AI Structured Summary
Not yet generated for this judgment
Judgment
B. Subhashan Reddy, C.J.—The constitutionality of Governmental Orders contained in G.O. Ms. Nos.128, 129 and 130 Prohibition and
Excise (VI) Department, dated 8.7.2002 has been assailed in this batch of writ petitions. Of course, there is a Writ Appeal filed against the interim
order passed in W.P.M.P. No.34563 of 2002 in W.P. No.25181 of 2002. But the said Writ Appeal gets disposed of in view of the disposal of
these writ petitions themselves.
We refer all the writ petitioners as the petitioners; the State Government as the Government; the Commissioner of Excise as the Commissioner
and the District Collector as the Collector.
The petitioners are the licensees of retail outlets set up pursuant to the licences issued during the last excise year 2001 - 2002. The excise year
commenced on 1.8.2001 and expires on 31.7.2002. While the wholesale distribution is controlled by the State through the Tamil Nadu State
Marketing Corporation, which supplies the Indian Made Foreign Liquor to the retailers like the petitioners, the retailers, including the petitioners,
sell the same at the licensed premises. Privilege to vend the liquor in retail was being granted pursuant to Rules framed by virtue of rule-making
power conferred by Sections 17-C, 17-D, 17-E, 18-B, 18-C, 20, 21 and 54 of Tamil Nadu Prohibition Act, 1937, hereinafter referred to as the
Prohibition Act.
Tamil Nadu Liquor (License and Permit) Rules, 1981, were framed in exercise of the above statutory provisions. The said Rules contemplate
issuance of various kinds of licences apart from retail, with which we are not concerned. F.L.1 related to licence for the grant of privilege of retail
sale of bottled Indian-made foreign spirits or sale of foreign liquor. Persons making application for grant of retail licence had to remit the application
fee of Rs.100/-, privilege fee of Rs.20,000/- and a licence fee of Rs.5,000/- and had to comply with some other conditions. The duration of the
licence is one year under Rule 18. The conditions to be specified before such a privilege is granted and licence issued are enumerated in Rule 19
thereof. If the licence was granted, then the licensee was entitled to apply for renewal under Rule 21 and the Authority thereunder was empowered
to consider the same. In addition to the fees stated above, a security deposit of Rs.5,000/- was to be made for Form F.L.1 licence.
The Tamil Nadu Liquor (Retail Vending) Rules, 1989, were framed repealing the above Rules of 1981 in so far as they relate to the retail
vending of the Indian Made Foreign Spirits and Beer and in fact, it is explicit from the very title of the Rules of 1989. It became effective from 1st
of June 1989. Rule 3 provides for the grant of privilege by mode of auction. Rule 4 empowers the Government to fix the maximum number of
shops to be established in the State, the Commissioner to allocate the shops to respective districts according to the needs and the Collector to
identify the areas in which shops are to be opened in the district. Rule 5 deals with auction; Rule 6 with Earnest Money Deposit; Rule 7 with
conduct of auction; Rule 8 with receipt of tender; Rule 9 with bidding; Rule 10 with remittance of privilege amount by auction purchaser; Rule 11
with confirmation of sale privilege; Rule 12 with mode of dealing with Earnest Money; Rule 13 with grant of licence and the deposit of the amount
of Rs.100/- towards the application, Rs.2,500/- towards the licence fee for one year and Rs.25,000/- towards security deposit. Rule 13-A
enables grant of licence to nominees of public bodies to the extent provided in Rule 3 and with the same conditions as are applicable to new
licensees. Rule 14 deals with renewal of licence. Other Rules need no mention. Under sub-Rule 2-A of Rule 13, the period of licence shall be for
the period ending 31st May of the succeeding year unless otherwise specified in the licence issued in a particular case provided that the said period
shall not apply to the licences renewed and the second and third years under Rule 14. Under Rule 14, if a licensee intends to renew the licence for
the second year, he shall apply at least sixty days before the expiry of the licence for renewal in Form VIII after remitting an application fee of
Rs.100/-, the licence fee of Rs.2,500/- and the privilege amount determined at fifteen percent more than the privilege amount at which the sale of
the privilege was confirmed in the previous year and should the licensee intend to renew the licence for the third year also, he shall apply at least
sixty days before the date of expiry of the licence for renewal in Form VIII after remitting an application fee of Rs.100/-, the licence fee of
Rs.2,500/- and the privilege amount determined at ten percent more than the privilege amount at which the sale of the privilege was confirmed for
the first renewal. Sub-Rule 3 of Rule 14 empowers the Licensing Authority not to renew the licence but only after affording opportunity to the
licensee and recording reasons for such refusal.
But this auction system was changed to drawal of lots by bringing forth amendment by the Government firstly framing a policy under G.O. Ms.
