International Spirits and Wines Association of India vs The State of Haryana and Others

INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF INDIA ....APPELLANT(S)

VERSUS

STATE OF HARYANA AND OTHERS ...RESPONDENT(S)

JUDGMENT

NAVIN SINHA, J.

The appellant having been unsuccessful in its challenge to

Rule 24(i-eeee) of the Haryana Liquor License Rules 1970 (as

amended by the Haryana Liquor License (Amendment) Rules

2017), (hereinafter referred to as ‘the Rules’) as being ultra vires the

Punjab Excise Act, 1914 (hereinafter referred to as ‘the Act’), is in

appeal before this Court. The amended Rule provides for a single

L-1BF license for the entire State to deal in imported foreign liquor,

bottled outside India and imported into the country in a bottled Signature Not Verified

form (i.e. bottled in original). Under challenge is also clause 9.5.1.2 Digitally signed by DEEPAK GUGLANI Date: 2019.02.12 15:31:34 IST Reason:

of the State Excise Policy for the year 2017-2018 to that extent,

1 carried forward to the year 2018-2019 also. The procedure for

grant of the single license under the amended Rule is through

tender by e-bidding, with a reserve price of Rs. 50 crores.

2. Sri Gopal Subramanium, learned senior counsel for the

appellant, submitted that the creation of a monopoly by the State

in favour of a private entity, to trade in liquor, is contrary to Article

19(6) of the Constitution of India. The impugned order

acknowledges that it would lead to serious distortions in the

market, yet erroneously declines interference holding that once the

matter moves from State control into the hands of private

enterprise, the restrictions applicable to the State cease to apply.

Reliance was placed on Akadasi Padhan vs. State of Orissa, AIR

1963 SC 1047, to contend that if a monopoly is created by the State

in its favour, the same cannot be constitutionally permitted if the

private agents appointed pursuant thereto, act as independent

entities. Sri Subramanium also relied on Khoday Distilleries Ltd.

vs. State of Karnataka (I), (1995)1 SCC 574, to submit that once

the State parts with its privilege to trade in liquor, in favour of

private individuals, the rigours of Article 14 will continue to apply

to provide equal opportunity to all desirous to do so. Alternatively,

it was submitted that the absence of sufficient checks and balances

2 gives untrammeled and uncanalised powers to the sole licensee

which again is constitutionally impermissible. Sri Subramanium

further relied on Khoday Distilleries Ltd. vs. State of

Karnataka (II) (1996) 10 SCC 304, to submit that the

interpretation of Section 58 (2)(e) and 59(a) of the Act by the High

Court was flawed. Rule 24 (i-eeee) was ultra vires the Act. The

interpretation put by the High Court grants wider powers to the

Financial Commissioner, than the State Government itself. The

single monopolistic L-1BF license was also discriminatory and

violative of Article 14 of the Constitution in so far as no such

requirement was stipulated for wholesale trade in Indian made

foreign liquor or country liquor in the State. There was no rational

or reasonable classification for this distinction between licensees,

having any rationale or nexus with any object to be achieved.

3. Ms. Pinky Anand, learned Additional Solicitor General,

submitted that the appellant never participated in the bidding

process for the L-1BF license. A mere apprehension that a single

L-1BF license for the entire State may affect market dynamics,

when the reality was otherwise, resulting in rise of revenue, negates

the challenge laid out by the appellant. The issue of monopoly in

the hands of a private entity is devoid of merit as the process is

3 through public auction, open to participation by all, and not

tailored to suit any particular person or activated by malafides,

relying on Association of Registration Plates vs. Union of India,

(2005) 1 SCC 679. Trade in original bottled foreign liquor was only

a fraction of the entire liquor trade in the State, ranging between

0.64 percent to 1.98 per cent. The aim and object of the

amendment was to increase revenue, curb pilferage, control illicit

trade in the State of Indian made foreign liquor and bottled in

original bottled foreign liquor. The Financial Commissioner was

competent under Section 59(a) read with Section 13 to amend Rule

24 by incorporation of Rule 24 (i-eeee) providing for a single L-1BF

license for the entire State, as the competence of the State for

issuance of license under Section 58(2)(e) was limited to a local

area only.

4. Sri M.K. Dutta, learned counsel for the sole L-1BF licensee for

2017-2018, submitted that the appellant was not even a bidder.

The question of any apprehension on its part simply does not arise.

There are sufficient checks and balances in the excise license

providing for cancellation also if the conditions of the license were

not followed. The grant of a monopolistic license as the agent of

the State Government was permissible in the law for trade in liquor.

4

5. We have considered the submissions on behalf of parties. The

appellant assails the amended Rule 24(i-eeee) as ultra vires the

provisions of the Act. Integral to the issue is whether the state

government is competent to issue licences for a local area alone

under Section 58(2)(e) of the Act, while the Excise Commissioner,

a sub-delegate of the Financial Commissioner is competent under

Section 13(b) read with Section 59(a) to issue L-1BF licence for the

entire state under the amended rule, notwithstanding the

prohibition in Section 13(a) to the delegation of powers under

Section 58 by the State Government. The amended Rule 24(i-eeee)

relevant to the controversy reads as follows:

“ (xiv) for clause (i-eeee), the following clause shall be substituted, namely: -

(i-eeee) For a license in form L-1BF –

(a) Reserve price shall be Rs.50,00,00,000/-.

(b) The license in form L-1BF shall be allotted through e-bidding to the highest bidder.

(c) There shall be only one L-1BF license in the State.”

6. Under Section 8 of the Act, the State government exercises

general superintendence and control of Excise Administration and

Excise Officers. Section 9 provides for vesting powers of the

5 Financial Commissioner in the Excise Commissioner by the State

Government. Section 13 dealing with delegation of powers

provides:

“Delegation:

(a) The State Government may by notification delegate to the Financial Commissioner or Commissioners all or any of its powers under this Act, except the powers conferred by sections 14, 21,22, 31, 56 and 58 of this Act.

(b) The State Government may by notification permit the delegation by the Financial Commissioner, Commissioner or Collector to any person or class of persons specified in such notification of any powers conferred by this Act or exercised in respect of excise revenue under any Act for the time being in force.”

The Financial Commissioner is therefore competent to delegate

only such powers to the Excise Commissioner which the State

Government can delegate to the former under the Act, in view of

the prohibition contained in Section 13(a) of the Act.

7. Section 58 of the Act, in its relevant extract reads as follows:

“Power of State Government to make Rules:

(1) The State Government may by notification make rules for the purpose of carrying out the provisions of this Act or any other law for the time being in force relating to excise revenue.

