Supreme Court of India
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF INDIAversusSTATE OF HARYANA AND OTHERS
- Citation
- 2019 INSC 178
- Decided
- 12 February 2019
- Disposal
- Appeal(s) allowed
- Bench
- RANJAN GOGOI
Holding
Rule 24(i‑eeee) is ultra vires the Punjab Excise Act, 1914; the Financial Commissioner lacks power to issue a single state‑wide licence, and the amendment is struck down.
Summary
The International Spirits and Wines Association of India challenged the Haryana Liquor License (Amendment) Rules, 2017 which introduced Rule 24(i‑eeee) creating a single L‑1BF licence for the entire state to trade in imported foreign liquor. The issue was whether the Financial Commissioner, acting under Section 59 of the Punjab Excise Act, 1914, could determine the number of licences for the whole state, a power that the Act reserves for the State Government under Section 58(2)(e) and prohibits from delegation by Section 13(a). The Supreme Court held that the amendment was ultra vires because the Financial Commissioner lacked authority to prescribe a state‑wide licence and the power to regulate the number of licences lies exclusively with the State Government. Consequently, Rule 24(i‑eeee) was struck down. The Court also rejected the appellant’s constitutional challenges under Articles 19 and 14, finding no violation. The appeal was allowed.
Issues considered
- The validity of Rule 24(i‑eeee) granting a single L‑1BF licence for the whole of Haryana.
- Whether the Financial Commissioner can, under Section 59, determine the number of licences for the entire state contrary to Section 58(2)(e) and Section 13(a) of the Punjab Excise Act, 1914.
- Whether the rule creates an unconstitutional monopoly violating Article 19(1)(g) and Article 14 of the Constitution.
- Whether the policy is arbitrary, unfair or violative of fundamental rights.
Legislation cited
- Haryana Liquor License (Amendment) Rules, 2017s. Rule 24(i‑eeee)
- Haryana Liquor License Rules, 1970s. Rule 24, s. Rule 3
- Punjab Excise Act, 1914s. 13(a), s. 5, s. 58(2)(e), s. 59(a), s. 6, s. 8, s. 9
Subjects
liquor licensingultra viresfinancial commissionermonopolyArticle 19Article 14Punjab Excise ActHaryanadelegation of powersrule making
Judgment
234 [2019]REPORTS
SUPREME COURT 3 S.C.R. 234 [2019] 3 S.C.R.
A INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF
INDIA
v.
STATE OF HARYANA AND OTHERS
(Civil Appeal No. 9533 of 2018)
B FEBRUARY 12, 2019
[RANJAN GOGOI, CJI, NAVIN SINHA AND
K. M. JOSEPH, JJ.]
Haryana Liquor License Rules, 1970:
C r. 24(i-eeee)(as amended) – L-1BF license to trade in foreign
liquor – r. 24(i-eeee) providing 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 form (i.e. bottled in
original), if ultra vires the provisions of the 1914 Act – Held: r.24(i-
eeee) is ultra vires the powers of the Financial Commissioner under
D the Act and is struck down – Financial Commissioner was not
competent to amend the Rules with regard to grant of number of
licenses for the entire State, and which power was exclusive to the
State Government u/s. 6 read with ss.13(a) and 58(2)(e) – To hold
that the power of Financial Commissioner u/s. 59(a) to regulate
E sale of liquor, and that sale could be regulated through grant of
license, the Financial Commissioner was vested with the power to
determine the number of licenses, is unreasonable as also
unsustainable – Amendment notified by the Excise Commissioner
as a delegate of the Financial Commissioner was per se ultra vires
the powers of the latter u/ss. 6 and 13(a) r/w s. 58(2)(e) – While the
F State Government would have the power to determine the number
of licenses and to issue licence for a local area only, the Excise
Commissioner would have a superior power to determine the number
of licenses and issue licenses for the entire State – Punjab Excise
Act, 1914 – ss. 8, 6, 13(a) and 58(2)(e) – Haryana Liquor License
G (Amendment) Rules, 2017 – Liquor.
