Gwalior Distilleries Pvt. Ltd. vs The State Of Madhya Pradesh

CIVIL APPEAL No. 1701 of 2019 [ Arising out of S.L.P. (Civil) No. 30428 of 2018 ]

GWALIOR DISTILLERIES PVT. LTD. .... Appellant

Versus

THE STATE OF MADHYA PRADESH & ORS.

….Respondents

JUDGMENT

L. NAGESWARA RAO, J.

Leave granted.

1. The Appellant is a manufacturer of spirits and holds a

licence in the form of D-1 granted in the year 2017. A

tender notice was issued for supply of country spirit in

sealed bottles, in the State of Madhya Pradesh for the year

2018-2019. The condition imposed for participating in the

Signature Not Verified tender was that the tenderer must have a licence for Digitally signed by VISHAL ANAND

manufacturing, bottling and wholesale supply of country Date: 2019.02.16 12:09:36 IST Reason:

spirit in the State of Madhya Pradesh, issued in the form of

1 CS-1 licence. Clause 2(i) of the tender notice dated

03.02.2018 was challenged by the Appellant on the ground

that the stipulation pertaining to possession of

CS-1 licence was contrary to Rule 3 of the Madhya Pradesh

Country Spirit Rules, 1995 (hereinafter referred to as ‘ the

Rules’) since such licence could not be granted unless the

distiller has participated in the tender process. That

according to Rule 3, a successful tenderer is granted an

area for supply of country spirit which would enable him to

claim a CS-1 licence and CS-1-1B licence. The Writ Petition

filed by the Appellant was dismissed. However, the High

Court observed that the contention of the Appellant that

he could not be granted a licence under the Rules unless

an area was allotted to him was not borne out from Section

18 of the Excise Act, 1915 (hereinafter referred to as ‘ the

Act’) or the Rules.

2. Thereafter, the Appellant submitted an application for

grant of CS-1 licence on 09.04.2018. By an order dated

26.07.2018, the application filed by the Appellant for grant

of CS-1 licence was rejected. Aggrieved by the said

rejection, the Appellant filed a Writ Petition which was

dismissed by the High Court. Hence, this appeal.

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3. The order by which the request for issuance of CS-1

licence was rejected by the Respondent No.2 was

challenged by the Appellant as being in violation of Articles

14 and 19 (1) (g) of the Constitution of India. The

Appellant alleged discrimination since eight other distillers

in the State of Madhya Pradesh who were similarly situated

to the Appellant, not possessing CS-1 and CS-1-1B licence

were allowed to participate in the tender process. The

Appellant relied upon the observations of the High Court in

its judgment dated 21.03.2018, in Writ Petition No.6525 of

2018 filed by the Appellant, that neither the Act nor the

Rules made thereunder required allotment of an area for

grant of CS-1 licence.

4. The High Court dismissed the Writ Petition by

observing that allotment of an area was an imperative pre-

condition for grant of CS-1 licence. The High Court further

held that there was no fundamental right to trade in liquor

and opined that the Appellant was not entitled to any

relief. Clause 2 (i) of the tender notice dated 03.02.2018

issued by the Respondents provides that a distiller having

a proper licence for manufacturing, bottling and wholesale

supply of country spirit shall be eligible to participate in

3 the tender process. The validity of the said condition was

challenged by the Appellant in Writ Petition No.6525 of

2018 in the High Court of Madhya Pradesh. The Appellant

contended in said Writ Petition that according to the

scheme of the Rules, a CS-1 licence will not be granted

unless the area is allotted. A Division Bench of the High

Court dismissed the Writ Petition finding no substance in

the challenge to Clause 2 (i) of the tender notice. While

dismissing the Writ Petition, the High Court observed that

the allotment of an area was not a pre-requisite for grant

of CS-1 licence. Subsequently, the Appellant submitted an

application to the Excise Commissioner, Gwalior on

09.04.2018, requesting issuance of a CS-1 licence. The

application for granting CS-1 licence was rejected on

26.07.2018 on the ground that the Appellant did not

participate in the tender process, published on 20.02.2018

for the year 2018-19. There is no doubt that the Appellant

has a D-1 licence. A perusal of Rule 3 would show that

manufacturing, bottling and wholesale supply of country

spirit can be only undertaken by persons who possess a

CS-1 licence. CS-1 licence is granted by the Excise

Commissioner after the approval of the State Government.

