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

1.1 Under Section 8 of the Punjab Excise Act, 1914 the State Government exercises general superintendence and control of Excise Administration and Excise Officers. Section 9 provides for vesting powers of the Financial Commissioner in the Excise Commissioner by the State Government. The Financial Commissioner is therefore, competent to delegate only such powers to the Excise Commissioner which the State Government can delegate to the former under the Act, in view of the prohibition contained in Section 13(a). Under Section 58(2)(e) of the Act, the State Government alone has the power to regulate the number of licenses which may be granted in any local area for wholesale or retail sale. In the scheme of the Act, the Haryana Liquor License Rules, 1970 and the Punjab Intoxicants License and Sales Orders, 1956 read together it is apparent that a liquor license is to be granted for a local area only. The power to determine the number of licences that may be granted in any category in a local area is exclusively vested in the State Government under Section 58(2)(e) of the Act. The delegation of this power by the State Government to the Financial Commissioner is prohibited by Section 13(a). This is only in consonance with the general power of superintendence vested in the State Government under Section

8. The Act maintains a clear distinction between a local area as the unit for grant of licence, and the entire State for other purposes. The State government is the sole repository of these other powers with regard to the entire State evident from Sections 5 and 6. The power to declare by notification that a licence granted shall be applicable to the entire State is exclusively vested in the State Government under Section 6(a) of the Act. [Paras 6, 10, 12][245B, E; 248-A, E]

1.2 The High Court held that in contradistinction to Section 58(2)(e) of the Act, which limits the powers of the State Government to grant of licence for a local area, the Excise Commissioner, as the delegatee of the Financial Commissioner, was competent under Section 59(a) to grant a single L-1BF licence for the entire State. [Para 13][248-F]

1.3 The nature of powers conferred under Section 59 of the Act, make it manifest that it is but a regulatory power available only after a license is granted to the licensee for a local area, to ensure supply, storage, sale or otherwise that the conditions of the license are adhered to and necessary directions can also be given for the purpose. [Para 14][250-E]

1.4 The Excise Commissioner, a sub-delegate of the Financial Commissioner, in exercise of the powers conferred under section 59 of the Act by virtue of the Haryana Government Excise and Taxation notification dated 01.04.2016, made the impugned amendment to the Haryana Liquor License Rules, 1970. The same were notified on 29.03.2017. These rules were called the Haryana Liquor License (Amendment) Rules, 2017. Rule 1(2) stated that they shall come into force with effect from 01.04.2017. Rule 3 of the amendment substituted Rule 24 (i-eeee) which provided that there shall be only one L-1BF license in the State. The amendment with regard to the number of licenses that could be issued for the entire State is in teeth of Sections 6 and 58(2)(e), delegation of which by the State Government is expressly prohibited by Section 13(a). [Para 15][250-F-H]

1.5 The distinction sought to be drawn by the High Court with regard to the term ‘local area’ under Section 58(2)(e) of the Act as being confined to small compact area only and that the Financial Commissioner by virtue of the power to regulate supply, storage or sale of any intoxicant had the power to determine the number of licenses to be granted for the entire State in a particular category, is not only unreasonable but also in teeth of the statutory Scheme and its provisions. To hold that the power of Financial Commissioner under Section 59(a) of the Act to regulate sale of liquor, and that sale could be regulated through grant of license, the Financial Commissioner was vested with the power to determine the number of licenses, is not only unreasonable but also unsustainable. Such an interpretation amounts to reading words into the statute which the legislature itself never intended. The amendment notified by the Excise Commissioner as a delegate of the Financial Commissioner was per se ultra vires the powers of the latter under Section 6 and 13(a) read with Section 58(2)(e) of the Act. The unreasonableness and incongruity in the reasoning by the High Court would vest wider powers in the Excise Commissioner than the State Government itself. While the State Government would have the power to determine the number of licenses and to issue licence for a local area only, the Excise Commissioner would have a superior power to determine the number of licenses and issue licenses for the entire State. [Para 16][251-A-E]

