http://indiankanoon.org/doc/180381452/
M/S.Golden Vats Private Ltd vs The Chairman on 12 March, 2014
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED :: 12-03-2014
CORAM
THE HONOURABLE MR.JUSTICE V.DHANAPALAN
W.P.Nos.1937 & 1938 OF 2014
M/s.Golden Vats Private Ltd. ... Petitioner
-vs-
1.The Chairman,
Tamil Nadu State Marketing Corporation Ltd. (TASMAC)
4th Floor, CMDA Tower-II,
Gandhi Irwin Bridge Road,
Egmore, Chennai-600 008.
2.The State of Tamil Nadu,
rep.by its Principal Secretary,
Home, Prohibition and Excise Department,
Secretariat, Fort St.George,
Chennai.
3.The Commissioner,
Prohibition and Excise,
Chepauk,
Chennai-600 005.
4.Tamil Nadu State Marketing Corporation Ltd.(TASMAC)
rep.by its Managing Director,
4th Floor, CMDA Tower-II,
Gandhi Irwin Bridge Road,
Egmore, Chennai-600 008.
5.Thiru T.Soundiah. ... Respondents
For petitioner : Mr.P.Wilson, Senior Counsel, for K.Karthik Jagannath.
For respondents 1,4 and 5: Mr.A.L.Somayaji, Advocate General, assisted by Mr.Muthuraj.
For respondents 2 and 3 : Mr.V.Jayaprakash Narayanan.
Spl.Govt.Pleader.
Petitions under Article 226 of the Constitution of India.
COMMON ORDER While W.P.No.1937 of 2014 has been filed, praying for issuance of a writ of mandamus, directing the fourth respondent to issue supply orders and indent to the petitioner premium brands from the month of July 2013 on the basis of monthly average retail sale of each premium brand of the petitioner right from the date of its launching till October 2013 and continue to issue supply order and indent to the petitioner premium brands on the same basis till the guidelines on scientific and commercial data and on choice of consumer are framed by adopting transparency in the procedure of placing supply and indent orders, W.P.No.1938 of 2014 has been filed for issuance of a writ of mandamus, directing the respondents to frame guidelines on the basis of scientific and commercial data and consumer choice by adopting fair and transparent procedure for placing supply orders and indent with IMFL manufactures including the petitioner and to fix reasonable retail price to sell the IMFL brands in retail shops of fourth respondent without the element of profiteering.
2. Since both these Writ Petitions involve one and the same issue, they are being disposed of in common.
3.The facts are as under :
3.1. Petitioner is a company registered under the Companies Act,1956, in the year 2007 and is involved in the manufacturing and selling of Indian Made Foreign Spirits. The manufacturing unit of the petitioner company is located in a remote village called Karnavur near Mannargudi in Thiruvarur district of Tamil Nadu, which is a most backward area, in order to create lot of employment opportunities to the rural and downtrodden people who live in the said village.
3.2. Petitioner company was granted with prior approval by the second respondent for grant of privilege for setting up of a new IMFL manufacturing unit to manufacture IMFL spirits in the aforesaid factory in accordance with the provisions laid down in Rule 7 of Tamil Nadu IMFL Spirits (Manufacture) Rules 1981, in short, "the Rules", vide G.O.Ms.No.56, dated 13.10.2010. Thereafter, by proceedings dated 20.10.2010, the third respondent granted privilege for setting up of new IMFS unit in the aforesaid village. Subsequently, by another proceedings, dated 29.12.2010, the third respondent, after receipt of Rs.6,00,000/- under Rule 21 of the Rules, on the basis of the report of Collector, Thiruvarur District, and other authorities about completion of construction and compliance of requirements, including obtaining NOC, water analysis report, local body resolution, structural stability certificate, consent letter from TNPCB, approval from Chief Inspector of Factories, NOC from Fire Department etc., granted licence in Form No.2 valid up to 31.03.2011 under Rule 7 (1) of the Rules.