(2) In particular and without prejudice to the generality of the foregoing provisions, the State Government may make rules:

…… 6

(e) Regulating the period and localities for which, and, the persons or classes of persons, to whom licenses, permits and passes for the vend by wholesale or by retail of any intoxicant may be granted and regulating the number of such licenses which may be granted in any local area;

(3) Previous publication of rules: - The power conferred by this section of making rules is subject to the condition that the rules be made after previous publication;

Provided that any such rules may be made without previous publication if State Government consider that they should be brought into force at once.”

Under Section 58(2)(e) of the Act, the State Government alone has

the power to regulate the number of licenses which may be granted

in any local area for wholesale or retail sale.

8. Relevant to the discussion are also Rules 3 and 4 which

provide as follows :

“3. The authority given by these rules to grant and renew licenses is, in each case, subject to the restrictions contained in the Punjab Intoxicants License and Sale Order as to the localities in which licenses may be granted and the number of licenses which may be granted in any local area, and to such reservations from the general superintendence of the Financial Commissioner as the State Government may notify under Section 8 of the Punjab Excise Act, 1914.

7 4. Every license shall be granted to a particular licensee in respect of particular premises/area.”

9. Chapter D of the Punjab Intoxicants License and Sales

Orders, 1956 (hereinafter referred to as ‘the Order’) provides for the

number of licences and reads as under :

“6. The number of liquor vends except vends licenced in form L-2 for the wholesale and retail sale of foreign liquor to the public only and drug shops, which may be licenced in any local area, shall be the number which the Financial Commissioner, subject to the control of the State government considers necessary. The number of L-2 vends, which may be licenced in any local area, shall be the number of such licences granted by the Collector under the rules.”

10. In the scheme of the Act, the Rules and the Order read

together it is apparent that a liquor license is to be granted for a

local area only. The power to determine the number of licences

that may be granted in any category in a local area is exclusively

vested in the State Government under Section 58(2)(e) of the Act.

The delegation of this power by the State Government to the

Financial Commissioner is prohibited by Section 13(a). This is only

in consonance with the general power of superintendence vested in

the State Government under Section 8.

8

11. In Khoday Distilleries vs. State of Karnataka (II) (supra),

a similar provision under the Karnataka Excise Act 1965 fell for

consideration therein:

“71(1): The State Government may, by notification and after previous publication, make Rules to carry out the purposes of this Act.

(2) In particular and without prejudice to the generality of the foregoing provision, the State Government may make Rules – …..

(e) regulating the periods and localities in which and the persons or classes of persons to whom, licenses for the wholesale or retail sale of any intoxicant may be granted and regulating the number of such licenses which may be granted in any local area:

(f) ……

(g) ……

(h) prescribing the authority by which, the form in which and the terms and conditions on and subject to which any license or permit shall be granted, and may, by such Rules, among other matters.”

This Court held as follows :-

“11. ….The Act itself provides that the number of licenses can be regulated by the State. If the State chooses to regulate licenses by providing that the license shall be granted only to a company owned by the State, it cannot be said that such a license is something which is outside the purview of the Act or the rule-making authority of the State under the Act.”

9

12. The Act maintains a clear distinction between a local area as

the unit for grant of licence, and the entire State for other purposes.

The State government is the sole repository of these other powers

with regard to the entire State evident from Sections 5 and 6 which

read:

“5. Power of State Government to declare limit of sale by retail and by wholesale- The State Government may by notification declare with respect either to the whole of Punjab or to any local area comprised therein, and as regards purchasers generally or any specified class of purchasers, and generally or for any specified occasion, the maximum or minimum quantity or both of any intoxicant which for the purposes of this Act may be sold by retail and by wholesale.

6. Power to limit application of notifications, permits, etc., made under this Act.- Where under this Act any notification is made, any power conferred, any appointment made or any license, pass or permit granted, it shall be lawful to direct –

(a) That it shall apply to the whole of Punjab or to any specified local area or areas;

xxxxx"

The power to declare by notification that a licence granted shall be

applicable to the entire State is exclusively vested in the State

Government under Section 6(a) of the Act.

10 13. The High Court has held that in contradistinction to Section

58(2)(e) of the Act, which limits the powers of the State Government

to grant of licence for a local area, the Excise Commissioner, as the

delegatee of the Financial Commissioner, was competent under

Section 59(a) to grant a single L-1BF licence for the entire State.

“59. Powers of Financial Commissioner to make rules:-

The Financial Commissioner may, by notification, make rules,-

(a) regulating the manufacture, supply, storage or sale of any intoxicant, including-

(i) the character, erection, alteration, repair, inspection, supervision, management and control of any place for the manufacture, supply, storage or sale of such article and the fittings, implements, apparatus and registers to be maintained therein;

(ii) the cultivation of the hemp plant and the collection of spontaneous growth of such plant and the preparation of any intoxicating drug;

(iii) the tapping or drawing of tari from any tari producting tree;

(b) regulating the bottling of liquor for purposes of sale;

(c) regulating the deposit of any intoxicant in a warehouse and the removal of any intoxicant from any warehouse or from any distillery or brewery;

(d) prescribing the scale of fees or the manner of fixing the fees payable in respect of any license, permit or pass or in respect of the storing of any intoxicant;

11 (e) regulating the time, place and manner of payment of any duty or fee;

(f) prescribing the authority by, the restrictions under, and the conditions on, which any license, permit or pass may be granted, including provisions for the following matters-

(i) the prohibition of the admixture with any intoxicant of any substance deemed to be noxious or objectionable;

(ii) the regulation or prohibition of the reduction of liquor by a licensed manufacturer or licensed vendor from a higher to a lower strength;

(iii) the strength at which intoxicant shall be sold, supplied or possessed;

(iii-a) the fixing of the price below and above which any intoxicant shall not be sold or supplied by the licenced vendor.

(iv) the prohibition of sale of any intoxicant except for cash;

(v) the fixing of the days and hours during which any licensed premises may or may not be kept open, and the closure of such premises on special occasions;

(vi) the specification of the nature of the premises in which any intoxicant may be sold, and the notice to be exposed at such premises;

(vii) the form of the accounts to be maintained and the returns to be submitted by license- holders; and

(viii) the prohibition or regulation of the transfer of licenses;

(g) (i) declaring the process by which spirit shall be denatured;

(ii) for causing spirit to be denatured through the agency or under the supervision of its own officers;

12

(iii) for ascertaining whether such spirit has been denatured;

(h) providing for the destruction or other disposal of any intoxicant deemed to be unfit for use;

(i) regulating the disposal of confiscated articles;

(j) prescribing the amount of security to be deposited by holders of leases, licenses, permits or passes for the performance of the conditions of the same.”

