Supreme Court of India
M/S KHODAY DISTILLERIES LTD. ETC.versusSTATE OF KARNATAKA AND ORS. ETC.
- Citation
- 1994 INSC 466
- Decided
- 19 October 1994
- Disposal
- Disposed off
- Bench
- M N VENKATACHALIAH
Holding
A citizen has no fundamental right to trade or business in potable liquor; the State may prohibit such trade, create a monopoly, and impose reasonable restrictions under Article 19(6) even through subordinate legislation.
Summary
The petitioners, wholesale liquor traders, challenged several Karnataka excise rules and a Kerala government order, alleging that they violated their fundamental right under Article 19(1)(g) to carry on trade or business in liquor and were inconsistent with Articles 14, 47, 300A, 301 and 304. The Constitution Bench was asked to decide whether the right to trade in liquor is a fundamental right and whether the State can completely prohibit such trade, create a monopoly, and impose restrictions through subordinate legislation. The Court held that Article 19 rights are qualified and that potable liquor is a "res extra commercium" – an inherently harmful commodity – so no fundamental right exists to trade in it, allowing the State to prohibit the trade entirely, create a monopoly, and impose reasonable restrictions under Article 19(6) even via rules. The Court also clarified that "trade" and "business" are synonymous in Article 19(1)(g) and that restrictions may be placed by subordinate legislation provided they do not violate the Constitution. Consequently, the special leave petitions were dismissed as frivolous.
Issues considered
- The existence of a fundamental right to carry on trade or business in liquor under Article 19(1)(g).
- Whether the State may completely prohibit the manufacture, sale, and distribution of potable liquor.
- The power of the State to create a monopoly in liquor trade and to sell licences.
- The scope of Article 19(6) – whether reasonable restrictions must be made only by a legislative act or may also be imposed by subordinate legislation.
Legislation cited
- Industries (Development and Regulation) Act, 1951
- Karnataka Excise (Bottling of Liquor) (Amendment) Rules, 1989
- Karnataka Excise (Brewery) (Amendment) Rules, 1989
- Karnataka Excise (Distillery and Warehouse) (Amendment) Rules, 1989
- Karnataka Excise (Manufacture of Wine from Grapes) (Amendment) Rules, 1989
- Karnataka Excise (Sale of Indian and Foreign Liquor) (Amendment) Rules, 1989
- U.P. Excise (Amendment) Act, 1972s. Section 24-A, s. Section 4(2)
- U.P. Excise (Amendment) (Re‑enactment and Validation) Act, 1976
Subjects
Article 19(1)(g)Article 19(6)Article 47Fundamental rightLiquor tradeState monopolyRes extra commerciumSubordinate legislationLicensingIndustrial alcohol
Judgment
MIS KHODA Y DISTILLERIES LTD. ETC. A
v.
STATE OF KARNATAKA AND ORS. ETC.
OCTOBER 19, 1994
B
(M.N. VENKATACHALIAH, CJ, J.S. VERMA, P.B. SAWANT,
K. RAMASWAMY AND B.P. JEEVAN REDDY, JJ.]
Constitution of India-Articles 19(1) (g), 19(6), 47, 298, 300A, 301 to
305 and Entry 8 and 51 of list JI and Entry 52 of list I, Seventh
Schedule-Right to carry trade in liquor-Whether a fundamental right-Held,
c
Ntr-State can prohibit completely trade or business in potable liquor
Monopoly for manufacture, trade or business in liquor can be created in favour
of State-Reasonable restrictions under Article 19(6) can be placed by subor-
dinate legislation as well, so long as such legislation is not violative of any
provisions of Constitution. D
Words and Phrases-Constitution of India-Article 19( 1) (gj-Words
'trade' and 'business'-Meaning of-Held, word 'trade' may include all con-
notations of word 'business'-lnArticle 19(1) (g), words 'trade' and 'business'
are used synonymously.
E
Petitioners, wholesale trades in liquor had challenged the constitu-
tional validity of the Kamataka Excise (Distillery and Warehouse)
(Amendment) Rules, 1989, Karnataka Excise (Manufacture of Wine from
Grapes) (Amendment) Rules 1989, Karnataka Excise (Brewery) (Amend·
ment) Rules, 1989, Kamataka Excise (Sale of Indian and Foreign Liquor) f
(Amendment) Rules, 1989 and Karnataka Excise (Bottling of liquor)
(Amendment) Rules, 1989 on the group that the Rules in question affected
adversely the fundamental right of the parties to carry on trade or business
in liquor and that the said Rules were violative of Articles 14, 19(l)(g), 47,
300 A, 301 and 304 of the Constitution of India. Some appeals bad also
been tiled against the decision of the Kerala High Court upholding the G
validity of the. Government order dated 9th December, 1992 passed by the
Government of Kerala deciding to cancel all foreign liquor licences issued
under Rule 13 (3) of the Kerala Foreign Liquor Rules, 1974 to Hotels,
Restaurants and Tourist Homes. A bunch of special leave Petitions and
writ petitions were tiled against various decisions of the Andbra Pradesh H
477
478 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A High Court upholding the validity of the amendments to the A.P. Foreign
Liquor and Indian Liquor Rules, 1970 and A.P. (Regulations of wholesale
Trade, Distribution and Retail Trade in Indian Liquor and Foreign Liq-
uor, Wine and Beer) Act, 1993.
Two rival contentions of law raised. One, that there was no fun-
B damental right to trade or business in liquor and that the State had power
to regulate the trade or business by placing restrictions on such trade or
business in the interests of the general public even to the extent of
prohibiting completely such business or trade. The other contention was
that a citizen had a fundamental right to trade or business in liquor and
C the State could only place reasonable restriction on the said right in the
interests of general public by law made for purpose under Article 19 (6)
of the Constitution. The State could not, therefore, prohibit completely the
said trade or business in liquor in the garb of regulating it, and the
limitations or restrictions placed had to pass the test of reasonableness.
D
These matters were referrel\ to the Constitution Bench to decide
questions, firstly whether the pe:itioners/appellants had a fundamental
right to carry on trade in liquor and secondly, whether the State could
prevent the petitioners from carrying on with the business of liquor as
apart from trade, during the unexpired period of the licences. Two inciden-
E ta! questions raised were (i) .whether a monopoly for the manufacture,
trade or business in liquor could be created in favour of the State and (ii)
whether reasonable restrictions under Article 19 (6) of the Constitution
could be placed only by Act of Legislature or by a subordinate legislation
as well.
F
It was contended that the State could not carry on trade in liquor
under Article 47 of the Constitution. If the law on the subject was con-
sidered to be law under Article 19(6), it bad to be on the basis that a citizen
had got a fundamental right to trade in liquor. If the law was that a citizen
bad no fundamental right, then Article 19(6) could not be applied because
G the said article applied only to those rights which a citizen possessed. What
a citizen could not do under Article 19 (1), the State could not do under
Article 19(6). Secondly, it was submitted that assuming that the State had
got the power to carry on trade in liquor de hors Article 19(6) and under
Article 298 of the Constitution, the power under Article 298 could not
H extend to trade in liquor. Thus was so because the Union Government had
KHODAYDISTILLERIESLTD. v. STATEOFKARNATAKA 479
no executive power to trade in commodity which under Article 47 it was A
J enjoined to prohibit.
Alleging that the appellants petitioners had a fundamental right to
trade in liquor, it was stated firstly, that Entry 51 of list II specifically
accepted the fact that the manufacture of alcohol could be for human
consumption. Entry 8 of List II specifically provided for production, B
manufacture, purchase and sale of intoxicating liquor. The implication of
this Entry was that till prohibition was introduced by applying Article 47,
there was no prohibition of consumption of liquor, and hence there was
no prohibition for manufacture and sale of liquor. Secondly, it was sub·
mitted that the trade in liquor could not be looked upon as an obnoxious C
trade. Thirdly, the Union .Government itself bad recognised nuder its
Industrial Policy Resolution as early as in 1956 that the production of
potable alcohol as an industry had to be recognised though regulated and
the licences had to be freely granted for the manufacture of the potable
liquor. For all these reasons, it was submitted that there was no warrant
for excluding liquor from the ambit of the word "any occupation, trade or D
business" under Article 19 (l)(g) of the Constitution.
Disposing of the matter, this Court
HELD: 1.1. The rights protected by Article 19 (1) are not absolute E
but qualified. The qualifications are stated in clauses (2) to (6) of Article
19. The fundamental rights guaranteed In Articles 19 (l)(a) to (g) are,
therefore, to be read along with the said qualifications. (520-F)
1.2. The right to practise any profession or to carry on any occupa·
tion, trade or business does not extend to practising a profession or carry- F
Ing or an occupation, trade or business which is inherently vicious and
pernicious, and is commended by all civilised societies. It does not entitled
citizens to carry on trade or business in activities which are immoral and
criminal and in articles or goods which are obnoxious and injurious to
health, safety and welfare of the general public i.e. res extra commercium G
(outside commerce). There cannot be business in crime. (520-H, 521-A)
. .1.3. Potable liquor as a beverage is an intoxicating and depressent
drink which is dangerous and injurious to health and is, therefore, an
a!"licle which is res-extra Commercium inherently harmful. A citizen bas,
therefore, no fundamental right to do trade or business in liquor. Hence H
480 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A the trade or business in liquor can be completely prohibited. (521-B-C]
1.4. Article 47 of the Constitution considers intoxicating drinks and
drugs as injurious to health and impeding the raising of level of nutrition
and the standard of living of the people and improvement of the public
health. It, therefore, ordains the State to bring about prohibition of the
8 consumption of intoxicating drinks which obviously include liquor, except
for medical purposes. Article 47 is one of the Directive principles which is
fundamental in the governance of the country. The State bas, therefore, the
power to completely prohibit the manufacture, sale, possession, distribu-
tion and consumption of potable liquor as a beverage, both because it is
inherently a dangerous article of consumption and also because of the
c Directive principle contained in Article 47, except when it is used and
consumed for medical purposes. (521-D-E]
1.5. The State can create a monopoly either it itself or in the agency
created by it for the manufacture, possession, sale and distribution of the
D liquor as a beverage and also sell the licences to the citizens for the said
purpose by charging fees. This can be done under Article 19(6) or even
otherwise. (521-F]
1.6. Again the State can impose limitations and restrictions on the
trade or business in potable liquor as a beverage which restrictions are in
E nature different from those imposed on the trace or business in legitimate
activities and goods and articles which are res commercium. The restric-
tions and limitations on the trade of business in potable liquor can again
be both under Article 19 (6) or otherwise. The restrictions and limitation
can extend to the State carrying on the trade or business itself to the
F exclusion of and elimination of others and/or to preserving to itself the
right to sell licences to do trade or business in the same, to others.
[521-G-H, 522-A]
1.7. When the State permits trade or business in the potable liquor
with or without limitation, the citizen bas the right to carry on trade or
G business subject to the limitations, If any and the State oannot make dis-
crimination between the citizens who are qualified to carry on the trade on
business. (522-B]
1.8. The State can accept any mode of selling litences for trade or
business with a view to maximise its revenue so long as the metbod adopted
H is not discriminatory. (522-C]
KHO DAY DISTILLERIES LTD. v. STATE OF KARNATAKA 481
1.9. The State can carry on trade or business in potable liquor A
notwithstanding that it is an intoxicating drink and Article 47 enjoins it
to prohibit its consumption. When the State carries on such business, it
does so to restrict and regulate productions, supply and consumption of
liquor which is also an aspect of reasonable restriction in the interest of
general public. The State cannot on that account be said to be carrying on
B
an illegitimate business. [522-D-E]
1.10. The mere fact that the State levies taxes or fees on the produc·
lions, sale and income derived from potable liquor whether the production,
sale to income is legitimate illegitimate, does not make the State a party
to the said activities. The power of the State to raise revenue by levying C
taxes and fees should not be confused with the power of the State to
prohibit or regulate the trade or business in question. The State exercises
its two different powers on such occasions. Hence the mere fact that the
State levies taxes and fees on trade or business in liquor or income derived
from it, does not make the right to carry on trade or business in liquor a D
fundamental right, or even a legal right when such trade or business is
completely prohibited. [522-F ·GI
1.11. The State cannot prohibit trade or business in medicinal and
toilet preparations containing liquor or alcohol. The State can, however, ·
under Article 19(6) place reasonable restrictions on the right to trade E
business in the same the interests of general public. [522-H, 52~·A]
1.12. Likewise, the state cannot prohibit trade or business in in·
dustrial alcohol which is not used a beverage but used legitimately for
industrial purpose. The State, however, can place reasonable restrictions
on the said trade or business in the interests of the general public under F
Article 19(6) of the Constitution. [523-B]
1.13. The restriction placed on the trade or business in industrial
alcohol or in medicinal and toilet preparations containing liquor on
alcohol may also be for the purpose of preventing their abuse of diversion G
for use as or in beverage. [523-C]
StateofBombay&Anr. v.F.N. Ba/sara, [1951] SCR682; T.B. lbrahim
v. Regional Transport Authority, Tanjore, [1953] SCR 290; Cooverjee B.