3.3. By letter dated 31.12.2010, the petitioner company requested the fourth respondent to permit them to introduce 11 own brands and 3 brands with collaboration with M/s.Radico Khaitan Ltd. and 3 brands with M/s.Khoday India Ltd. The fourth respondent recommended to introduce the brands of the petitioner to the third respondent, who by his proceedings dated 11.01.2011, accorded permission under Rule 25 (3-B) for introduction of the above said brands and directed to remit registration fee of Rs.2.00 lakhs per brand and also stated that the above said brands had to be introduced within a period of six months from the date of issue of the order.
3.4. The fourth respondent, by letter dated 12.01.2011, sought for certain details to fix the manufacturer's price. By G.O.Ms.No.45, dated 14.02.2011, the second respondent granted RL 3 Licence for possession limit of Extra Neutral Alcohol (ENA)/Rectified Spirit under Tamil Nadu Rectified Spirit Rules,2000, to an extent of 4.01,70,000 bulk litres in a year. However, the third respondent, based upon the request of the company to possess the required quantity of ENA, has issued proceedings for every quarter in advance. Thus, with the above licenses and permission granted by the second respondent and respondents 3 and 4, the petitioner commenced manufacturing IMF Spirits from March,2011, in the brands of ordinary, medium and premium by giving employment to about 600 persons both directly and indirectly.
3.5. For introduction of two new IMFS brands by the petitioner company, the same was approved by the second respondent in its proceedings dated 26.02.2011. Likewise, for another premium brand introduced by the year, the second respondent issued G.O.Ms.No.58, dated 16.11.2012, approving the said brand and, consequently, the fourth respondent, by his letter, dated 20.11.2012, issued his approval letter for the supply to be effected.
3.6. RL-3 licence granted was renewed periodically and every time the petitioner has paid the required fee. The last renewal of RL-3 licence was on 16.04.2013, which was valid up to 31.03.2014. Apart from that, the licence for manufacture of IMFL was renewed for the period from 01.04.2013 to 31.03.2014, vide proceedings, dated 31.05.2012, based upon the second respondent's order in G.O.Ms.No.100, dated 31.05.2013, and after receipt of brand renewal fee for 13 brands.
3.7. By an Act 31 of 2003, Section 17-C of the Tamil Nadu Prohibition Act,1937, was amended andSection 17-C (1-B) was inserted. Under the amended provisions of the said Act, the fourth respondent was statutorily empowered with exhaustive privilege of selling, by retail, IMFL for the whole State of Tamil Nadu and no other person shall be entitled to any privilege of selling, by retail, IMFL in whole or any part of the State and the fourth respondent alone was entitled to open as many shops for carrying on the business of sale, by retail, of IMFL and fix the number of shops depending upon the population of locality, needs of locality and other factors. Today, there are 6800 shops established by the fourth respondent.
3.8. The second respondent, by G.O.Ms.No.20, dated 25.02.2011, approved four more brands of the petitioner. Totally, there are 18 brands, which are manufactured by the petitioner. Earlier, for 17 brands, the fourth respondent, by his proceedings, dated 25.02.2011, fixed the manufacturer's price and MRP, which include 7 premium brands manufactured by the petitioner company.
3.9. When the petitioner launched its first brand Tropicana in Medium segment in March 2011, due to model code of conduct, the fourth respondent did not issue supply and indent order to other brands. Hence, the petitioner approached this Court by filing W.P.No.7710 of 2011 and the First Bench, by its order, dated 26.04.2011, directed the Election Commission to issue release orders for introducing of other brands. The petitioner, by its letter dated 05.12.2011, sought to delete 3 brands (ordinary and medium) and the fourth respondent, by his letter dated 02.07.2012, accepted to delete 3 brands. Thus, out of 13 brands, which are now manufactured by the petitioner, the petitioner is concerned with placing of supply and indent for 7 premium brands, which are as detailed as under :
S.No.
Brand Names List of own Brands Le Charante XO French Brandy Saint Louis French BrandyRoyal Napoleon VSOP Brandy Stallion Stride Dark Rum List of Radico Brands Florence XO Premium Brandy Gold Finger Premium Brandy List of Khodays Brands (Tie-up) Peter Scot Premium Malt Whisky 3.10. The fourth respondent being sole and exclusive wholesale and retail dealer for sale of IMFL in State of Tamil Nadu cannot act in an arbitrary and discriminatory manner.