14. The nature of powers conferred under Section 59 of the Act,

make it manifest that it is but a regulatory power available only

after a license is granted to the licensee for a local area, to ensure

supply, storage, sale or otherwise that the conditions of the license

are adhered to and necessary directions can also be given for the

purpose.

15. The Excise Commissioner, a sub-delegate of the Financial

Commissioner, in exercise of the powers conferred under section

59 of the Act by virtue of the Haryana Government Excise and

Taxation notification dated 01.04.2016, made the impugned

amendment to the Haryana Liquor License Rules, 1970. The same

were notified on 29.03.2017. These rules were called the Haryana

Liquor License (Amendment) Rules, 2017. Rule 1(2) stated that

they shall come into force with effect from 01.04.2017. Rule 3 of

13 the amendment substituted Rule 24 (i-eeee) which provided that

there shall be only one L-1BF license in the State. The amendment

with regard to the number of licenses that could be issued for the

entire State is in teeth of Sections 6 and 58(2)(e), delegation of

which by the State Government is expressly prohibited by Section

13(a).

16. The distinction sought to be drawn by the High Court with

regard to the term ‘local area’ under Section 58(2)(e) of the Act as

being confined to small compact area only and that the Financial

Commissioner by virtue of the power to regulate supply, storage

or sale of any intoxicant had the power to determine the number

of licenses to be granted for the entire State in a particular

category, in our view, is not only unreasonable but also in teeth of

the statutory Scheme and its provisions. To hold that the power of

Financial Commissioner under Section 59(a) of the Act to regulate

sale of liquor, and that sale could be regulated through grant of

licence, the Financial Commissioner was vested with the power to

determine the number of licences, to our mind is not only

unreasonable but also unsustainable. Such an interpretation

amounts to reading words into the statute which the legislature

itself never intended. The amendment notified by the Excise

14 Commissioner as a delegate of the Financial Commissioner was

per se ultra vires the powers of the latter under Section 6 and 13(a)

read with Section 58(2)(e) of the Act. The unreasonableness and

incongruity in the reasoning by the High Court would vest wider

powers in the Excise Commissioner than the State Government

itself. While the State Government would have the power to

determine the number of licences and to issue licence for a local

area only, the Excise Commissioner would have a superior power

to determine the number of licences and issue licences for the

entire State.

17. The meaning and scope of a regulatory power fell for

consideration in Deepak Theatre vs. State of Punjab, 1992 Supp

(1) SCC 684,

“4. The power to regulate includes the power to restrain, which embraces limitations and restrictions on all incidental matters connected with the right to trade or business under the existing licence. Rule 12(3) regulated entry to different classes to the cinema hall and it was within the rule making power of the State Government to frame such rule. The court further held that fixing limit of rate of admission was an absolute necessity in the interest of the general public and the restriction so placed was reasonable and in public interest….” 15

18. The Financial Commissioner was therefore not competent to

amend the Rules with regard to grant of number of licences for the

entire state, and which power was exclusive to the State

Government under Section 6 read with Section 13(a) and 58(2)(e)

of the Act. In conclusion, we hold that Rule 24(i-eeee) as amended

by the Financial Commissioner in exercise of powers under Section

59(a) of the Act is ultra vires the powers of the Financial

Commissioner under the Act and is therefore struck down. In view

of Rule 24(i-eeee) itself having been struck down, it is not

considered necessary to discuss or consider the other grounds of

challenge raised.

19. The appeal is allowed.

………............................CJI.

[RANJAN GOGOI]

…………............................J. [NAVIN SINHA]

NEW DELHI FEBRUARY 12, 2019.

16 1

Reportable IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.9533 OF 2018

INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF INDIA ..APPELLANT(S) VERSUS

STATE OF HARYANA AND ORS. ..RESPONDENT(S)

JUDGMENT

K.M. JOSEPH,J.

1. Having perused the judgment authored by

brother Justice Navin Sinha notwithstanding the

highest respect that I maintain for him, I express my

inability to accept the reasoning given in support of

the conclusion on the point which has been dealt with

by him and the consequent verdict.

2. The appellant is the writ petitioner before

the High Court in writ petition No.6870 of 2017 which

came to be decided along with another writ petition.

Appellant is a company registered under Section 25 of

the Companies Act. It claims to be a representative

body of International spirits and wines companies 2

doing business in India. On 06.03.2017, the excise

policy for the State of Haryana came to be announced

for the period 01.04.2017 to 31.03.2018. Under clause

9.5.1.1, a wholesale licence in the form of L-1BF for

imported foreign liquor (BIO) was prescribed. The

licensee was authorized to import IFL (BIO) including

beer from other countries and supply it to L-1s, L-4

and L-5s, L-12Cs and L-12Gs of the State. Clause

9.5.12, however, provided that there will be only one

wholesale licence in the form of L-1BF in the State.

It was contemplated that licence was to be settled by

e-tenders through the Departmental Portal in a

completely secure and transparent manner. The reserve

price was fixed at Rs.50 crores. Under the general

conditions provisions for L-1BF it was provided as

follows:

“(vi) The licensee will have to submit pricing of each brands at the time of approval of the brand and department will approve his maximum sale price factoring in the landing price, expenses, profit margin, prevalent rates of same or equivalent brands in the neighboring States and the Government levies. The licensee shall do this preferably in the first quarter of the financial year.” 3

3. Originally Clause 9.5.1.2 was challenged.

The third respondent had been appointed as exclusive

licensee and declaration was sought that the

appointment was invalid. While the Writ Petition was

pending, the Haryana Liquor License (Amendment) Rules,

2017 was introduced. The rules came into effect on

01.4.2017. Thereupon the appellant challenged Rule

24 (i-eeee) of the 1970 Rules introduced by the

amending Rules. The said Rule reads as follows:

“3. In the said rules, in rule 24, -

…....

(xiv) for clause (i-eeee), the following clause shall be substituted, namely:-

“(i-eeee) For a license in form L-1BF -

(a) Reserve price shall be Rs. 50,00,00,000/-

(b) The license in form L-1BF shall be allotted through e-bidding to the highest bidder

(b) There shall be only one L-1BF license in the State.

