Judgment

MOHAN

(1) LEAVE granted.

(2) THE first appellant in CA No. 4981 of 1994 arising out of Special Leave Petition (C) No. 9854 of 1993 is an Association registered under the Societies Registration Act. The members of the Association have been granted licences to carry on business in the retail vending of Indian-made foreign spirits (hereinafter referred to as I.M.F.S.).

(3) THE second appellant is a licensee of 1.M.F.S. Shop No. 336 at No. 7, Thyagaraja Road, Madras-17 for the year 1992-93.

(4) THE respondent, the government of Tamil Nadu framed the Tamil Nadu Liquor (Licence and Permit) Rules, 1981. Under these Rules, Indian-made foreign spirit and foreign liquor was to be sold only by persons who are granted licence for personal consumption. In the year 1989, the government of Tamil Nadu decided to grant the privilege of selling by retail of I.M.F.S. and beer through auction/tender system. Accordingly, the government framed Tamil Nadu Liquor (Retail Vending) Rules, 1989 by GOMs No. 506 Home (Prohibition) dated 15/4/1989. In the auction, the successful bidder was granted the licence to carry on the business of vending 1.M.F.S. in retail in their respective shops. The licence was valid for a period of one year. Under the said rules, it was provided for a renewal of the licence for two successive years on the licensee offering to pay 15 and 10 respectively more than the privilege amount at which the sale was confirmed in his favour during the previous years. Rule 13 contained all these clauses. Under Rule 14(3, a provision was made that it was open to the licensing authority to refuse the renewal by an order recording the reasons for refusal. However, before such refusal, the licensing authority was obligated to give a reasonable opportunity to the licensee of being heard.

(5) THE successful bidders obtained licences for the year 1989-90 and carried on the business. Most of them obtained renewal for the subsequent excise year 1991-92.

(6) THE government issued orders in GOMs No. 90 Prohibition dated 21/4/1992 to the effect that fresh auction may be conducted for all the liquor retail vending shops whose licence period expires on or before 31/5/1992 as well as those whose licence period expires on or after 31/5/1992 by restricting the period of licence to 31/5/1992 and refunding the proportionate portion of the privilege amount. This course was adopted in order to facilitate the government to evolve fresh scheme of upset price for auctioning of the liquor retail vending shops in the State.

(7) THE notification also provided that the licence to be issued for the year 1992-93 shall be renewed for the second and third years after collecting increased privilege fees. The prescription relating to increased fees was provided under Rule 14(1 and (2 of the 1989 Rules made under the Tamil Nadu Prohibition Act, 1937. An ordinance was passed terminating the validity of licences which enured beyond 31/5/1992 with the expiry of the said period. Subsequently, Tamil Nadu Act 42 of 1992 came into force with effect from 12/5/1992. By this Act Section 23(b) of the Tamil Nadu Prohibition Act, 1937 was substituted. In accordance with GOMs No. 90 Prohibition dated 21/4/1992, auctions came to be conducted. The successful bidders were issued the licences. At that stage, the government received representations from these dealers for the establishment of a bar within or adjoining licence premises. The government forwarded these representations to the Commissioner of Prohibition and Excise and obtained necessary recommendations. Thereafter, the government framed rules by GOMs No. 99, Prohibition, dated 26/5/1992 known as Tamil Nadu Liquor (Retail Vending in Bar) Rules, 1992. Those rules permitted to open a bar within or adjoining licence premises. These rules came into force on 1/6/1992. Rule 3 provides for grant of privilege by issue of licence to a person holding a licence granted un