3.11. Hence, these Writ Petitions.
4. The respondents have filed a common counter affidavit, stating as under :
4.1. The Government, vide G.O.Ms.No.20, Home, Prohibition and Excise (II) Department, dated 25.02.2011, have classified several brands inclusive of 17 brands of M/s.Golden Vats Private Limited. TASMAC, vide letter No.B2/9882/2010, dated 25.02.2011, had communicated the price structure and MRP of 17 brands inclusive of 8 premium brands to the petitioner. After approval was given by the Commissioner of Prohibition and Excise for brand names, TASMAC is requesting the manufacturer to furnish several details inclusive of expected cost of various input items and the manufacturer's basic price at which they are willing to supply the brands to TASMAC. Based on the details furnished by the manufacturers, the Internal Committee of TASMAC is negotiating the price with the manufacturer for fixing the price for the brands. Then, the details of price negotiated are placed before the Board of TASMAC for its approval. Thereafter, notifications classifying the brands are issued by the Government. TASMAC communicates the price details to the manufacturer who in turn will get the CPE's approval for brand labels. TASMAC is acting according to various provisions of the Tamil Nadu Prohibition Act,1937 and various rules made thereunder. All the 11 manufacturers are supplying ordinary and medium brands to the requirement of TASMAC, which is arrived at based on the demand from consumer and closing stock. MRP of a brand is fixed on the excise duty and sales tax rates notified by the Government from time to time. This practice is being followed in various States. Liquor is not available at a subsidised rate to the consumer. Due to model code of conduct implemented for Assembly elections in May 2011, all the IMFS and Beer suppliers including the petitioner were not permitted to introduce their brands. As per the directions of the Hon'ble High Court of Madras and Election Commission, the petitioner was permitted to introduce its brands. TASMAC is purchasing IMFS from 11 local IMFS manufacturers. The system of placing orders with the various manufacturers on 1st of every month has been computerised. The order quantity is based on the sales of the concerned brand and the closing balance of the concerned brand in the Depots and the stock in transit. Indents are being placed with the various manufacturers/suppliers based on the sale and closing stock of the concerned brand. In respect of premium brands, indents are being issued based on the two times of retail vending sales of previous month minus closing stock at retail vending shops and depots. This system of placing indents for premium brands is in practice since July 2013. This system was discussed with all the IMFS suppliers and then only it was introduced in order to reduce the closing stock of non/slow moving premium brands piled up at the retail outlets. All the suppliers except the petitioner are satisfied with this system of placing indents for premium brands. Since order is being placed based on the sale, the demand and taste of the liquor consuming public are automatically taken into account. The statement of the petitioner that all the brands manufactured and supplied by the petitioner were of good quality and liked by the consumer is not correct. The further statement of the petitioner that premium brands supplied by them are most popular among elite class and taste and quality are comparable to that of foreign brands is not correct.
4.2. Based on the instructions given by the fourth respondent to its District Managers to collect the not required quantity of more than 90 days stock from various retail shops vide its letter dated 31.10.2013, the various depots of the fourth respondent received back 1,86,147 cases in total out of which the stock of the petitioner was 33,186 cases which was 17.83% of the total stock returned. The MRP value of these brands was Rs.23.78 crores against the total value of Rs.108.67 crores, amounting to 21.90%. The stock of the petitioner was available for 29 days to 242 days as on 31st October,2013. The fourth respondent can keep stock of premium brands to the tune of 3 to 4 weeks only, Hence, the requirement for the brands of the petitioner did not arise. The sale of premium brands of the petitioner during December 2013 was 10,220 cases. Two times of the sales is 20440 cases. The opening stock as on 1st January 2014 was 44,810 cases. Therefore, the eligibility of the petitioner for the premium brands is (-) 24,370 cases. There is no malafide intention on the part of the fourth respondent to favour any particular supplier. The petitioner has no problem in getting supply orders and indents for its ordinary and medium brands. In respect of the premium brands, the fourth respondent is following the new formula, which has been accepted by all the suppliers for the past 8 months. Slow/non-moving stock of all the companies which is more than 90 days old has been brought back to the depots for redistribution to the needy shops. This procedure has been followed uniformly in respect of all the companies without any deviation/discrimination. Both the systems of placing orders and indents with various companies are being done in a transparent manner. No favouritism is shown to any company.