Bharucha v. The Excise .commissioner and Ors., [1954] SCR 8733; Com-
monwealth or Australia v. The Bank of New South Wales, (1950) AC 235; H
482 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A State of Assam v. A.N. Kidwai, Commissioner of Hills Divisions and Ap-
peals, Shillong, [1059] SCR 295; The State of Bombay v. Chamarbaugwala,
[1957] SCR 874; Nagendra Nath Bora andAnr. v. The Commissioner of Hills
Division and Appeals, Assam and Ors., [1958] SCR 1240; Narendra Kumar
and Ors. v. Union of India & Ors., [1960] 2 S.C.R. 375; A.B. Abdul Kadir
B and 0-s. v. The State of Kera/a and Anr., [1962] Supp. 2 SCR 741; Krishna
Kumar Narula and Ors. v. State of Jammu & Kashmir and Ors., [1967] 3
SCR 50; State of Orissa and Ors. v. Harinarayan Jaiswal and Ors., [1972] 3
SCR 784; Amar Chandra Chakraborty v. Collector of Excise Government of
Tripura and Ors., [1973] 1 SCR 533; Nashirwar etc. etc. v. State of Madhya
Pradesh, [1975] 2 SCR 881; Har Shankar and Ors. etc. etc. v. The Dy. Excise
C and Taxation Commissioner and Ors., [1975] 3 SCR 254; Lakhan/a/ Etc. v.
State of Orissa and Ors., [1977] 1 SCR 811; Sat Pal and Co. etc. v. Lt.
Governor of Delhi and Ors., [1977] 3 SCR 651; Southern Petroleum and
Chemicals, Trichur and Ors. v. State of Kera/a and Ors., [1981] 4 SCC 391;
State of M.P. and Ors. v. Nandlal Jaiswal and Ors., [1986] 4 SCC 566;
D Doongaji and Co. v. State of Madhya Pradesh ond Ors., AIR (1991) SC 1947;
Indian Mica Micanite Industries v. The State of Bihar and Ors., [1971] 2 SCC
236; The State of U.P. and Ors. v. Synthetics and Chemicals Limited and Ors.,
[1980] 2 SCC 441 and Synthetics and Chemicals Ltd. and Ors. v. State of
U.P. and Ors, [1990] 1 SCC 109, relied on.
,E
2. Artide 13(3)(a) of the Constitution states that law includes "any
ordinance, order, bye-law, rule regulation, notification, custom or usage
have in the territory oflndia the force oflaw" Clauses. (2) to (6) of Article
19 make no distinction between the law made by the Legislature and the
F subordinate legislation for the purpose of placing the restrictions on the
exercise of the respective fundamental rights mentioned in_ Article 19 (l)(a)
to (q). Clause (6) of Article 19 only speaks of "operation of any existing
law in so far as it imposes ......""from making any law imposing" reasonable
restrictions on the exercises of the rights conferred by Article 19 (l)(g).
There is nothing in this provision which makes it imperative t.J impose the
G restrictions in question only by a law enacted by the Legislature. Hence the
restrictions in question can also be imposed by any snbordinate legislation
so long as such legislation is not violative of any provisions of the Con·
stitution. This is apart from the fact that the trade nr business in potable
liquor is a trade or business in res extra commercium and hence can be
H regulated and restricted even by executive order provided it is issued by
KHODAYDISTILLER!ESLTD.v. SfATEOFKARNATAKA[SAWANT,J.J 483
the Government of State. [524-D-G] A
3. The word "business" is more comprehensive than ~e word "trade"
since it will include manufacture which the word "trade" may not ordinarily
include. The primary meaning of the word "trade" is the exchange of goods
for goods or goods for money. However, the word "trade" and "industry"
are also used interchangeably many times. It all depends upon the context B
in which the words occur. Thus it is apparent that the word "trade" may
inclnde all the connotations of the word "business". In Article 19 (l)(g) of
our Constitution, the words "trade" and "business" are used synonimously.
Hence, in this case, after the taking-over of the trade, viz., the activity of
buying and selling liquor, no activity was left with the petitioners to carry C
on under the licence held by them. [525-H, 526·A·B, 527-C-D]
Skinner v. Jack Breach Ltd., (1927) 2 KB 220; National Association of
Local Government Officers v. Bolton Corporation, (1943) AC 166; Aviation
shipping Co. Ltd. v. Mu"ay (Inspector of Texas), [1961] 2 All ER 805 and
K.K. Naru/a and Ors. v. State of Jammu and Kashmir and Ors., [1967) 3 D
SCR 50, referred to.
CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal
Nos. 4708-12 of 1989 etc. etc.
From the Judgment and Order dated 13.11.89 of the Karnataka High E
· Court in W.P. No. 16878-82 of 1989.
V.R. Reddy, Additional Solicitor General, K. Madhava Reddy, Shan-
ti Bhushan, R.F. Nariman, A K. Ganguli, T.V.S.N. Chari, Nikhil Nayyar,
B.V. Acharaya, M. Veerappa, K.H. Nobin Singh, D. Prakash Reddy, Mrs.
D. Bharathi Reddy, R.N. Naidu, N.Reddy, S.Sukumaran, C.N. Sreekumar, F
P. Mahale, P.N. Ramalingam, E.M.S. Anam, P.K. Pillai, M.A. Firoz,
A.T.M. Sampath, E.C.Agrawala, P.P. Tripathi and B. Kanta Rao for ap-
pearing parties.
The Judgment of the Court was delivered by G
SAWANT, J. This is a bunch of appeals, special leave petitions and
writ petitions. The first group consists of C.A. Nos. 4708- 12/89, 4718-27/89,
W.P. (C) Nos. 666 667, 693, 694, 774 and 910of1990 wherein constitutional
validity of the (i) Karnataka Excise (Distillery and Warehouse) (Amend-
ment) Rules, 1989, (ii) Karnataka Excise (Manufacture of Wine from H
484 SUPREME COURT REPORTS ·[1994] SUPP. 4S.C.R.
A Grapes) (Amendment) Rules, 1989, (iii) Karnataka Excise (Brewery)
(Amendment) Rules, 1989, (iv) Karnataka Excise (Sale of Indian and
Foreign Liquors) (Amendment) Rules, 1989 and (v) Karnataka Excise
(Bottling of Liquor) (Amendment) Rules, 1989 was unsuccessfully chal-
lenged by various parties before the Karnataka High Court, inter alia on
the ground that the Rules in question affected adversely the fundamental
B right of the parties to carry on trade or business in liquor and that the said
Rules were violative of Articles 14, 19 (1) (g), 47, 300A, 301 and 304 of the
Constitution of India. A Bench of three learned judges of this Court which
heard this group of matters has referred them to the Constitution Bench.
C The second group consists of C.A. Nos. 6043-50, 6051 and 6052 of
1993. These appeals arise out of the deciding of the Kerala High Court
upholding the validity of the Government Order 9th December, 1992
passed by the Government of Kerala deciding to cancel all foreign liquor
licences issued under Rule 13(3) of the Kerala Foreign Liquor Rules, 1974
D to Hotels, Restaurants and Tourist Homes. A Bench of two learned Judges
has referred the said matters also to the Constitution Bench for decision
on the question whether appellants have a fundamental right to carry on
trade in liquor.
The third group consists of SLP (C) Nos. 13817- 28, 16208, 16601-02,
E 17935, 17953 of 1993, 185, 2479, 2962-63, 5898 of 1994, and W.P. (c) Nos.
587, 591, 592, 608, 612 & 625 of 1993. These matters arise out of various
decisions of the Andhra Pradesh High Court upholding the validity of the
amendments to the Andhra Pradesh Foreign Liquor and Indian Liquor
Rules, 1970 from time to time and A.P. (Regulation of Wholesale Trade,
F Distribution and Retail Trade in Indian Liquor and Foreign Liquor, Wine
and Beer) Act, 1993 (hereinafter referred to as the "A.P. 1993 Act"). The
High Court has held that the Rules and the amendments thereto as well
as the Act are not invalid on the ground that they violate the right to carry
on trade in liquor which is not fundan1ental.
G In appears that some of the parties affected by the decision of the
Andhra Pradesh High Court upholding the validity of the enactments and
rejecting the argument that the petitioners have a fundamental right to
carry on trade in liquor, filed writ petitions in the High Court for a
declaration that though the validity of the enactments had been upheld by
H the High Court the A.P. 1993 Act deals only with the taking over of trade
KHODAYDISTILLERJESLID.v. STATEOFKARNATAKA[SAWANf,J.] 485
but not business in liquor and, therefore, the State had no right to prevent A
the writ petitioners from carrying on which the business of liquor during
the validity of their licences. The argument was that "trade" is different
from "business". The High Court dismissed the petitions, S.L.P. (c) Nos.
9422-24 of 1994 filed against the said decision, forming the fourth group,
has also been referred to the Constitution Bench to be decided along with
B
the matters in the above three groups.
2. Thus in matters in the first three groups, this Bench has to answer
one question viz., whether the appellants/petitioners have a fundamental
right to carry on trade in liquor. The question involved in matters in the
fourth group is different, viz., since the A.P. 1993 Act referred to above, C
deals. only with the taking over of trade in liquor but not business, whether
the State can prevent the petitioners from carrying on with the business of
liquor as apart from trade, during the unexpired period of the licences.
3. We will first deal with the matters in groups 1, 2 and 3 and, D
therefore, with the question whether the appellants/petitioner have a fun-
damental right to carry on business in liquor.
4. Before we proceed to examine the question, it is necessary at the
outset to focus our attention on the precise controversy raised before us
and which, it is claimed, arises out of the conflicting decisions of this Court. E
For the purposes of contentions advanced before us, liquor covers not only
those alcoholic liquids which are generally us"d as beverages and produce
intoxication but also all liquids containing alcohol. Liquor is classified
· broadly·into three classes, viz., (i) potable liquor which is used as beverage,
(ii) liquor used in medicinal and toilet preparation and (iii) ·industrial F
liquor used for industrial purpose. Two rival contentions of law are can-
vassed before us. One, that there is no fundamental right to trade or
business in liquor and that the State has power to regulate the trade or
business by placing restrictions on such trade or business in the interests
of the general public even to the extent of prohibiting completely such G
business or trade. The incidental consequence which flows from this con-
tention is that the State has the exclusive privilege to sell liquor and this
privilege can be sold under the relevant law. The State can, therefore, have
also a monopoly in manufacturing, possessing and distributing liquor. The
other contention is that a citizen has a fundamental right to trade or
business in liquor and the State can only place reasonable restrictions on H
486 SUPREME COURT REPORTS [1994] SUPP. 4S.C.R.
A the said right in the interests of general public by law made for the purpose
under Article 19(6) of the Constitution. The State cannot, therefore,
prohibit completely the said trade or business in liquor· in the garb of
regulating it, and the limitations or restrictions placed have to pass the test
of reasonableness as in the case of trade or business in any other article.
It is in light of these rival contentions that we have to examine the question
B raised before us.
5. Two incidental question which, therefore, arise are (i) whether a
monopoly for the manufacture, trade or business in liquor can be created
in favour of the State and (ii) whether reasonable restrictions under Article
C 19(6) of the Constitution can be placed only by Act of Legislature or by a
subordinate legislations as well.
It is contended that the State cannot carry on trade in liquor under
Article 47 of the Constitution. If the law on the subject is considered to be
D law under Article 19 (6), it has to be on the basis that a citizen had got a
fundamental right to trade in liquor. If the law is that a citizen has no
fundamental right, then Article 19 (6) cannot be applied because the said
Article applies only to those rights which a citizen possesses. What a citizen
cannot do under Article 19 (1), the State cannot do under Article 19 (6).
Secondly, it is submitted that assuming that the State has got the power to
E carry on trade in liquor de hors Article 19 (6) and under Article 298 of the
Constitution, the power under Article 298 cannot extend to trade in liquor.
This is so because the Union Government has no executive power to trade
in a commodity which under Article 47 it is enjoined to prohibit.
F In support of the contention that the appellants/petitioners have a
fundamental right to trade in liquor, it is argued firstly, that Entry 51 of
List II specifically accepts the fact that the manufacture of alcohol can be
for human consumption. The said Entry, among others, provides as follows
: "Duty of Excise on intoxicating liquor for human consumption". Entry 8
of List II specifically provides for production, manufacture, purchase and
G sale of intoxicating liquor. The implication of this Entry is that till prohibi-
tion is introduced by applying Article 47, there is no prohibition of con-
sumption of liquor, and hence there is no prohibition for manufacture and
sale of liquor. Secondly, it is submitted that there are other substances like
tobacco which are more harmful to health than alcohol and they are being
H sold freely. A ljlajority of the States did not introduce prohibition and some
KHODAY DISl1LLERIESLTD. v. SfATEOFKARNATAKA(SAWANf,J.J 487
States' which purported to do it, failed and reverted to the earlier pre- A
prohibition condition. On the other hand, the revenue from the auction of
excise, vend-fees, liquor and other levies forms a major source of the
revenue of the State. Hence the trade in liquor cannot be looked upon as
an obnoxious trade. Thirdly, the Union Government itself has recognised
under its Industrial Policy Resolution as early as in 1956 that the produc- B
lion of potable alcohol as an industry has to be recognised though regulated
and the licences have to be freely granted for the manufacture of the
potable liquor. During the last several years, a large number of distillery,
brewery and winery licences have been granted all over the country. For
all these reasons, it is submitted that there is no warrant for excluding
liquor from the ambit of the words "any occupation, trade or business" C
under Article 19(1) (g) of the Constitution.
6. We will first refer to the relevant provisions of the tonstitution
which have a bearing on the subject.
D
Article 19(1) (g) provides that all citizens shall have the right to
practise any profession or to carry on any occupation, trade or business.