(d) In case no eligible bid equal to or above the reserve price is received for the lone L-

1BF license, the same shall be allotted exclusively to a Government owned entity on the terms and conditions as decided by the Government. The permit and brand label fee shall be levied as under to procure Stock of liquor by the L-1BF licensee.”

4. The ground which failed to persuade the

Division Bench of the High Court but which has found

acceptance at the hands of my learned Brother Sinha J. 4

is that the impugned rule is ultra vires, the power

of the Finance Commissioner under Section 59 of the

Punjab Excise Act, 1914 (hereinafter referred to as

“the Act”). The argument of the appellant is that the

power to make a rule regarding number of licenses is

with the State Government and it is said power which

has been usurped by the Financial Commissioner in

purported exercise of the power under Section 59 of

the Act. To put it differently, the question would be

whether the power is vested with the State Government

under Section 58 or with the Financial Commissioner

under Section 59 of the Act. It is but natural that

I set out the provisions of Section 58 and 59 of the

Act.

“58. Power of State Government to make Rules – (1) The State Government may by notification make rules for the purpose of carrying out the provisions of this Act or any other law for the time being in force relating to excise revenue.

(2) In particular and without prejudice to the generally of the foregoing provisions, the State Government may make rules: -

(a) prescribing the duties of excise officers;

(b) regulating the delegation of any power by the Financial Commissioner, Commissioner or Collector, under Section 13, Clause (b);

(c) prescribing the time and manner of presenting and the procedure for dealing 5

with appeals from orders of excise officers;

(d) regulating the import, export, transport or possession of any intoxicant or Excise bottle and the transfer, price or use of any type of description of such bottle.

(e) regulating the period and localities for which, and, the persons or classes of persons, to whom licenses, permits and passes for the vend by wholesale or by retail of any intoxicants may be granted and regulating the number of such licenses which may be granted in any local area;

(f) prescribing the procedure to be followed and the matters to be ascertained before any license is granted for the retail vend of liquor for consumption on the premises;

(g) for the prohibition of the sale of any intoxicant to any person or class of persons;

(h) regulating the power of excise officers to summon witnesses form a distance;

(I) regulating the grant of expenses to witnesses and compensation to persons charged with offences under this Act and subsequently released, discharged or acquitted.

(j) for the prohibition of the employment by a license holder of any person or class of persons to assist in his business in any capacity what so ever;

(k) for the prevention of drunkness, gambling and disorderly conduct in or near any licensed premises and the meeting or remaining of persons of bad character in such premises;

(l) prohibiting the printing, publishing or otherwise displaying or distributing any advertisement or other matter commending or soliciting the use of, or offering any intoxicant calculated to encourage or incite any individual or class of individuals or the public generally to commit an offence under this Act, or to commit a breach or evade the provisions of any rule or order made there under, 6

or the conditions of any license, permit or pass obtained there under:-

(m) prohibiting within the State the circulation, distribution or sale of any newspaper, book, leaflet, booklet, or other publication printed and published outside the State which contains any advertisement or matter of the nature described in clause (1);

(n) declaring any newspaper, book, leaflet, booklet or other publication, wherever printed or published, containing any advertisement or matter [of the nature described in clause (1)] to be forefeited to the State Government; and

(o) implementing generally the policy of prohibition.

(3) Previous publication of rules – The power conferred by this section of making rules is subject to the condition that the rules be made after previous publication.

Provided that any such rules may be made without previous publication if State Government consider that they should be brought into force at once.

59. Powers of Financial Commissioner to make rules – The Financial Commission may, by notification, make rules.

(a) regulating the manufacture, supply, storage or sale of any intoxicant, including:-

(i) the character, erection, alteration, repair, inspection, supervision, management and control of any place for the manufacture, supply storage or sale of such article and the fittings, implements apparatus and registers to be maintained therein;

(ii) the cultivation of the hemp plant and the collection of spontaneous growth of such plant and the preparation of any intoxicating drug.

(iii) the tapping of drawing of tari from any tari producting tree.

7 (b) regulating the bottling of liquor for purposes of sale.

(d) regulating the deposit of any intoxicant in a warehouse and the removal of any intoxicant from any warehouse or from any distillery or brewery.

(e) prescribing the scale of fees or the manner of fixing the fees payable in respect of any license, permit or pass or in respect of the storing of any intoxicant;

(f) regulating the time, place and manner of payment of any duty or fee;

(g) prescribing the authority by, the restrictions under, and the conditions on which any license, permit or pass may be granted including provision for the following matters: -

(i)The prohibition of the admixture with any intoxicant of any substance deemed to be noxious or objectionable;

(ii) The regulation or prohibition of the reduction of liquor by a licensed manufacture or licensed vendor from a higher to a lower strength;

(iii) [the strength at which intoxicant shall be sold], supplied or possessed;

(iii-a) the fixing of the price below and above which any intoxicant shall not be sold or supplied by the licensed vendors;

(iv) The prohibition of sale of any intoxicant except for cash;

(v) The fixing of the days and hours during which any licensed premises may or may not be kept open, and the closure of such premises on special occasions;

(vi) The specification of the nature of the premises in which any intoxicant may be sole, and the notice to be exposed at such premises; 8

(vii)The form of the accounts to be maintained and the return to be submitted by license holders; and

(viii) The prohibition or regulation of the transfer of licenses;

(g-i) declaring the process by which spirit shall be denatured;

(ii) for causing spirits to be denatured through the agency or under the supervision of its own officers;

(iii) for causing spirits to be denatured through the agency or under the supervision of its own officers;

(h) providing for the destruction or other disposal of any intoxicant deemed to be unfit for use;

(i) regulating the disposal of confiscated articles;

(j) prescribing the amount of security to be deposited by holders of leases, licenses, permits or passes for the performance of the conditions of the same.”

5. The case of the appellant is built around the

provisions contained in Section 58(2)(e) of the Act.

6. The Punjab Excise Act, 1914 as extended to

the State of Haryana contains the following provisions

inter alia:

Section 5 of the said Act reads as follows:

“5. Power of State Government to declare limit of sale by retail and by wholesale. – The [State] Government may by notification declare with respect either to the whole of [Haryana] or to any local area comprised therein, and as regards 9

purchasers generally or any specified class of purchasers, and generally or for any specified occasion, the maximum or minimum quantity or both of any [intoxicant] which for the purposes of this Act may be sold by retail and by wholesale.” (emphasis supplied) The expression “any local area” stands out in the said

statutory provision as distinct from the whole of

Haryana. It is to be noted that Section 5 does not

deal with the rule making power of the State. In

fact, it relates to the maximum and minimum quantity

or both of any intoxicants which may be sold by retail

and by wholesale. Similarly, Section 6(a) reads as

follows:

“6. Power to limit application of notifications, permits, etc., made under this Act.- Where under this Act any notification is made, any power conferred, any appointment made or any license, pass or permit granted, it shall be lawful to direct –

(a) that it shall apply to the whole of [Har-

yana] or to any specified local area or areas;

(b) ….. (c) ….. (d) …..”