4.3. Since the indents for premium brands of all the companies are based on the previous month sale and the closing stock, the petitioner was not eligible to take indents during the previous few months. The petitioner was given indents for premium brands for a quantity of 8655,1500,6000,0,10000 and 8000 from August, September, October, November, December,2013 and January 2014 respectively. The instructions issued to withdraw the stock was uniformly applicable for all brands of all companies lying more than 90 days in the retail vending shops for early liquidation. It is not obligatory on the part of the respondents to take delivery of all the end products of the petitioner company without taking into account of the market demand, choice of the consumers and earlier liquidation otherwise which may lead to loss of revenue and financial loss to TASMAC as well as Government. When sufficient stock is available, the fourth respondent cannot place orders and indents against its own interest and the interest of the Government and the consumers. No whims and fancies are shown to any company in placing orders and indents. No supplier other than the petitioner has made any representation against the system of placing orders and indent and other suppliers are fully satisfied with the present system of placing orders and indents.
4.4. The fourth respondent is not abusing its powers and favouring any particular supplier. There is already a set of procedure in issuing orders and indents for liquor products. The petitioner has questioned the order and indent placing procedure in respect of premium brands alone. Since the system of ordering and indenting in respect of premium brands is transparent and accepted by all the companies, there is no need to frame any further guidelines. The profit of TASMAC is reasonable and the retail price is fixed by adopting the taxes and duties notified by the Government under the Tamil Nadu Prohibition Act 1937 and Tamil Nadu VAT Act 2006. The same procedure is being followed by various State Governments and their undertakings.
4.5. Since the consumer's choice changes periodically due to various factors, taking monthly average sale of a brand from July 2013 for the purpose of placing orders and indents will lead to accumulation of stock at the depots and shops of TASMAC and the same will be against the interest of the Government, the consumers and all the suppliers. The request of the petitioner for issue of orders directing the fourth respondent to issue supply orders and purchase indents from the month of July 2013 on the basis of monthly average sale of each brand right from the date of launching till October 2013 and continue to issue supply orders and indents on the same basis cannot be accepted and that the request to frame fresh guidelines adopting transparent procedure in purchase is untenable.
5. Mr.P.Wilson, learned Senior Counsel appearing for the petitioner, would contend that the action of the fourth respondent in not placing the orders and indents for supply of premium brands of the petitioner company is discriminative and violative of Articles 14 and 19 (1) (g) of the Constitution of India and, therefore, he would request the court to issue necessary directions to the fourth respondent for placement of orders and indents on par with other manufacturing companies. He would rely on the following decisions :
(i) Tata Cellular v. Union of India, (1994) 6 SCC 651 :
"74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself.
77. The duty of the court is to confine itself to the question of legality. Its concern should be:
1. Whether a decision-making authority exceeded its powers?
2. Committed an error of law,
3. committed a breach of the rules of natural justice,
4. reached a decision which no reasonable tribunal would have reached or,
5. abused its powers.
Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:
(i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind28, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, consider whether something has gone wrong of a nature and degree which requires its intervention .
94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure."