This right conferred by the aforesaid provision is circumscribed by the
provisions of clause (6) of the very Article which reads as follows :
"(6) Nothing in sub-clause (g) of the said clause shall affect the E
operation of any existing law in so far as it imposes, or prevent the
States from making any law imposing, in the interests of the general
public, reasonable restrictions on the exercise of the right con-
ferred by the said sub-clause, and, in particular, nothing in the said
sub-clause shall affect. the operation of any existing law in so far F
as it relates to, or prevent the State from making any law relating
to -
(i) the professional or technical qualifications necessary for prac-
tising any profession or carrying on any occupation, trade or
business, or G
(ii) the carrying on by the State, or by a corporation owned or
controlled by the State, of any trade, business, industry or service,
whether to the exclusion, complete or partial, of citizens or other-
wise." H
488 SUPREME COURT REPORTS [1994) SUPP. 4 S.C.R.
A Thus Article 19(1) (g) read with Article 19 (6) spells out a fundamen-
tal right of the citizens to practise any profession or to carry on any
occupation, trade or business so long as it is not prohibited or is within the
framework of the regulation, if any, if such prohibition or regulation has
been imposed by the State by e1.acting a law in the interests of the general
public. It cannot be disputed that certain professions, occupations, trades
B
or businesses which are not in the interests of the general public may be
completely prohibited while others may be permitted with reasonable
restrictions on them. For the same purpose, viz., to subserve the interests
of general public, the reasonable restrictions on the carrying on of a
profession, occupation, trade etc., may provide that such trade, business
c etc., may be carried on exclusively by the State or by a Corporation owned
or controlled by it. The right conferred upon the citizens under Article 19
(l)(g) is thus subject to the complete or partial prohibition or to regulation,
by the State. However, under the provisions of Article 19 (6) the prohibi-
tion, partial or complete, or the regulation, has to be in the interests of the
D general public.
Article 47 which is one of the Directive Principles of the State Policy
reads as follows :
"47. Duty of the State to raise the level of nutrition and the standard
E of living and to improve public health. - The State shall regard the
raising of the level of nutrition and the standard of living of its
people and the improvement of public health as among its primary
duties and, in particular, the State shall endeavour to bring about
prohibition of the consumption except for medicinal purposes of
intoxicating drinks and of drugs which are injurious to health."
F
This Article enjoins upon and in turn enables the state to take
measures to raise the level of nutrition and the standard of living of its
people and to improve the public health. Towards this end, the State is
required to bring about prohibition of the consumption of intoxicating
G drinks and drugs which are injurious to health. The prohibition may be
complete or partial and it would also include regulation. It cannot be
disputed that liquor is one such drink.
Article 298 of the Constitution provides as follows :
H "298. Power to carry on trade, etc. - The executive power of the
KHODAYDISTILLERIESLTD.v. STATEOFKARNATAKA[SAWANT,J.j 489 '
Union and of each State shall extend to the carrying on of any A
trade or business and to the acquisition, holding and disposal of
property and the making of contracts for any purpose :
Provided that -
(a) the said executive power of the Union shall, in so far as such B
trade or business or such purpose is not one with respect to which
Parliament may make laws, be subject in each State to legislation
by the State; and
(b) the said <executive power of each State shall, in so far as such C
trade or business or such purpose is not one with respect to which
the State Legislature may make laws, be subject to legislation by
Parliament."
Thus both the Union and the State Government have within their
respective spheres, power to carry on trade or business. D
Article 300A proyides that no person shall be deprived of his proper-
ty save by authority of law. It is undisputed that if a citizen is carrying on
the business according to the provisions of law, his business cannot be
taken away save by authority of law, if such a law is enacted to further the
purpose whether of Article 19 (6) or Article 47. E
Article 301 reads as :
"301. Freedom of trade, commerce and intercourse- Subject to the
other provisions of this part, trade commerce and intercourse
throughout the territory of India shall be free." F
The right given by this Article to freely carry on trade, commerce
and intercourse throughout the territory of India is undisputedly subject to
the same restrictions as is the right under Article 19(1)(g).
Apart from the restrictions placed on the right under Article 301 by G
the provisions of Articles 19(6), 47, 302 and 303, the provisions of Article
304 also place such restrictions on the said right. So do the provisions of
Article 305, so far as they protect existing laws and Jaws creating State
monopolies. The provisions of the aforesaid Articles, so far as they are
relevant for our purpose, read together, therefore, make the position clear H
490 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A that the right conferred by Article 19(1)(g) is not absolute. It is subject to
restrictions imposed by the other provisions of the Constitution. Thoso
provisions are contained in Articles 19 (6), 47, 302, 303, 304 and 305.
7. We may now refer to th~ relevant Entries of List II of the Seventh
Schedule to the Constitution which give power to the State Governments
B to make the laws in question. Entry 8 reads as follows :
"8. Intoxicating liquors, that is to say, the production, manufacture,
possession, transport, purchase and sale of intoxicating liquors.
Entry 51 reads as follows :
c
"51. Duties of excise on the following goods manufactured or
produced in the State and countervailing duties at the same or
lower rates on similar goods manufactured or produced elsewhere
in India:-
D (a) Alcoholic liquors for human consumption;
(b) Opium, Indian hemp and other narcotic drugs and narcotics;
but not including medicinal and toilet preparations containing
alcohol or any substance included in sub-paragraph (b) of this
E Entry. 11
Thus a State has legislative competence to make laws in respect of
the above subjects.
The relevant Entry in List I which has a bearing on the subject is
F Entry 52 which reads as follows :
"52. Industries , the control of which by the Union is declared by
Parliament by law to be expedient in the public interest."
Under this Entry, the Parliament has enacted the Industries
G (Development and Regulation) Act, 1951 (for short 'IDR Act') and Item
26 of Schedule I of that Act reads as "Fermentation Industries - (1)
Alcohol, (2) Other products of Fermentation and Distillery". Read with
Section 2 of the IDR Act, the said Entry would mean that the alcohol
industry dealing in potable or non- potable alcohol is a controlled industry
H within the meaning of the said Act. We are not in this reference concerned
'
KHODAYDISTILLERIESLID.v. SfAIBOFKARNATAKA[SAWANf,J.] 491
with the question as to whether there is any conflict between the relevant A
Acts of the respective State Legislatures and the Rules, Regulations,
Notifications and Orders issued under the said Acts and the provisions of
the IDR Act. It cannot further be denied that the pith and substance of
the ID R Act is to provide the Central Government with the means of
implementing their industrial policy which was announced in their resolu- B
tion of 6th April, 1948 and approved by the Central legislature. That brings
under central control the development and regulation of a number of
important industries, the activities of which affect the country as a whole
and the development of which must be governed by economic factors of
all India import. The development of the industries on sound and balanced
Jines is sought to be secured by the licensing of all new undertakings. f!ence C
the IDR Act confers on the Central Government power to make rules for
the registration of existing undertakings and for regulating the production
and development of the industries mentioned in the Schedule and also for
consultation with the Provincial (now-State) Governments in these matters.
The Act ooes not in any way denude the power of the State Governments D
to make laws regulating and prohibiting the production, manufacture,
· possession, transport, purchase and sale of intoxicating liquors meant for
human consumption (but not for medicinal or toilet preparations) and
levying excise on them under Entries 8 an 51 of List II. If there is any.
incidental encroachment by the relevant State Acts on the area occupied
. by the IDR Act, that will not invalidate the State Acts. The impugned E
judgments of the High Courts also mention that the State Acts have
received the assent of the President. Be that as it may.
8. We may now refer to the relevant authorities cited atthe Bar.
F
In State of Bombay & Anr, v. F.N. Balsara, [1951] SCR 682 which is
a decision of the Constitution Bench of five learned Judges, what fell for
consideration was the validity of the Bombay Prohibition Act, 1949. In that
case, this Court held that in view of the provisions of Article 47 of the
Constitution, the total prohibition on potable liquor would be reasonable.
It does not appear that any contentions were raised there on the .basis of G
Article 19(1) (g) and hence there is no di&cussion with reference to the
said provision.
In T.B. Ibrahim v. Regional Transport Authority, Tanjore, (1953] SCR
290 what fell for consideration was the validity of the amendment in 1950 H
492 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.
A to Rule 268 of the Madras Motor Vehicles Rules, 1940 to empower the
Transport Authority to alter from time to time the starting place and
termini for motor vehicles. The appellant was the owner of a bus-stand in
the municipal limits which was being used for several years as a starting
place and terminus for buses plying to and from the said limits. The
Transport authority passed a resolution changing the starting place and
B
terminus for convenience of the public. The appellant challenged the said
resolution and consequently the amendment to Rule 268, among others, as
repugnant to Article 19 (l){g) of the Constitution. A Constitution Bench
of five learned Judges dealing with this contention held that the restrictions
placed upon the use of the bus-stand for the purpose of picking up or
C setting down passengers cannot be considered to be unreasonable. It may
be that the appellant by reason of the shifting of the bus-stand has been
depiived of the income he used to enjoy when the bus-stand was used for
outward journeys. There is no fundamental right in a citizen to carry on
business wherever he chooses and his right must be subject to any
D reasonable restriction imposed by the executive authority in the interests
of the public convenience. The restriction imposed has the effect of ter-
minating the use to which the stand has been put hitherto. The restriction
cannot be regarded as being unreasonable if the authority imposing such
restriction has the power to do so. Whether the abolition of the stand was
conducive to public convenience of !IOI is a matter entirely for the
E Transport Authority to judge and it is not up to the Court to substitute its
opinion with that of the authority which is in the position having regard to
its knowledge of local conditions, to appraise the situation.
In Cooveijee B. Bharncha v. The Excise Commissioner and the Chief
Commissioner, Ajmer & Ors., (1954] SCR 873 where the vires of Excise
F
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
others things, held that :
(a) In order to determine the reasonableness of restrictions, en-
G visaged 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 con-
cerning all trade and no hard and fast rule concerning all trades
can be laid down. It cannot also be denied that the State has the
H power to prohibit trades which are illegal or immoral or injurious
KHO DAY DISTILLERIES LTD. v. SfATE OF KARNATAKA [SAWANf, J.] 493
to the health and welfare of the public. Laws prohibiting trades in A
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 tlfe business is, therefore, an important element in
deciding the reasonableness of the restrictions. The right of every
citizen to pursue any lawful trade or business is obviously subject
B
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 c
character of the article .used, manufactured or sold require also
special qualification in the parties permitted to use them, manufac-
ture or sell them. The Court in this connection referred to the
observation of Field J. in P. Crowley v. Henry Christensen, 34 L.ed.
620 a part of which is as follows ·:
D
"................... The sale of such liquors in this way has, therefore,
been at all times by the courts of every state considered as
the P.roper subject of legislative regulation ....Their sale in that
form may be absolutely prohibited. It 1s a question of public
expediency and public morality and not of federal law. The E
police power of the State ii 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 the citizens of the State
or of a citizen of the United States. As it is a business F
attended with danger to the community, it may, as already
said, be entirely prohibited or be permitted under such con-
ditions 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 G
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 1 H
494 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A 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. The Bank of New South Wales, [1950] AC 235:
B "Yet about this as about every other proposition in this field,
a reservation must be made. For their Lordships do not
intend t-0 lay it down that in no circumstances would ex-
clusion of competition so as to create a monopoly either in a
State or commonwealth agency or in some other body be
c justified. Every case must be judged on its own facts and its
own setting of timen.
(c) When the contract is thrown open to public auction, it cannot
be said that there is exclusion of competition and thereby monopo-
ly is created.
D
In State of Assam v. A.N. Kidwai, Commissioner of Hills Division and
Appeals, Shillong, [1957] SCR 295 which is also a decision of the Constitu-
tion Bench of five learned Judges, the validity of the notification by which
the Commissioner of Hills Division and Appeals was appointed the Appel-
E late Authority under Assam Revenue Tribunal (Transfer of Powers) Act,
1948, was under challenge. The rival claimants had applied for grant of
licences and settlement of country spirit shops and the parties who were
dissatisfied with the orders of the Deputy Commissioner and those of the
Excise Commissioner in appeals therefrom, appealed to the Appellate
Authority whose orders were quashed by the High Court on the ground
F that the concerned notification was void. While dealing with the conten- ·
tions raised therein, the Court held that a perusal of the Act and the Rules
made it clear that no person had any absolute right to sell liquor, and the
purpose of the Act and the Rules was to control and restrict the consump-
tion of intoxicating liquors, such control and restriction being obviously
G necessary for the preservation of public health and inorals, and to raise
revenue.