Allowing the appeal, the Court
HELD: Per Navin Sinha, J. (for himself and Ranjan Gogoi,
CJI):
1.1 Under Section 8 of the Punjab Excise Act, 1914 the
H State Government exercises general superintendence and control
234
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 235
INDIA v. STATE OF HARYANA
of Excise Administration and Excise Officers. Section 9 provides A
for vesting powers of the Financial Commissioner in the Excise
Commissioner by the State Government. 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
B
contained in Section 13(a). 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. In the scheme of the Act, the Haryana Liquor License
Rules, 1970 and the Punjab Intoxicants License and Sales Orders,
1956 read together it is apparent that a liquor license is to be C
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).
D
This is only in consonance with the general power of
superintendence vested in the State Government under Section
8. 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. E
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. [Paras 6, 10, 12][245-
B, E; 248-A, E]
1.2 The High Court held that in contradistinction to Section F
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. [Para 13][248-F]
G
1.3 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
H
236 SUPREME COURT REPORTS [2019] 3 S.C.R.
A the license are adhered to and necessary directions can also be
given for the purpose. [Para 14][250-E]
1.4 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
B 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 the amendment substituted Rule 24 (i-eeee) which
C 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). [Para 15][250-F-H]
D 1.5 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
E number of licenses to be granted for the entire State in a particular
category, 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 license,
the Financial Commissioner was vested with the power to
F determine the number of licenses, 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 Commissioner as a
delegate of the Financial Commissioner was per se ultra vires
G 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 licenses and to issue licence for a local area only, the
H Excise Commissioner would have a superior power to determine
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 237
INDIA v. STATE OF HARYANA
the number of licenses and issue licenses for the entire State. A
[Para 16][251-A-E]
1.6 The Financial Commissioner was not competent to
amend the Rules with regard to grant of number of licenses 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) B
of the Act. 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. [Para 18][251-H; 252-A-
B]
C
Akadasi Padhan v. State of Orissa AIR 1963 SC 1047
: [1963] Suppl. SCR 691; Khoday Distilleries Ltd. v.
State of Karnataka (I) (1995) 1 SCC 574 : [1994] 4
Suppl. SCR 477; Khoday Distilleries Ltd. v. State of
Karnataka (II) (1996) 10 SCC 304 : [1995] 6 Suppl.
SCR 759; Association of Registration Plates v. Union D
of India (2005) 1 SCC 679 : [2004] 6 Suppl. SCR 496;
Deepak Theatre v. State of Punjab, (1992) Supp 1 SCC
684 : [1991] 3 Suppl. SCR 242 – referred to.
Per K.M. Joseph, J. (Dissenting): E
1.1 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. Section 13 forbids delegation of power under Section
58 inter alia on the Financial Commissioner or Commissioner. F
[Para 9][258-H; 259-A]
1.2 Section 58(2)(e) states that the State Government has
the power to frame rules to regulate the periods of licences,
permits and passes either wholesale or retail; to regulate the
localities for which wholesale or retail licences, permits or passes G
may be granted, and 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. 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
H
238 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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 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
B
the manufacture, supply, storage or sale or any intoxicant. [Paras
11, 12][259-F-H; 260-A-B]
1.3 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
C 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 (maxim-Omne Majus Continet in Se Minus) but the
converse namely the part would include the whole could not hold
D good. Thus, the 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
E 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.
This view finds support also from another circumstance in the
F form of Rule 3 of the 1970 Rules. [Para 13][260-C-F]
1.4 Rule 3 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
G 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
H local area upon the State. Unless it can be reasoned that the
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 239
INDIA v. STATE OF HARYANA
powers to regulate sale of liquor within the meaning of Section A
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 cannot be accepted. [Para 14][261-A-
C]
B
1.5 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 C
power to provide for number of licences qua the State as a whole,
which does not fall under Section 58(2)(e) of the Act. [Para
17][262-G-H]
1.6 The finding by the Division Bench of the High Court
that the Financial Commissioner has power to decide upon the D
number of licenses is upheld. [Para 20][263-D-E]
1.7 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 E
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. Therefore reliance placed on Article 19 may not hold good.