No.113, Prohibition and Excise Department, dated 22.6.2001 followed by enactment of the Rules vide G.O. Ms.No.115, Prohibition and Excise
Department, dated 22.6.2001 amending the mode of grant of privilege and method of filing application for grant of privilege. Auction method was
changed by providing for applications and if there was more than one application for the retail outlet concerned, the privilege was to be granted on
drawal of lots. Application for the grant of privilege was to be accompanied by a demand draft and an amount equivalent to one third of the
privilege amount fixed for the shop and Rs.200/- towards application. On selection for grant of privilege, the applicant shall remit two thirds of the
privilege amount and licence fee of Rs.5,000/- on the date of receipt of the intimation. The period of licence shall be for the period ending with the
15th of July of the succeeding year, unless otherwise specified in the licence issued in a particular case. Rule 13-B has been introduced obligating
every licensee to make a deposit of Rs.1 Lakh as security deposit for due observance of the terms and conditions of the licence. It is only one time
deposit and not necessary for every renewal. In so far as the enhanced privilege amounts for the first and second renewals are concerned, the
specific amount mentioned on percentage basis has been amended and substituted with the words, ''the privilege amount fixed by the
Commissioner on the basis of the guidelines approved by the Government''. So far as the quantum of application fee and licence fee are
concerned, they remain the same for both the first and second renewals. Sub-Rule 2 to Rule 30 has been inserted making it obligatory on the
licensee to lift a minimum off-take of liquor fixed for the shop by the Licensing Authority based on the guidelines issued by the Government. There
is a penal clause in the said inserted sub-Rule to the effect that if the licensee fails to lift the minimum off-take, consecutively for two months, he is
liable to pay a penalty which shall be in proportion to the loss of revenue to the Government due to such non-lifting and should the licensee fail to
lift such minimum off-take for another two months consecutively, the licence shall be liable to be cancelled and the shop shall be re-notified for
grant of privilege. But such power is conferred subject to condition of providing opportunity to the licensee of being heard. The privilege amount
varied according to the gradation of local areas and as mentioned below.
Corporations Rs.14 Lakhs
Special Grade/Selection Grade Municipalities Rs.12 Lakhs.
Other Municipalities Rs.11 Lakhs.
Special Grade/Selection Grade Town Panchayats Rs. 9 Lakhs.
Other Town Panchayats Rs. 8 Lakhs.
Village Panchayats Rs. 5 Lakhs
The policy decision, which was taken last year, was for the block period of 2001 to 2004 and it is apt to extract G.O.Ms.No.113, dated
22.6.2001.
PROHIBITION AND EXCISE (VI) DEPARTMENT
G.O. (Ms.)No.113 Dated: 22.6.2001
Read:
G.O.Ms.No.104, Prohibition and Excise, dated
17.5.2001.
G.O.Ms.No.109, Prohibition and Excise, dated
6.6.2001.
G.O. Ms.No.112, Prohibition and Excise, dated
20.6.2001.
ORDER:
The Government have carefully examined the policy to be adopted for licensing of the Indian Made Foreign Liquor retail vending shops for the
block period 2001-2004 and have decided that a new licensing system should be followed for the licensing of the Indian Made Foreign Liquor
retail vending shops for the block period 2001-2004.
2.The Government also direct that,
a)The number of Indian Made Foreign Liquor retail vending shops for the entire State for the block period 2001-2004 be fixed at 6000.
b)The privilege fee of the Indian Made Foreign Liquor retail vending shops for the year 2001-2002 shall be worked out on notified area basis,
taking the average privilege fee of the last three years and providing for some suitable increase. There should be a uniform privilege fee for a given
notified area.
c)A notice inviting applications in a format to be prescribed for the grant of licence for the year 2001-2002 should be published in the newspapers
on 23.6.2001 and 24.6.2001 stipulating 28.6.2001 as the last date for receipt of applications. In case there are more than one eligible applications
per shop, the selection shall be by drawal of lot in the presence of the District Collectors and licences shall be issued thereafter. The District
Collectors are instructed to grant licences on or before 10.7.2001. The shops should start functioning from 16.7.2001.
d)The licensee should lift the minimum off-take fixed for the shop by the licensing authority. In case of failure to lift the minimum off-take
consecutively for two months, the licensee will be liable to pay a penalty in proportion to the loss of revenue due to non-lifting of stock and if there
is default for a period of another two months consecutively, the licence will be liable to be cancelled. Necessary amendments to the Tamil Nadu
Liquor (Retail Vending) Rules, 1989, will be issued separately in this regard.
3.The Commissioner of Prohibition and Excise and the Collectors are requested to take immediate action to implement the orders contained in the
paragraph 2 above.
(BY ORDER OF THE GOVERNOR)
B.K. PRASAD,
SECRETARY TO GOVERNMENT
According to the said policy decision, a new licensing system was to be followed for the licensing of the Indian Made Foreign Liquor retail vending
shops for the block period 2001 to 2004 and the number of such shops established were to be six thousand and the privilege fee for the initial year
2001 - 2002 to be worked out on notified area basis taking the average privilege fee of the last three years (preceding the year 2001) and
providing for some suitable increase.
Even though six thousand shops were notified, applications were received only for 5,087 shops and licences were issued for 5,067 shops and
after re-notification relating to unsold shops, the tally went up to 5,341 shops and to augment more finances, the Government made the exercise to
notify 125 additional shops in the then existing notified areas and 134 new shops, which led to the filing of W.P. No.21835 of 2001 challenging the
action of the Government in issuing G.O. Ms.No.238, Prohibition and Excise Department, dated 9.11.2001 whereunder, sanction was given for
the above additional and new shops. Writ Petitions having been dismissed, W.A. Nos.2740 of 2001 and batch were filed but the same were also
dismissed by judgment of the Division Bench of this Court dated 21.12.2001 and consequent to the same, the above 259 new shops were notified
but only 171 shops could be sold making a total of 5,512 shops for which licences were issued still leaving a balance of 488 shops which remained
unsold for the excise year 2001 - 2002.