(ii) State of Punjab v. Devans Modern Breweries Ltd., (2004) 11 SCC 26 :
"34. Regulatory measures in the matter of trade and business in potable liquor have been taken by reason of a statute. All regulations on the trade, thus, must be governed by the statutes operating in the field and not by way of executive action. The provisions of the statute or the contracts made thereunder, must scrupulously be followed by all concerned as they are bound by the same. When a legislation referable to Entries 8, 51 and 66, etc. had occupied the field, the State, in the absence of any provision contained in the statute, cannot turn round and contend that it will exercise its power of exclusive privilege even though it had granted licence in terms of the statute. Having regard to the constitutional scheme the power of the State to undertake trade and business is referable to Article 298 of the Constitution. The duties, functions and responsibilities of a Government in a democracy are different from monarchism. Rights and privileges of a monarch cannot be equated with an elected Government in a democratic set-up. If the power of the Government in other words to deal in trade or commerce, be it liquor or any other commodity, can only be traced to Article 298 of the Constitution, it goes without saying that the same would be subject to all constitutional limitations applicable in relation thereto. The State while exercising its constitutional power under Article 298 of the Constitution cannot itself be an extra-constitutional authority so as to violate the constitutional provisions. It, like any other trader, must confine itself within the four corners of the statutes governing the field which are enacted in terms of one entry or the other made in any of the three lists to the Seventh Schedule of the Constitution.
35. A State, therefore, may be entitled to either completely prohibit a trade or business in liquor and create monopoly either in itself or in any other agency, and furthermore it can for the purpose of selling the licence adopt any mode with a view to maximise its revenue but while doing so it must, having regard to a large number of decisions of this Court, not act arbitrarily. The State while carrying on business by way of parting with its privilege or distribution of largesse must conform to the equality clause enshrined in Article 14 of the Constitution. It has been so held in Nandlal Jaiswal17 at SCC pp. 604-05, para 33 in the following terms:
33. But, before we do so, we may at this stage conveniently refer to a contention of a preliminary nature advanced on behalf of the State Government and Respondents 5 to 11 against the applicability of Article 14 in a case dealing with the grant of liquor licences. The contention was that trade or business in liquor is so inherently pernicious that no one can claim any fundamental right in respect of it and Article 14 cannot therefore be invoked by the petitioners. Now, it is true, and it is well settled by several decisions of this Court including the decision in Har Shankar v. Dy. Excise & Taxation Commr.3 that there is no fundamental right in a citizen to carry on trade or business in liquor. The State under its regulatory power has the power to prohibit absolutely every form of activity in relation to intoxicants its manufacture, storage, export, import, sale and possession. No one can claim as against the State the right to carry on trade or business in liquor and the State cannot be compelled to part with its exclusive right or privilege of manufacturing and selling liquor. But when the State decides to grant such right or privilege to others the State cannot escape the rigour of Article 14. It cannot act arbitrarily or at its sweet will. It must comply with the equality clause while granting the exclusive right or privilege of manufacturing or selling liquor. It is, therefore, not possible to uphold the contention of the State Government and Respondents 5 to 11 that Article 14 can have no application in a case where the licence to manufacture or sell liquor is being granted by the State Government. The State cannot ride roughshod over the requirement of that article.
36. Privilege, thus, can be claimed by a State in a no-right situation, namely, when a citizen is not permitted to carry on trade. But once the State takes a decision to part with its privilege, it cannot make any discrimination whatsoever. Dealing in liquor by the persons in whose favour licences have been granted in terms of the statutory enactments derive a right therefor which cannot be said to be res extra commercium .
37. Now comes the question as to how far and to what extent, if any, the fundamental and other rights of a citizen could be available in the matter of trade in potable liquor. Article 19(1)(g)guarantees that all citizens shall have the right to practise any profession or to carry on any occupation, trade or business. However, in terms of Article 19(6) this right can be restricted by a statute imposing reasonable restrictions. A combined reading of clauses (1) and (6) of Article 19makes it clear that a citizen has a fundamental right to carry on any trade or business and the State can make a law imposing reasonable restrictions on the said right in the interest of the general public. It is, therefore, obvious that unless dealing in liquor is excluded from trade or business , a citizen has a fundamental right to deal in that commodity.