Judicial review of policy is justified only if the policy is arbitrary F
or unfair or violative of fundamental rights. Courts must be loathe
to venture into an evaluation of State policy. [Paras 24, 25][266-
H; 267-A-C]
1.8 The guarantee of Article 14 against the State
undoubtedly embraces all spheres of its activities. If the action G
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 principles have been culled
out with sufficient clarity and there is no occasion or any reason H
240 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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. An effort at
bringing a body within Article 12 must originate specifically in
the pleadings, which is absent. [Paras 28, 29][270-A-C]
B 1.9 It is noticed 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 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
C 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
D Government levies. [Para 31][270-G-H; 271-A]
1.10 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
E 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 the
instant case, the members of the appellant would fall within the
expression ‘procuring licensees’. Secondly, there is a regulation
of the maximum price which the exclusive licensee can demand
F as the price is to be fixed by the State itself. A question as regards,
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. Ordinarily on the principle that a
person would act in his own self interest there would be no reason
G 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. It is
assumed, 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
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 241
INDIA v. STATE OF HARYANA
placed in a more advantageous position, and therefore, he prefers A
it. The complaint of the individual company would be that brand
which it wishes to import and deal in is not made available. Quite
clearly if there is any such concrete incident, it would be an
infraction of the condition of the license. Certainly it would give
rise to power with the authorities to take suitable action as
B
available in law including in appropriate cases, cancellation of
the license. If such provisions are not already there it would be
observed 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. At the same time, the State has apparently gained C
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
D
for a suitable mechanism by which it can provide appropriate
safeguards so that there is fair dealing by the exclusive
licensee.[271-B-H; 272-A]
The Kerala Bar Hotels Association & Another v. State
of Kerala & Others AIR 2016 SC 163 : [2015] SCR
256 – distinguished. E
D.K. Trivedi and Sons v. State of Gujarat (1986) Suppl.
SCC 20 : [1986] SCR 479; Khoday Distilleries Ltd.
and Others v. State of Karnataka and Others (1996) 10
SCC 304 : [1995] 6 Suppl. SCR 759; Khoday
Distilleries Ltd and Others v. State of Karnataka and F
Others (I) (1995) 1 SCC 574 : [1994] 4 Suppl. SCR
477; Maninderjit Singh Bitta v. Union of India and
others (2005) 1 SCC 679 : [2004] 6 Suppl. SCR 496;
Krishna Kumar Narula v. State of Jammu & Kashmir
AIR 1957 SC 1368; Cooverjee B. Bharucha Vs. Excise G
Commissioner and the Chief Commissioner, Ajmer and
Others AIR 1954 SC 220 : [1954] SCR 873 – referred
to.
H
242 SUPREME COURT REPORTS [2019] 3 S.C.R.
A Case Law Reference
In the Judgment of Navin Sinha, J.
[1963] Suppl. SCR 691 referred to Para 2
[1994] 4 Suppl. SCR 477 referred to Para 2
[1995] 6 Suppl. SCR 759 referred to Para 2
B
[2004] 6 Suppl. SCR 496 referred to Para 3
[1991] 3 Suppl. SCR 242 referred to Para 17
In the Judgment of K.M. Joseph, J.
[1986] SCR 479 referred to Para 15
C [1995] 6 Suppl. SCR 759 referred to Para 18
[1994] 4 Suppl. SCR 477 referred to Para 21
[2004] 6 Suppl. SCR 496 referred to Para 22
[2015] SCR 256 distinguished Para 25
AIR 1957 SC 1368 referred to Para 23
D
[1954] SCR 873 referred to Para 25
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9533
of 2018.
From the Judgment and Order dated 26.05.2017 of the High Court
E of Punjab and Haryana at Chandigarh in Civil Writ Petition No. 6870 of
2017.
Gopal Subramanium, Sr. Adv., Aashish Gupta, Aditya Mukharji,
Anirudh Lekhi, Ravinder Nijhawan, S. S. Shroff , Advs. for the Appellant.
Ms. Pinky Anand, ASG, Ms. Nidhi Gupta, AAG, Sumit Teterwal,
F Vishwa Pal Singh, Sanjay Singh, M. K. Dutta, Ugra Shankar Prasad,
Advs. for the Respondents.
The Judgments of the Court were delivered by
NAVIN SINHA, J. 1. The appellant having been unsuccessful
in its challenge to Rule 24(i-eeee) of the Haryana Liquor License Rules
G 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
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 243
INDIA v. STATE OF HARYANA [NAVIN SINHA, J.]
outside India and imported into the country in a bottled form (i.e. bottled A
in original). Under challenge is also clause 9.5.1.2 of the State Excise
Policy for the year 2017-2018 to that extent, 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.