The impugned Governmental Orders of 8th July of this year deviate from the last year''s policy and doing away with the block period of three
years. It also does not contemplate any renewal. The above three orders make the present licensees of retail I.M.F.L. vending go out of the
business paving the way for fresh applications and fresh drawals even increasing the number of shops from six thousand to that of seven thousand.
The privilege fee, which was being collected on the basis of the limits of the respective local authorities on the basis of their gradation, is also
changed substantially making 5 kms. radius around the municipal corporations and municipalities as falling into category of the municipal
corporations and municipalities for the purpose of levy and collection of privilege fees, on par with the shops located in municipal corporations and
municipalities. There is a raise in the quantum of privilege amount as mentioned below.
Sl.No. Area Privilege amount for 2002 - 2003 (Rupees in Lakhs)
Corporations 16.10
Special Grade / Selection Grade Municipalities 13.80
Other Grade Municipalities 12.65
Special Grade / Selection Grade Town Panchayats 10.35
Other Grade Town Panchayats 9.20
Village Panchayats 6.00
Comparing to the privilege amount fixed for the last excise year, the raised privilege amount for this year conforms to 15% raise to all the other
local authorities excepting the village panchayats which is at 20%. In effect, the escalation in the privilege amount is 15% and there is no change in
the mode of increase. As such, the petitioners cannot grudge over the increase in the privilege amount and to be fair to the learned counsel
appearing for the petitioners, nobody has even raised the point that the raise in the privilege amount for this excise year is either exorbitant or
untenable. But they cry hoarse regarding deprivation of their rights to vend the liquor in retail. But Mr.R.Muthukumaraswamy, the learned
Additional Advocate General, tries to wipe off their tears on the ground that the petitioners are not at all deprived of their rights to vend the liquor
and they have got every right to file application and try their luck in the drawals of the lots. This is no solace at all for the petitioners for the reason
that nobody is sure of getting the privilege as the only criteria for the grant of such privilege is a sheer luck in the drawals of lots and there is no
element of competitiveness in considering the grant of such privilege. While in 1981 Rules, the privilege was discretionary subject to compliance of
the conditions enumerated with a lot of room to play, the 1989 Rules aimed at competitiveness where the highest bidder would get the privilege by
participating in auction process and now with the recent amendment last year, it has become sheer luck or chance by whatever name it is called.
But this policy of the Government fixing the mode of grant of privilege is not justiciable for, the Government has got the monopoly in intoxicant
trade and it can either prohibit the liquor trade completely or do itself by adopting appropriate measures or lease out the privilege to
individuals/societies/corporations to vend the liquor. Though the Prohibition Act of 1937 aims at prohibition of consumption of potable alcohol to
the extent possible and making exceptions for medicinal uses, the State, having earlier imposed prohibition and tasted its failure, has framed Rules
for the grant of privilege to vend the liquor in retail on compliance of certain conditions. Now, it is too well settled a law and beyond any pale of
controversy that in liquor trade, there is no fundamental right.
Fairly, M/s. K.M. Vijayan, R. Krishnamurthy and R.Gandhi, Senior counsel and M/s.K. Chandrasekaran, AR.L. Sundaresan, A. Sivaji, P.S.
Venkatasubramanian, M. Balasubramaniam, B. Baskar, M.Palani, M.Mathappan, V. Soundararajan, R.S. Pandiraj and S. Seshadri, learned
counsel, who have argued for the respective petitioners and whose arguments were adopted by the rest of the counsel, have not made submissions
in that regard at all and as already stated above, they did not complain about the quantum of increase in the privilege amount over the one fixed last
year. They have raised the legal submissions as detailed below.
i.Rule 14 of the Rules vests them with right to seek renewal for second and third years also i.e. 2002 - 2003 and 2003 - 2004 on compliance of
the conditions and the curtailment of two renewals is arbitrary infracting Article 14 of Indian Constitution;
ii.increase in shops beyond the number mentioned in G.O. Ms.No.113, dated 22.6.2001 is illegal and arbitrary;
iii.the raise in privilege amount is violative of Section 17-D of the Tamil Nadu Prohibition Act, 1937; and
iv.the categorization of shops for the purpose of enhanced levy of privilege amount is also illegal and arbitrary.
Countering the above arguments advanced on behalf of the petitioners, Mr. R. Muthukumaraswamy, learned Additional Advocate General,
appearing for the respondent Government and its authorities, submits that there was no accrued right for the petitioners for grant of renewals and
their term of one year, for which licence was granted, is coming to an end, that the Government is free to change its policy of the last year in view
of the fresh facts and circumstances, that being a liquor trade and there being no fundamental right, the petitioners cannot raise any voice for
continuance of their licence by renewal and that it is up to the Government not to provide for the renewals, that the new excise policy has been
framed by issuing G.O. Ms. Nos. 128 and 129, dated 8.7.2002 with a view to augment more financial resources to the State by increasing the
number of shops and also by re-categorising the local areas, that such an economic policy for augmenting more finances to the State is in public
interest and is unquestionable and that the amended G.O. Ms.No.130, dated 8.7.2002 only gives effect to the above policy of the Government
and to do away with the renewal policy. He also submits that the Government cannot be tied down to the policy enunciated in G.O. Ms.No.113,
dated 22.6.2001 and that if the circumstances warrant, the Government can always change its policy in public interest, that there is no violation of
Section 17-D of the Prohibition Act as the Rule empowers fixation of such privilege amount and the privilege amount has been fixed in G.O.
