game. The writ petitions are not maintainable. Most of the Petitioners have lifted minimum guaranteed quota. So far the bar and restaurant which have licenses to sell foreign liquor in peg, they are liable to pay fee and, therefore, no minimum guaranteed quota has been fixed for them. The reduction of time for sale of foreign liquor at the retail vends from Sunrise to 10 P.M. has been done to control the sale of illicit liquor which was detrimental to public health.

On the basis of the submissions made on behalf of the learned Counsel appearing on behalf of the parties, the points which are required to decided in this writ petition are:

(A) Whether the condition by which minimum guaranteed quota has been fixed for each of the Petitioners can be allowed to be challenged by them in filing the writ applications?

(B) Whether the condition fixing minimum guaranteed quota was bad in law in view of Article 47 of the Constitution?

(C) Whether the amendment of Rule 138 of the Excise Rules shall have prospective effect and shall not apply to existing licence?

(D) Whether Rule 138 of the Excise Rules as amended by notification as contained in Annexure-4 is hit by Article 14 of the Constitution because the same has not been made applicable to bar and restaurant licenced to sell foreign liquor?

Point No. (A):--It is admitted position that in the sale notice it was stated that person who participated in the auction were require to get themselves acquainted with the terms and conditions of the auction and that they would be bound by the same. One such condition as embodied in Clause 6 of Annexure-1 was that for each retail vend, there shall be annual minimum guaranteed quota of liquor and this quantify divided on monthly basis the licensee shall be required to lift per month. Clause 5(a) of the conditions provided that if any licensee failed to lift per month the minimum guaranteed quota, action u/s 42 of the Excise Act would be taken. It will thus appear that all the successful bidders including the Petitioners No. 2 to 6 and the members of Petitioner No. 1 knew about these terms and conditions and made themselves bound by it. They voluntarily participated in the auction and be came successful in the bid. They cannot be allowed to challenge the same by filing a writ-application.

In Har Shankar and Others Vs. The Dy. Excise and Taxation Commr. and Others, a licensee under Punjab Excise Act challenged the terms and conditions of the auction in which they had participated with full knowledge of the same. It was held by the Supreme Court "publication of condition of auction was invitation for giving offer. The bidder who participated in the auction made their offer and after the bid to whom the licenses were granted, was accepted by the State, the contract became concluded," It was further held that writ petition cannot be filed for impeaching contractual obligations. In State Bank of Haryana and Others Vs. Jage Ram and Others, which also arose under Punjab Excise Act the terms and conditions attaching to the auction, were challenged by the successful biders, following Har Shankar (supra), it was held that the writ petition was not maintainable.

(sic) Mullick, learned Counsel appearing on behalf of the Petitioners submitted that clause 5 of the aforementioned licences as contained in Annexure-1 to the writ application is ultra vires Article 14 of the Constitution of India as also Section 23 of the Indian Contract Act. Learned Counsel in this connection has relied on Shri Sachidanand Pandey and Another Vs. The State of West Bengal and Others, Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay, and Central Inland Water Transport Corporation Limited and Another Vs. Brojo Nath Ganguly and Another, .

Learned Counsel further submitted that the said clause 5 of the agreement is unreasonable and is thus liable to be struck down. In this connection, reliance has Olga Tellis and Others Vs. Bombay Municipal Corporation and Others, .

It was farther contended by learned Counsel that the old doctrine of privilege of the State in respect of liquor has been given a go bye by the Supreme Court in Synthetics and Chemicals Ltd. and Others Vs. State of U.P. and Others, and thin according to learned Counsel (sic) Shankar''s case (supra) and other cases following the same are no longer good law.

The question as to whether dealing in liquor is a trade business or commerce in terms of the provisions of the Constitution or not is no longer res Integra.

In Cooverjee B. Bharucha Vs. The Excise Commissioner and the Chief Commissioner, Ajmer and Others, the Supreme Court assumed the applicability of Article 19(1)(g) of the Constitution to the liquor trade but it was held that the Government has a very wide power to regulate or prohibit the said trade. It was held that elimination and exclusion from business is inherent in the nature of liquor business and it would hardly be proper to apply to such business principles applicable to trade which all could carry.