1.6 The Financial Commissioner was not competent to amend the Rules with regard to grant of number of licenses for the entire state, and which power was exclusive to the State Government under Section 6 read with Section 13(a) and 58(2)(e) of the Act. Rule 24(i-eeee) as amended by the Financial Commissioner in exercise of powers under Section 59(a) of the Act is ultra vires the powers of the Financial Commissioner under the Act and is therefore, struck down. [Para 18][251-H; 252-AB] Akadasi Padhan v. State of Orissa AIR 1963 SC 1047 : [1963] Suppl. SCR 691; Khoday Distilleries Ltd. v. State of Karnataka (I) (1995) 1 SCC 574 : [1994] 4 Suppl. SCR 477; Khoday Distilleries Ltd. v. State of Karnataka (II) (1996) 10 SCC 304 : [1995] 6 Suppl. SCR 759; Association of Registration Plates v. Union of India (2005) 1 SCC 679 : [2004] 6 Suppl. SCR 496; Deepak Theatre v. State of Punjab, (1992) Supp 1 SCC

684 : [1991] 3 Suppl. SCR 242 – referred to.

Per K.M. Joseph, J. (Dissenting):

1.1 In terms of the notification vesting powers of the finance Commissioner apparently under Section 59 it is that the Excise Commissioner has made the rules “Haryana Liquor Licence Rules 1970. Section 13 forbids delegation of power under Section

58 inter alia on the Financial Commissioner or Commissioner. [Para 9][258-H; 259-A]

1.2 Section 58(2)(e) states that the State Government has the power to frame rules to regulate the periods of licences, permits and passes either wholesale or retail; to regulate the localities for which wholesale or retail licences, permits or passes may be granted, and to regulate the persons or classes of persons to whom the licences, permits or passes may be granted either by way of a wholesale or retail licence. The latter part of Section 58(2)(e) on the other hand also permits the Government to regulate by rules, the number of such licences which may be granted in any local area. Therefore, it is clear that it is in respect of the licences which are referred, be it wholesale or retail mentioned earlier in the provision which can be regulated but however limited to any local area. As against this and immediately following Section 58 in Section 59, legislature has also empowered the financial Commissioner to make rules inter alia to regulate the manufacture, supply, storage or sale or any intoxicant. [Paras 11, 12][259-F-H; 260-A-B]

1.3 The expression “local area” has been designedly employed and it has to be given full play. It certainly cannot mean the whole of the State. Any other interpretation would render the word ‘local area’ in Section 58(2)(e) meaningless and, in fact, it would involve doing complete violence to the plain meaning of the words “local area”. It may be true that the whole may include the part (maxim-Omne Majus Continet in Se Minus) but the converse namely the part would include the whole could not hold good. Thus, the expression “local area” as used in Section 58(2)(e) would appear to convey the impression that the legislature intended to confer power on the State to place restrictions on the number of licences which are to be given qua any local area. In fact, in the written submission given by the State of Haryana, a definite case is set up that the State in its wisdom can conclude that a particular local area owing to the special conditions should be protected from the harmful effects of alcohol consumption. An example of tribal sub plan area is enlisted where the State may be carrying on a special programme. This view finds support also from another circumstance in the form of Rule 3 of the 1970 Rules. [Para 13][260-C-F]

1.4 Rule 3 reinforces the view that the expression “number of licences” which may be granted in the local area is within the exclusive domain of the State Government and reliance placed by the appellant on the number of licences which may be granted in Section 58(2)(e) to strike at the impugned rule which is otherwise sourced under Section 59 is without any basis. In other words going through both the Act and the Rules, a distinction is made between the whole of the State and the local area. In regard to rule making power, undoubtedly, the legislature has specifically conferred rule making power qua the number of licences in any local area upon the State. Unless it can be reasoned that the powers to regulate sale of liquor within the meaning of Section

59 which is undoubtedly placed on the shoulders of the financial Commissioner would not include the power to make rules in regard to the number of licences for the State as a whole, the argument of the appellant cannot be accepted. [Para 14][261-AC]

1.5 Having regard to the connotation of the word ‘regulate’ it would include power to control the sale of liquor under the Act. Control of sale is possible by providing for licences as it is through licencing that the authority can provide for conditions under which the sale could be best controlled. If the power to regulate include the power to stipulate licences it undoubtedly also would include power to provide for number of licences qua the State as a whole, which does not fall under Section 58(2)(e) of the Act. [Para 17][262-G-H]

1.6 The finding by the Division Bench of the High Court that the Financial Commissioner has power to decide upon the number of licenses is upheld. [Para 20][263-D-E]