Ms.No.129, dated 8.7.2002 and that it is not necessary to specify the privilege amount in the Rule itself.
In Selvaraj v. Govt. of Tamil Nadu - W.A. Nos.2740 to 2473 of 2001 and batch - 2002 (1) M.L.J. 627 which was decided by a Division
Bench of this Court, to which one of us was a member (B.S.R., CJ) and which came to be filed in the circumstances mentioned above, a detailed
discussion was made with regard to a number of judgments relating to liquor trade and it was held that the legal principles, which have been
crystallized and stated by a Constitution Bench of the Supreme Court in Khoday Distilleries Ltd. and Others Vs. State of Karnataka and Others,
have to be taken as a guiding principle in the matter relating to liquor trade. It is apt to re-state the same and they read as follows:
(a)The rights protected by Article 19(1) are not absolute but qualified. The qualifications are stated in clauses (2) to (6) of Article 19. The
fundamental rights guaranteed in Article 19(1)(a) to (g) are, therefore, to be read along with the said qualifications. Even the rights guaranteed
under the Constitutions of the other civilized countries are not absolute but are read subject to the implied limitations on them. Those implied
limitations are made explicit by clauses (2) to (6) of Article 19 of our Constitution.
(b)The right to practise any profession or to carry on any occupation, trade or business does not extend to practising a profession or carrying on
an occupation, trade or business, which is inherently vicious and pernicious and is condemned by all civilised societies. It does not entitle citizens to
carry on trade or business in activities which are immoral and criminal and in articles or goods which are obnoxious and injurious to health, safety
and welfare of the general public, i.e. res extra commercium (outside commerce). There cannot be business in crime.
(c)Potable liquor as a beverage is an intoxicating and depressant drink which is dangerous and injurious to health and is, therefore, an article which
is res extra commercium being inherently harmful. A citizen has, therefore, no fundamental right to do trade or business in liquor. Hence the trade
or business in liquor can be completely prohibited.
(d)Article 47 of the Constitution considers intoxicating drinks and drugs as injurious to health and impeding the raising of level of nutrition and the
standard of living of the people and improvement of the public health. It therefore, ordains the State to bring about prohibition of the consumption
of intoxicating drinks, which obviously include liquor, except for medicinal purposes. Article 47 is one of the directive principles, which is
fundamental in the governance of the country. The State has, therefore, the power to completely prohibit the manufacture, sale, possession,
distribution and consumption of potable liquor as a beverage, both because it is inherently a dangerous article of consumption and also because of
the directive principle contained in Article 47, except when it is used and consumed for medicinal purposes.
(e)For the same reason, State can create a monopoly either in itself or in the agency created by it for the manufacture, possession, sale and
distribution of the liquor as a beverage and also sell the licence to the citizens for the said purpose by charging fees. This can be done under Article
19(6) or even otherwise.
(f)For the same reason, the State can impose limitations and restrictions on the trade or business in potable liquor as a beverage which restrictions
are in nature different from those imposed on the trade or business in legitimate activities and goods and articles which are res commercium. The
restrictions and limitations on the trade or business in potable liquor can again be both under Article 19(6) or otherwise. The restrictions and
limitations can extend to the State carrying on the trade or business itself to the exclusion of and elimination of others and/or to preserving to itself
the right to sell licences to do trade or business in the same, to others.
(g)When the State permits trade or business in the potable liquor with or without limitation, the citizen has the right to carry on trade or business
subject to the limitations, if any, and the State cannot make discrimination between the citizens, who are qualified to carry on the trade or business.
(h)The State can adopt any mode of selling the licences for trade or business with a view to maximise its revenue so long as the method adopted is
not discriminatory.
(i)The State can carry on trade or business in potable liquor notwithstanding that it is an intoxicating drink and Article 47 enjoins it to prohibit its
consumption. When the State carries on such business, it does so to restrict and regulate production, supply and consumption of liquor, which is
also an aspect of reasonable restriction in the interest of general public. The state cannot on that account be said to be carrying on an illegitimate
business. It carries on business in products which are not declared illegal by completely prohibiting their production but in products the
manufacture, possession and supply of which is regulated in the interests of the health, morals and welfare of the people. It does so also in the
interests of the general public under Article 19(6).
(j)The mere fact that the State levies taxes or fees on the production, sale and income derived from potable liquor whether the production, sale or
income is legitimate or illegitimate, does not make the State a party to the said activities. The power of the State to raise revenue by levying taxes
and fees should not be confused with the power of the State to prohibit or regulate the trade or business in question. The State exercises its two
different powers on such occasions. Hence, the mere fact that the State levies taxes and fees on trade or business in liquor or derives income from
it, does not make the right to carry on trade or business in liquor a fundamental right, or even a legal right when such trade or business is
completely prohibited.
(k)The State cannot prohibit trade or business in medicinal and toilet preparations containing liquor or alcohol. The State can, however, under
Article 19(6) place reasonable restrictions on the right to trade or business in the same in the interests of general public.
(l)Likewise, the State cannot prohibit trade or business in industrial alcohol, which is not used as a beverage but used legitimately for industrial
purposes. The State, however, can place reasonable restrictions on the said trade or business in the interests of the general public under Article
19(6) of the Constitution.