It is true that in Krishna Kumar Narula etc. Vs. The State of Jammu and Kashmir and Others, the Supreme Court held that dealing in liquor is business and a citizen has a right to deal in business of liquor but the State can make a law imposing reasonable restrictions on the said right in public interest. However the Supreme Court in its subsequent decisions expressed absolutely different views some of which have been referred to hereinbefore. In Sat Pal and Co. and Others Vs. Lt. Governor of Delhi and Others, . The Supreme Court held:

Since Kalyani Stores Vs. The State of Orissa and Others, that since judicial opinion on the vexed question of right to carry on trade or business in intoxicating drink has undergone a sea-change culminating into Harshanker''s case which again is a decision of the five Judges Constitution Bench of this Court. Unfortunately the judgment Kulyani Stores case in not referred to In Harslunker''s case. However the undisputed position that now emerges is that there no fundamental right to do trade or business in intoxicants.

Recently the Supreme Court in State of M.P. and Others Vs. Nandlal Jaiswal and Others, although pointed out that there is no fundamental right in a citizen to carry on trade or business in liquor but held that if and when the State permits the trade by grant of such right or privilege to others, the State cannot escape the rigour of Article 14. However the Supreme Court in that case referred to R.K. Garg''s case AIR 1981 SC 2138 and observed:

We must not forgot that in complex economics matters every decision is necessarily empiric and is based on experimentation or what one may gall trial and error method, and therefore, its validity cannot be tested on any rigid "apriori" considerations or on the application of any strait-jacket formula.

The Supreme Court proceeded to hold that is Government can make pragmatic adjusted is which may be culled for by particular (sic). It held that more errors of Government are not subject to judicial review and when only its palpable arbitrary exercise of can be declared void. Proceeding further the Supreme Court held that the Court does not strike down the policy decision taken by the Government merely because it felt that another policy decision would have been fairer or wiser or more scientific or logical and the Court can (sic) only if the policy decision is patently arbitrary, discriminatory or malafide.

It is therefore clear that the right to (sic) in intoxicants basically belongs to the state Government and grant of a licence to legal in liquor merely a privilege which is derived by the liceusee to deal therein to the (sic) permitted by the licence. Such activity on the part of a liquor dealer is subject to regulatory measure which may be adopted by the State from time to time. The activities of persons dealing in liquor are in fact "extra (sic).

The contentions raised in the writ applications, therefore, have to be judged in the aforementioned context. The right to cause on business in liquor is peruse unlawful accept when carried on under licence or permit. A licence granted for carrying on business in liquor by itself however does not take away the pernicious character of the activities id thus only those can carry on business who live capacity to comply with the strict, severe and stringent conditions imposed by the statute and/or the conditions of the licence. The clause in the licence whereby the licensees are required to take minimum guaranteed quota which is to be progressively increased at 5% every year over the entire period of five years cannot be said to be irrational or arbitrary. According to the Respondents, the said policy decision had to be taken recourse to in order to prevent distribution and consumption of illicit liquor. The said policy decision had to be taken recourse to by the State for the purpose of enhancement its revenue.

Recently the Supreme Court in Federation of Hotel and Restaurant Association of India, etc., Vs. Union of India (UOI) and Others, observed:

A taxing statute is not peruse a restriction on the freedom under Article 19(1)(g). The policy of a tax, in its (sic) might of course, bring in some hardship some individual cases. But that is inevitable, so long as law represents a process of abstraction from the generality of cases and reflects the highest common factor.

In that case it was further held that a taxing statute although is not outside the purview of Article 14 but the same having regard to wide variety of diverse economic criteria criteria that go into formulation of a fiscal policy in which it has a wide latitude in the matter of selection of persons, subject matter and funds etc. for taxation. The tests of vice of discriminate in a tax law are accordingly less rigorous. The policy decision in respect of minimum guaranteed quota whereby the State intends to increase its revenue, in our opinion, would also come within the purview of the aforementioned dictum of the Supreme Court, In such a situation, in our opinion, the policy decision of the State can neither be said to be arbitrary or discriminatory so as to attract the provisions of Article 14 of the Constitution of India.

For the reasons aforementioned in our opinion, the decision of the Supreme Court in Olga Tellis and Others Vs. Bombay Municipal Corporation and Others, cannot be said to have any application whatsoever.