In The State of Bombay v. R.M.D. Chamarbauwa/a, [1957) SCR 874,
which is also a decision of a Constitution Bench of five learned Judges, the
challenge was to the Bombay Lotteries and Prize Competition Control and
H Tax Act, 1948 as amended by the Bombay Lotteries and Prize Competition
KHODAYDISTILLERIESLID.v. SfATEOFKARNATAKA(SAWANf,J.] 495
Control and Tax (Amendment) Act, 1952. After referring to the observa- A
lions made in the American decision in Phalen v. Virginia, 12 L.ed. i030,
the Court held as follows' :
"It will be abundantly clear from the foregoing observation that
the activities which have been condemned in this country from B
ancient times appear to have been equally discouraged and looked
upon with disfavour in England, Scotland, the United States of
America and in Australia in the cases referred to above. We find
it difficult to accept the contention that those activities which
encourage a spirit of reckless propensity for making easy gain by
' lot or chance, which lead to the loss of the hard earned money of C
the undiscerning and improvident common man and thereby lower
his standard of living and drive him into a chronic state of indeb-
tedness and eventually disrupt the peace and happiness of his
humble home could possibly have been intended by our Constitu-
tion makers to be raised to the status of trade, commerce' or D
intercourse and to be made the subject-matter of a fundamental
right guaranteed by Art. 19(1) (g). We find it difficult to persuade
ourselves that gambling was ever intended to form any part of this
ancieut country's trade, commerce or intercourse to be declared
as free under Art. 301. It is not our purpose nor is it necessary for E
us in deciding this case to attempt an exhaustive definition of the
word "traden, "business", or 11intercourse". We are, however, clearly
of opinion that whatever else may or may not be regarded as falling
within the meaning of these words, gambling carmot certainly be
t'lken as one of them. We are convinced and satisfied that the real F
purpose of Arts. 19(1)(g) and 301 could not possibly have been to
guarantee or declare the freedom of gambling. Gambling activities
from their very nature and in essence are extra-commercium al-
though the external forms, formalities and instruments of trade
may be employed and they are not protected either by Art. 19 (1)
(g) or Art. 301 of our Constitution.' G
The Court further held, relying on the observations in United States
v. Kahrigar, 97 Led. 754, Lewis v. United States of America, 99 L.ed. 475
and Mann v. Nash, L.R., (1932] 1 K.B. D. 752 that the fact of issuing' a
licence or imposing a tax means nothing except that the licensee shall be H
496 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A subject to no penalties under the law if he pays it. The Government may
tax what it also forbids and that nobody has a constitutional right to gamble
but that if he elects to do so, though it be unlawful, he must pay tax. The
revenue authorities are merely taxing the individual with reference to
certain facts. They are not partners or shares in the illegality. The crime is
not a business and fact regulatory provisions have been enacted to control
B gambling by issuing licences and by imposing taxes does not in any way
alter the nature of gambling which is inherently vicious and pernicious.
The Court further held that the same result can be arrived at by applying
the doctrine of pith and substance. When Article 19(1) (g) guarantees or
Article 301 declares the freedom of trade, they describe human activities
C in a specific aspect. They single out attributes which the act or transaction
may wear and make the freedom, which they confer depend upon those
attributes. The freedom secures by the two articles implies that no un-
reasonable restraint or burden shall be placed upon the act falling under
that description because it is trade or commerce or iniercourse. The Court,
D then held that the Act impugned there did not purport directly to interfere
with trade, commerce or intercourse as such, for the criterion of its
application was the specific gambling nature of the transaction which it
restricted. The purpose of the Act was not to restrict any thing which
brought the transactions under the description of trade, commerce or
intercourse. The Act was in pith and substance, an Act with respect to
E betting and gambling and to control and restrict betting and gambling was
not to interfere with trade, commerce or intercourse as such but to keep
their flow free and unpolluted and to save them from anti-social activities.
Hence the validity of that Act had not to be decided by the yardstick of
reasonableness and public interest laid down in Articles 19(6) and 304. The
appeal against the stringency and harshness, if any, of the law does not lie
F to court of law. In that view of the matter, the court felt that it was not
·necessary to consider or express any opinion with regard to the vexed
question whether restriction contemplated under Article 19 (6) and 305 (b)
may extend to total prohibition. This was so because, the Court felt that
it could not persuade itself to hold that Article 19 (1) (g) or Article 301
G comprises all activities undertaken with a view to profit as "trade" within
the meaning of those Articles. In this view of the matter, the Court held
that the prize competition which the respondents there were carrying on
being of a gambling nature, could not be regarded a.s trade or commerce
and such, the respondents could not claim any fundamental right under
H Article 19(1) (g) in respect of such competitions nor were they entitled to
KHODAYDISTILLERJESLTD.v. STATEOFKARNATAKA[SAWANf,J.J 497
the protection of Article 301. A
In Nagendra Nath Bora & Anr. v. The Commissioner of Hills Division
& Appeals, Assam and Ors., [1958] SCR 1240, the appeals arose out of the
orders passed by the revenue authorities under the provisions of Eastern
Bengal and Assam Excise Act, 1910. The dispute was between the rival
claimants who had tendered for the settlement of country spirit shops.
B
While dealing with the matters in question, the Constitution Bench of five
learned Judges observed by referring to the State of Assam v. A.N. Kidwai,
(supra) and th_e observations made therein that no one had an inherent
right to settlement of liquor shops. When the State by public notice invites
candidates for settlement to make their tenders and in pursuance of such C
a notice, a number of persons make such tenders, each one makes a claim
for himself in opposition to the claims and the others, and the public
authorities concerned have to choose from amongst them. The question
whether an administrative authority on such occasions functions merely in
an administrative or quasi-judicial capacity must be determined on an D
examination of the statute and its rules. The Court held that the authorities
cannot be said to pass purely administrative orders which were beyond the
ambit of High Court's power of supervision and control.
In Narendra Kumar & Ors. v. Union of India & Ors., [1960] 2 SCR
375 which is decision of the Constitution Bench of five learned Judges, the E
question whether restriction on fundamental rights includes their prohibi-
tion, fell for consideration squarely. On different dates prior to April 3,
1958, the petitioners in that case had entered into contracts of purchase of
co'op1:r with importers at Bombay and Calcutta, but before they could take
delivery from the importers, the Government of India in exercise of its F
powers under Section 3 of the Essential Commodities Act, 1955, issued on
April 2, 1958 Non- ferrous Metal Control Order, 1958. Clause (3) of the
Order provided that no person shall sell or purchase any non-ferrous metal
at a price which exceeded the amount represented by an addition of 35
per cent to its landed cost, while clause (4) prohibited any person from G
acquiring any non-ferrous metal except under and in accordance with the
permit issued in that behalf by the Controller in accordance with such
principles as the Central Government may from time to time specify. No
such principles were, however, published in the gazette nor laid before the
Houses of Parliament. The Court held that the word 'restriction' in Article
19(5) and (6) of the Constitution includes cases of prohibition also. Where H
498 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.
A the restriction reaches the stage of total restraint of rights, special care has
to be taken by the courts to see that the test of reasonableness is satisfied
by considering the question in the background ()f the facts and circumstan-
ces under which the Order was made, taking into account the nature of
evil that was sought to be remedied by such law, the ratio of the harm
caused to individual citizens by the proposed remedy, the beneficial effect
B
reasonably expected to result to the general public, and whether the
restraint caused by the law was more than what was necessary in the
interests of the general public. The Court, in this connection referred to
Chintaman Rao v. The State of Madhya Pradesh, (1950] SCR 759,
Cooverjee's case (supra) and Madhya Bharat Cotton Association Ltd. v.
c Union of India, AIR (1959) SC 634. The prohibition, according to the
Court, has to be treated as only a kind of restriction. The Court then
observed as follows :
"After Art. 19 ( 1) has conferred on the citizen the several rights
D set out in its seven sub-clauses, action is at once taken by the
Constitution in els. 2 to 6 to keep the way of social control free
from unreasonable impediment. The raison d'etre of a State being
the welfare of the members of the State by suitable legislation and
appropriate administration the whole purpose of creation of the
State would be frustrated if the conferment of these seven rights
E would result in cessation of legislation in the extensive fields where
thes.e seven rights operate. But without the saying provisions that
wonld be the exact result of the Art. 13 of the Constitution. It was
to guard against this position that the Constitution provided in its
els. 2 to 6 that even in the fields of these rights new laws might be
F made and old laws would operate where this was necessary for
general welfare. Laws imposing reasonable restriction on the ex-
ercise of the rights are saved by cl. 2 in respect of rights under
sub. cl. (a) where the restrictions are "in the interests of lhe security
of the State;" and other matters mentioned therein; by cl. 3 in
respect of the right conferred by sub. cl. (b) where the restrictions
G are "in the interests of the public order; by els. 4, 5 and 6 in respect
of the rights conferred by sub-cls.(c), (d), (e), (t) and (g) the
restrictions are "in the interest of the general public" - in cl. 5 is
in respect of rights conferred by sub-els. (d), (e) & (t) also where
the restrictions are "for the protection of the interests of any
H scheduled tribe" . But for these saving provisions such laws would
KHODAY DISTILLERIES LID. v. STATE OF KARNATAKA (SAWANT, J.] 499
' been void because of Art. 13, which is in these words : - All A
have
laws in force in the territory of India immediately before the
commencement of this Constitution, in so far as they are inconsis-
tent with the provisions of this Part, shall to the extent of such
inconsistency be void; (2) The State shall not make any law which
takes or abridges the rights conferred by this part aod aoy law
B
made in contravention of this clause shall, to the extent of the
contravention, be void .........11
At it was to remedy the harm that would' otherwise be caused
by the provisions of Art. 13, that these saving provision were made,
it is proper to remember the words of Art. 13 in interpreting the C
words "reasonable restrictions" on the exercise of the right as used
in cl. (2). It is reasonable to think that the makers of the Constitu-
tion considered the word 11 restrictio.n" to be sufficiently wide to
save laws "inconsistent" with Art. 19 (1), or "taking away the rights"
conferred by the Article, provided this inconsistency or taking away
was reasonable in the interests of the different matters mentioned D
in the clause. There can be no doubt therefore that they intended
the word 11 restriction" to include cases of "prohibition" also. The
contention that a law prohibiting the exercise of a fundamental
right is in no case saved, cannot therefore, be accepted."
E
In A.B. Abdul Khadir and Ors. v. the State of Kera/a & Anr., (1962]
Supp. 2 SCR 741, which is a decision of Constitution Bench of five learned
Judges, the Court observed that the system of auctioning of the right to
possess excisable goods like country liquor, gaoja, and bhang was only a
method of realising duty through grant of licences to these who made the
highest bid at the auctions and thus to raise revenue. In that case, what was F
under challenge was the system of auctions under the Cochin Tobacco Act,
1084 (M.E.) with the object of controlling the cultivation, production,
manufacture, storage and sale of tobacco. By majority, the Court held .that
the income realised from such auction was in the nature of excise duty.
G
9. In Krishna Kumar Narula & Ors. v. State of Jammu & Kashmir &
Ors., [1967] 3 SCR 50 any question whether the right to carry on business
of liquor is a fundamental right fell directly for consideration before a
Constitution Bench of five learned Judges.
Since heavy reliance is placed on behalf of the appellants/petitioners H
500 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A on this to contend that the right to carry on business in liquor is fundamen-
tal, it is necessary to eJ9lllline this case a little more in detail.
The facts were that the appellant was carrying on business in liquor
in his hotel under an annual licence issued under Section 20 of the J ammu
& Kashmir Excise Act, 1958. He had applied for a fresh licence for another
B year. Meanwhile, the Excise Department received complaints from the
inhabitants of the locality objecting to the location of the bar in that
locality. The complaints were inquired into and the appellant was informed
by the Commission that the licence will not be issued unless he shifted the
premises to some other approved locality. Writ petition filed by the appel-
c lant for quashing the order of the Commissioner was dismissed by the High
Court. While dealing with the appeal against the High Court's order, this
Court commenting on the combined reading of clauses {1) and (6) of
Article 19 observed as follows :
D "A combined reading of els. (1) and (6) of Art. 19 makes it
clear that a citizen has a fundamental right to carry on any trade
or business, and the State can make a law imposing reasonable
restrictions on the said right in the interests of the general public.
It is, therefore, obvious that unless dealing in liquor is not trade
or business, a citizen ljas a fundamental right to deal in that
E commodity. The learned Advocate General contended that dealing
in liquor was no business or trade, as the dealing in noxious and
dangerous goods like liquor was dangerous to the community and
subversive of its morals. The acceptance of this broad argument
involves the position that the meaning of the expression "trade or
F business" upon and varies with the general acceptance of the
standards of morality obtaining at a particular point of time in our
country. Such an approach leads to incoherence in thought and
expression. Standards of morality can afford a guidance to impose
restrictions, but cannot limit the scope of the right. So too, a
Legislature can impose restrictions on, or even prohibit the carry-
G ing on of a particular trade or business and the Court, having
regard to the circumstances obtaining at a particular time or place
may hold the restrictions or prohibition reasonable. The question,
therefore, is, what is trade or business? Though the word nbusinessn
is ordinarily more comprehensive than the word "traden, one is
H used as synonymous with the other. It is not necessary to bring out
KHODAY DISTILLERIES LTD. v. STATE OF KARNATAKA [SAWANf, J.] 501
the finer points of distinction between the said two concepts in this A
case. In the words of S.R. Das, J., as he then was, in Narain
Swadeshi Weaving Mills v. The Commissioner of Excess Profits Tax,
[1955] SCR 952 at p. 961: AIR (1955) SC 176 at p. 181 the words
11
business11 connotes some real, substantial and systematic or or-
ganised course of activity or conduct with a set purpose. Even
B
accepting this test, if the activity of a dealer, say, in ghee is business;
then how does it cease to be business if it is in liquor? Liquor can
be manufactured, brought or sold like any other commodity. It is
consumed throughout the world, though some countries restrict or
prohibit the same on economic or moral grounds. The morality or
otherwise of a deal does not affect the quality of the activity though c
it may be a ground for imposing a restriction on the said activity.
The illegality of an activity does not affect the character of the
activity but operates as a restriction on it. If a law prohibits dealing
in liquor, the dealing does not cease to be business, but the said
law imposes a restriction on the said dealing."
