The quota and penalty provisions in the Foreign Liquor Rules and Country Spirit Rules were valid and enforceable because they did not impose excise duty on unlifted liquor but were contractual obligations voluntarily accepted by the licensees, and they were not arbitrary or violative of Article 47 of the Constitution, which deals with the prohibition of intoxicating drinks and drugs.

U.L. Bhat, C.J.

1. Petitioners in some of these writ petitions challenge notification dated 17-1-1990 amending condition 2-C in Form FL-1 in the Foreign Liquor Rules (for short the FL Rules) framed by the State Government under the provisions of the M. P. Excise Act, 1915 (hereinafter called 'the Act of 1915'). What is challenged in other writ petitions is a similar notification dated 31-3-1978 amending Condition 2-C in Form-CS-3 of" the Country Spirit Rules (for short 'the C.S. Rules') framed by the Government under the provisions of the Act of 1915. The petitioners have, in public auction under the provisions of the Act and the respective rules, become the successful bidders in regard to foreign liquor shops or country liquor shops, as the case may be, and have bean granted licences under the appropriate rules. Condition 2-C in the two sets of rules requires the licensee to take for sale from the warehouse the minimum quantity of liquor (referred to hereinafter as 'Quota') which is to be stipulated by the Licensing Authority in the licence. Condition-2-C of licence under the two sets of rules contemplates fixation of quota for lifting liquor and for levy of penalty on failure to lift the quota. The prescription of quota and the provision for penalty are challenged as ultra vires the provisions of the Act and the Constitution.

2. Originally, the Rules did not provide any condition of quota. Such a condition was introduced in the two sets of rules for the first time in 1964. Condition-2-C introduced in 1964 prescribed that the licensee shall be liable to make good the deficit of the monthly average of the total minimum excise duty. This condition was challenged by a licensee under Country Liquor Rules, in Bimal Chandra Banerjee's, M. P. No. 426 of 1964 = AIR 1971 SC 517 on the ground that the condition provided for imposition of excise duty on unlifted liquor which is unsustainable. The writ petition was dismissed by the order short-noted in Paliwal Trading Co. v. Bhairon Prasad, 1965 MPLJNOC 43. The Supreme Court reversed this decision by its judgment reported in B. C. Banerjee v. State of M. P., M. P. No. 426 of 1964 = AIR 1971 SC 517, holding that the Act did not empower the Rule making authority to levy excise duty on excisable articles which have not been imported, exported, transported or manufactured in any distillery established or licensed under the Act. The two sets of Rules were amended in 1970 altering Condition-2-C as one requiring payment of "Pratikar at the rate fixed by the Government for.......Spirit.......to the extent to which it would be less than the fixed monthly minimum quantity". The High Court relying on the above decision of the Supreme Court quashed the condition in Gappulal v. State of M. P. and another, 1971 MPLJ 547. The appeal filed by the State Government was dismissed in the decision in Gappulal's case, AIR 1976 SC 633 taking the view that the provision amounted to imposition of excise duty in respect of short-lifted liquor. The Court distinguished the decision in Pannalal's case, AIR 1975 SC 2008, which had to consider the parallel provisions of the Rules in force in Rajasthan, stating that in the latter case the contractual obligation to pay the guaranteed sum mentioned in the licence was not dependent on the quantum of liquor sold by them and no excise duty was charged or chargeable on the undrawn liquor and excise duty was collected only in relation to the quantity and quality of the country liquor that was drawn. Condition 2-C was again amended to provide for payment of "compensation" in case of failure to lift the quota of liquor. This condition was also held to be invalid in Suresh Chandra's case, M. P. No. 579 of 1990 and State v. Sunderlal, 1976 MPLJ 254 holding that the provision for compensation was nothing but a provision for payment of duty on unlifted liquor.

3. The two sets of Rules were subsequently amended by the notifications impugned in these cases, amending Condition No. 2