(emphasis supplied)

Equally Section 6 also does not deal with the power

to make rules.

7. It is apparent that the legislature has

maintained a distinction between the whole and a part 10

and the part is what is captured in the expression

“local area”. Further Section 8 of the said Act reads

as follows:

“8. Superintendence and control of excise administration and excise officers. -

(a) Subject to the control of the [State] Gov-

ernment and unless the [State] Government shall by notification otherwise direct, the general superintendence and admin- istration of all matters relating to ex- cise shall vest in the Financial Commis- sioner.”

(b) ….

(c) ….” (emphasis supplied)

8. Section 9 of the said Act provides for

appointment of an Excise commissioner and it reads as

follows:

“9. Excise Commissioner. - The State Government may by notification appoint an Excise Commissioner, and, subject to such conditions and restrictions as it may deem fit, may invest him with all or any of the powers conferred on the Financial Commissioner by this Act.”

9. In terms of the notification vesting powers

of the finance Commissioner apparently under Section

59 it is that the Excise Commissioner has made the

rules “Haryana Liquor Licence Rules 1970. It is

undoubtedly true that Section 13 forbids delegation 11

of power under Section 58 inter alia on the Financial

Commissioner or Commissioner. Section 34 comes under

Chapter VI and is relevant. It reads as follows:

“34. Fee for terms, conditions and form of, and duration of licenses, permits and passes. – (1) Every licence, permit or pass granted under this Act shall be granted, -

(a) On payment of such fees, if any;

(b) Subject to such restrictions and on such conditions;

(c) In such form and containing such partic- ulars;

(d) For such period;

as the Financial Commissioner may direct. (2) …..

(3) …..”

10. Section 35 speaks about grant of licences for

sale. Sub-section (1) of the said provision reads as

follows:

“35. (1) Grant of lincenses for sale. - Subject to the rules made by the Financial Commissioner under the powers conferred by this Act, the Collector may grant licenses for the sale of any [intoxicant] within his district.” (emphasis supplied) 12

11. Coming to Section 58 undoubtedly what is

pressed before us by the appellant is a specific

provision contained in Section 58(2)(e). Breaking down

the said sub-section, in my view produces the

following inevitable result. The State Government has

the power to frame rules.

1) To regulate the periods of licences, permits and

passes either wholesale or retail;

2) To regulate the localities for which wholesale or

retail licences, permits or passes may be granted.

3) To regulate the persons or classes of persons to

whom the licences, permits or passes may be

granted either by way of a wholesale or retail

licence;

12. The latter part of Section 58(2)(e) on the

other hand also permits the Government to regulate by

rules, the number of such licences which may be

granted in any local area. Therefore, it is clear

that it is in respect of the licences which are

referred, be it wholesale or retail mentioned earlier 13

in the provision which can be regulated but however

limited to any local area. As against this and

immediately following Section 58 in Section 59,

legislature has also empowered the financial

Commissioner to make rules inter alia to regulate the

manufacture, supply, storage or sale or any

intoxicant.

13. It is relevant to notice that the High Court

in the impugned judgment has specifically dealt with

the expression “local area” by adverting to a judgment

of this Court reported in 1995 (1) SCC 351. The

expression “local area” has been designedly employed

and it has to be given full play. It certainly cannot

mean the whole of the State. Any other interpretation

would render the word ‘local area’ in Section 58(2)(e)

meaningless and, in fact, it would involve doing

complete violence to the plain meaning of the words

“local area”. It may be true that the whole may

include the part (see in this regard the maxim in

Brooms Legal Maxims Omne Majus Continet in Se Minus)

but I do not think that the converse namely the part

would include the whole could hold good. Thus, the 14

expression “local area” as used in Section 58(2)(e)

would appear to convey the impression that the

legislature intended to confer power on the State to

place restrictions on the number of licences which are

to be given qua any local area. In fact, in the written

submission given by the State of Haryana, a definite

case is set up that the State in its wisdom can

conclude that a particular local area owing to the

special conditions should be protected from the

harmful effects of alcohol consumption. An example of

tribal sub plan area is enlisted where the State may

be carrying on a special programme. I would think that

this view finds support also from another circumstance

in the form of Rule 3 of Haryana Liquor Licence Rules,

1970. The said Rule reads as under:

“3. The authority given by these rules to grant and renew licenses is, in each case, subject to the restrictions contained in the Punjab Intoxicants License and Sale Order as to the localities in which licenses may be granted and the number of licenses which may be granted in any local area, and to such reservations from the general superintendence of the financial commissioner as the State government may notify under Section 8 of the Punjab Excise Act, 1914.

(emphasis supplied) 15

14. Thus, the said rule reinforces the view that

the expression “number of licences” which may be

granted in the local area is within the exclusive

domain of the State Government and reliance placed by

the appellant on the number of licences which may be

granted in Section 58(2)(e) to strike at the impugned

rule which is otherwise sourced under Section 59 is

without any basis. In other words going through both

the Act and the Rules, a distinction is made between

the whole of the State and the local area. In regard

to rule making power, undoubtedly, the legislature has

specifically conferred rule making power qua the

number of licences in any local area upon the State.

Unless it can be reasoned that the powers to regulate

sale of liquor within the meaning of Section 59 which

is undoubtedly placed on the shoulders of the

financial Commissioner would not include the power to

make rules in regard to the number of licences for the

State as a whole, the argument of the appellant must

fail.

16

15. The word `regulate’ in fact came to be

considered by the decision of this Court in D.K.

Trivedi and Sons v. State of Gujarat 1986 (Suppl.)