(m)The restrictions placed on the trade or business in industrial alcohol or in medicinal and toilet preparations containing liquor or alcohol may also
be for the purposes of preventing their abuse or diversion for use as or in beverage.
Of the above legal principles stated, what is stated in paragraphs (g) and (h) are relevant for adjudication. The learned counsel appearing for
either parties addressed arguments touching on the aspects of interpretation of statutes relating to repeal provision as also the effect of the General
Clauses Act on such repeal, to stress that the repeal is only prospective to be operative only from the excise year of 2004 onwards. In our
considered view, there is no room for any such doubt so as to adjudicate as to whether the provision relating to the renewal contained in Rule is
repealed expressly or impliedly. Section 6 of the Central General Clauses Act, 1897, corresponding to Section 8 of Tamil Nadu General Clauses
Act, is also consequential to the said adjudication. Inasmuch as the State made its intention very clear both in the policy enunciated in G.O.
Ms.No.128 and also omitting of the renewal provision in G.O. Ms.No.130, by seeking to amend the Rules, there is no scope for interpretation on
the point of repeal or the effect of General Clauses Act. The action of the State is so clear that it does not want the renewal provision to continue in
the statute book and that it has given a go-by to the policy decision taken in G.O. Ms.No.113, dated 22.6.2001 regarding the block period for
three years from 2001 to 2004 and nullifying the right of the petitioners to opt for any renewal and then inviting all such willing applicants, including
the present licensees, to opt for drawal system afresh, that too, restricting to yearly basis and instantly for the excise year 2002 - 2003
commencing on 1.8.2002 and expiring on 31.7.2003.
Now, we are required to consider whether the policy decisions in G.O. Ms.Nos.128 and 129 and the Rule amendment in G.O. Ms.No.130
are infractive of Article 14 of Indian Constitution. Arguments have been advanced by the learned counsel for the petitioners projecting the
doctrines of promissory estoppel and legitimate expectation apart from the points that renewal rule hither to existed, conferred a right and such an
accrued right cannot be divested and thus, the action of the State is discriminatory resulting in arbitrariness. Mr. N.R. Chandran, learned Advocate
General, has also addressed his arguments supplementing the arguments of the learned Additional Advocate General. The learned Advocate
General had mainly relied upon the statement of law made by a Division Bench of this Court in Vadiappan v. State of Tamil Nadu 1984 (I) M.L.J.
Mr. R. Muthukumaraswmay, learned Additional Advocate General, who submitted main arguments on behalf of the State, was firm on his
stand that the excise policy framed by the Government being a public policy and the liquor trade not being a fundamental right, the petitioners have
got no legs to stand and that the impugned Governmental Orders, be it policy or the Rule amendment, are not amenable to the jurisdiction of the
Courts, urging this Court to dismiss these writ petitions.
It is too late in a day for this Court to propound the theories of promissory estoppel and legitimate expectation. Time and again, the Apex
Court stated the legal principles touching upon the said two doctrines. Suffice it to mention two latest judgments of the Supreme Court on the
theory of promissory estoppel, in Daiichi Karkaria Ltd. v. Union of India, AIR 2000 S.C. 1741 and Sharma Transport Rep. by D.P. Sharma Vs.
Government of Andhra Pradesh and Others, In Daiichi Karkaria Ltd''s case (cited supra), an exemption was granted from paying the customs duty
but the same was cut down and the said reduction of exemption was questioned invoking the doctrine of promissory estoppel. The Supreme Court
held as follows:
6.The law on the matter is now well settled that even in respect of exemptions that may have been made by the Government the doctrine of
promissory estoppel will not be applicable if the change in the stand of the Government is made on account of public policy. This position has been
explained in detail by this Court in Kasinka Trading and another, etc. etc. Vs. Union of India and another, and reiterated in reiterated in Shrijee
Sales Corporation and Another Vs. Union of India (UOI), . In both these cases this Court is concerned with notifications issued u/s 25 of the
Customs Act. In Kasinka Trading (supra) case it is stated that the exemptions granted u/s 25(i) of the Customs Act in public interest is designed to
off-set the excess price which the local entrepreneurs were required to pay for importing PVC resin at a time when the difference between the
indigenous product and the imported product was substantial and at a time when the notification was withdrawn by the Government there was no
scope for any loss to be suffered by the importers and, therefore, the change of policy was permissible. This decision is the same is Shrijee Sales
Corporation (supra) wherein it was noticed that once public interest is accepted as the superior equity which can override individual equity, the
principle would be applicable even in cases where a period has been indicated for which period the notification would remain in force and
Government is competent to resile from a promise. It was further noticed therein that the Government can resile from a promise even if there is no
manifest public interest involved provided, of course, that no one is put in any adverse situation which cannot be rectified.