Learned Counsel further relied on decision the Supreme Court in Excise Commissioner, Uttar Pradesh, Allahabad and Others Vs. Ram Kumar and Others, and Ganga Prasad Vs. Zila Abkari Adhikari, Banda and Another, . In the cases aforementioned the question which arose for consideration was as to whether the condition to pay excise duty on unlifted quantity of liquor out of the minimum guaranteed quota by way of compensation is valid or not.

The Supreme Court in Ram Kumar''s case (Supra) which was followed, by the Allahabad High Court in Ganga Prasad''s case held that payment of such compensation which was really in the nature of excise duty is not warranted under the provisions of the Excise Act. It was further held chat duty can be imposed only on the basis of legislative enactment and not by reason of any rule or contract. The Supreme Court further held that even the provisions of the Excise Act do not authorise levy of the amount sought to be recovered. In Pannalal v. State of Rajasthan AIR 1975 SC 2008 the Supreme Court followed its decision in Nashirwar and Others Vs. State of Madhya Pradesh and Others, as well as Harshnkar (supra) and held as follows:

The Appellants objected to the preliminary contention of the Respondents on the ground that in their counter-affidavit in the High Court, Respondents had not pleaded that there was any contract between the parties or that the writ jurisdiction of the High Court was inappropriate for the enforcement of contractual rights. This submission overlooks the material averments contained in the Respondent''s counter-affidavit. This is what the Respondents say:

The allegations with respect to the policy are not relevant inasmuch as the Petitioners liabilty arises from the terms and condition of the Excise Contract granted in his favour.

Nature of the trade is such that the State confers the right to vend liquor by auction or by private trade. Rental is the consideration for the privilege granted by the Government for manufacturing or vending liquor. Rental is neither a tax nor art excise duty. Rental is the consideration for the gram of privilege by the Government.

Proceeding further it held:

If the stipulation in the contract to pay the lump-sum mentioned in the licence by way of granted sum is valid, we do not see reason why the conditions to lift minimum guaranteed quota of liquor will not be valid.

(Emphasis Supplied)

XXXX

In State of U.P. v. Prabhakar Reddy 1978 (2) S.C.C. 136 it was held that issue price is no more and no less than the price which the contractor agrees to pay for the grant of privilege to sell liquor, drawn or undrawn.

So far as the contention of the learned Counsel to the effect that the impugned clause is hit by Section 23 of the Indian. Contract Act is concerned, the same in our opinion, has DO substance. If a clause survives the test, of Article 14 of the Constitution of India, it cannot be held that It is but by Section 23 of the Indian Contract Act. In Central Inland (Supra), the Supreme Court was concerned with a contract of service. In that case it was hold that the right of an employer to terminate the service of an employee by merely serving three month''s notice is hit by Section 23 of the Indian Contract Act, Such, is not the case here. In this view of the matter, the decision of the Central Inland (supra), in our opinion, has no application in the fact sand circumstances of this case.

In Synthetics & Chemicals Ltd (supra), (he Supreme Court was considering the matter us to whether the impost on spirit which is not a potable spirit falls within the legislative competence of the State. In the facts and circumstances of the case it was held that the State Legislature has no jurisdiction to levy fee in respect of the spirit which is not a potable one. The Supreme Court, however, in that case it-self referred to Harshankar''s case (supra) and other, cases and held that those cases apply in relation to a contract. In this case also, we are concerned with the right of the State to deal exclusively in liquor. Such a right of the Stale, as indicated hereinbefore, has been upheld by the Supreme Court in a number of decisions. In view of the fact that in Synthetics & Chemicals Ltd. (supra), Harshankar''s case and other case* have not been over ruled but were merely distinguished which distinction has no application in the facts and circumstances of this case, it must be held that Synthetics & Chemicals Ltd. (supra) cannot be said to have any application in the case of this nature.

Following the law laid down by the Supreme Court, it must thus be held that the Petitioners cannot be allowed to challenge the contractual obligations by filing the writ petitions.