1.7 The appellant is an association of companies. Article

19 provides for various fundamental freedoms. However, unlike Article 14 and 21, these freedoms are not conferred on noncitizens. In other words, Article 19 is confined to citizens. It is well settled that a company though a juristic person but not being a natural person is not a citizen within the meaning of Article 19. The writ petition is filed without joining any shareholder who is a citizen. Therefore reliance placed on Article 19 may not hold good. Judicial review of policy is justified only if the policy is arbitrary or unfair or violative of fundamental rights. Courts must be loathe to venture into an evaluation of State policy. [Paras 24, 25][266H; 267-A-C]

1.8 The guarantee of Article 14 against the State undoubtedly embraces all spheres of its activities. If the action falls foul of the mandate of Article 14 it is vulnerable, though different yardsticks may operate. Undoubtedly the expression ‘state’ would also include within its sweep an instrumentality of the State as it would fall under the expression “other authorities” in Article 12 of the Constitution. The principles have been culled out with sufficient clarity and there is no occasion or any reason to dwell more upon the same as the appellant even does not have a case that the licensee would be an instrumentality of the State within the meaning of Article 12 of the Constitution. An effort at bringing a body within Article 12 must originate specifically in the pleadings, which is absent. [Paras 28, 29][270-A-C]

1.9 It is noticed that many of the contentions of the appellant are in the form of apprehensions about what may happen in future. In fact there is a case for the respondents that no complaint as such was moved against the licensee during the period. The licensee is duty bound under the terms and conditions of licence to submit pricing of each brand at the time of approval of the brand. The department is bound to approve the maximum sales price factoring in various elements. The licensee must indicate among other things, the landing price, expenses, profit margin. The price is also determined based on the prevalent rates of the same and equivalent rate at the neighboring states and the Government levies. [Para 31][270-G-H; 271-A]

1.10 The exclusive licensee is under the condition required to keep sufficient stock of all brands as are demanded by the procuring licensees and all such brands as were registered with the department in 2016-17. Thus, at least two restrictions exist as in built safeguards which operate against the exclusive licensee. The licensee is obliged to keep sufficient number of stock of all brands which are demanded by the procuring licensees. In the instant case, the members of the appellant would fall within the expression ‘procuring licensees’. Secondly, there is a regulation of the maximum price which the exclusive licensee can demand as the price is to be fixed by the State itself. A question as regards, as to what would happen if the exclusive licensee himself also operates retail outlets and he promotes certain brands and/ or dampens the trade in others. Ordinarily on the principle that a person would act in his own self interest there would be no reason for the licensee to deny himself the proceeds of the higher turnover based on more sales as by seeking to dampen the sale of certain brands it is the licensee who would suffer a loss. It is assumed, however that he is placed in a situation where there is a conflict of interest and by suppressing the sale of certain brands and permitting the sale of other brands the exclusive licensee is placed in a more advantageous position, and therefore, he prefers it. The complaint of the individual company would be that brand which it wishes to import and deal in is not made available. Quite clearly if there is any such concrete incident, it would be an infraction of the condition of the license. Certainly it would give rise to power with the authorities to take suitable action as available in law including in appropriate cases, cancellation of the license. If such provisions are not already there it would be observed that the State may devise suitable provisions so that an individual who acts as the licensee of the State would not do what the State itself would be forbidden from doing under the Constitution. At the same time, the State has apparently gained by way of enhanced collection of revenue by the new regime put in place. The State’s power to experiment in economic matters shall not suffer invalidation at the hands of the Court. Such power must be premised solely on State action falling foul of the Constitution and the laws. State would however, do well to provide for a suitable mechanism by which it can provide appropriate safeguards so that there is fair dealing by the exclusive licensee.[271-B-H; 272-A]

The Kerala Bar Hotels Association & Another v. State of Kerala & Others AIR 2016 SC 163 : [2015] SCR

256 – distinguished.

D.K. Trivedi and Sons v. State of Gujarat (1986) Suppl. SCC 20 : [1986] SCR 479; Khoday Distilleries Ltd. and Others v. State of Karnataka and Others (1996) 10 SCC 304 : [1995] 6 Suppl. SCR 759; Khoday

Distilleries Ltd and Others v. State of Karnataka and Others (I) (1995) 1 SCC 574 : [1994] 4 Suppl. SCR 477; Maninderjit Singh Bitta v. Union of India and others (2005) 1 SCC 679 : [2004] 6 Suppl. SCR 496; Krishna Kumar Narula v. State of Jammu & Kashmir AIR 1957 SC 1368; Cooverjee B. Bharucha Vs. Excise Commissioner and the Chief Commissioner, Ajmer and Others AIR 1954 SC 220 : [1954] SCR 873 – referred to.