SCC 20. The matter arose under Section 13 inter alia

of the Mines and Minerals (Regulation & Development)

Act, 1957. This Court went on to hold inter alia as

follows :

“30. Bearing this in mind, we now turn to examine the nature of the rule-making power conferred upon the State Governments by Section 15(1). Although under Section 14, Section 13 is one of the sections which does not apply to minor minerals, the language of Section 13(1) is in pari materia with the language of Section 15(1). Each of these provisions confers the power to make rules for "regulating". The Shorter Oxford English Dictionary, Third Edition, defines the word "regulate" as meaning "to control, govern, or direct by rule or regulations; to subject to guidance or restrictions; to adapt to circumstances or surroundings". Thus, the power to regulate by rules given by Sections 13(1) and 15(1) is a power to control, govern and direct by rules the grant of prospecting licences and mining leases in respect of minerals other than minor minerals and for purposes connected therewith in the case of Section 13(1) and the grant of quarry leases, mining leases and other mineral concessions in respect of minor minerals and for purposes connected therewith in the case of Section 15(1) and to subject such grant to restrictions and to adapt them to the circumstances of the case and the surroundings with reference to which such power is exercised. It is pertinent to bear in mind that the power to regulate 17

conferred by Sections 13(1) and 15(1) is not only with respect to the grant of licences and leases mentioned in those sub-sections but is also with respect to "purposes connected therewith", that is, purposes connected with such grant.”

16. No doubt it is true that Section 13 of the

Mines and Minerals (Regulation & Development) Act,

1957 which was considered by the Court inter alia read

as follows:

"13. Power of Central Government to make rules in respect of minerals. -

(1) The Central Government may, by notification in the Official Gazette, make rules for regulation the grant of prospecting licences and mining leases in respect of minerals and for purposes connected therewith.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely :-

* * * *

(i) the fixing and collection of dead rent fines, fees or other charges and the collection of royalties in respect of -

(i) prospecting licences,

(ii) mining leases,

(iii) minerals mined, quarried, excavated or collected;

* * * *

(r) any other matter which is to be, or may be, prescribed under this Act."

18 17. However, having regard to the connotation of

the word ‘regulate’ it would include power to control

the sale of liquor under the Act. Control of sale is

possible by providing for licences as it is through

licencing that the authority can provide for

conditions under which the sale could be best

controlled. If the power to regulate include the

power to stipulate licences it undoubtedly also would

include power to provide for number of licences qua

the State as a whole a matter which I have reasoned

does not fall under Section 58(2)(e) of the Act.

18. In the judgment of this court in Khoday

Distilleries Ltd. and Others v. State of Karnataka and

Others reported in 1996 (10) SCC 304, the issue arose

under the Karnataka Excise Act, 1965. Undoubtedly,

there is a provision therein which is pari materia

with Section 58(2)(e) of the Punjab Excise Act in the

Karnataka Excise Act, 1965 which has been extracted

at para 8 of the said judgment. The case in fact

related to a distributor licence and not wholesale or

retail licence which is what the provision speaks of. 19

19. The Court was not dealing with the specific

question which is posed before us as is clear from the

judgement. I have in fact, gone through the Karnataka

Excise Act and I find that while Section 71 confers

power on the State Government to make rules there is

no provision akin to Section 59 of the Punjab Excise

Act which confers power on any other authority in

which case it could not possibly be contended that

sub-section (2) of Section 71 would in any manner cut

down the width of the general power of Section 71(1)

for the State Government to make rules for the purpose

of the Act.

20. In such circumstances, I would respectfully

disagree with the majority view as expressed in the

judgment of my learned Brother Justice Navin Sinha.

I would confirm the finding by the learned Division

Bench of the High Court that the Financial

Commissioner has power to decide upon the number of

licenses.

21. Having expressed my disagreement with regard

to the finding of the sole issue which has been dealt

with in the majority judgment I must necessarily 20

proceed to consider the two other contentions which

has been raised by the appellant. The appellant has

contended that the rule leads to the creation of a

monopoly and what is really objectionable, in favour

of a private party and it is contrary to the guarantee

embedded under Article 19(1)(g) of the Constitution.

The High Court has repelled this argument also. It

relied upon the judgment of this Court reported in

Khoday Distilleries Ltd. and Others Vs. State of

Karnataka and Others; 1995(1) SCC 574 wherein this

Court in paragraph 22 held as follows :

“22. In Cooverjee B. Bharucha v. Excise Commissioner and the Chief Commissioner AIR 1954 SC 220, where the vires of Excise Regulation I of 1915 was under challenge on the ground of violation of Article 19(1)(g), the Constitution Bench of five learned Judges, among other things, held that:

(a)In order to determine the reasonableness of restrictions, envisaged by Article 19(6), regard must be had to the nature of the business and the conditions prevailing in that trade. These factors would differ from trade to trade and no hard and fast rule concerning all trades can be laid down. It cannot also be denied that the State has the power to prohibit trades which are illegal or immoral or injurious to the health and welfare of the public. Laws prohibiting trades in noxious or dangerous goods or trafficking in women cannot be held to be illegal as enacting a prohibition and not a mere regulation. The nature of the business is, therefore, an important element in deciding the reasonableness of the restrictions. The right of every citizen to pursue any lawful trade or 21

business is obviously subject to such reasonable conditions as may be deemed by the governing authority of the country essential to the safety, health, peace, order and morals of the community.

Some occupations by the noise made in their pursuit, some by the odours they engender, and some by the dangers accompanying them require regulation as to the locality in which they may be conducted. Some, by the dangerous character of the articles used, manufactured or sold, require also special qualification in the parties permitted to use them, manufacture or sell them. The Court in this connection referred to the observations of Field, J. in P. Crowley v. Henry Christensen; 34 L ED 620 : 137 US 86 (1890) a part of which is as follows:

"The sale of such liquors in this way has, therefore been, at all times, by the courts of every State, considered as the proper subject of legislative regulation. ... Their sale in that form may be absolutely prohibited. It is a question of public expediency and public morality and not of federal law. The police power of the State is fully competent to regulate the business to mitigate its evils or to suppress it entirely. There is no inherent right in a citizen to thus sell intoxicating liquors by retail; it is not a privilege of a citizen of the State or of a citizen of the United States. As it is a business attended with danger to the community, it may, as already said, be entirely prohibited, or be permitted under such conditions as will limit to the utmost its evils. ... It is a matter of legislative will only."

(b)The elimination and exclusion from business is inherent in the nature of liquor business and it will hardly be proper to apply to such a business principles applicable to trade which all could carry on. The provisions of the law cannot be attacked merely on the ground that they create a monopoly. Properly speaking, there can be a monopoly only when a trade which could be carried on by all persons is entrusted by law to one or more persons to the exclusion of the general public. Such, however, is not the case with the business of liquor. The Court for this purpose relied upon the following observations of Lord Porter in Commonwealth of Australia v. 22

Bank of New South Wales; 1950 AC 235 : (1949) 2 AII ER 755:

"Yet about this, as about every other proposition in this field, a reservation must be made, for their Lordships do not intend to lay it down that in no circumstances could the exclusion of competition so as to create a monopoly either in a State or Commonwealth agency, or in some other body, be justified. Every case must be judged on its own facts and its own setting of time."