D
The Court then referred to the decision in T.B. Ibrahim's case
(supra). According to the respondent-State there, it was held. in that case
that dealing in liquor was not a business or trade within the meaning of
Article 19 of the Constitution and there is no fundamental right in a citizen
to carry on the business wherever he chooses and his right must be subject E
to any reasonable restriction imposed by the executive authority in the
interests of public convenience. The Court observed that in that case this
Court did not say that there was no fundamental right to do business but
only held that a citizen could not claim that his fundamental right could
not be restricted in public interests.
F
Nor, according to the Court, did the decision in Cooverjee's case
(supra) lay down any such proposition. According to the Court, in that case
this Court held that the impugned regulation was a reasonable restriction
within the meaning of Article 19 (6). Referring to the extract from the
Judgment of Field, J, in Crowlene v. Christensen referred to in that G
judgment (which we have already quoted above) and the concurrence
expressed by the Court there with the said observations, the Court ob-
served that the said passage from the judgment of Field, J. had nothing to
do with the construction of Article_ 19 (l) (g) of the Constitution. Accord-
ing to the Court , there the learned Judge was considering the scope of the H
502 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A "police power" and the said observations were made in that context and
those observations were applied by this Court in Cooveljee's (supra) in
considering the reasonableness of the restrictions imposed upon the fuo-
damental rights. According to the Court, the perusal of the entire judgment
shows that to the Court had indeed conceded the fundamental right but
held that the said regulations operated as reasonable restriction on the said
B rights.
Similarly, according to the Court the following observations of this
Court in A.N Kidwai's case (supra) had no relevance to the inquiry, viz.,
whether there was a fundamental right to carry on business in liquor. The
C said observations are as follows :
"A perusal of the Act and rules will make it clear that no person
has any absolute right to sell liquor and that the purpose of the
Act and the rules is to control and restrict the consumption of
intoxicating liquors, such control and restriction being obviously
D necessary for the preservation of public health and morals, and to
raise revenue. 11
According to the Court, the said observations only mean that no
absolute right to sell liquor was given to any person under the Act and that
the said right was controlled by the provisions of the said Act. The Court
E
further held that the respondent-state there could not draw any support
from the decision of this Court in Narendra Nath's case (supra) because
the question there was in regard to the scope of Articles 226 and 227 of
the Constitution vis-a-vis the orders passed by the appropriate authorities
under the Eastern Bengal and Assam Excise Act, 1910 although in that
F case two decisions of this Court, viz., Cooveljee's case (supra) and A. N
Kidwai'~ case (supra) were noticed, and it was observed that there was no
inherent nght to the settlement of liquor shops. According to the Court no
question of fundamental right under Article 19 (1) arose in that case and
hence the said observations were unhelpful to the State.
G The Court also found that the following observation made in the
R.M.D. Chamarba!lgwala's case (supra) were also not helpful to the State
because that decision only laid down that gambling was not business of
trade:
H "We find it difficult to accept the contention that those activities
KHODAYDISTIILERIESLID.v. STATEOFKARNATAKA[SAWANf,J.) 503
which encourage a spirit of reckless propensity for making easy A
gain by lot or chance, which lead to the loss of the hard earned
money of the undiscerning and improvident common man and
thereby lower his standard of living and drive him into a chronic
state of indebtedness and eventually disrupt the peace and happi-
ness of his humble home could possibly have been intended by B
our Constitution makers to the raised . to the status of trade,
commerce or intercourse and to be made the subject-matter of a
fundamental right guaranteed by Art. 19 (1) (g).
Since the Court was not concerned with gambling, the said observa-
tions were not relevant. The Court then concluded with the scrutiny of the C
earlier decisions of this Court referred to above, that they did not support
the contention that dealing in liquor was not business or trade. According
to the Court, in those decisions this Court was only considering the
provisions of the various acts which conferred a restricted right to business.
None of the decisions held that a right to do business in liquor was not a D
fundamental right. The Court, therefore, held that dealing in liquor was
business and a citizen has a right to do business in that commodity; but a
state can make a Jaw imposing reasonable restrictions on the said right in
public interest. We will have an occasion to deal with the Court's observa-
tions and conclusions in this case at .the appropriate stage hereinafter.
E
10. To proceed further with the decisions of this Court in chronologi-
cal order, we may now refer to the next decision, viz., State of Orissa &
Ors. v. Harinarayana Jaiswa/ & Ors., (1972] 3 SCR 784 which is a decision
of two learned judges, The facts were that the first respondent was carrying
on business of country liquor in exercise of the powers conferred by Section F
29 (2) of the Bihar and Orissa Excise Act, 1915. The appellant-State issued
an order and in pursuance of that order a date was notified for "selling by
public auction the exclusive privilege of selling by retail, country liquor in
eight shops. The respondent was the highest bidder but his bid was rejected
because the Government was of the view that inadequate prices had been
offered as a result of collusion between the bidders. Thereafter, tenders G
called for and the appellant accepted the tender in respect of one shop
and rejected the others as it was again of the opinion that price offered
was inadequate. Thereafter, the remaining seven shops were sold by private
negotiations for substantially higher prices. The High Court had allowed
the writ petition filed by the respondent and in appeal this Court referred H
504 SUPREMECOURTREPORTS [1994]SUPP.4S.C.R.
A to the decisions which we have cited above including the decision in K.K.
NtJTU/a's case (supra). Hedge, J. speaking for the Court held has follows:
"It is true that this Court has ruled that the right to trade in
intoxicatmg drugs is also a right to carry on any trade or business
within the meaning of Art. 19(1) (g) - See Krishna Kumar Narnla
B v. Jammu Kashmir State and Ors. At the same time, it was held by
this Court in Cooverjee B. Bharncha v. The Excise Commissioner
and the Chief Commissioner, Ajmer and Ors., that for determining
reasonable restrictions within the meaning of Art. 19(6) of the
Constitution on the right given under cl. 19 (Sic) (l)(g), regard
c must be had to the nature of the business and the conditions
prevailing in a particular trade; State has power to prohibit trades
which are illegal or immoral or injurious to the health and welfare
of the public and there is no inherent right in a citizen to sell
intoxicating liquors by retail".
D In Amar Chandra Chakraborry v. Collector of Excise, Government of
Tripura & Ors., (1973] 1 SCR 533 which is a decision of Constitution Bench
of five learned Judges, the challenge was to the Excise Collector's order
withdrawing liquor licence before expiry of time. Referring to the decision
in K.K Narnla's case (supra), the Court held there as follows :
E "....... It is no doubt true that this Court in the case cited held that
dealing in liquor is business and a citizen has a right to do business
in that commodity but it was added that the State can make a law
imposing reasonable restrictions on the said right in public interest.
In dealing with reasonable restrictions on abstract standard or
F general pattern is possible to lay down. In each case, regard has
to be had to the nature of trade or business, the conditions
prevailing in such trade or business, the nature of the infringement
alleged, and the underlying purpose of the restriction, the imposi-
tion of which is alleged to constitute an infringement."
G The Court then referred to the contention on behalf of the appellant
· that the provisions of section 43 of the Bengal Excise Act, 1909 which
empowered the licensing authority to withdraw the licence for any reason
whatsoever not falling under Section 42 of that Act, were unreasonable and
violative of the appellant's fundamental right under Article 19, and held as
H follows:
KHODAYDISfllLERIESLTD.v. SfATEOFKARNATAKA[SAWANf,J.] 505
"...... It is no doubt true that in s.43, there is no express mention A
of the precise grounds on which the licence can be withdrawn. But
in our opinion keeping in view the nature of the trade or business
for which the grant of licence under the Act is provided the cause
contemplated by s. 43 must be such as may have reasonable nexus
with the object of regulating this trade or business in the general B
interest of the public. In the determination of reasonableness of
restrictions on trade or business regard must be had to its nature,
the conditions prevailing in it and its impact on the society as a
whole. These factors must inevitably differ from trade to trade and
no general rule governing all trades or businesses is possible to lay
down. The right to carry on lawful trade or business is subject to C
such reasonable conditions as may be considered essential by the
appropriate authority for the safety, health, peace, order and
morals of the society. Article 47 of our Constitution directs the
State to endeavour to prohibit consumption of intoxicating drinks
or drugs which are injurious to health except for medicinal pur- D
poses. In the case of country liquor, therefore, the question of
determining reasonableness of the restriction may appropriately
be considered by giving due weight to the increasing evils of
excessive consumption of country liquor in the interests of health
and social welfare. Principles applicable to trades which all persons
carry on free from regulatory controls do not apply to trade or E
business in country liquor; this is so because of the impact of this
trade on society due to its inherent nature."
In Nashirwar etc. etc. v. State of Madhya Pradesh, [1975] 2 SCR 881
which is a judgment of three learned Judges, while dealing with the p;
question whether the State has power to grant liquor licence by public
auction and whether the said power violated fundamental right under
Article 19 (1) (g) of the Constitution, the Court held as follows :
"There are three principal reasons to hold that there is no G
fundamental right of citizens to carry on trade or to do business
in liquor. First, there is the police power of the State to enforce
public morality to prohibit trades in noxious or dangerous goods.
Second there is power of the State to enforce an absolute prohibi-
tion of manufacturer or sale of intoxicating liquor. Article 47 states
that the State shall endeavour to bring about prohibition of the H
506 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A consumption except for medicinal purpose of intoxication drinks
and of drugs which are injurious to health. Third, the history of
excise laws sho"'s that the State has the exclusive right or privilege
of manufacture or sale of liquor.
In Balsara's case (supra) this Court referred to Article 47 and
B said that the idea of prohibition was connected with public health.
The Challenge to .a prohibition law under our Constitution was
made under Article 14 and 19 in Balsara's case, This Court held
that absolute prohibition of manufacture or sale of liquor is per-
missible and the only exception can be for medicinal preparations.
c The concept of inherent right of citizens to do business in liquor
is antithetical to the power of the State to enforce prohibition laws
in respect of liquor.
Das, C.J. in State of Bombay v. R.M.D. Chamarbaugwala, (1957]
SCR 874 said that gambling could not be regarded as trade or
D business within the meaning of Article 19 (1) (!) and (g) and
Article 301. Inherently vicious activities cannot be treated as
entitling citizen& to do business or trade in such activities. No one
can deal in counterfeit coins or currency notes. Das C.J. held that
activities which are criminal, or dealing in articles or goods which
E are res extra commercium could not have been intended to the
permitted by Article 19 (1) (!) and (g) relating to fundamental
rights to trade or business."
Referring to KK Narula's case (supra) the Court held that it was
not correct to read the said decision to mean that there was a fundamental
F right to do business in liqnor. According to the Court, the said decision
was that dealing in liquor is business and a citizen had a right to do business
in that commodity and the State could impose reasonable restrictions on
that right in pnblic interest. If the State could prohibit business in liquor
as held in F.N. Ba/sara's case (supra) that established that the State had
G exclusive right or privilege to manufacture, possess, or sell intoxicating
liquor and, therefore, the State granted a right or privilege to persons in
the shape of licence or lease. The Court then referred to Harinarayan
Jaiswa/'s case (supra) and stated that that case had explained KK Narula's
case (supra). The Court then observed as follows :
H "Trade in liquor has historically stood on a different footing
KHODAYDISTILLERJESLTD.v. STAIBOFKARNATAKA[SAWANf,J.] 507
from other trades, Restrictions which are not permissible with A
other trades are lawful and reasonable so far as the trade in liquor
is concerned. That is why even prohibition of the trade in liquor
is not only permissible but is also reasonable. The reasons are
public morality, public interest and harmful and dangerous char-
acter of the liquor. The State possesses the right of complete B
control over all aspects of intoxicants, viz,. manufacture, collection,
sale and consumption. The State has exclusive right to manufacture
and sell liquor and to sell the said right in order to raise revenue.
That is the view of this Court took in Bharucha's case (supra) and
Jaiswal's case (supra)."
c
The Court also held that since in Cooveljee's case (supra) in no
uncertain terms this Court had repelled the citizens' contention of inherent
right to sell intoxicating liquor and since Cooveljee's case was a Constitu-
tion Bench decision, K.K. Narula's case which is also a Constitution Bench
decision, cannot be said to have overruled the decision in Co_oveljee's case. D
In Har Shankar and Ors. etc. etc. v. The Dy. Excise and Toxlition
Commissioner and Ors., [1975] 3 SCR 254 which is a decision of Constitu-
tion Bench of five learned Judges, the question whether a citizen had a .
fundamental right to trade in intoxicants and whether State had power to
prohibit absolutely every form of activity relating to intoxicants, fell directly E
for consideration, While dealing with it, after referring to all the earlier
decisions including the decision in K.K. Narula's case \supra), the Court
held as follows :
"These unanimous -decisions of five C~nstitution Benches F
uniformly emphasised after a careful consideration of the problem
involved that the State has the power to prohibit trades which are
injurious to the health and welfare of the public, that elimination
and exclusion from the business is inherent in the nature of liquor
business, that no person has an absolute right to deal in liquor and G
that all forms of dealings in liquor have, from their inherent nature,
been treated as a class by themselves by all civilised communities.
The contention that the citizen had either a natural or a fundamen-
tal right to carry on trade or business in liquor thus stood rejected.