Point No. (B):-- It was streneously urged by Mr. Mullick, learned Counsel appearing on behalf of the Petitioners in C.W.J.C No. 1303 of 1990 (R), which was adopted by Mr. Debi Prasad learned Counsel appearing on behalf of the Petitioner in the other case, that when Article 47 contains the Directive Principles of the State Policy that the State shall make ail endeavour to bring about prohibition of the consumption of intoxicating drinks, the State cannot be allowed to take any step which shall increase its sell. It was submitted that the condition fixing a minimum guaranteed quota for each retail vendor and by progressively increasing the same each year was in conflict with Article 47. According to learned counsel, the State cannot be allowed to do this and such condition namely Clause 6 of the terms and conditions attached to the auction must be struck down.

Article 37 makes it clear that the Directive Principles of the State Policy, Article 47 is one such, shall not be enforceable by any Court, but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws. Article 47, therefore, cannot be enforced by filing writ application. In Deep Chand Vs. The State of Uttar Pradesh and Others, it was observed with reference to the Directive Principles that "The directions, even if disobeyed by the State cannot affect the legislative power of the State, as they are only directory in scope and operation."

Mr. Mullick has drawn our attention to a decision in Balwant Raj v. The Union of India AIR 1968 Allahabad 14 In that case the Allahabad High Court was concerned with a service matter interpreted the words "fails to resume duties". In that case it was merely held that the words aforementioned can be interpreted taking aid of the Directive principles of the Constitution contained in Article 41 thereof in that case it held that "failure to resume duties after expiry of leave" applies only in case of those persons who had so done voluntarily and has no application in relation to those persons who being sick could not resume duties.

ta his Constitutional Law of India, at page 1607 H.M. Seervai observed that She word fundamental in the concept of Parts III and IV of the Constitution has to be construed in two different senses. It was observed lie word "fundamental" in Article 37 also means basic or essential but it is used in the normative sense of setting before the State foals which it should try to reach. Fundamental right are backed by legal sanctions, Directive principles are left to the sense of duty of those charged with governance of the country.

It was also observed at page 1909, "Prohibition was tried in several States in India and failed to prevent people from drinking smuggled or illegally distilled liquor further prohibition brought corruption and graft in its wake." The learned author, therefore, opined that failure of prohibition in various Suites in India would suggest that controlled use of alcoholic liquor may be the lesser of two evils, and would free thousands of millions of rupees to be devoted to urgent and pressing social and economic needs.

In this State admittedly total prohibition has not been Imposed in terms of Article 47 of the Constitution. As total prohibition has not been introduced, evidently, the State is free to regulate the trade in such a manner as it thinks fit and proper.

In view of the contentious raised on behalf of the State that the provision for minimum guaranteed quota was introduced in order to prevent use of illicit liquor and for the purpose of enhancement of its revenue of the State which, in our opinion, cannot be said to be violative of Article 47 of the Constitution. It must, therefore, be held that Clause 3 cannot be held to be bad even if the same may not be in strict consonance with Article 47 of the COnstitution.

Point No. (C):-Mr. Debi Prasad submitted that when the licence was g-anted to Petitioner in C.W.J.C. No. 851 of 1990 (R), a retail vendor was entitled to keep his shop open from sunrise to 10 P.M. as provided in Rule 138 of the Excise rules. The amendment of this rule by curtailing the period and fixing from 8 A.M. to 7 P.M. would not apply to licences granted before the amendment of Rule 138 of the Excise Rules. Reliance was placed in G.C. Jaiswal arid Ors. v. Excise Commissioner U.P. and Anr. 1976 TAX L.R. 1953.

