Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
CASE NO.:
Special Leave Petition (civil) 14735 of 2002
PETITIONER:
Secretary to Govt., Tamil Nadu & Anr.
RESPONDENT:
K.Vinayagamurthy
DATE OF JUDGMENT: 26/08/2002
BENCH:
G.B. PATTANAIK, RUMA PAL & K.G. BALAKRISHNAN.
JUDGMENT:
JUDGMENT
WITH
SLP[c] Nos. 15724, 15725, 15726, 15727 and 15728 of 2002.
PATTANAIK,J.
This batch of Special Leave Petitions are by the State
of Tamil Nadu, directed against the Judgment of the
Division Bench of Madras High Court, dealing with the
licensing system for retail vending of Indian made foreign
liquor. The Excise Year is for the period of 1st of August of
the year in question till the 31st of July of the next year. In
June, 2001, the Government of Tamil Nadu came forward
with a Policy to be adopted for licensing of the Indian made
foreign liquor retail vending shops for the block period 2001-
2004. The said Policy was issued under G.O.Ms. No. 113.
For the aforesaid block period, it was decided that the retail
vending shops for the entire State should be fixed at 6000 and
the privilege fee shall be worked out on the notified area
basis, taking the average privilege fee of the last three years
and providing for some suitable increase. It was also
stipulated that the licensee should lift the minimum off-take
fixed for the shop by the licensing authority and in case of
failure to lift the same, the licensee will be liable to pay a
penalty in proportion to the loss of revenue due to non-lifting
of stocks and if there is still further default, then the licence
would be liable to be cancelled. In accordance with the
aforesaid policy decision, amendments to the Tamil Nadu
Liquor (Retail Vending) Rules, 1989 were made, which were
issued under G.O.Ms. No. 115 dated 22nd of June, 2001. The
Prohibition Commissioner also recommended a new
licensing system for grant of licences to the Indian made
foreign liquor retail vending shops for the block year 2001-
2004, which was accepted by the State Government and the
necessary amendments to the Retail Vending Rules were
made. Under Rule 13 of the amended rules, when the
number of eligible applications does not exceed the number
of shops notified for an area, then all applicants shall be
selected for the grant of privilege. But when the number of
applications in respect of the shops in a notified area is more
then the number of shops in that area, the selection of
applicant for grant of privilege shall be decided by drawal of
lot by the licensing authority in the presence of the Collector
and the applicants who prefer to be present. Rule 14 of the
amended rules provided that privilege amount be fixed by the
Commissioner, on the basis of the guidelines approved by
the Government. Rule 30(2) provides for the lifting of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
minimum off-take of the liquor fixed for the shops by the
licensing authority based on the guidelines issued by the
Government and the consequences to follow, in case the
licensee fails to lift the minimum off-take. Sub-rule (7) of
Rule 30 provides that the applicant on being granted licence,
shall abide by the provisions of the Tamil Nadu Prohibition
Act, 1937, as wall as the Tamil Nadu Liquor (Retail
Vending) Rules, 1989, as amended from time to time and the
terms and conditions of the licence granted thereunder.
In accordance with the aforesaid Excise Policy and the
provisions of the Act and the Rules, the exclusive privilege in
respect of different retail vending shops of Indian made
foreign liquor were settled with the applicants and licences
were also issued by the licensing authority in favour of them
for carrying on the business. Even though the policy was for
the block period of 2001-2004 and an existing licensee could
apply for renewal of his licence, for the excise year 2002-
2003, the Government of Tamil Nadu changed the policy by
issuance of three G.O.Ms. of the same date being G.O.Ms.
Nos. 128, 129 and 130. The aforesaid three G.O.Ms. indicate
that the Government felt that there is a need for increasing
the number of shops in unserved areas that are not notified
and also in the existing notified areas where there is further
potential and demand identified by the Collectors. It was
also indicated that the privilege amount in respect of the
shops located in areas adjoining the Corporations and
Municipalities could be enhanced and as such there is a need
to re-categorise the shops and to re-fix the privilege amount.