B
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
C
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. D
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
E
of sufficient checks and balances 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 F
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
G
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
H
244 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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 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
B
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
C 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.
D 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
E was permissible in the law for trade in liquor.
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)
F 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-
G 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 –
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 245
INDIA v. STATE OF HARYANA [NAVIN SINHA, J.]
(a) Reserve price shall be Rs.50,00,00,000/-. A
(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 B
general superintendence and control of Excise Administration and Excise
Officers. Section 9 provides for vesting powers of the Financial
Commissioner in the Excise Commissioner by the State Government.
Section 13 dealing with delegation of powers provides:
“Delegation: C
(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 D
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 E
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: F
(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 G
foregoing provisions, the State Government may make rules:
……
(e) Regulating the period and localities for which, and, the persons
or classes of persons, to whom licenses, permits and passes for
H
246 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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
B 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
C 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 :
D “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
E State Government may notify under Section 8 of the Punjab Excise
Act, 1914.
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,
F
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,
G 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.”
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 247
INDIA v. STATE OF HARYANA [NAVIN SINHA, J.]
10. In the scheme of the Act, the Rules and the Order read together A
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
B
13(a). This is only in consonance with the general power of
superintendence vested in the State Government under Section 8.
11. In Khoday Distilleries vs. State of Karnataka (II) (supra), a
similar provision under the Karnataka Excise Act 1965 fell for
consideration therein:
C
“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 – D
…..
(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: E
(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 F
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 G
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.”
H
248 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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
B 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
C 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 –
D
(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
E be applicable to the entire State is exclusively vested in the State
Government under Section 6(a) of the Act.
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
F 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,-
G (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
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 249
INDIA v. STATE OF HARYANA [NAVIN SINHA, J.]
fittings, implements, apparatus and registers to be maintained A
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 B
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 C
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;
(e) regulating the time, place and manner of payment of any duty D
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 E
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;
F
(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; G
(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
H
250 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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;
B
(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;
(iii) for ascertaining whether such spirit has been denatured;
C
(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
D 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,
E 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
F 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 the amendment substituted
Rule 24 (i-eeee) which provided that there shall be only one L-1BF
G 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).
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 251
INDIA v. STATE OF HARYANA [NAVIN SINHA, J.]
16. The distinction sought to be drawn by the High Court with A
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
B
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 C
to reading words into the statute which the legislature itself never intended.
The amendment notified by the Excise 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
D
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 E
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 F
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 G
and in public interest….”
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 H
252 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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.
B
19. The appeal is allowed.
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
C 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
D 25 of the Companies Act. It claims to be a representative body of
International spirits and wines companies 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)
E 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
F 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
G 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. 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,
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 253
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
the Haryana Liquor License (Amendment) Rules, 2017 was introduced. A
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, -
….... B
(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/- C
(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 D
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.”
E
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. 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 F
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 G
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. H
254 SUPREME COURT REPORTS [2019] 3 S.C.R.
A (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
B Commissioner, Commissioner or Collector, under Section 13,
Clause (b);
(c) prescribing the time and manner of presenting and the procedure
for dealing with appeals from orders of excise officers;
(d) regulating the import, export, transport or possession of any
C
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
D 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
E 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
F 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
G 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;
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 255
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
(l) prohibiting the printing, publishing or otherwise displaying or A
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
B
under, 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
C
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
D
(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 E
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.
F
(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
G
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.
H
256 SUPREME COURT REPORTS [2019] 3 S.C.R.
A (iii) the tapping of drawing of tari from any tari producting
tree.
(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
B 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;
C (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: -
D (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;
E (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;
F (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
G any intoxicant may be sole, and the notice to be exposed at
such premises;
(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;
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 257
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
(g-i) declaring the process by which spirit shall be denatured; A
(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;
B
(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 C
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
D
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 E
either to the whole of [Haryana] 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.” F
(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 G
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
H
258 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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 [Haryana] or to any
specified local area or areas;
(b) …..
B
(c) …..
(d) …..”
(emphasis supplied)
Equally Section 6 also does not deal with the power to make rules.