There is no dispute that Section 90 of the Excise Act gives power to the Board of Revenue to make Rules. Section 90(9)(vi), inter-alla, provides for making rules prescribing days and hours during which licenced premises may or may not be kept open. There is also no dispute that Section 91 provides that the Board may exercise power conferred by the Excise Act (sic) time to time as the occasion requires. In exercise of this power, Rule 138 was amended by the Board of Revenue by issuing notification, copy of which is Annexure-4 to C.W.J.C. No. 1303 of 1990 (R). One of the terms attached to the auction as evidenced by Clause 4.9 of Annexure-1 was that the licensees shall be bound to follow all the rules framed by the State and the Board of Revenue and also such rules as may be framed from time to time. In view of Section 90 read with Section 91 of the Excise Act and also in view of clause 4.9 of the terms and conditions attached to the auction, the amendment to Rule 138 will apply to subsisting licences which might have been issued before issuance of notification as contained in Ahnextfre-4. So far the ease of G.C. Jaiswal (Supra) was concerned, it appeared that in view of the language of Section 41(e)(v) of the U.P. Excise Act, a Bench of Allahabad High Court held that the restrictions and conditions prescribed by the Government under that clause will apply today to the licences to be granted in future. The judgment of G.C. Jaiswal (supra) has no application to the facts of these cases. In this case, it is admitted that interms of the interim order passed by the Patna High Court, State High Court State has been directed to grant licences to the licensees aforementioned. Further licences which have been granted to the Petitioners earlier were remaining in force with effect from 1.4.1990. Amended Rule 138 of the Bihar Excise Rules has also come into force with effect from 1.4.1990. In this view of the matter, it cannot be said that the amended rule will have no application in the facts and circumstances of this case, It must, therefore, be held that Rule 138 as amended shall apply to all subsisting licences.

Point No. (D): A retail vendor is permitted to sell liquor in sealed bottles. Bars and restaurants are permitted to sell it in the premises in pegs. Admittedly, amended Rule 138 has been made applicable only to retail vend of foreign liquor for consumption off the premises. This applies to (he Petitioners and it docs not apply to the licenced bars and restaurants whereas the Petitioners can keep their shops open only from 8 a.m. to 7 p.m. the bars and restaurants licensed to sell liquor in pegs may keep it open from Sunrise to 10.00 p.m. a� provided in Rule 136.

in the counter-affidavit, reason assigned for reducing the period under Rule 138 is that it has been to check sale of illicit liquor which is detrimental to public health and affects excise revenue.

So far retail vends is concerned, liquor is sold in sealed bottles whereas in licensed hotel/restaurant/bar it is sold in peg. At both those places, there is scope for selling illicit liquor. On the basis stated in the counter affidavit retail vend cannot be separately classified from premises licenced as hotel/restaurant/bar for the sale of liquor. The classification being arbitrary Rule 138 as amended is hit by Article 14 of the Constitution. In this connection, we may refer to P.N. Kaushal and Others Vs. Union of India (UOI) and Others, where Punjab liquor Licence Rule prohibiting sale of liquor on Tuesday and Friday was made applicable to hotel/restaurant and other institutions, whereas the same was not made applicable to the State Government organ. The Supreme Court observed that prima facie it was discriminatory, but in view of the undertaking given by the State Government that ban would be observed in State Government organ also the point was not pressed. In view of the decision of the Supreme Court in Kaushal''s case, it is held that Rule 138 as amended is ultra vires Article 14 of the Constitution.

It was urged that action taken in pursuance of Clause 5(a) of Annexure-1 by issuing notices to some of the Petitioners for taking appropriate action u/s 42 of the Excise Act was void.

Clause 5(a) of Annexure-1 provides that appropriate authority may take appropriate action u/s 42 of the Excise Act against licensees who failed to lift the minimum guaranteed quota. This is one of the terms and conditions attached to the auction. Admittedly as some of the Petitioners, failed to lift quota, notices were issued to show cause why action be not taken by not extending the period of licence. Specimen copy of such notice is Annexure 5 to C.W.J.C. No. 1303 of 1090 (R). Section 42 empowers the authority who granted licence, permit or pass under the Excise Act to cancel or suspend it on the grounds mentioned in that Section. It was urged on behalf of the Petitioner that failure to lift the monthly minimum guaranteed quota cannot be a ground fox cancellation or suspension of licences. The Act empowers the licensing authority for cancelling or suspending licence in the event of breach of the terms and conditions thereof. Both Clauses 5(a) and 6 are the terms and conditions attached to the bid which the Petitioners accepted. Those are conditions of licence. Power to cancel or suspend a licence for breach of any of the conditions having been provided under the Act itself, the proposed action of the licensing authority cannot be held to be bad.

In this view of the matter, it is for the authorities concerned to consider each case on its own merits and in accordance with law.

In the result, the Petitioners succeed only on Point No. (D). The notification amending Rule 138 of the Excise Rule, copy of which is Annexure-4 to C.W.J.C. No. 1303 of 1990 (R) is quashed. There shall be no order as to costs.