(c)When the contract is thrown open to public auction, it cannot be said that there is exclusion of competition and thereby monopoly is created.

(Emphasis supplied)

22. I may also refer to the judgment of this Court

in Maninderjit Singh Bitta v. Union of India and

others reported in 2005(1)SCC 679. In this case

undoubtedly the rule provided that there will be only

one license of the nature concerned. However, the

right to the license was settled by way of e-tender.

It was open to any person who is otherwise eligible

to participate in the e-tender. Undoubtedly the

guarantee of fairness of the State action and the

taboo against arbitrariness must inform the State

action once it decides to permit trade in liquor. It

is to be noticed that the introduction of the rule was 23

primarily to earn maximum profits. The case of the

state is that introduction of the rule has enabled

collection of greater amounts by way of revenue. This

cannot be said to be entirely an irrelevant

consideration. Going too far in these matters may

involve the court making a foray into the ordinarily

forbidden territory of policy.

23. No doubt, the appellant draws our attention

to the recent decision of this Court in The Kerala

Bar Hotels Association & Another v. State of Kerala

& Others AIR 2016 SC 163. In fact, one the

contentions of the appellants was that the state

had 3 options. The first is prohibition, the second

is State monopoly in manufacture or trade and the

third was to allow private players into the business

in which everyone has a right to partake in the

business. The court went on to hold inter alia as

follows:

“24. We disagree with the submissions of the Respondents that there is no right to trade in liquor because it is res extra commercium. The interpretation of Khoday put forward by Mr. Sundaram is, in our opinion, more acceptable. A right under Article 19(1)(g) to trade in liquor 24

does exist provided the State permits any person to undertake this business. It is further qualified by Article 19(6) and Article 47. The question, then, is whether the restrictions imposed on the Appellants are reasonable.”

The Court found support from the judgment of this

Court in the Constitution Bench in Krishna Kumar

Narula v. State of Jammu & Kashmir AIR 1957 SC 1368

which took the view that dealing in liquor is a

legitimate business although the State could impose

reasonable restriction. The court however noted

that in Khoday’s case (supra), the concept of res

extra commercius came to be applied on the business

of manufacture and trade of potable liquor.

I may also notice paragraph 27 of The Kerala

Bar Hotels Association case (supra) which reads as

below:

“27. We now move to the arguments predicated on Article 19 of the Constitution. We have already noted that the business in potable liquor is in the nature of res extra commercium and would therefore be subject to more stringent restrictions than any other trade or business. Thus while the ground of Article 19(1)(g) can be raised, in light of the arguments discussed with regard to Article 14, it cannot be said that the qualification on that right is unreasonable.” (Emphasis supplied) 25

24. I would not lose sight of in the facts of this

case one dimension in this regard. The appellant is

an association of companies. Article 19 provides for

various fundamental freedoms. However, unlike Article

14 and 21, these freedoms are not conferred on non-

citizens. In other words, Article 19 is confined to

citizens. It is well settled that a company though a

juristic person but not being a natural person is not

a citizen within the meaning of Article 19. The writ

petition is filed without joining any shareholder who

is a citizen. I would also take the view that

therefore reliance placed on Article 19 may not hold

good.

25. Judicial review of policy is justified

only if the policy is arbitrary or unfair or

violative of fundamental rights. Courts must be

loathe to venture into an evaluation of State

policy. I have noticed the principles enunciated

in paragraph 25 and also noted the view taken by

this Court in paragraph 27 of the Kerala Bar Hotel

Cases Supra. I may also notice that the question 26

which actually fell for consideration was in a

different factual matrix. I do not think that the

earlier view taken by this Court both in Cooverjee

B. Bharucha Vs. Excise Commissioner and the Chief

Commissioner, Ajmer and Others AIR 1954 SC 220 and

Khodays’ case (supra) in relation to the effect of

throwing open the right to obtain an exclusive

privilege not flowering into a monopoly has not been

overridden.

26. The third complaint of the appellant is

this. The assumption of the monopolistic position

by the licensee would lead to arbitrary and unfair

practices which would leave the members of the

appellant without redress. The High Court, it is

pointed out has rejected the contention by

essentially reasoning that the licensee as long as

it confirms to the conditions and law is a free

agent and shut out the prospect of judicial review.

This is what the High Court finds:-

“32. There may be some safeguards within the policy which protect the rights of the upstream licenses such as manufacturers as well as the downstream licenses i.e. the purchasers, such as, retailers and holders of licences for bars, clubs and restaurants. There is no doubt, however, that a sole wholesaler can pick and choose the 27

parties that he wishes to deal with and, in effect, refuse to deal with those he does not wish to deal with including by devising various strategies. In doing so, the sole wholesaler can also effectively promote and encourage a particular brand or brands in preference to others. For instance, he may grant a particular dealer or a dealer in particular brands different payment facilities and not grant the same to others or others who deal in certain other brands. There is nothing that stops him from doing so. The question is whether that would render the appointment of a sole wholesaler illegal.

33. The State, we will presume, even in the trade and business of liquor must act fairly and impartially and not arbitrarily. We will presume that in granting liquor licences and permits the State cannot adopt a pick and choose policy and must throw the field open to all those who are otherwise eligible. In the present excise policy, the State has permitted every eligible party to bid. It has not discriminated against or in favour of any party. The essential criteria for the appointment of the wholesaler is the value of the bid.

34. The challenge to the policy and to the rule on the ground that the appointment of a sole wholesaler in respect of an L-1BF Licence would adversely affect the commercial interests of those who he deals with or those who must deal with him, such as, the petitioners is not well founded. As we noted earlier, theoretically it is possible that the commercial interests of certain dealers and manufacturers will be affected, in as much as, the sole wholesaler will have the choice of who it would deal with. The sole wholesaler would also be entitled to grant better facilities to some of the dealers. That, however, would not render the policy illegal. A private party is entitled to deal with any person or enterprise. The State, absent special circumstances, cannot do so. We will presume it cannot do so, even in so far as the trade and business of liquor is concerned. However, once a matter moves from the control of the State or the instrumentalities of the State into the hands of private enterprises, the restrictions applicable to the State and its instrumentalities cease to be applicable. This 28

is invariably the case in auctions and tenders.