The Commissioner of Prohibition and Excise also suggested
that along with the increase in the number of notified shops
and re-fixation of the privilege amount for the shops located
in peripheral areas of Corporations/Municipalities, as well as
the revision of privilege amount for augmenting the excise
revenue, the Government should consider whether instead of
renewing the licences of the existing licensees, all the shops
may be allotted afresh in accordance with earlier G.O.Ms.
No. 115 dated 22nd of June, 2001. In other words, it
suggested to have a fresh draw of lot. In accordance with the
aforesaid recommendations contained in G.O.Ms. No. 128,
the State Government passed the necessary orders, directing
that the provision for renewal of licences prescribed in Rule
14 of the Tamil Nadu Liquor (Retail Vending) Rules, 1989
be repealed and all the 7000 shops including the re-
categorised shops shall be disposed of, as per the procedures
laid down in G.O.Ms. No. 115 dated 22nd June, 2001.
Consequential amendments of certain rules were also made.
The existing holders of the privilege in question who
had obtained licences for carrying on the business for the
excise year 2001-2002, approached the High Court of Madras
by filing writ petitions, challenging the validity of the
Government Order Nos. 128, 129 and 130. The Learned
Single Judge, on entertaining the writ petitions, granted
interim orders on 16th of July, 2002, directing ad hoc renewal
of licences for a period of three months in respect of the
petitioners who had approached the Court. The State
preferred the appeal to the Division Bench against the
aforesaid interim order of the learned Single Judge and the
Division Bench while being in seisin of appeal against the
interim order, passed by the Single Judge, brought before it
the writ petitions which were pending before the Single
Judge and disposed them of together by the impugned
judgment dated 24th of July, 2002. On considering the
submissions made at the Bar as well as the new excise policy
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
and introduction of G.O.Ms. Nos. 128, 129 and 130, the
Division Bench of the High Court came to the conclusion
that though the excise policy is a subject of the policy-maker
and it relates to a trade, which cannot be claimed as a matter
of right by any citizen, but the Court would be entitled to
probe into the reasonableness or otherwise of the
Governmental orders and examine whether they can be
sustained on the touchstone of the arbitrariness. The
Division Bench sustained the Government orders, so far as
they relate to the fiscal policy of the government and the
provisions made therein for augmentation of the excise
revenue. It rejected the contention of the privilege holders
and held that doctrine of promissory estoppel and legitimate
expectation will have no application. But so far as the
provisions dealing with the abolition of the renewal of the
existing licence holders and to follow the procedure in
respect of the shops by a fresh lot, the Court came to the
conclusion that the aforesaid provision has absolutely no
nexus with the object of augmentation of excise revenue and
it was only meant to disable the existing licensees from
opting for the renewal notwithstanding that the excise policy
as enunciated in June, 2001 was for the block period 2001-
2004. The Court held the aforesaid revised excise policy to
be wholly unreasonable and arbitrary, having no nexus at all
with the object of augmentation of excise revenue for which
purpose the new policy was introduced. The Court finally
disposed of the matter with the following directions:
"(i) The Government is at liberty to go ahead with
the grant of privilege of retail vending of Indian
Made Foreign Liquor to the extent of 7,000 shops
as decided.
(ii)But the Government shall adhere to the places
of retail vending which have been licenced for the
excise year 2001-2002 and held by the petitioners
and renew the licence of the petitioners for the
excise year 2002-2003 on the petitioners’
remittance of the privilege amount on the basis of
the amount fixed in G.O.Ms. No. 129 dated
8.7.2002 and also taking into account the re-
categorisation of the shops for the purpose of levy
of the privilege amount.
(iii)The above facility of renewal to the petitioners
shall be made available if the petitioners remit the
requisite amounts on or before 31st of July, 2002.
(iv)For any reason, if there is a delay in renewal,
the petitioners shall be entitled to vend the Indian
Made Foreign Liquor in retail on payment of the
proportionate privilege amount till the grant of
licence.
(v)The Government, the Commissioner and all the
District Collectors shall be entitled to re-locate the
shops out of 7,000 at the places they feel
expedient, but only after safeguarding the shops
which are being run by the petitioners."