But, in spite of the weight of this authority, a Constitution H
508 SUPREME COURT REPORTS [1994] SUPP. 4S.C.R.
A Bench Struck a different n0te in Krishna Kumar Naru/a etc. v. The
State of Jammu and Kashmir & Ors., ...."It would, however, appear
that the learned judges of the High Court had differed on the
question whether the appellant had a fundamental right to do
business in liquor and this Court desired "to make the position
11
clear" in order to avoid further confusion in the matter11 • The
B
decisions in Cooverjee's case Kidwai's case and Nagendra Nath's
case were cited before the Court but it took the view that they did
not support the contention that dealing in liquor was not business
or trade or that a right to do business in liquor was not a fun-
damental right ....... "
c
The Court then referred to the decision in R.M.D. Chamarbaug-
wa/a's case (supra) and observed as follows :
"This decision was also cited before the Court in Krishna
Kumar's case but it said : "fhis decision only lays down that
D gambling is not business or trade. We are not concerned in this
case with gambling". With great respect, the reasons mentioned by
Das, C.J. for holding that there can be no fundamental right to do
trade or business.in an activity like gambling apply with equal force
to the alleged right to !rage in liquor and those reasons may not
E be brushed aside by restricting them to gambling operations".
JOO{ xxx xxx
"In our opinion, the true position governing dealings in in-
toxicants is as stated and reflected in the Constitution Bench
F decisions of this Court in Balsara's case, Cooverjee's case, Kidwai's
case, Nagendra Nath's case, Amar Chakraborty's case and the
R.M.D.C. case, as interpreted in Harinarayan Jaiswa/'s case and
Nashirwar's case. There is no fundamental right to do trade or
business in intoxicants. The State, under its regulatory powers, has
the right to prohibit absolutely every form of activity in relation to
G
intoxicants . its manufacture, storage, export, import, sale and
possession. In all their manifestations, these rights are vested in
the State and indeed without such vesting there can be no effective
regulation of various forms of activities in relation to intoxicants.
In "American Jurisprudence", Volume 30 it is stated that while
H engaging in liquor traffic is not inherently lawful, nevertheless it is
KHODAYDISfILLERIESLID.v. STATEOFKARNATAKA[SAWANf,J.) 509
a privilege and not a right, subject to governmental control. (page A
538). This power of control is an incident of the society's right to
self-protection and it rests upon the right of the State to care for
the health, morals and welfare of the people. Liquor traffic is a
source of pauperism and crime. (pp. 539, 540, 541).
It was unnecessary in Krishna Kumar Narnla's case to examine B
that question from this brother point of view, as the only conten-
tion bearing on the Constitutional validity of the provision im-
pugned therein was not permitted to be raised as it was not argued
in the High Court. The discussion of the question whether a
citizen has a fundamental right to do trade or business in liquor C
proceeded in that case, avowedly, from a desire to clear the
confusion arising from the "different views" expressed by the two
judges of the High Court. This may explain why the Court
restricted its final conclusion to holding that dealing in liquor is
business and the citizen has a right to do business in that com-
modity. The Court did not say, though such an implication may D
arise from its conclusion, that the citizen has a fundamental right
to do trade or business in liquor. If we may repeat, Subba Rao, C.
J. said :
;'We, therefore, hold that dealing in liquor is business .,,;d a
citizen has a right to do business in that commodity; but the E
State can make a law imposing reasonable restrictions on the
said right, in public interest".
"lt is significant that the judgment in Krishna Kumar Narnla's case
does not negate the right of the state to. prohibit absolutely all
forms of activities in relation to intoxicants. The wider right to F
prohibit absolutely would include the narrower right to permit
dealing in intoxicants on such terms of general application as the
State deems expedient."
. In Lakhan/a/ etc. v. State of Orissa & Ors., (1977) 1 SCR 811 which G
is decision of two learned Judges, the Court after referring to the decisions
in Cooveljee's case, K.K. Namla's case and Har Shankar's case (supra)
reiterated that there was no fundament_al right to trade or business in
intoxicants and that in all their manifestations these rights were vested in
. the State and indeed without such. vesting there could be no effective
regulation of various forms of activities in relation to intoxicants. H
510 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A In Sat Pal & Co. etc. v. Lt. Governor of Delhi & Ors., [1979] 3 SCR
651 which is a decision of two learned judges, it was observed that if there
is no fundamental right to carry on trade or business in liquor, there is no
question of its abridgement of any restriction which can be styled as
unreasonable. The Court reiterated the view taken in Har Shankar's case
(supra) that the State under its regulatory power has a right to control or
B
even to prohibit absolutely every form of activity in relation to intoxicants
apart from anything else, its import too. This power of control is a question
of society's right to self-protection and it rests upon the right of the State
to act for the health, moral and welfare of the people. Liquor traffic is a
source of pauperism and crime.
c
In Southern Petroleum and Chemicals, Trichur and Ors. v. State of
Kera/a & Ors., [1981] 4 SCC 391 which is a decision of three learned Judges,
the Court held that no citizen has any fundamental right guaranteed under
Article 19 (1) (g) of the Constitution to carry on trade in any noxious and
D dangerous goods like intoxicating drugs or intoxicating liquors.
In State of M.P. & Ors. v. Nandlal Jaiswal & Ors., [1986] 4 SCC 566,
the Bench of two learned judges reiterated that it is well-settled by several
decisions of this Conrt including the decision in Har Shankar's case (supra)
that there is no fundamental right in a citizen to carry on trade or business
E in liquor. The State under its regulatory power has the power to prohibit
absolutely every form of activity in relation to intoxicants and its manufac-
ture, storage, export, import, sale and possession. No one can claim as
against the State the right to carry on trade or business in liquor and the
State cannot be compelled to part with its exclusive right or privilege of
F mannfa'cturing and selling liquor.
In Doongaji & Co. v. State of Madhya Pradesh & Ors., AIR (1991) SC
1947, a Bench of two learned Judges while dealing with the question
whether, after the expiration of the licence given to the appellant, fixation
of the prices of the plant and machinery of the distillery and the attached
G warehouses and stock-in-trade and payment thereof to the appellant, was
a condition precedent to taking possession thereof and given delivery to
the new licensee which was a state owned Corporation found on facts that
the appellant had .no exclusive possession of the distillery which always
remained with the Excise Department and the appellant was only working
H out the contract of manufacturing rectified spirit in the distillery and
KHODAYDISTILLERIESLTD.v.STATEOFKARNATAKA[SAWANT,J.] 511
wholesale supply of the same to the retail vendors within the area attached A
to it. Due to non-cooperation of the appellant, possession was taken and
delivered to the incoming licensee as per the Rules and the appellant was
not entitled to restitution. Jn that connection, the Court observed as
follows:
nit is settled law by several decision of this Court that there is B
no fundamental right to a citizen to carry on trade or business in
liquor. The State under its regulatory power has power to prohibit
absolutely any form of activity in relation to an intoxicant, its
manufacture, possession, import and export. No one claim, as
against the State, the right to carry on trade or business in any C
intoxicants, nor the State be compelled to part with its exclusive
right or privilege of manufacture, sale, storage of liquor. Further
when the State has decided to part with such right or privilege to
the others, then State can regulate consistent with the principles
of equality enshrined under Art. 14 and any infraction in this behalf D
at its pleasure is arbitrary violating Art. 14. Therefore, the exclusive
right or privilege of manufacture, storage, sale, import and export
of the liquor through any agency other than the State would be
subject to rigour of Art. 14."
11. We may now deal with the decisions rc·lating to trade or business E
in industrial alcohol.
in Indian Mica Micanite Industries. v. The State of Bihar & Ors., [1971]
2 SCC 236, a Constitution Bench of five learned Judges was concerned only
with the question whether the fee levied under Rule 111 of the Bihar and F
Orissa Excise Rules on denatured spirit used and possessed by the appel-
lant had sufficient quid pro quo for that levy. The question whether the
citizen had a fundamental right to carry on trade or business in industrial
alcohol was neither raised nor answered. Dealing with the question raised
before it, the Court held, among other things that before a levy can be G
upheld as a fee, it must be shown that the levy has a reasonable co-relation-
ship with the services rendered by the Government. The co-relationship is
essentially a question of fact. On the facts of that case, the Court found
that the only service rendered by the Government to the appellant and to
other similar licensees was that the Excise Department had to maintain an
elaborate staff not only for the purposes of ensuring that denaturing is done H
512 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.
A properly by the manufacturer but also to see that the subsequent possession
of denatured spirit in the hands either of a wholesale dealer or retail seller
or any other licensee or permit holder was not misused by converting the
denatured spirit into alcohol fit for human consumption. Since the State in
that case, had not chosen to place before the Court the material in its
possession from which the co-relationship between the levy and the services
B rendered could be established at least in a general way, the Court held that
the levy under the impugned Rule could not be justified.
In State of U.P. & Ors. v. Synthetics and Chemicals Limited anti Ors.,
[1980] 2 SCC 441, which is a decision of two learned Judges of this Court,
C the facts were that the State Legislature had enacted the U.P. Excise
(Amendment) Act 30 of 1972. Under Notification dated 3rd November,
1972, the Government was authorised to sell by auction the right of retail
or wholesale vend of foreign liquor. The new Rules were accordingly
framed, the effect of which was that a vend-fee of Rs. 1.10 per bulk litre
D was imposed. The Allahabad High Court, however, held that notification
to be ultra vires. However, after the decision of this Court in Nashirwar's
case and Har Shankar's case (supra) where the State's power (O auction
the rigbt to vend, by retail or wholesale, foreign liquor was upheld, the
State Legislature enacted U.P. Excise (Amendment) Act, 1972 by U.P.
Excise (Amendment) (Re-enactment and Validation) Act 5of1976. There-
E after the High Court upheld the validity of the re-enacted Act and against
that appeals were preferred here. The vend fee was made payable in
advance on denatured spirit issued for industrial purposes. In that case,
the Court held that the expression "intoxicating liquor" in Entry 8 of List
II of Seventh Schedule of the Constitution is not confined to potable liquor
F alone but would include all kinds of liquor which contain alcohol. Hence
the expression covered alcohol manufactured for the purpose of industries
such as industrial alcohol. The Court also held that the words "foreign
liquor" in Section 24-A of the State Act included the denatured spirit and
the said words could not be given a restricted meaning for the word
'consumption' cannot be confined to consumption of beverages alone.
G When the liquor is put to any use such as manufacture of any articles,
liquor is all the same consumed. Further, Section 4 (2) of the Act provides
. that the State may declare what shall be deemed to be country liquor or
foreign liquor and the State had under the rules issued the notification
defining "foreign liquor" as meaning all rectified, perfumed, medicated and
H denatured spirit whenever made. The Court further held that "specially
KHODAYDISTILLERIESLTD. v. SfATEOFKARNATAKA [SAWANf,J.] 513
denatured spirit" for industrial purposes is not different from denatured A
spirit. The denatured spirit mentioned in the rules in question was treated
as including "specially denatured spirit" for industrial purposes. The dena-
tured spirit has ethyl alcohol as one of its constituents. The specially
denatured spirit for industrial purposes is different from denatured spirit
only because of the different in the quality and quantity of the denaturants. B
Specially denatured spirit and ordinary denatured spirits are classified
according to the use and the denaturants used. Hence the definition of
"alcohol" in the rules in question included both ordinary as well as specially
denatured spirit.
The Court further held that although it was true that the stand taken C
by the State Government in the earlier proceedings in the High Court was
that the levy was in the nature of excise duty or a fee and the present stand
was that it was neither a duty nor a fee but only a levy for the conferment
of the exclusive privilege, that would not make any difference so long as
the Government has the right to impose the levy. The levy was imposed for D
permission granted in favour of the licensees and allotment orders of
denatured spirits issued to them from the various distilleries. The parties
having paid the fee, had taken possession of denatured spirit from the
distilleries and the re-enacted legislation, viz., Act 5 of 1976 had only
restored the status quo enabling the State to collect the levy validly made
under the earlier Act 30 of 1972 which was found to be illegal by the High E
Court.
Since the State had exclusive right of manufacturing and selling of
intoxicating liquors, the imposition of vend-fee on denatured spirit and the
grant of licences to wholesale vend of denatured spirit was within the F
legislative competence of the State under Entry 8 of List II. The Court
further held that the Ethyl Alcohol (Price Control) Order issued by the
Central Government in exercise of power conferred under section 18-G of
the IDR Act did not explicitly or impliedly take away the power of the
State Government to regulate the distribution of intoxicating liquor by
collecting a levy for parting away with its exclusive rights. The power of the G
State under Entry 24 of List II is subject to the provisions of Entry 52 of
List I. Therefore, the power of Parliament and the State Legislature were
confmed to Entry 52 of List I and Entry 24 of List II respectively. The
Parliament wonld have had exclusive power to legislate in respect of
industry notified by the Parliament bnt the provisions of Entry 26 of List H
514 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A II and Entry 33 of List III would also have to be taken into account for
determining the scope of legislative power of the Parliament and the State.
Entry 33 of List III enables a law to be made regarding the productions,
supply and distribution of products of a notified industry. Thus a fair
scrutiny of the relevant entries made it clear that the power to regulate
notified industrie& is not exclusively within the jurisdiction of Parliament.
B
Hence, it cannot be contended that after passing of the Industries
(Development and Regulation) Act, 1951, the claim by the State to
monopoly with regard to the production and manufacture and the sale of
the denatured spirit or the industrial alcohol was unsustainable.
