1. Challenge to the rejection of an application for a liquor manufacturing licence based on the applicant's non-participation in a tender process under the Excise Act and Rules. (Para 1 , 2 )
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2019 Supreme(SC) 172
SUPREME COURT OF INDIA
L. NAGESWARA RAO, M.R. SHAH, JJ.
GWALIOR DISTILLERIES PVT. LTD. - Appellant
Vs.
THE STATE OF MADHYA PRADESH AND OTHERS - Respondent
CIVIL APPEAL NO. 1701 OF 2019 (ARISING OUT OF S.L.P. (CIVIL) NO. 30428 OF 2018)
Decided On : 15-02-2019
Important Points
IMPORTANT POINT
No one can claim as against State right to carry on trade or business in liquor and State cannot be compelled to part with its exclusive right or privilege of manufacturing and selling liquor but when State decides to grant such right or privilege to others State cannot escape rigour of Article 14.
No one can claim as against State right to carry on trade or business in liquor and State cannot be compelled to part with its exclusive right or privilege of manufacturing and selling liquor but when State decides to grant such right or privilege to others State cannot escape rigour of Article 14.
Subject
Administrative Law - Licensing
Act Referred
Headnote
Excise Act, 1915 – Section 18 – Madhya Pradesh Country Spirit Rules, 1995 – Rule 3 – Constitution of India – Article 14 – Supply of country spirit – Rejection of application for grant of licence – There is no condition either in Section 18 or Rule 3 that CS-1 licence will be granted only to a person who participated in tender process – Order passed by Respondent is arbitrary and contrary to Section 18 of Act and Rule 3 of Rules – Rule 3 (1) provides for allotment of an area to a person who is given a CS-1 licence – Participation in process of tender as a condition for applying for a CS-1 licence is not found in Rules – High Court dismissed Writ Petition by holding that there is no fundamental right to trade of liquor – However, other contention raised by Appellant that there is hostile discrimination against Appellant as other similarly situated distillers were permitted to participate in tender, has not been dealt with by High Court – No one can claim as against State the right to carry on trade or business in liquor and State cannot be compelled to part with its exclusive right or privilege of manufacturing and selling liquor – But when State decides to grant such right or privilege to others State cannot escape rigour of Article 14 – It cannot act arbitrarily or at its sweet will – It must comply with equality clause while granting exclusive right or privilege of manufacturing or selling liquor – Appellant's request for grant of a CS-1 license requires to be considered strictly in accordance with law – Respondents are directed to consider application of Appellant for issuance of CS-1 licence in accordance with Act and Rules made thereunder – Respondents should not insist on condition that Appellant should have participated in a tender and should have been allotted an area of operation – Judgment of High Court set aside. (Paras 6, 7 and 8)
Facts of Case:
Appellant is a manufacturer of spirits and holds a licence in form of D-1 granted in year 2017. A tender notice was issued for supply of country spirit in sealed bottles, in State of Madhya Pradesh for year 2018-2019. Appellant submitted an application for grant of CS-1 licence on 09.04.2018. Application filed by the Appellant for grant of CS-1 licence was rejected. Aggrieved by said rejection, Appellant filed Writ Petition which was dismissed by High Court. Hence, this appeal.
Findings of Court:
There is no condition either in Section 18 or Rule 3 that CS-1 licence will be granted only to a person who participated in tender process. Order passed by Respondent No. 2 is arbitrary and contrary to Section 18 of Act and Rule 3 of Rules. By impugned judgment High Court held that allotment of an area is a pre-condition for issuance of CS-1 licence without examining judgment in Writ Petition.
Result : Appeal allowed.
Legal Category Hierarchy
Advocates Appeared:
For the Appellant :Ms. Rajkumari Banju, Advocate
For the Respondent:Mr. Varun Chopra, Advocate, Mrs. Swarupama Chaturvedi, Advocate, Mr. B.N. Dubey, Advocate, Mr. Mukesh Kumar, Advocate, Mr. Gurtej Pal Singh, Advocate, Ms. Indira Bhakar, Advocate, Ms. Aparna Trivedi, Advocate and Mr. Shanatanu Singh, Advocate
For the Appellant :Ms. Rajkumari Banju, Advocate
For the Respondent:Mr. Varun Chopra, Advocate, Mrs. Swarupama Chaturvedi, Advocate, Mr. B.N. Dubey, Advocate, Mr. Mukesh Kumar, Advocate, Mr. Gurtej Pal Singh, Advocate, Ms. Indira Bhakar, Advocate, Ms. Aparna Trivedi, Advocate and Mr. Shanatanu Singh, Advocate
Table of Contents
2. Whether tender participation is a mandatory precondition for granting a manufacturing licence and whether the rejection of the application violated the equality clause of the Constitution. (Para 1 , 3 , 4 )
3. The statutory rules do not mandate tender participation for granting the licence; the State must act non-arbitrarily and comply with Article 14 when granting exclusive privileges. (Para 4 , 6 )
4. While the State cannot be compelled to grant liquor trade rights, it must adhere to the equality clause of Article 14 and avoid arbitrariness when doing so. (Para 6 )
5. Appeal allowed and High Court judgment set aside; Respondents directed to consider the licence application without insisting on tender participation or area allotment. (Para 7 , 8 )
6. Is participation in a tender process a mandatory prerequisite for the grant of a CS-1 licence under the Madhya Pradesh Country Spirit Rules?