Applying the said principles to the said case and weighing the public interest vis-�-vis that of the petitioners, the Supreme Court held that the
factors taken into consideration by the Government for reduction of the exemption are wholly irrelevant and do not sub-serve public interest. The
Supreme Court held, ""in cases where power vested in the Government is a power which has got to be exercised in public interest, as is the case in
the present case, the Court may require the Government to exercise that power in a reasonable way in accordance with the spirit of the
Constitution"", and went on to say further, ""we may state that the Government has failed to discharge its statutory obligation while issuing the
impugned notification. Justifications offered, to say the least, is far too na�ve to be accepted. The reason does not take the case of the
Government further at all"". Finally the Governmental action in reducing the exemption of customs duty was set at naught, bringing the doctrine of
promissory estoppel into the fold of Article 14 of Indian Constitution. In SHARMA''s case (cited supra), the Supreme Court has re-stated the
doctrine of promissory estoppel to the effect that the Government cannot claim any immunity from the doctrine of promissory estoppel and it
cannot say that it is under no obligation to act in a fair and just manner or that it is not bound by the considerations of the honesty and good faith
and that the Government should be held to high standard of rectangular rectitude while dealing with citizens. It is further held that since the doctrine
of promissory estoppel is an equitable doctrine, it must yield where the equity so requires and the Government can wriggle out of the said doctrine
only when it makes out a case that it would be inequitable to hold it to the promise or representation made by it and such defence can be put up
only when there is a sufferance of public interest and not otherwise. But it is made clear that it is for the Courts to weigh the said balancing act as to
whether the equity claimed by the citizen renders the larger public interest inequitable.
Likewise, the theory of legitimate expectation has been evolved by the Courts in equitable jurisdiction. Avoiding multiplication of citations on
the point and adverting only to the latest Supreme Court judgments, firstly we refer to the judgment in Madras City Wine Merchants'' Association
and Another Vs. State of T.N. and Another, which, in fact, is relied upon most by the learned Additional Advocate General. Incidentally, the said
matter emanated from this State and from the same Act, i.e. the Tamil Nadu Prohibition Act, 1937. The Rules, which came to be interpreted, were
Tamil Nadu Liquor (Vending in Bar) Rules, 1992 vis-�-vis Tamil Nadu Liquor (Retail Vending) Rules, 1989. To vend liquor in bar carries an
obligation to obtain not only a licence under Tamil Nadu Liquor (Retail Vending) Rules, 1989 but also under Tamil Nadu Liquor (Vending in Bar)
Rules, 1992. In so far as the bar licence is concerned, it was on yearly basis, of course with a possibility of renewal on payment of such fees as
may be fixed by the Government. After the expiry of the licence period on 31.5.1993, further renewal was not made because of repeal of Tamil
Nadu Liquor (Vending in Bar) Rules, 1992 with effect from 1.6.1993. The legal scenario here is entirely different. If the bars have been closed
because of the public policy, the matter straightaway fell within the established legal principles that, ''there is no fundamental right to trade in liquor''.
But here is a case where the liquor trade is continued. In fact such a distinction has been drawn by the Supreme Court in paragraph 49, the
relevant passage of which reads herein.
49.The licence under the Bar Rules of 1992 is for a period of one year. That could be renewed, as seen above only on a privilege amount, as may
be fixed by the State Government, in this behalf. This is unlike the case of the retail vending licence wherein the renewal is contemplated on
payment of 15 per cent more than the privilege amount at which the sale of the privilege was confirmed in the previous year. This is as regards the
second year. Likewise, 10 percent more than the privilege amount for the third year. Therefore, the position is entirely different giving no room for
any expectation. At best, it could be a hope.
Far from supporting the argument of the Government, the above judgment supports the cause of the petitioners. The decision VADIAPPAN v.
STATE OF TAMIL NADU (referred supra), on which much reliance is placed by the learned Additional Advocate General also, does not
support his argument for the reason that the ratio decidendi in the above case is on a different factual and legal background. In the said case, there
were two sets of licensees i.e. manufacturers and wholesale distributors and because of the policy decision taken, the whole licence method was
discontinued by framing a Rule to that effect, thus disabling the wholesale licensees to opt for licence any further but it was only after the expiry of
their licence period, thus investing Tamil Nadu State Marketing Corporation to take up the wholesale distribution system and in that context, it was
rightly held by the Division Bench that there was no discrimination as both the classes i.e. the manufacturers'' class and the whole distributors class
were different and distinct and that the discrimination was validly explained and in the result, there was no infraction of Article 14 of Indian
Constitution. That judgment has got no bearing on the facts of these cases. In Punjab Communications Ltd. Vs. Union of India and Others, the
Central Government evolved a scheme to provide digital wireless telecom facility to 36,000 identified villages in Eastern U.P. and for the
installation of the same, sought for a loan from Asian Development Bank, which has initially agreed to fund the said project. Pursuant to the same,
tenders were called for and the petitioner therein was one of the tenderers, which was found fit to be accepted. But because of later developments,
the loan by the above bank could not be sanctioned and the Government of India had changed its policy for installation of telephones for all rural
areas funding through its own sources. This was questioned projecting the doctrine of legitimate expectation and the Supreme Court had
elaborately dealt with the doctrine of legitimate expectation and pointing out that legitimate expectation consists of both substantive legitimate
expectation and also procedural legitimate expectation, held that substantive legitimate expectation is rooted in the theory of legal certainty and the
Government should honour it but the exception is overriding public interest and if public interest suffers, then the individual interest can be
sacrificed. To the same effect is the judgment of the Supreme Court in State of West Bengal v. Niranjan Singha 2001) 2 S.C.C. 326. In fact in the
above case, it is categorically held that, ""the doctrine of legitimate expectation is only an aspect of Article 14 of the Constitution in dealing with
citizens in a non-arbitrary manner and thus, by itself, does not give rise to an enforceable right but in testing the action taken by the Government
authority, whether arbitrary or otherwise, it would be relevant"".