52. No case, and in particular the decisions relied upon by the learned counsel appearing on behalf of the State of Punjab and that of Kerala, has evolved a principle that despite paying a large amount of licence fees and despite fulfilment of terms and conditions of licence and other statutory provisions, the trade or business carried out by the licensee shall be at an eternal peril, which may at any point of time be determined or a new tax imposed or they be proceeded against at the whims or caprice of the executive wing of the State. In our constitutional scheme such a situation is unthinkable. The country is governed by rule of law and despite existence of a valid legislation operating in the field, executive whims or caprice cannot be permitted to have any role to play. Validity of a tax imposed by the State Legislature, thus, must be determined on the constitutional anvil of the legislative competence and not on any other basis. The decisions of this Court which had no occasion to consider these aspects of the matter can be of no assistance and would not constitute binding precedents. [See Bhavnagar University v. Palitana Sugar Mill (P) Ltd.46]
53. The right of the State to carry on trade or business under Article 298 of the Constitution would be subject to the same constitutional limitations in the matter of carrying on trade or business in liquor as in other cases. The distinction being only that the State has a monopoly to do so. Once the State does not exercise the said right and considers it expedient to allow citizens to carry on the business or trade, it cannot be said that the licensees do not derive any right whatsoever. Even when the State exercises such right by creating a monopoly in itself, it would be subject to the same constitutional limitations as are envisaged, inter alia, under Articles 14 and 301 of the Constitution. Articles 14 and 301 of the Constitution protect from the maladies of discrimination. Such discrimination may be between persons and persons, persons and State and State and State.
163. The right of a State to carry on business of liquor as being a part of its exclusive privilege must be traced to Article 298 of the Constitution. (See Kapila Hingorani v. State of Bihar89.)
164. While granting largesse or licence in such trade, the State must exercise its functions underArticle 298 within the parameters of the constitutional scheme, which would include imposition of such regulation as would not be violative of Article 301 of the Constitution.
167. As a sovereign prior to coming into force of the Constitution, the State may have exclusive privilege to do business in liquor but all post-constitutional statutes and actions taken thereunder must relate to a source of power under the Constitution. Even if there is no express provision in the Constitution, principles of constitutionalism exist providing that, for the said purpose, the relevant statutes should also be looked into. A statute is enacted by the State Legislature or Parliament having regard to one or the other entry made in the three lists contained in the Seventh Schedule of the Constitution. The Punjab Excise Act and the Kerala Abkari Act although pre-constitutional Acts, the subsequent amendments which are impugned in these matters must, thus, be referable either to Entry 8 or Entry 51 of List II of the Seventh Schedule of the Constitution. When a statute governs the trade in a particular commodity, the provisions contained therein would only regulate the same. The Constitution or the State legislations do not state that trade in liquor ipso facto is totally prohibited. The States of Punjab and Kerala have not adopted any policy of prohibition whether in whole or in part.
170. Trade in liquor is regulated by statutes and, thus, if it is carried out within the parameters of the regulatory provisions and subject to observance of the terms and conditions of the licence, it would be legal. All rights and obligations flowing from the grant of such licence being mutual would be binding on the parties.
171. If the Constitution or the relevant statutes do not prohibit carrying out a trade/business, the courts cannot do so by taking recourse to interpretive process or on the supposed grounds of public morality.
212. In that case, therefore, it was laid down that the executive authorities of the State in exercise of their purported regulatory power cannot hold the people who are legally carrying on their business in liquor to ransom. They, on the ground of contractual power or otherwise, cannot be permitted to travel beyond the four corners of a statute by levying any penalty or any other amount which is not contemplated thereunder.
213. The aforementioned decision is also an authority for the proposition that rule of law must prevail. The country is governed by the rule of law and not by whims and caprice of the executive authorities. The court cannot be a party to such whims and caprices.
215. Yet again in State of U.P. v. Jagjeet Singh a three-Judge Bench of this Court while interpreting Rule 34 of the U.P. Excise Licences (Tender-cum-Auction) Rules, 1991 vis-`-vis para 179 of the Excise Manual enforced the right of the liquor vendors as regards remission of fee in terms thereof. The said decision is, therefore, an authority for the proposition that the rights contained in the statutory rules can be enforced in a given situation. Thus, it cannot be said that the licensees have no enforceable right at all.
216. The statute lays down that the acts regulating the trade would be lawful, if done in the manner and to the extent provided by the provisions thereof or any rules, regulations or orders made thereunder.
