IMPORTANT POINTS
1. Provisions of the Chhattisgarh Excise Act, regarding grant of excise licences deserve strict construction which requires that while granting licence the statutory committee and other authorities must resort to strict scrutiny of the applications.
2. En-masse cancellation of excise licences on ground of ineligibility is not justified when several District Level Committees had carried out the selection process and the Court passed the order without arriving at a finding as to how and in what manner licence granted was in violation of the provisions of the statute or directions of the Supreme Court.

Headnote:(i) Chhattisgarh Excise Act, 1915 — Sections 7(e), 62 — Chhattisgarh Excise Settlement of Licences for Retail Sale of Country/Foreign Liquor Rules, 2002 — Rules 4, 6, 7, 8, 9, 10, 11, 12, 13 — Grant of excise licences — En-Masse Cancellation — Violation of eligibility criteria — Several District Level Committees have carried out the selection process — It was obligatory to consider the mode or manner of selection made by each one of them individually — High Court committed an error in directing cancellation of licences of all private respondents without arriving at a finding as to how and in what manner licence granted to each one of them was in violation of provisions of the Act — Judgment of the High Court held not sustainable — However, period for which licences had been granted is over — Directions made to the State of Chhattisgarh and its authorities not to commit the alleged irregularities in coming years.
       Held : In law it is permissible to cancel the entire selection process if it is held that the same is tainted to such an extent that it may not be possible to separate the innocent from the tainted ones. As, for example, in a case of mass cheating adopted by the students in a Board Examination, it may be permissible to cancel the entire examination. When selections, however, are carried out not by one agency but by several ones, the principle of en masse cancellation may not apply. In this case, admittedly, several District Level Committees have carried out the selection process and in that view of the matter it was obligatory on the part of the High Court to consider the mode of manner of selection made by each one of them individually. It was not a case of mass cheating in an examination or an illegality or gross irregularity in the selection process which would lead to cancellation of the entire selection process.(Para 36)
       In the writ petition, the writ petitioners have not disclosed as to how each one of the licensees who had appeared as respondents therein were ineligible or otherwise disqualified and/or did not fulfil the conditions therefor. Had such opportunities been given, the State as also the said respondents could have met the said allegations. Such allegations were made only in the rejoinder. No new plea ordinarily could have been permitted in the rejoinder without the leave of the court. We would not have commented upon this as the High Court does not appear to have placed reliance upon the additional affidavit filed by the State inter alia on the ground that the same being a sur-rejoinder could not have been filed. The High Court’s attention was evidently not drawn to the fact that writ petitioners brought on record new facts for the first time in the rejoinder and, thus, the State was entitled to file a sur-rejoinder controverting the allegations made therein.(Para 37)
       We are, therefore, of the opinion that the High Court committed an error in directing cancellation of licences of all the private respondents of the writ petition without arriving at a finding as to how and in what manner licence granted to each one of them was either in violation of the provisions of the statute or the directions of this Court.(Para 42)
       To put it shortly, the inadequacies or otherwise of fulfillment of eligibility criteria or the violation of the statute should have been decided by taking up individual matters and upon proper scrutiny of the case. To the aforementioned extent, the judgment of the High Court cannot be sustained.(Para 43)
       (ii) Chhattisgarh Excise Act, 1915 — Sections 7(e), 62 — Chhattisgarh Excise Settlement of Licences for Retail Sale of Country/Foreign Liquor Rules, 2002 — Rules 4, 6, 7, 8, 9, 10, 11, 12, 13 — Grant of excise licences — Strict compliance of Rules — No proper proof of residence or age was produced by applicants — Applicants who had submitted improper documents were not asked by the State at the scrutiny, to submit proper documents — Directions made to the State to take appropriate steps for the following excise years — Constitution of India — Article 47.
       Held : We hope and trust that in future, i.e., for the following excise year, appropriate steps shall be taken to make the position clear that if the applicants are not residents of the State of Jharkhand either on a temporary or permanent basis, they would not be shown to be residents of such places wherefrom their antecedents cannot be verified. Such applicants, therefore, should not be allowed to furnish an address only for the purpose of communication and if so, the same should clearly be stated in the application.(Para 67)
       In the Act or the Rules, again no particular authority had been mentioned as having been authorized to issue certificate. No particular method of verification of proof of address and identity had also been shown to exist. It will be appropriate if a clarification is issued in this behalf.(Para 68)
       The Scrutiny Committee appears to have relied upon certificates issued by Tahsildars, Municipal Counsellors, etc. which had not been objected to by the writ petitioners. It is stated that most of the applicants are income tax payees. They have been granted a PAN Card. In future, however, the authorities should insist that the applicants must enclose Xeroxed copies of their PAN Cards along with their applicants.(Para 69)
       The period for which licences had been granted is over. For all practical purposes, the State and the licensees have succeeded in their attempts to defeat the purpose for which the writ petitions were filed by the writ petitioners - Respondents. We must express our dismay that despite our directions, the applications filed by the Appellants had not been scrutinized minutely which should have been done. The State of Chhattisgarh, we are not very sure, whether was aware of its constitutional duties and functions. It seems to have been more concerned with raising of revenue. To that extent it had succeeded, as the High Court in the first round of litigation despite directing a fresh scrutiny of the applications did not direct refund of the huge amount collected by it by way of application fees. We would, however, expect the State and its officers to scrupulously follow the constitutional mandate in future.(Para 70)
       (iii) Constitution of India — Article 47 — Public Health — Regulation and control over the trade in intoxicating drinks — Grant of excise licences — Criteria for selection of persons — Obligation of State — All information supplied by the applicants for licences must undergo and satisfy ‘strict scrutiny test’.
       Held : When a law is made, having regard to the phraseology used in Part IV of the Constitution of India, it is expected that law made or actions taken would be in furtherance thereof. In terms of the Directive Principles of State Policy, the State is bound to make endeavours to promote public health which is one of its primary duties of the State. One important component of the said directions was regulation and control over the trade in intoxicating drinks so as to enable the State to curb or minimize, as far as possible, the consumption thereof. The State may or may not prohibit manufacture, sale or consumption of liquor but it is vital that while parting with its exclusive privilege to deal with intoxicating liquor, the provisions of the Act and the Rules for which the same had been enacted must be strictly complied with.(Para 18)
       The Act and the Rules deal only with control and regulations. There was no provision which gives any discretion to the authorities concerned to relax the provisions of the Rules. The Rules in this behalf again must be framed upon taking into consideration of all relevant factors. The State in making the rules and formulating the policy decisions must be guided by public interest. In such matters, the State has a positive obligation to ensure that any activity contemplated, strictly conforms to the requirements of public good and is not otherwise derogative of public health. The State parts with its exclusive privilege on certain statutory conditions such as payment of excise fee. When it lays down criteria for selection of persons who would become qualified for grant of licence under the Act, not only the eligibility criteria therefor should be laid down, but having regard to its past experience as to how and in what manner, the licensees find means and methods to circumvent the said provisions, all endeavours should be made to plug all loopholes. The State has an extremely solemn obligation to fulfil in that behalf. All information supplied by the applicants for licences, thus, must undergo and satisfy the ‘strict scrutiny test’. The State should not treat its right of parting with its privilege only as a means of earning more and more revenue. It may certainly earn revenue but only upon fulfillment of its constitutional and statutory obligations. There exists a strong underlying notion of public health and welfare when the matter comes to retention of the exclusive privilege and/or parting therewith either in whole or in part.(Para 19)