Take for instance, a case where the State decides to construct a building or a group of buildings. It can do so itself to the exclusion of all others. It is also entitled to engage private parties to do so. The State cannot pick and choose who to deal with. Absent any special circumstances, the State would be bound to consider the claim of every party that is otherwise eligible to undertake the work. However, once the State parts with its rights to construct a building and hands it over to a private enterprise, the matter ends there so far as it concerns the work that it has contracted to the private party. The contractor is not bound to call for tenders in respect of every item involved in the construction. The contractor is not bound to consider the application of every party for the supply of material required for the construction of the buildings. The contractor is entitled to obtain the material from such parties as it desires and on such terms and conditions that the contractor desires. The suppliers of the material would not be entitled to compel the contractor to afford them an opportunity of supplying the material. The rules of the game that apply to a State or an instrumentality of the State do not apply to such contractors.”

27. In this case, in fact, Mr. Gopal Subramanium,

learned senior counsel for the appellant drew our

attention to the fact that the figures would show that

the licensee has indeed being acting unfairly. It is

the case of the appellant that the sole licensee can

misuse his position in at least three ways. It is

contended that it is possible that the licensee

prefers certain brands to others inasmuch as it

concerns negotiation, longer credit period and other 29

terms and conditions. BIO suppliers would be at the

mercy of the licensee and they would have no option

but to reconcile with the terms and conditions which

would be laid down by the licensee. Secondly, it is

contended that failure to adhere with the terms and

conditions set out may result in a situation where a

particular brand would not be made available in the

State of Haryana. It is further contended that in

view of the monopolistic position enjoyed by the

licensee it may choose to promote certain brands over

others on account of unfair negotiating position made

available to it by the license. There are no checks

and balances to ensure that interest of other stake

holders is taken care of. Though the conditions

provide that the licensee will have to supply goods

demanded there are no means by which the actual demand

can be ascertained. It is further pointed out that

it is open to the licensee to offer discounts to the

retailers it seeks to favour. This results in

neutralizing the condition relating to the maximum

sale price being fixed by the excise authority.

Onerous conditions can be placed upon purchasers as 30

well as suppliers by the sole licensee and the lack

of checks and balances renders the same violative of

Article 14.

28. The guarantee of Article 14 against the State

undoubtedly embraces all spheres of its activities.

If the action falls foul of the mandate of Article 14

it is vulnerable, though different yardsticks may

operate. Undoubtedly the expression ‘state’ would

also include within its sweep an instrumentality of

the State as it would fall under the expression “other

authorities” in Article 12 of the Constitution. The

matter relating to which authorities fall under

Article 12 has been the subject matter of a catena of

decisions of this Court. The principles have been

culled out with sufficient clarity and I do not see

any occasion or any reason to dwell more upon the same

as the appellant even does not have a case that the

licensee would be an instrumentality of the state

within the meaning of Article 12 of the Constitution.

It is a trite law that an effort at bringing a body

within Article 12 must originate specifically in the

pleadings.

31

29. Pleadings in this case on this point is

conspicuous by its absence.

30. The appellant would point out that in fact,

after the new regime has been put in place, 5 star

hotels were not being provided sufficient stocks of

BIO products being supplied by the members of the

appellant. Further it is pointed out that immediately

upon grant of the licence in 2017, there has been a

sudden decline in the sales of BIO prod8ucts supplied

by the members of the appellant. The reason for this

decline is sought to be placed at the door step of

the sole licensee. The appellant has pointed out that

there has been sudden decline of 25% in the supply of

BIO brands of United Spirits Ltd.. There is a

reference of 30% decline of BIO products of Pernod

Ricard as well. There has been significant rise of

the product of Pernod Ricard in the neighboring states

of Rajasthan and Delhi, it is pointed out.

31. I would notice that many of the contentions

of the appellant are in the form of apprehensions

about what may happen in future. In fact, there is

a case for the respondents that no complaint as such 32

was moved against the licensee during the period.

The licensee is duty bound under the terms and

conditions of licence to submit pricing of each

brand at the time of approval of the brand. The

department is bound to approve the maximum sales

price factoring in various elements. The licensee

must indicate among other things, the landing price,

expenses, profit margin. The price is also

determined based on the prevalent rates of the same

and equivalent rate at the neighboring states and

the Government levies.

32. Furthermore, the exclusive licensee is

under the condition required to keep sufficient

stock of all brands as are demanded by the procuring

licensees and all such brands as were registered

with the department in 2016-17. Thus at least two

restrictions exist as in built safeguards which

operate against the exclusive licensee. The licensee

is obliged to keep sufficient number of stock of

all brands which are demanded by the procuring

licensees. In this case, the members of the

appellant would fall within the expression 33

‘procuring licensees’. Secondly, there is a

regulation of the maximum price which the exclusive

licensee can demand as the price is to be fixed by

the State itself. A question however, no doubt,

arises as to what would happen if the exclusive

licensee himself also operates retail outlets and

he promotes certain brands and/ or dampens the trade

in others. In the first place I would think that

ordinarily on the principle that a person would act

in his own self interest there would be no reason

for the licensee to deny himself the proceeds of

the higher turnover based on more sales as by

seeking to dampen the sale of certain brands it is

the licensee who would suffer a loss. Let me assume

however that he is placed in a situation where there

is a conflict of interest and by suppressing the

sale of certain brands and permitting the sale of

other brands the exclusive licensee is placed in a

more advantageous position, and therefore, he

prefers it. I must remind myself that the complaint

of the individual company would be that brand which

it wishes to import and deal in is not made 34

available. Quite clearly if there is any such

concrete incident which is pointed out, it would be

an infraction of the condition of the licence.

Certainly it would give rise to power with the

authorities to take suitable action as available in

law including in appropriate cases, cancellation of

the licence. If such provisions are not already

there I would observe that the State may devise

suitable provisions so that an individual who acts

as the licensee of the state would not do what the

State itself would be forbidden from doing under

the Constitution. I must also remind myself that

at the same time, the State has apparently gained

by way of enhanced collection of revenue by the new

regime put in place. The State’s power to

experiment in economic matters shall not suffer

invalidation at the hands of the Court. Such power

must be premised solely on State action falling foul

of the Constitution and the laws. State would

however do well to provide for a suitable mechanism

by which it can provide appropriate safeguards so

that there is fair dealing by the exclusive 35

licensee. Subject to the above observations I would

dismiss the appeal with no order as to costs.

………………………………….J. (K.M. Joseph)

New Delhi;

February 12, 2019