No. The court held that neither Section 18 of the Excise Act nor Rule 3 of the Rules stipulates that a CS-1 licence shall be granted only to a person who participated in the tender process. (Para 6 )
7. Does the State have absolute discretion when granting exclusive privileges to manufacture and sell liquor?
No. Although the State cannot be compelled to part with its exclusive right to manufacture or sell liquor, it must comply with the equality clause of Article 14 and cannot act arbitrarily when granting such privileges to others. (Para 6 )
8. Is the allotment of an area a mandatory precondition for the issuance of a CS-1 licence?
No. The court observed that Rule 3(1) provides for the allotment of an area to a person who is granted a CS-1 licence, rather than making the allotment a precondition for the grant of the licence. (Para 4 , 6 )
JUDGMENT :
L. Nageswara Rao, J.
Leave granted.
1. The Appellant is a manufacturer of spirits and holds a licence in the form of D-1 granted in the year 2017. A tender notice was issued for supply of country spirit in sealed bottles, in the State of Madhya Pradesh for the year 2018-2019. The condition imposed for participating in the tender was that the tenderer must have a licence for manufacturing, bottling and wholesale supply of country spirit in the State of Madhya Pradesh, issued in the form of CS-1 licence. Clause 2(i) of the tender notice dated 03.02.2018 was challenged by the Appellant on the ground that the stipulation pertaining to possession of CS-1 licence was contrary to Rule 3 of the Madhya Pradesh Country Spirit Rules, 1995 (hereinafter referred to as 'the Rules') since such licence could not be granted unless the distiller has participated in the tender process. That according to Rule 3, a successful tenderer is granted an area for supply of country spirit which would enable him to claim a CS-1 licence and CS-1-1B licence. The Writ Petition filed by the Appellant was dismissed. However, the High Court observed that the contention of the Appellant that he could not be granted a licence under the Rules unless an area was allotted to him was not borne out from Section 18 of the Excise Act, 1915 (hereinafter referred to as 'the Act) or the Rules.
2. Thereafter, the Appellant submitted an application for grant of CS-1 licence on 09.04.2018. By an order dated 26.07.2018, the application filed by the Appellant for grant of CS-1 licence was rejected. Aggrieved by the said rejection, the Appellant filed a Writ Petition which was dismissed by the High Court. Hence, this appeal.
3. The order by which the request for issuance of CS-1 licence was rejected by the Respondent No. 2 was challenged by the Appellant as being in violation of Articles 14 and 19 (1) (g) of the Constitution of India. The Appellant alleged discrimination since eight other distillers in the State of Madhya Pradesh who were similarly situated to the Appellant, not possessing CS-1 and CS-1-1B licence were allowed to participate in the tender process. The Appellant relied upon the observations of the High Court in its judgment dated 21.03.2018, in Writ Petition No. 6525 of 2018 filed by the Appellant, that neither the Act nor the Rules made thereunder required allotment of an area for grant of CS-1 licence.
4. The High Court dismissed the Writ Petition by observing that allotment of an area was an imperative precondition for grant of CS-1 licence. The High Court further held that there was no fundamental right to trade in liquor and opined that the Appellant was not entitled to any relief. Clause 2 (i) of the tender notice dated 03.02.2018 issued by the Respondents provides that a distiller having a proper licence for manufacturing, bottling and wholesale supply of country spirit shall be eligible to participate in the tender process. The validity of the said condition was challenged by the Appellant in Writ Petition No. 6525 of 2018 in the High Court of Madhya Pradesh. The Appellant contended in said Writ Petition that according to the scheme of the Rules, a CS-1 licence will not be granted unless the area is allotted. A Division Bench of the High Court dismissed the Writ Petition finding no substance in the challenge to Clause 2 (i) of the tender notice. While dismissing the Writ Petition, the High Court observed that the allotment of an area was not a pre-requisite for grant of CS-1 licence. Subsequently, the Appellant submitted an application to the Excise Commissioner, Gwalior on 09.04.2018, requesting issuance of a CS-1 licence. The application for granting CS-1 licence was rejected on 26.07.2018 on the ground that the Appellant did not participate in the tender process, published on 20.02.2018 for the year 2018-19. There is no doubt that the Appellant has a D-1 licence. A perusal of Rule 3 would show that manufacturing, bottling and wholesale supply of c