JUDGMENT

S.B. Sinha, J. — Leave granted.

INTRODUCTION

The Appellants are before us in the second round. They, except the State of Chhattisgarh, were granted excise licences. Grant of such licences indisputably is governed by the Chhattisgarh Excise Act, 1915 (for short “the Act”). On or about 15.3.2002, the State Government under `the Act’ made rules known as Chhattisgarh Excise Settlement of Licences for Retail Sale of Country/Foreign Liquor Rules, 2002 (for short “the Rules”).

2. The State issued notices inviting tenders for grant of licences under the Rules. Pursuant to or in furtherance of the said notices inviting tenders about 2,64,703 applications were filed. The grant of licences in favour of the Appellants in some of the appeals came to be questioned before the Chhattisgarh High Court. By reason of a judgment dated 31.3.2005, a Division Bench of the said Court allowed the writ petition and directed cancellation of the licences. Appeals thereagainst were filed before this Court. Interim orders were passed therein as a result whereof licensees continued to carry on their business. This Court, however, while refraining itself from setting aside the entire selection process thought it fit to ask the respective District Level Committees to consider the matter relating to grant of such licences afresh. Having regard to the actions of the statutory functionaries, the exercises as regard scrutiny so as to arrive at a satisfaction that the requirement of the Rules vis-a-vis selection process were required to be undertaken by the Selection Committees. They were directed to do so afresh.

3. We would advert to the said directions a little later. However, we at this juncture, may notice that, according to the State, in terms of the directions of this Court, the District Level Committee under the strict supervision of the Chief Secretary as also the Commissioner of Excise went into the said exercise over again and found that the licensees were not only eligible therefor but also fulfilled other conditions laid down in the Rules. It is not in dispute that the writ petitioners - Respondents, filed objections before the District Level Committee. The said objections were rejected. Aggrieved by and dissatisfied therewith, the writ petitioners - Respondents filed a writ petition before the Chhattisgarh High Court. The State in the meanwhile issued a notification effecting an amendment in Rule 9 of the Rules in terms of a notification dated 22.3.2005.

PROCEEDINGS BEFORE THE HIGH COURT

4. In the writ petition, the following reliefs were prayed for :

“7.1 That, this Hon’ble Court may be pleased to send for the entire records from the respondents and district committees in regard to the compliance of the directions of the Hon’ble Supreme Court and observance of the statutory rules and all such other relevant and complete record as are in their possession leading to the affirmation of the selection of the select candidates.

7.2 The respondents 1 to 12 be directed to satisfy this Hon’ble Court regarding the compliance of the mandatory directions as given by the Hon’ble Apex Court in the case of Ashok Lanka Vs. Rishi Dikshit.

7.3 That the Hon’ble Court may be pleased to issue a writ in the nature of mandamus quashing and annulling the entire selection of respondents 13 to 89 and also quashing the temporary licences by issuing a writ in the nature of certiorari.

That, the Hon’ble Court may be pleased to issue a writ in the nature of mandamus commanding the respondents 1 to 12 to make selection strictly in accordance with law, rules and the directions of the Hon’ble Supreme Court, afresh.

7.4 That the contempt proceedings be initiated against the respondents 2 to 12 for the non-compliance of the order of the Hon’ble Apex Court.”

5. Before the High Court, the questions raised by the parties inter alia were :

(i)The permanent addresses of the persons in whose favour licences were granted were not property verified.

(ii)The temporary addresses given by them were

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2006 Supreme(SC) 371

Cases Referred (10)