C
7. It is apparent that the legislature has maintained a distinction
between the whole and a part and the part is what is captured in the
expression “local area”. Further Section 8 of the said Act reads as
follows:
D “8. Superintendence and control of excise administration and
excise officers. -
(a) Subject to the control of the [State] Government and unless
the [State] Government shall by notification otherwise direct,
the general superintendence and administration of all matters
E relating to excise shall vest in the Financial Commissioner.”
(b) ….
(c) ….”
(emphasis supplied)
F 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
G 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.
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 259
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
It is undoubtedly true that Section 13 forbids delegation of power under A
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 B
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 particulars; C
(d) For such period;
as the Financial Commissioner may direct.
(2) …..
(3) …..” D
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 E
this Act, the Collector may grant licenses for the sale of any
[intoxicant] within his district.”
(emphasis supplied)
11. Coming to Section 58 undoubtedly what is pressed before us
by the appellant is a specific provision contained in Section 58(2)(e). F
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, G
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;
H
260 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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 in the provision which can be regulated but however
limited to any local area. As against this and immediately following
B
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
C 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
D
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 expression “local area” as used in Section 58(2)(e) would appear to
convey the impression that the legislature intended to confer power on
E 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
F
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
G 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.
H
(emphasis supplied)
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 261
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
14. Thus, the said rule reinforces the view that the expression A
“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
B
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 C
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.
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 D
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 E
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, F
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 G
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
H
262 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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 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.”
B
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. -
C
(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
D 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 -
E
(i) prospecting licences,
(ii) mining leases,
(iii) minerals mined, quarried, excavated or collected;
* * * *
F (r) any other matter which is to be, or may be, prescribed under
this Act.”
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
G
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.
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 263
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
18. In the judgment of this court in Khoday Distilleries Ltd. and A
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
B
to a distributor licence and not wholesale or retail licence which is what
the provision speaks of.
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 C
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. D
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. E
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 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, F
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 : G
“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: H
264 SUPREME COURT REPORTS [2019] 3 S.C.R.
A (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
B
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.
C The right of every citizen to pursue any lawful trade or 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
D
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.
E 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
F 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
G 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.”
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 265
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
(b)The elimination and exclusion from business is inherent in the A
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
B
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. Bank of New South Wales; 1950 AC 235 : (1949) 2
AII ER 755: C
“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. D
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. E
(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 F
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 primarily to earn maximum G
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.
H
266 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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
B
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
C 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 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.”
D
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
E 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:
F “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
G
cannot be said that the qualification on that right is unreasonable.”
(Emphasis supplied)
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
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 267
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
provides for various fundamental freedoms. However, unlike Article 14 A
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
B
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 C
in paragraph 27 of the Kerala Bar Hotel Cases Supra. I may also notice
that the question 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 D
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 E
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 F
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 parties that he wishes to deal with and, in effect, refuse G
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
H
268 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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
B 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
C 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
D 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
E 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
F 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 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
G 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
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 269
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
State parts with its rights to construct a building and hands it over A
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
B
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 C
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 D
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 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 E
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 F
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
G
in neutralizing the condition relating to the maximum sale price being
fixed by the excise authority. Onerous conditions can be placed upon
purchasers as well as suppliers by the sole licensee and the lack of
checks and balances renders the same violative of Article 14.
H
270 SUPREME COURT REPORTS [2019] 3 S.C.R.
A 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
B
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
C 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.
29. Pleadings in this case on this point is conspicuous by its absence.
D 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 products
supplied by the members of the appellant. The reason for this decline is
E 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
F 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 was
moved against the licensee during the period. The licensee is duty bound
G 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
H
INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF 271
INDIA v. STATE OF HARYANA [K. M. JOSEPH, J.]
same and equivalent rate at the neighboring states and the Government A
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 B
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 ‘procuring licensees’. Secondly,
there is a regulation of the maximum price which the exclusive licensee C
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 D
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 E
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 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 F
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
G
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 H
272 SUPREME COURT REPORTS [2019] 3 S.C.R.
A safeguards so that there is fair dealing by the exclusive licensee. Subject
to the above observations I would dismiss the appeal with no order as to
costs.
B Nidhi Jain Appeal allowed.
C
D
E
F
G
H
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