237. In certain cases even in relation to the grant of contract in liquor, Article 14 of the Constitution has been held to be applicable. Once it is held that a person, in certain situation is entitled to invoke the equality clause contained in Article 14 of the Constitution, there is absolutely no reason as to why Article 301 will not be applicable.
272. The upshot of the discussions made hereinbefore would be that whereas in terms of Article 19(6) as also Article 302 of the Constitution in relation to a trade which is noxious in nature a complete prohibition would be permissible, the same would not mean that while permitting the trade to go on the State s action whether legislative or executive need not undergo the constitutional tests in terms of Article 14, 19 or 301 of the Constitution. The argument that the relationship between the State and the licensee is contractual in nature but the same would not mean that any legislative interference thereupon as a result whereof the contract becomes more burdensome would not be a subject-matter of challenge. There is no estoppel against statute. There cannot be any waiver of fundamental right.
344. (4) Article 14 is applicable in the matter of grant by the State and, thus, there is no reason as to why the grantee would not be entitled to invoke the commerce clause contained in Article 301of the Constitution."
(iii) State of Sikkim v. Dorjee Tshering Bhutia, (1991) 4 SCC 243 :
"15. The executive power of the State cannot be exercised in the field which is already occupied by the laws made by the legislature. It is settled law that any order, instruction, direction or notification issued in exercise of the executive power of the State which is contrary to any statutory provisions, is without jurisdiction and is a nullity. But in this case we are faced with a peculiar situation. The Rules, though enforced, remained unworkable for about five years. The Public Service Commission, which was the authority to implement the Rules, was not in existence during the said period. There is nothing on the record to show as to why the Public Service Commission was not constituted during all those five years. In the absence of any material to the contrary we assume that there were justifiable reasons for the delay in constituting the Commission. The executive power of the State being divided amongst various functionaries underArticle 166(3) of the Constitution of India there is possibility of lack of co-ordination amongst various limbs of the government working within their respective spheres of allocation. The object of regulating the recruitment and conditions of service by statutory provisions is to rule out arbitrariness, provide consistency and crystallise the rights of employees concerned. The statutory provisions which are unworkable and inoperative cannot achieve these objectives. Such provisions are non-est till made operational. It is the operative statutory provisions which have the effect of ousting executive power of the State from the same field. When in a peculiar situation, as in the present case, the statutory provisions could not be operated there was no bar for the State Government to act in exercise of its executive power. The impugned notification to hold special selection was issued almost four years after the enforcement of the Rules. It was done to remove stagnation and to afford an opportunity to the eligible persons to enter the service. In our view the State Government was justified in issuing the impugned notification in exercise of its executive power and the High Court fell into error in quashing the same."
(iv) St. Johns Teachers Training Institute v. Regional Director, NCTE, (2003) 3 SCC 321 :
"10. A regulation is a rule or order prescribed by a superior for the management of some business and implies a rule for general course of action. Rules and regulations are all comprised in delegated legislations. The power to make subordinate legislation is derived from the enabling Act and it is fundamental that the delegate on whom such a power is conferred has to act within the limits of authority conferred by the Act. Rules cannot be made to supplant the provisions of the enabling Act but to supplement it. What is permitted is the delegation of ancillary or subordinate legislative functions, or, what is fictionally called, a power to fill up details. The legislature may, after laying down the legislative policy confer discretion on an administrative agency as to the execution of the policy and leave it to the agency to work out the details within the framework of policy. The need for delegated legislation is that they are framed with care and minuteness when the statutory authority making the rule, after coming into force of the Act, is in a better position to adapt the Act to special circumstances. Delegated legislation permits utilisation of experience and consultation with interests affected by the practical operation of statutes. Rules and regulations made by reason of the specific power conferred by the statutes to make rules and regulations establish the pattern of conduct to be followed. Regulations are in aid of enforcement of the provisions of the statute. The process of legislation by departmental regulations saves time and is intended to deal with local variations and the power to legislate by statutory instrument in the form of rules and regulations is conferred by Parliament. The main justification for delegated legislation is that the legislature being overburdened and the needs of the modern-day society being complex, it cannot possibly foresee every administrative difficulty that may arise after the statute has begun to operate. Delegated legislation fills those needs. The regulations made under power conferred by the statute are supporting legislation and have the force and effect, if validly made, as an Act passed by the competent legislature."