Apart from the above two doctrines referred to in paragraphs 15 and 16, the element of arbitrariness itself is deeply embedded in Article 14 of
Indian Constitution as the said Article, which guarantees a fundamental right to equality and equal protection of laws and is an antithesis to
arbitrariness, is held to be applicable even to decisions taken as policy decisions, which are amenable to judicial review if they smack of
arbitrariness.
The proposition laid down by the Supreme Court in State of M.P. and Others Vs. Nandlal Jaiswal and Others, is clear on the point. It is apt to
extract as to what the Supreme Court said on the application of Article 14 to liquor trade.
32.But, before we do so, we may at this stage conveniently refer to a contention of a preliminary nature advanced on behalf of the State
Government and respondents Nos.5-11 against the applicability of Article 14 in the case dealing with grant of liquor licence. The contention was
that trade or business in liquor is so inherently pernicious that no one claim any fundamental right in respect of it and Article 14 cannot therefore be
invoked by the petitioners. Now, it is true, and it is well settled by several decisions of this Court including the decision in Har Shankar and Others
Vs. The Dy. Excise and Taxation Commr. and Others, that there is no fundamental right in a citizen to carry on trade or business in liquor. The
State under its regulatory power has the power to prohibit absolutely every form of activity in relation to intoxicants - its manufacture, storage,
export, import, sale and possession. 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 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. It is, therefore, not possible to uphold the contention of the State
Government and respondent Nos.5 - 11 that Article 14 can have no application in a case where the licence to manufacture or sell liquor is being
granted by the State Government. The State cannot ride roughshod over the requirement of that Article.
To the same effect is the judgment of the Supreme Court in M/s. Ugar Sugar Works Ltd. Vs. Delhi Administration and Others, is relevant on the
point, which reads,
The challenge, thus, in effect, is to the executive policy regulating trade in liquor in Delhi. It is well settled that the courts, in exercise of their power
of judicial review, do not ordinarily interfere with the policy decisions of the executive unless the policy can be faulted on grounds of mala fide,
unreasonableness, arbitrariness or unfairness etc. Indeed, arbitrariness, irrationality, perversity and mala fide will render the policy unconstitutional.
However, if the policy cannot be faulted on any of these grounds, the mere fact that it would hurt business interests of a party, does not justify
invalidating the policy. In tax and economic regulation cases, there are good reasons for judicial restraint, if not judicial deference, to judgment of
the executive. The courts are not expected to express their opinion as to whether at a particular point of time or in a particular situation any such
policy should have been adopted or not. It is best left to the discretion of the State.
Even though not on liquor trade but dealing with the general proposition of the power of judicial review in testing the policy decision, the
Supreme Court has rendered a decision in Union of India and Others Vs. Dinesh Engineering Corporation and Another etc., In the said case, the
Railway Board formed a policy to procure some spare parts only from a particular company and not from others. The said policy was challenged
by another company and the said challenge was sustained by the High Court and the High Court''s view was affirmed by the Supreme Court. The
Supreme Court in paragraph 12 of the judgment, repelling the argument of the Railway Board that the policy is not susceptible to judicial review,
held,
On behalf of the appellants, it has been very seriously contended before us that the decision by letter dated 23.10.1992 being in the nature of a
policy decision it is not open to courts to interfere since policies are normally formulated by experts on the subjects and the courts is not being in a
position to step in to the issues of the experts cannot interfere with such policy matters. There is no doubt that this court has held morethan one
case that where the decision of the authority is in regard to a policy matter, this court will not ordinarily interfere since these policy matters are
taken based on expert knowledge of the persons concerned and courts are normally not equipped to question the correctness of the policy
decision. But then, this does not mean that the courts have to abdicate their right to scrutinize whether the policy in question is formulated keeping
in mind all the relevant facts and the said policy can be held to be beyond the pale of discrimination or unreasonableness bearing in mind the
material on record. It is with this limited object if we scrutinise the policy reflected in the letter dated 23.10.1992, it is seen that the Railways took
the decision to create a monopoly on proprietary basis on EDC on the ground that the spares required by it for replacement in the Governors used
by the Railways required a high degree of sophistication, complexity and precision, and in the background of the fact that there was no party
otherthan EDC which could supply such spares. There can be no doubt that an equipment of the nature of a spare part of a governor which is used
to control the speed in a diesel locomotive should be a quality product which can adhere to the strict scrutiny/standards of the Railways, but then
the pertinent question is; has the Board taken into consideration the availability or non-availability of such characteristics in the spare parts supplied
by the writ petitioner or, for that matter, was the Board alive to the fact that like EDC the writ petitioner was also supplying the spare parts as the
replacement parts for the GE governors for the last over 17 years to the various divisions of the Railways? A perusal of the letter dated
23.10.1992 does not show that the Board was either aware of the existence of the writ petitioner or its capacity or otherwise to supply the spare
parts required by the Railways for replacement in the governors used by it, an ignorance which is fatal to its policy decision. Any decision, be it a
simple administrative decision or a policy decision, if taken without considering the relevant facts, can only be termed as an arbitrary decision. If it
is so, then be it a policy decision or otherwise, it will be violative of the mandate of Article 14 of the Constitution.
In view of our discussion in paragraphs 15, 16 and 17 regarding the law laid down by the Supreme Court, we hold that even though the excise
policy is a subject of the policy-maker i.e. the Government and even if it is relating to liquor trade, we are entitled to probe into the reasonableness
or otherwise of the impugned Governmental Orders and as to whether they can sustain in toto or in part on the touchstone of the arbitrariness.