It is this order of the Division Bench of the Madras High
Court, which is the subject matter of challenge in all the
special leave petitions.
After hearing Mr. K.K. Venugopal, the learned senior
counsel, appearing for the State of Tamil Nadu at great length
and Mr. P. Chidambaram, the learned senior counsel,
appearing for the respondents, though we did not find any
infirmity with the impugned judgment of the Division Bench
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
of Madras High Court and would have normally dismissed
the special leave petitions, but since Mr. Venugopal had
advanced a lengthy argument and certain directions given in
the impugned judgment require modulation, we thought it
appropriate to notice and answer the same, while dismissing
the special leave petitions.
Mr. K.K. Venugopal, the learned senior counsel,
appearing for the State contended that there is no inherent
right in a citizen to sell intoxicating liquor by retail and it is
not a privilege of a citizen. As it is a business attended with
danger to the community, it may be entirely prohibited or be
permitted under such conditions as will limit to the utmost its
evils. The legislature of a state or the executive government
is fully competent to regulate the business of vending
intoxicating liquor to mitigate its evils or to suppress it
entirely. That being the right of a citizen to deal with the
liquor and by the impugned orders the State Government
having altered the existing policy for augmentation of excise
revenue, the same could not have been interfered with by the
High Court. Mr. Venugopal also further contended that there
is no right of renewal of the licences with the grantee of the
privilege and the amended provisions having been engrafted
for the new excise year, the High Court committed error in
holding the same to be arbitrary. In support of this
contention, reliance was placed on the decision of this Court
in the case of Madras City Wine Merchants’ Association
and another vs. State of Tamil Nadu and Anr., 1994(5) SCC
509. According to Mr. Venugopal, in accordance with the
Rules in force, the existing licensees having failed to lift the
minimum off-take quantity of liquor, the State has suffered a
loss in excise revenue and, therefore, for augmentation of the
excise revenue, a new set of policy having been formulated in
respect of a trade over which no citizen can claim a
fundamental right, the Court was not justified in interfering
with the same on the ground that the decision to have a fresh
lot for all the shops is arbitrary and unreasonable.
Mr. Chidambaram, the learned senior counsel appearing
for the existing licensees, on the other hand contended that
the High Court was fully justified in striking down only that
part of the government order which was held to have no
nexus with the object of augmentation of excise revenue. He
further contended that the licensees are agreeable to pay the
privilege fee as decided by the Government and also would
be bound by the limit of off-take of liquor to be decided by
the excise authorities. According to Mr. Chidambaram,
there is no error in the impugned judgment, which requires
any interference by this Court in exercise of powers under
Article 136 of the Constitution.
We have carefully considered the rival submissions at
the Bar as well as the decision cited in support of the
contention raised. So far as the trade in noxious or dangerous
goods are concerned, no citizen can claim to have trade in the
same and the intoxicating liquor being a noxious material, no
citizen can claim any inherent right to sell intoxicating liquor
by retail. It cannot be claimed as a privilege of a citizen of a
State. That being the position, any restriction which the State
brings forth, must be a reasonable restriction within the
meaning of Article 19(6) and reasonableness of the
restriction would differ from trade to trade and no hard and
fast rule concerning all trades can be laid down. The
Government of Tamil Nadu does not purport to abolish the
trade in intoxicating liquor and what it purports to do is to
change its policy intended for augmentation of excise
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
revenue. With that end in view under the new set of
Government orders, there have been large number of shops to
deal with retail vending of Indian made foreign liquor, there
has been re-categorisation of the shops, there has been re-
adjustment and relocation of the retail shops, there has been
increase in the amount of privilege fee and the High Court
has upheld all these conditions on the ground that they relate
to the augmentation of excise revenue. But so far as the right
of renewal is concerned, the same having been unequivocally
indicated in the excise policy of 2001-2002, as reflected in
G.O.Ms. No. 115 for the block period of 2001-2004, the State
Government could not have annulled the same and directing
afresh the self same procedure to be adopted again by drawal
of lots for settling of the privileges in respect of 7,000 shops
inasmuch as that has nothing to do with the augmentation of
excise revenue. To our query, as to how this should be
helpful in achieving the augmentation of excise revenue, Mr.