4 A CS-1 licensee shall operate in such area or areas as may

be determined by the Excise Commissioner from time to

time. The apprehension of the Appellant that a CS-1

licence would not be granted unless an area was allotted

pursuant to a tender process was addressed by the High

Court in the earlier round of litigation. The High Court held

that the Act and the Rules do not provide for allotment of

an area as a condition for issuance of CS-1 licence. The

application filed by the Appellant for issuance of CS-1

licence was rejected by the Respondents on the ground

that the Appellant did not participate in the tender

process.

5. Section 18 of the Act which confers power on the

State Government to grant lease of right to manufacture,

etc. and Rule 3 of the Rules read as follows:

“18. Power to grant lease of right to manufacture, etc. — (1) The State Government may lease to any person, on such conditions and for such period as it may think fit, the right—

(a) of manufacturing, or of supplying by wholesale or of both; or

(b) of selling by wholesale or by retail; or

(c) of manufacturing or of supplying by wholesale, or of both, and selling by retail; and liquor or intoxicating within any specified area.”

*** *** *** ***

5 “3. Grant of Licence. - (1) (a) A licence in Form C.S.1 for manufacture, bottling and wholesale supply of country spirit may be granted by the Excise Commissioner after approval of the State Government. It shall commence on such date as may be specified therein and be in force for such period as the State Government may decide and shall be for such area or areas as may be determined by the Excise Commissioner from time to time.

(b) [Licence in Form C.S. 1 shall be granted by the Excise Commissioner as aforesaid on payment of fee in advance at the rate of one lakh rupees for a period of one year’s licence or such proportional amount of fees for the period of licence to be granted.] The licensee shall be required to deposit additional amount of Rs.5 lacs as security in cash or in any other form as may be directed by the Excise Commissioner for the due observance of conditions of licence, provisions of the Act and the rules made thereunder and orders issued by State Government or Excise Commissioner. The Excise Commissioner may ask for additional sum as security amount not exceeding Rs.10 lacs as and when he deems it necessary in circumstances of repeated breaches of conditions of increase in area of supply and the licencee shall comply with such order within 15 days of its communication to him.”

6. There is no condition either in Section 18 or Rule 3

that CS-1 licence will be granted only to a person who

participated in the tender process. The order passed by

the Respondent No.2 is arbitrary and contrary to Section

18 of the Act and Rule 3 of the Rules. By the impugned

judgment the High Court held that allotment of an area is a

6 pre-condition for issuance of the CS-1 licence without

examining the judgment in Writ Petition No.6525 of 2018.

Reference made to Writ Petition No. 6525 of 2018 was

restricted to recording a finding that the said Writ Petition

was dismissed and the contentions raised by the Appellant

in the said Writ Petition were negatived. To our

understanding, Rule 3 (1) provides for allotment of an area

to a person who is given a CS-1 licence. Participation in

the process of tender as a condition for applying for a CS-1

licence is not found in the Rules. The High Court dismissed

the Writ Petition by holding that there is no fundamental

right to trade of liquor. However, the other contention

raised by the Appellant that there is hostile discrimination

against the Appellant as other similarly situated distillers

were permitted to participate in the tender, has not been

dealt with by the High Court. This Court in State of M.P.

& others v. Nandlal Jaiswal & others1 has held that no

one can claim as against the State the right to carry on

trade or business in liquor and the State cannot be

compelled to part with its exclusive right or privilege of

manufacturing and selling liquor. But when the State

decides to grant such right or privilege to others the State 1 (1986) 4 SCC 566

7 cannot escape the rigour of Article 14. It cannot act

arbitrarily or at its sweet will. It must comply with the

equality clause while granting the exclusive right or

privilege of manufacturing or selling liquor. The Appellant’s

request for grant of a CS-1 license requires to be

considered strictly in accordance with law.

7. The Respondents are directed to consider the

application of the Appellant for issuance of CS-1 licence in

accordance with the Act and the Rules made thereunder.

It is needless to mention that the Respondents should not

insist on the condition that the Appellant should have

participated in a tender and should have been allotted an

area of operation.

8. For the aforementioned reasons, the judgment of the

High Court is set aside and the appeal is allowed.

.................................J. [L. NAGESWARA RAO]

……..........................J. [M.R. SHAH]

New Delhi, February 15, 2019.

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