C in Synthetics and Chemicals Ltd. & Ors. v. State of U.P. & Ors., [1990]
1 SCC 109 which is a decision of Constitution Bench of seven learned
Judges, the question was with regard to the validity of levy on industrial
alcohol The Court held that it must accept the decision that the States
have the power to regulate the use of alcohol and that power include power
D to make provisions to prevent and/or check industrial alcohol being used
as intoxicating or drinkable alcohol. The question, according to the Court,
was whether in the garb of regulations, the legislation which is in pith and
substance fee or levy which has no connection with the cost or expenses
administering the regulations, can be imposed purely as regulatory
measure. Judged by the pith and substance of the impugned legislation, the
E Court held that the levies in question could not be treated as part of
regulatory m.easures. The court further held that the State had power to
regulate though not as emanation of police power but as an expression of
the sovereign power of the State. But that power has its limitations. The
Court then observed that only in two cases the question of industrial
alcohol had come up for consideration before this Court. One in Synthetics
F
and Chemicals Ltd. case, [1980] 2 SCR 441 and the other in Indian Mica
and Micanite Industries, [1971] 2 SCC 236. The latter cases starting with
F.N. Balsara's case (supra) are of potable liquor. The Court then referred
to KK Narula's case (supra) and observed as follows :
G "..... there was not right to do business even in potable liquor. It is
not necessary to say whether it is a goods law or not. But this must
be held that the reasoning therein would apply with greater force
to industrial alcohol"
H The Court then observed in paragraphs 77 and 80 to 85 as under:
. Kii';;iDAY D'VILLERIES LIB. v. STATE OF KARNATAKA [SAWANT, J.) 515
"77. Ariicle 47 of the Constitution iml'oses upon the State the A
duty to endeavor to bring about prohibition of the consumption
except for medical purpose of intoxicating drinks and products
which are injurious to health. If the meaning of the expression
"intoxicating liquor" is taken in the wide sense adopted in Ba/sara's
case, it would lead to an anomalous result. Does Article 47 oblige
B
the State to prohibit even such industries as are licensed under the
!DR Act but whic,h manufacture industrial alcohol? This was never
intended by the above judgments or the Constitution. It appears
to us that the decision in the Synthetics and Chemicals Ltd. case
was not correct on this aspect.
c
xxx xxx xxx
80. It was submitted that the activity in potable liquor which
was regarded safe and exclusive right of the State in the earlier
judgments dealing with the potable liquor were sought to be
justifiable under the police power of the State, that is, the power D
to preserve public health, morals, etc. This reasoning can never
apply to industrial alcohol manufactured by industries which are
to be developed in the public interest and which are being en-
couraged by the State. In a situation of this nature, it is essential
to strike a balance and in striking the balance, it is difficult to find E
any justification for any theory of any exclusive right of a State to
deal with industrial alcohoi. Restriction valid under one cir-
cumstance may become invalid in changing circumstances ..... 11
81. It is not necessary for us here to say anything on the imposts
on potable alcohol as commonly understood. These are justified F
by the lists of our legislature practised in this country - see the
observations of Hidayatuallah, J. as the Chief Justice then was, in
Gurnswamy v. State of Mysore, at pp. 573-574 and other decisions
mentioned hereinbefore.
82. In that view of the matter, it appears to us that the relevant G
provisions of the U.P. Act, AP. Act, Tamil Nadu Act, Bombay
Prohibition Act, as mentioned hereinbefore, are unconstitutional
insofar as these purport to levy a tax or charge imposts upon
industrial alcohol, namely alcohol used and usable for industrial
purposes. H
516 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A 83. Having regard to the principles of interpretation and the
constitutional provisions, in the light of the language used and
having considered the impost and the composition of industrial
alcohol, and the legislative practice of this country, we are of the
· opinion that the impost in question cannot be justified as State
imposts as these have been done. We have examined the different
B
provisions. These are not merely regulatory. These are must more
than that. These seek to levy imposition in their pith and substance
not as incidental or as merely disincentives but as attempts to raise
revenue for States' purpose. There is no taxing provision permitting
these in the lists in the field of industrial alcohol for the State to
c legislate.
84. Furthermore, in view of the occupation of the field by the
IDR Act, it was not possible to levy this impost.
85. After the 1956 amendment to the IDR Act bringing alcohol
D industries (under fermentation industries) as Item 26 of the first
Schedule to !DR Act the control of this industry has vested
exclusively in the Union. Thereafter, licences to manufacture both
potable and non-potable alcohol is vested in the Central Govern-
ment. Distilleries are manufacturing alcohol under the Central
licences under IDR Act. No privilege for manufacture even if one
E
existed, has been transferred to the distilleries by the State. The
State cannot itself manufacture indusirial alcohol without the per-
mission of the Central Government. The States cannot claim to
pass a right which they do not possess. Nor can the State claim
exclusive right to produce and manufacture industrial alcohol
F which are manufactured under grant of licence from the Central
Government. Industrial alcohol ·cannot upon coming into existence
under such.grant be amenable to States claim of exclusive posses-
sion of privilege."
G The aforesaid decision pertaining to the trade or business in dena-
tured spirit or industrial alcohol, not only do not take the view that the
citizen !las a fundamental right to carry on trade or business in potable
alcohol but on the contrary, hold that he has no such right. This is
reiterated in the two Synthetics & Chemicals Cases (supra).
H 12. It will thus be obvious that all the decisions except the decision
KHODAYDISTILLERIESLID.v. SfATEOFKARNATAKA(SAWANT,J.l 517
iltKK Narula's case have unanimously held as shown above that there is A
no fundamental right to carry on trade or business in potable liquor sold
as a beverage. As pointed out above, the proposition of law which is put
in a different language in KK Narnla's case has been explained by the
subsequent decisions of this Court including those of the Constitution
Benches. The proposition of law laid down there has to be read in con- B
formity wiih the proposition laid down in that respect by the other
decisions of this Court not only to bring comity in the judicial decisions but
also to bring the law in conformity with the provisions of the Constitution.
The fundamental rights conferred by our Constitution are not absolute.
Article 19 has to be read as a whole. The fundamental rights enumerated
under Article 19 (1) are subject to the restrictions mentioned in clause (2) C
to (6) of ihe said Article. Hence, the correct way to describe the fundamen-
tal rights under Article 19(1) is to call them qualified fundamental rights.
To explain this position in law, we may take the same illustration as in given
in KK Narnla's case. The citizen has undoubtedly a fundamental right to
carry on business in ghee. But he had no fundamental right to do business D
in adulterated ghee. The expound the theme further, a citizen has no right
to trafficking in women or in slaves or in counterfeit coins or to carry on
business of exhibiting and publishing pornographic or obscene films and
literature The illustrations can be multiplied. This is so because there are
certain activities which are inherently vicious and pernicious and are i:;:
condemned by all civilised communities. So also, there are goods, articles
and services which are obnoxious and injurious to ihe healih, moral, safety
and welfare to ihe general public. To contend that merely because some
activities and trafficking in some goods can be organised as a trade or
business, · right ·to carry on trade or business in the same should be
F
considered a fundamental right is to beg the question. The correct inter-
pretation to be placed on the expression "the right to practise any profes-
_sion, or to carry on any occupation, trade or business" is to interpret it to
mean ihe right to practise any profession or to carry on any occupation,
trade or business which can be legitimately pursued in a civilised society
being not abhorrent to the generally accepted standards of is morality. G
Human perversity knows no limits and it is not possible to enumerate all
professions, occupations, trades and businesses which may be obnoxious to
decency morals, healih, safety and welfare of the society. This is apart from
the fact that under our Constitution the implied restrictions on the right to
practise any profession or to carry on any occupation, trade or business H
518 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A are made explicit in clauses (2) to (6) of Article 19 of the Constitution and
the State is permitted to make law for imposing the said restrictions. In the
present case, it will be clause (6) of Article 19 which places ~estrictions on
the fundamental right to do business under Article 19 ( 1) (g). These
restrictions and limitations on fundamental right are implicit and inherent
even in the fundamental rights spelt out in the American Constitution,
B
although they are not explicitly stated as in our Constitution by clause (2)
to (6) of Article 19. That is how the American Supreme Court has read
and interpreted the rights in the American Constitution as pointed out
above by the excerpts from the relevant decisions. It will have, therefore,
to be held that even under the American Constitution, there is no absolute
c fundamental right to do business or trade in any commodity or service. The
correct way, therefore, to read the fundamental rights enumerated under
Article 19(1) of our Constitution is to hold that the citizens do not possess
the said rights absolutely. They have the said rights as qualified by the
respective clauses (2) to (6) of Article 19. That is apart from the fact that
D Article 47 of the Constitution enjoins upon the State to prohibit consump-
tion of intoxicating drink like liquor, which falls for consideration in the
present case and, therefore, the right to trade or business in potable liquor
is subject also to the provisions of the said Article. Whether one states as
in K.K. NfJ1Ula's case that the citizen has a fundamental right to do business
but subject to the State's powers to impose valid restrictions under Oause
E (6) of Article 19 or one takes the view that a citizen has no fundamental
right to do business but he has only a qualified fundamental right to do
business, the practical consequence is that same so long as the former view
does not deny the State the power to completely prohibit, trade or business
in articles and products like liquor as a beverage, or such trafficking as in
women and slaves. This Court in K.K. NfJ1Ula's case has not taken such
F
view.
13. The contention that if a citizen has no fundamental right to carry
on trade or business in potable liquor, the State is also injuncted from
carrying on such trade, particularly in view of the provisions of Article 47,
G though apparently attractive, is fallacious. The State's power to regulate
and to restrict the business in potable liquor impliedly includes the power
to carry on such trade to the exclusion of others. Prohibition is not the only
way to restrict and . regulate the consumption of intoxicating liquor. The
abuse of drink intoxicates can be prevented also by limiting and controlling
H its production, supply and consumption. The State can do so also by
KHODAY DISTILLERIES LTD. v. STATEOFKARNATAKA (SAWANT,J.) 519
creating in itself the monopoly of the production and supply of the liquor A
When the State does so, it does not carry on business in illegal products.
It carries on business in products which are not declared illegal by com-
pletely prohibiting their production but in products the manufacture, pos-
session and supply of which is regulated in the interest of the health, morals
and welfare of the people. It does so also in the interest of the general B
public under Article 19(6) of the Constitution.
14. The contention further that till prohibition is introduced, a citizen
has a fundamental right to carry on trade or business in potable liquor has
also no merit. All that the citizen can claim in such a situation is an equal
right to carry on trade or business in potable liquor as against the other C
citizens. He cannot claim equal right to carry on the business against the
state when the State reserves to itself the exclusive right to carry on such
trade or business. When State neither prohibits nor monopolises the said
business, the citizens cannot be discriminated against while granting licen- ·
ces to carry on such business. But the said equal right cannot be elevated D
to the status of a fundamental right.
It is no answer against complete or partial prohibition of the produc-
tion, possession, sale and consumption etc. of potable liquor to contend
that the prohibition where it was inll oduced earlier and where it is in
operation at present has failed. The failure of measure permitted by law E
does not detract from the power of the State to introduce such measures
and implement them as best as they can.
We also do not see any merit in the argument that there are more
harmful substances like tobacco, the consumption of which is not f
prohibited and hence there is no justification for prohibiting the business
in potable alcohol. What article and goods should be allowed to be
produced, possessed, sold and consumed is to be left to the judgment of
the legislative and the executive wisdom. Things which are not considered
harmful today, may be considered so tomorrow in the light of the fresh G
medical evidence. It requires_ research and education to convince the
society of the harmful effects of the products before a consensus is reached
to ban its consumption. Alcohol has since long been known all over the
world to have had harmful effects on the health of the individual and the
\velfare of the society. Even long before the Constitution was framed, it was
one of the major items on the agenda of the Society to ban or at least to H
520 SUPREMECOURTREPORTS [1994]SUPP.4S.C.R.
A regulate, its consumption. That is why it found place in Article 47 of the
Constitution. It is only in recent years that medical research has brought
to the fore the fatal link between smoking and consumption.of tobacco and
cancer, cardiac diseases and deterioration and tuberculosis. There is a
sizeable movement all over the world includ;ng in this country to educate
people about the dangerous effect of tobacco on individual's health. The
B
society may, in course of time, think of prohibiting its production and
consumption as in the case of alcohol. There may be more such dangerous
products, the harmful effects of which are today unknown. But merely
because their production and consumption is not today banned, does not
mean that products like alcohol which are proved harmful, should not be
C banned.
The 1956 Resolution of Industrial Policy adopted by the Central
Government also does not help the petitioner/appellants in their contention
that the production of industrial alcohol as an industry has to be recognised
and all that can be done is to regulate the said production but not to
D prohibit it. Apart from the fact that the said resolution has no legal efficacy,
and cannot have the effect of limiting the powers of the State to prohibit
or restrict the production of potable alcohol, the resolution itself now
where speaks against such prohibition or limitation. The licences granted
to the distilleries, breweries and wineries of potable liquor are valid only
E so long as their production, possession, transport, sale, consumption etc.
are not completely prohibited in the States concerned.
15. We may now summarise the law on the subject as culled from the
aforesaid decisions.
F (a) The rights protected by Article 19(1) are not absolute but
qualified. The qualifications are stated in clauses (2) to (6) of
Article 19. The fundamental rights guaranteed in Article 19(1)(a)
to (g) are, therefore, to be read along with the said qualifications.
