2006 Supreme(SC) 269

2006(4) Supreme 156
SUPREME COURT OF INDIA
(From Kerala High Court)
S.B. Sinha and P.K. Balasubramanyan, JJ.
Kerala Samsthana Chethu Thozhilali Union—Appellants
versus
State of Kerala & Ors.—Respondents
Civil Appeal No. 1732/2006
(Arising out of SLP (Civil) No. 8588 of 2005)
With
Civil Appeal No. 1733 of 2006
(Arising out of SLP (Civil) Nos. 10703-10704 of 2005)
Decided on 24-3-2006
Counsel for the Parties :
For the Appellant : C.K. Sasi, Ms. Malini Poduval, Advocates.
For the Respondents : U.U. Lalit, Sr. Advocate, K.R. Sasiprabhu, Roy Abraham, M.P. Vinod, Mrs. Seema Jain, Himinder Lal, Romy Chacko, P.V. Dinesh, Advocates.

IMPORTANT POINTS
1. Rule 4(2) of the Kerala Abkari Shops Disposal Rules, 2002, is held ultra vires the Abkari Act.
2. The State may have unfettered power to regulate the manufacture, sale or export-import sale of intoxicants but in absence of any statutory provision, it cannot, in purported exercise of the said power, direct a particular class of workers to be employed in other categories of liquor shops.

Headnote:Kerala Abkari Act—Sections 3(6A), 3(8), 8 as amended by Act No. 16 of 1997, 18A, 24(c), 24(d) and 29(1)—Kerala Abkari Shops Disposal Rules, 2002—Rules 4(2), 9(10)(b)—Trade in Arrack—State of Kerala banned sale of arrack—A policy decision admittedly was taken by the Labour and Rehabilitation Department of State of Kerala that workers who had been engaged in trade of arrack should be rehabilitated—State paid compensation at the rate of Rs. 30,000/- per worker—Workers were also paid benefits under the Abkari Workers Welfare Fund Board Act—After a lapse of about six years, State inserted Rules directing that one arrack worker each must be employed in all toddy shops—Validity of Rules challenged by the holders of licences as also by the toddy workers—The Act does not contain any provision as regards adoption of welfare measures to be taken by the State—Whether State had competence to make such a rule—(No)—Rehabilitation is not within the statutory scheme—Rule 4(2) is declared ultra vires in its entirety.

       Held : The rule making power is contained in Section 29 of the Act. At the relevant time, sub-section (1) of Section 29 of the Act provided that the government may make rules for the purpose of carrying out the provisions of the Act which has been amended by Act No.12 of 2003 with effect from 1.4.2003 empowering the State to make rules either prospectively or retrospectively for the purposes of the Act. Its power, therefore, was to make rules only for the purpose of carrying out the purposes of the Act and not de’hors the same. In other words, rules cannot be framed in matters that are not contemplated under the Act.(Paras 26 & 27)

       Neither Section 18A nor sub-sections (c) and (d) of Sections 24 of the act confer power upon the delegatee to encroach upon the jurisdiction of the other department of the State and take upon its head something which is not within its domain or which otherwise would not come within the purview of the control and regulation of trade in liquor. The conditions imposed must be such which would promote the policy or secure the object of the Act. To grant employment to one arrack worker in each toddy shop in preference to the toddy workers neither promotes the policy nor secures the object of the Act. It is not in dispute that the purport and object of such rules is to rehabilitate the former employees of arrack shops. Rehabilitation of the employees is not within the statutory scheme and, thus, the Rule are ultra vires the provisions of the Act. (Para 39)

       It may be true that all types of intoxicating liquors including ‘toddy’ are subject matter of control but the power to control has been arbitrarily exercised. Whereas in the case of Arrack, the trade has totally been prohibited, the trade in toddy has merely been subjected to the control within the purview of the provisions of the Act. So far as trade in toddy is concerned, the toddy workers not only act in the shops, some of them are also toddy tappers. It requires a specialised skill. They form a different class. Even assuming that both toddy and former arrack workers belong to the same class, the rehabilitation of arrack workers who had been thrown out of employment because of an excise policy on the part of the State, do not have any reasonable nexus with the purpose of the Act, namely, the prohibition of grant of excise licence in relation to the trade in arrack. If a policy decision is taken, the consequences therefor must ensue. Rehabilitation of the workers, being not a part of the legislative policy for which the Act was enacted, we are of the opinion that by reason thereof, the power has not been exercised in a reasonable manner. Rehabilitation of the workers is not one of the objectives of the Act.(Paras 41 to 43)

       Reference to the provisions of Articles 39, 42 and 43 of the Constitution of India by the learned counsel for the Respondent is misconceived. While exercising the power of rehabilitation, the State did not take recourse to the provisions of Article 47 of the Constitution of India. The matter might have been different if the State took a decision in exercise of its executive power in consonance with the legislative policy of the State as also for the purpose of giving effect to Articles 39, 42 and 43 of the Constitution of India. But, herein, the State was exercising a specific power of delegated legislation. (Para 45)

       The rights and liabilities of a workman would fall within the purview of the provisions of the Industrial Disputes Act. What is the right of a workman in case an industry is closed is governed by Section 25(FFF) and/ or Section 25(J) of the Industrial Disputes Act. The State while pursuing its social object or policy may do something to rehabilitate the workers affected by the ban but the same would not mean that the State can thrust such employees upon an unwilling employer. It furthermore, would not mean that the State can rehabilitate one set of workers at the cost of the other. The employees in the arrack shops had already been paid an amount of Rs. 30,000/- as compensation and other benefits under the Abkari Workers Welfare Fund Board Act. We are informed that they have also been paid a sum of Rs. 2000/- each in 1997. If they became entitled to any other benefit, the State may provide the same as a part of welfare policy but not in pursuit of an excise policy. (Paras 50 to 52)

       When an employer gives employment to a person, a contract of employment is entered into. The right of the citizens to enter into any contract, unless it is expressly prohibited by law or is opposed to public policy, cannot be restricted. Such a power to enter into a contract is within the realm of the Indian Contract Act. It has not been and could not be contended that a contract of employment in the toddy shops would be hit by Section 23 of the Indian Contract Act. So long as the contract of employment in a particular trade is not prohibited either in terms of the statutory or constitutional scheme, the State’s intervention would be unwarranted unless there exists a statutory interdict. Even to what extent such a legislative power can be exercised would be the subject matter of debate but in a case of this nature there cannot be any doubt that the impugned rules are also contrary to the provisions of the Indian Contract Act as also the Specific Relief Act, 1963. (Para 53)

       We, however, accept the submission that Rule 4(2) of the Rules must be held to be ultra vires in its entirety as even that part of it, vis-à-vis, the toddy workers, is not severable. Hence Rule 4(2) is declared ultra vires in its entirety.(Para 60)

       (ii) INTERPRETATION OF STATUTES—Subordinate Legislation and Statute Law—Distinction—Grounds for judicial review of delegated legislation—A legislative policy must conform to provisions of constitutional mandates—A delegate cannot act contrary to basic feature of the Act.(Paras 32 to 36)

       (iii) INTERPRETATION OF STATUTES—Notification—If by a notification, the Act itself stands affected, the notification may be struck down. (Para 37)