Venugopal was not able to satisfy us and in our view, the
High Court rightly came to the conclusion that the aforesaid
decision was nothing but an arbitrary and whimsical one
taken by the State Government, only to replace the existing
licensees by a fresh set of persons by a fresh drawal of lot.
Even though the licensees under the earlier policy may not
claim an absolute right of renewal but it cannot be denied that
under G.O.Ms. No. 115 read with the excise policy evolved
for the block period 2001-2004 and the relevant provisions of
the Act and Rules, contemplate a case of renewal and this is
also apparent from the recommendations of the Excise
Commissioner himself on the basis of which the State
Government came forward with the revised policy and a new
set of rules by enacting G.O.Ms. Nos. 128, 129 and 130. We
have, therefore, no hesitation in affirming the conclusion of
the Division Bench of the Madras High Court that the
portions of G.O.Ms. dealing with the non-renewal of the
privileges granted to the existing licensees subject to their
fulfilling the other conditions of the provisions of the Act and
the rules to be arbitrary. We are, therefore, not persuaded to
interfere with the conclusion of the High Court, so far as it
deals with the dispensing with the right of renewal of the
existing licensees under the present set of G.O.Ms. which fell
before the High Court for consideration. Necessarily,
therefore, the appropriate excise authority will have to decide
the case of the applicants for renewal of the licences in
accordance with the Rules as well as the other conditions of
the licences. Mr. Chidambaram very fairly stated that none
of the respondents have any grievances to be governed by the
rules and conditions of licence including the conditions
providing for a minimum off-take. But the manner in which
the High Court has issued the directions, appears to us not to
be in conformity with the rules for issuance of a mandamus.
Once the court comes to the conclusion that certain
provisions of the Act or the Rules of the Government order is
arbitrary, then the Court would strike down the same, leaving
the matter for the appropriate authority under the statute to
deal with the cases of the applicants. In that view of the
matter, the directions contained in Clause (ii), Clause (iii) and
Clause (iv) require modulation. We, therefore, substitute the
aforesaid clauses of the impugned judgment by the following
directions:
The competent authority/the State Government shall
consider the application for renewal of the licence in
accordance with law and would be entitled to include all
conditions in the licence, including the condition of minimum
off-take. Needless to mention that the licensees of the
privileges would be bound by the enhancement of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
privilege amount as well as the re-categorisation of the shops
contained in the three G.O.Ms., referred to earlier. It is also
made clear that the facility of the renewal would be available
to those of the existing licensees, who had remitted the
requisite amount on or before 31st of July, 2002, as ordered
by the High Court itself. We also further direct that the
privilege fee already paid by these licensees for the Excise
Year 2002-2003 shall be duly adjusted. Clauses (i) and (v) of
the directions contained in the impugned judgment shall
remain as it is.
Mr. Venugopal had referred to an affidavit which had
been filed in this Court by the Secretary to the Government
of Tamil Nadu, Prohibition and Excise Department, wherein
it had been stated that the State Government will be willing
to consider the grant of renewal in favour of the existing
licensees, subject to their giving an undertaking to this court
that they would abide by the rules and conditions relating to
the minimum off-take during the current year as well as
previous excise year 2001-2002 and would withdraw the writ
petitions filed by them, which are pending in the High Court
of Madras. So far as the minimum off-take for the excise
year 2002-2003 is concerned, Mr. Chidambaram, appearing
for the respondents, fairly stated that the respondents would
abide by the same. But so far as the minimum off-take for
the previous excise year is concerned, the same not having
been there at the time of grant of the privilege and issuance
of licence, but having been introduced at a later point of
time, the legality of the same is the subject matter of
consideration before the High Court of Madras and we expres
no opinion on the same.
These special leave petitions are accordingly dismissed
with the modulated directions, as stated earlier.