In G.O. Ms. No.128, a policy decision has been taken regarding the number of shops, re-categorisation of the shops for the purpose of levy
of privilege fee and the first deposit of the application amount of 50% of the privilege amount instead of one third. The last and most important is
that of the 7,000 shops directed to be disposed as per the procedure laid down in G.O. Ms. No.115, dated 22.6.2001. We may have to deal
with this G.O. 128, dated 8.7.2002 in four parts as mentioned above. In so far as the first three parts are concerned, i.e. re-fixing the shops from
6,000 to 7,000 as compared to the previous year, re-categorisation of the shops bringing forth the peripheral areas within a radius of 5 Kms.
adjoining the Municipal Corporations and Municipalities for the purpose of levy of the privilege fee on par with the shops in Municipal
Corporations and Municipalities and also requiring 50% of the privilege amount to be deposited along with the applications, the same are touching
upon the fiscal policy of the Government so as to augment more financial resources. They have got nexus with the object to be achieved i.e. public
revenue. In that context, it can be said that the policy, which has been evolved for the block period 2001 to 2004 in G.O. Ms.No.113, dated
22.6.2001 and which is now changed year-wise, does not attract the doctrine of either promissory estoppel or legitimate expectation. We are
unable to even term it as arbitrary, either. But coming to the dispensing with the right of renewal of the petitioners, who are the existing licensees,
the consideration would be different. There is absolutely no nexus with the object of the excise policy for augmentation of more financial resources
as the petitioners are willing to get the renewal of their licences on payment of the prescribed privilege fee for this year and also having regard to
the re-catorisation of the shops attracting the payment of the excess licence fee as compared to the last year. When the petitioners are ready to pay
the amount as fixed by the Government, there is absolutely no reason as to why they should be excluded from the right of their renewal, which was
hitherto in the statute book. Taking away the right of renewal is one thing and to say that circumstances do not warrant for granting the renewal is
totally a different thing. It is not the case of the respondents that the petitioners did not make an offer for renewal. In fact such a situation did not
arise at all as no privilege amount has been fixed by any of the respondents as contemplated by clause (iii) of sub-Rule (1) of Rule 14 of the Rules.
Only to disable the petitioners from opting for renewal of their licences, the provision relating to renewal in Rule 14 is deleted and as already stated
above, this omission in so far as the block period of 2001 to 2004 is concerned, has got absolutely no nexus and by necessary corollary, attracts
the wrath of Article 14 of Indian Constitution being unreasonable and arbitrary. The said omission of Rule 14 can only be prospective in operation,
after the expiry of the block period, i.e. on or after 1.8.2004. It is pertinent to mention that proviso to sub-Rule (4) of Rule 14 of the Rules is
inapplicable and in fact it is not pressed into action by the Government and rightly so because the said proviso is not applicable to a circumstance
like this but can be invoked only when total prohibition is imposed in which event, the legal principles enunciated by the Supreme Court in
MADRAS CITY WINE MERCHANTS'' case (cited supra) are applicable. It is also pertinent to mention that the revised privilege fee has been
fixed by the Governmental Order in G.O. Ms.No.129, only on 8.7.2002 and for this delay in fixation of the privilege amount, the Government
alone is to be blamed. We have to say that there is a lax on the part of the Government in fixing this amount and this amount ought to have been
fixed long back at least before 15th of May 2002 so as to avoid this undue rush on the part of both the citizens, including the petitioners, and also
the Government. In the process, this Court had to overburden itself, be it at the filing time or processing time, hearing time and even for
adjudicating, as the Court staff had to overwork for more than four days and we had to hear these writ petitions for full two days keeping in view
the public interest as the public revenue is involved and the commencement of the excise year from 1.8.2002 and to render judgment this day in
order to avoid confusion regarding the rights of the parties, be it citizens or Government, and to set the matters right and at the right time. We hope
and trust that in future the Government would avoid these last minute decisions and anomalies.
In view of what is stated supra, we dispose of all the writ petitions as mentioned infra:
(i)The Government is at liberty to go ahead with the grant of privilege of retail vending of Indian Made Foreign Liquor to the extent of 7,000 shops
as decided.
(ii)But the Government shall adhere to the places of retail vending which have been licenced for the excise year 2001 - 2002 and held by the
petitioners and renew the licence of the petitioners for the excise year 2002 - 2003 on the petitioners'' remittance of the privilege amount on the
basis of the amount fixed in G.O. Ms.No.129, dated 8.7.2002 and also taking into account the re-categorisation of the shops for the purpose of
levy of the privilege amount.
(iii)The above facility of renewal to the petitioners shall be made available if the petitioners remit the requisite amounts on or before 31st of July,
2002.
(iv)For any reason, there is a delay in renewal, the petitioners shall be entitled to vend the Indian Made Foreign Liquor in retail on payment of the
proportionate privilege amount till the grant of licence.
(v)The Government, the Commissioner and all the District Collectors shall be entitled to re-locate the shops out of 7,000, at the places they feel
expedient, but only after safeguarding the shops which are being run by the petitioners.
As already stated above, no further orders are necessary in the Writ Appeal and the Writ Appeal and Writ Petitions are disposed of
accordingly. We direct each party to bear their own costs. Consequently, connected W.A.M.P. and W.P.M.Ps. are closed.