Even the rights guaranteed under the Constitutions of the other
civilized countries ~re not absolute but are. read subject to the
G implied limitations on them. Those implied limitations are made
explicit by clauses (2) to (6) of Article 19 of our Constitution.
(a) The right to practise any profession or to carry on any occupa-
tion, trade or business does not extend to practising a profession
H or carrying on an occupation, trade or business which is inherent·
KHODAYDISTILLERIESLID.y. SfATEOFKARNATAKA(SAWANf,J.( 521
ly vicious and pernicious, and is condemned by all civilised A
societies. It does not entitle citizens to carry on trade or business
in activities which are immoral and criminal and in articles or
goods which are obnoxious and injurious to health, safety and
welfare of the general public, i.e., res extra co111111erciz11n, (outside
commerce). There cannot be business in crime.
B
(c) Potable liquor as a bever.age is an intoxicating and depressant
drink which is dangerous and injurious to health and is, therefore,
an article which is res extra co111111ercizan being inherently harm-
ful. A citizen has, therefore, no fundamental right to do tra~e or
business in liquor. Hence the trade or business in liquor can be c
completely prohibited.
(d) Article 47 of the Constitution considers intoxication drinks and
drugs as injurious to health and impeding the raising of level of
nutrition and the standard of living of the people and improve-
ment of the public health. It, therefore, ordains the State to bring D
about prohibition of the consumption of intoxicating drinks which
obviously include liquor, except for medicinal purposes. Article
47 is one of the Directive Principles which is fundamental in the
governance of the country. The State has, therefore, the power
to completely prohibit the manufacture, sale possession, distribu- E
'- tion and consumption of potable liquor as a beverage, both
because it is inherently a dangerous article of consumption and
also because of the Directive Principle contained in Article 47,
~xcept when it is used and consumed for medical purposes.
(e) For the same reason, the State can create a monopoly either in F
itself or in the agency created by it for the manufacture, posses-
sion, sale and distribution of the liquor as a beverage and also
sell the licences to the citizens for the said purpose by charging
fees. This can be done under Article 19(6) or even otherwise.
(!) For the same reason, again) the State can impose limitations and
G
restrictions on the trade or business in potable liquor as a
beverage which restrictions are in nature different from those
imposed on the trade or business in legitimate activities and
goods and article which are res conunerchun. The restrictions
and limitations on the trade or business in potable liquor can H
522 SUPREMECOURTREPORTS (1994] SUPP. 4S.C.R.
A again be both under Article 19(6) or otherwise. The restrictions
and limitations can extend to the State carrying on the trade or
business itself to the exclusion of and elimination of others and/or
to preserving to itself the right to sell licences to do trade or
business in the same, to others.
B (g) When the State permits trade or business in the potable liquor
\\ith or without limitation, the citizen has the right to carry on
trade or business subject to the limitations, if any, and the State
cannot make discrimination between the citizens who are
qualified to carry on the trade or business.
c (h) The State can adopt any mode of selling the licences for trade
or business with a view to maximise its revenue so long as the
method adopted is not discriminatory.
(i) The State can carry on trade or business in potable liquor
D notwithstanding that it is an intoxicating drink and Article 47
enjoins it to prohibit its consumption. When the state carries on
such business, it does so to restrict and regulate production,
supply and consumption of liquor which is also an aspect of
reasonable restriction in the interest of general public. The State
cannot on that account be said to be carrying on an illegitimate
E
business.
G) The mere fact that the State levies taxes or fees on the produc-
lion, sale and income derived from potable liquor whether the
production, sale or income is legitimate or illegitimate, does not
F make the State a party to the said activities. The power of the
State to raise revenue by levying taxes and fees should not be
confused with the power of the State to prohibit or regulate the
trade or business in question. The State exercises its two different
powers on such occasions. Hence the mere fact that the State
levies truces and fees on trade or business in liquor or income
G derived from it, does not make the right to carry on trade or
business in liquor a fundamental right, or even a legal right when
such trade or business is completely prohibited.
(k) The State cannot prohibit trade or business in medicinal and
H toilet preparations containing liquor or alcohol. The State can
KHODAYDISTILLERIESLTD.v. SfATEOFKARNATAKA[SAWANT,J.] 523
however, under Article 19(6) place reasonable restrictions on the A
right to trade or business in the same in the interes.t of general
public.
(I) Likewise, the state cannot prohibit trade of business in industrial
alcohol which is not used as a beverage but used legitimately for
industrial purposes. The State, however, can place reasonable B
restrictions on the said trade or business in the interests of the
general public under Article 19 (6) of the Constitution.
(m) The restrictions placed on the trade or business in industrial
alcohol in medicinal and toilet preparations containing liquor or
alcohol may also be for the purpose of preventing their abuse or
c
diversion for use as or in beverage.
15. This Court neither in KK Narula's case (supra) nor in the second
Synthetics and Chemicals Ltd. case (supra) has held that the State cannot
prohibit trade or business in potable liquor. The observations made in KK D
Narula's case (supra) that a citizen has a fundamental right to trade or
business in liquor are to be understood, as explained above, to mean only
that when the State does not prohibit the trade or business in liquor, a
citizen has the right to do business in it subject to the res•rictio.ns and
limitations placed upon it. Those observations cannot be read to mean that
E
a citizen has an unqualified and an absolute right to trade or business in
potable liquor. This position in law is explained by this Court ~!so in Har
Shankar's case (supra). The decision in the second Synthetics and Chemi-
cals Ltd. case (snpra) also cannot be read to mean that the Court in that
case has taken the view that a citizen has a right to trade or business in
potable liquor. That decision is confined to trade or business in industrial F
alcohol which is legitimately used for industrial purpose and not for
consumption as an intoxicating drink. The Court has also there not taken
any exception to the right of the State to place reasonable restrictions on
the trade or business even of industrial alcohol to prevent its diversion for
the use in or as intoxicating beverage.
G
16. We, therefore, hold that a citizen has no fundamental right to
. trade or business in liqnor as beverage. The State can prohibit completely
the trade or business in potable liquor since liquor as beverage is res extra
commercium. The State may also create a monopoly in itself for trade or
business in such liquor. The State can further place restrictions and limita- H
524 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A tions on such trade or business which may be in nature different from those
on trade or business in articles res-commercium. The view taken by this
Court in K.K. Nam/a's case (supra) as well as in the second Synthetics and
Chemicals Ltd. case (supra) is not contrary to the aforesaid view which has
been consistently taken by this Court so far.
B 17. One of the incidental contentions, viz., whether the State can
create monopoly in trade or business in potable liquor is already answered
above. This is apart from the fact that Article 19(6) provides for such
monopoly in favour of the State even in trades and businesses which are
legitimate. It is not, therefore, necessary to dilate upon this aspect any
c further.
18. The last contention in these groups of matters is whether the State
can place restrictions and limitations under Article 19 (6) by subordinate
legislation. Article 13 (3)(a) of the Constitution states that law includes
D "any ordinance, order, bye- law rule, regulation, notification, custom or
usage having in the territory of India the force of law". Clauses (2) to (6)
of Article 19 make no distinction between the law made by the Legislature
and the subordinate legislation for the purpose of placing the restrictions
on the exercise of the respective fundamental right mentioned in Article
19 (1) (a) to (g). We are concerned in the present case with clause (6) of
E
Article 19. It will be apparent from the said clause that it only speaks of
"operation of any existing law in so far as it imposes .... " "from making any
law imposing" reasonable restrictions on the exercise of the right conferred
by Article 19(l)(g). There is nothing in this provision which make it
imperative to impose the restrictions in question only by a Jaw enacted by
F the Legislature. Hence the restrictions in question can also be imposed by
any subordinate legislation so long as such legislation is not violative of any
provisions of the Constitution. This is apart from the fact that trade or
business in potable liquor is a trade or business in a res extra commercium
and hence can be regulated and restricted even by executive order
G provided it is issued by the Governer of the State. We, therefore, answer
the question accordingly.
In the view that we have taken, the appeals, special leave petitions
and writ petitions will now be placed before an appropriate bench for
H decision in accordance with the law laid down above.
KHODAYDISflLLERIESLID. '· SfATEOFKARNATAKA [SAWANT,J.J 525
S.L.P 24-24 OF 1994 A
19. In these petitions, the contention raised is that the A.P. (Regula-
tions of Wholesale Trade, Distribution and Retail Trade in Indian Liquor
and Foreign Liquor, Wine and Beer) Act No. 15 of 1993 (hereinafter
referred to as the "Act") deals with taking over only of "trade" and not
11
business 11 in liquor and, therefore, the petitioners cannot be prevented
B
from carrying on the "business" of wholesale dealing in Indian Made
Foreign Liquor (IMFL) during the period of the validity of their FL-15
licences issued to them. It is not disputed that the petitioners are wholesale
traders in Indian Made Foreign Liquor (IMFL) and have been carrying on
the said trade under FL-15 licence issued to them. The licen.ce permits C
them to sell IMFL in the premises indicated in the licence.
As the preamble of the Act shows, it has been enacted to take over
the wholesale trade and distribution in Indian liquor/Foreign Liquor, Wine
and Beer from the private sector in order to have an effective control over D
the wholesale supply and distribution of the liquor. The State Government
had taken a policy decision that in public interest, the exclusive privilege
of the s'!pplying in wholesale the Indian liquor/Foreign liquor, Wine and
_, Beer in the whole of the State of Andhra Pradesh shall be vested in the
A.P. Beverage Corporation limited and f'1r terminating all existing licences
for wholesale trade and distribution of the Indian Liquor/Foreign Liquor, E
Wine and Beer. The title of the Act also shows that it is for regulation of
wholesale trade and distribution and retail trade in Indian Liquor/Foreign
Liquor, Wine and Beer, Section 3 of the Act further makes it clear that
any licence issued to sell Indian Liqnor/Foreign Liquor, Wine and Beer in
wholesale and remaining in force on the appointed day, shall otand ter- p
minated with effect from that day. As stated above, the licence issued to
the petitioners. viz., FL-15 is also to sell the liquor in the premises and to
do no more. When, .therefore, the Act terminated the said licence of the
petitioners with effect from the appointed day, the whole of the trade or
business of the petitioners for sale of the liquor came to an end. It is,
therefore, difficult to understand the logic of the petitioners' contention G
that what was extinguished was only the trade of sale and not the business
of sale. However, we will examine even the said contention for what it is
worth.
There is no doubt that the word "business" is more comprehensive H
526 SUPREME COURT REPORTS [1994) SUPP. 4 S.C.R.
A than the word "trade" since it will include manufacture which the word
11
''trade any not ordinarily include. The primary meaning of the word trade11 1
'
is the exchange of goods for goods or goods for money. However, the word
"trade!! has also secondary meaning viz., business carried on with a view to
profit. In fact, the words "trade" and "industry" are also used interchangeab-
ly many times. It all depends upon the context in which the words occur.
B In Words and Phrases Legally Defined, Third Edition (Volume 4: R-Z)
by John B, Saunders, the word "trade" is explained as:
"'Trade' in its primary meaning is the exchange of goods for
goods or goods for money and in a secondary meaning it is any
c business carried on with a view to profit, whether Manual or
mercantile, as distinguished from the liberal arts, or learned
professions and from agricultural. However, the word is of very
general application, and mnst always be considered in the context
in which it is used. As used in various revenue Acts, 'trade' is not
limited to buying and selling, but may include manufacture. In the
D 'expression restraint of trade' the word is used in its loosest sense
to cover every kind of trade, business, profession or occupation.
(47 Halsbury's Law (4th edn.) Para 1)."
E
(Emphasis supplied)
In Skinner v. Jack Breach Ltd., [1927] 2 KB 220 at 225- 227, DC, Lord
I
Hewart, C.J. has observed:
"No doubt in a great many contexts the word "trade" indicates a
process of buying and selling but that is by no means an exhaustive
F defmition of its meaning. It may also mean a calling or industry or
class of skilled labour.
While interpreting the provisions of the Industrial Courts Act, 1919
Lord Wright, in National Association of Local Government Officers v.
G Balton Corporation, (1943) AC 166 at 184, 185, has observed thus:
"Section 11 of the Act of 1919 (Industrial Court Act 1919) shows
that 11 trade11 is used as including "industry because it refers to a
trade dispute in the industry of agriculture .... Trade and i.1dustry
are thus treated as interchangeable terms. Indeed, "trade" is not
H only in the etymological or dictionary sense, but in legal usage, a
KHODAYDISTILIERIESLID.v. SfAIBOFKARNATAKA(SAWANr,J.J 527
term of the widest scope. It is connected originally with the word A
"tread" and indicates a way of life or an occupation. In ordinary
usage it may mean the occupation of a small shopkeeper equally
with that of a commercial magnate. It may also mean a skilled
11
craft •
In Aviation Shipping Co. Ltd. v. Murry (Inspector of Taxes), (1%1) 2 B
All ER 805 at 811 C.A., Lord Donovan has observed :
"A trade is an organised seeking after profits as a rule with aid of
physical assets."
21. Thus it is apparent that the word "trade" may include all the C
connotations of the word "business". As held in KK Narula's case (supra),
in Article 19 (1) (g) of our Constitution, the words "trade" and ''business"
are used synonymously. Hence, we reject the contention and hold that after
the taking-over of the trade, viz., the activity of buying and selling liquor,
no activity was left with the petitioners to carry on under the licence held D
by them.
22. The special leave petitions are frivolous and are dismissed with
costs.
A.G. Appeals and Petitions disposed of.
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