(v) State of U.P. v. Daulat Ram Gupta, (2002) 4 SCC 98 :
"16. Coming to the second restriction on the power of the State Government or the specified authorities, the provisions empowering them to issue directions to dealers could be exercised only to give effect to the provisions of the Statutory Order and further to effectuate the object behind the Statutory Order if the object is discernible in the Statutory Order. The nature of directions which could be issued under the enabling provisions contained in sub-clause (6) of clause 16 of the Statutory Order, is only for purposes of giving effect to the Statutory Order and not otherwise. The conditions of grant of licence and its renewal are the essential features of the Statutory Order and in guise of issuing directions, the State Government or a Licensing Authority cannot supplant the provisions of the Statutory Order, but can supplement it only with a view to give effect to the provisions of the Statutory Order. The State Government or the Licensing Authority while giving effect to the provisions of the Statutory Order is not authorised to amend the Statutory Order by issuing directions. Once the enabling provisions restrict the power of issuing directions only for giving effect to the provisions of the Statutory Order, the nature and extent of directions which the State Government or any authority specified therein is empowered to issue is confined to the area which is marked out by the Statutory Order. In the present case, what we find is that the Licensing Authority while issuing the direction that the respondent s licence shall not be renewed on the premise that his place of business falls within a radius of 5 km of a retail outlet of a government-run oil company has, in fact, purported to amend the conditions of renewal of licence granted under the Statutory Order which was not permissible under sub-clause (6) of clause 16 of the Statutory Order.
17. We have already noticed that the provisions of the Statutory Order do not provide for refusal to renew a licence granted under the Statutory Order, if the place of business of a licensee falls within a radius of 5 km of a government-run retail outlet. Further, the Statutory Order neither expressly nor by necessary implication prohibits the grant of licence to a person or refusal to renew such a licence if the place of business of such licensee falls within the radius of 5 km of a government-run outlet. In that view of the matter, the direction/order issued by the Licensing Authority refusing to renew the licence of the respondent was inconsistent with the provisions of the Statutory Order inasmuch as the same was not for purposes of giving effect to the Statutory Order and, therefore, such a direction/order could not have been given effect to, while considering the renewal of licence of the respondent herein."
(vi) State of Rajasthan v. Basant Nahata, (2005) 12 SCC 77 :
"19. The necessity of the legislature s delegating its powers in favour of the executive is a part of legislative function. It is a constituent element of the legislative power as a whole under Article 245 of the Constitution. Such delegation of power, however, cannot be wide, uncanalised or unguided. The legislature while delegating such power is required to lay down the criteria or standard so as to enable the delegatee to act within the framework of the statute. The principle on which the power of the legislature is to be exercised is required to be disclosed. It is also trite that essential legislative functions cannot be delegated.
20. The procedural powers are, therefore, normally left to be exercised by the executive by reason of a delegated legislation."
(vii) Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517 :
"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made lawfully and not to check whether choice or decision is sound . When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;
OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached ;
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action."
(viii) Madras University Staff Association v. State of Tamil Nadu, 2013 (3) CTC 337 :
"23. Also, a Five Judge Bench of this Court in the case of M.Aarthi, cited above, has held that the executive power of the State under Article 162 of the Constitution is coextensive with the legislative power and when the field of law is occupied by a legislative Act, the exercise of executive power is not available. It is further held therein that the executive power under Article 162 can be exercised only in the absence of a legislative Act.
24. Even in P.H.Paul Manoj Pandian's case, relied upon by the learned Advocate General, the Supreme Court has held that the exercise of executive power under Article 162 by the Government are subject to limitations, which are twofold. Firstly, if any Act or law has been made by the State Legislature conferring any function on any other authority, in that case, the Governor is not empowered to make any order in regard to that matter in exercise of his executive power nor can the Governor exercise such power in regard to that matter through officers subordinate to him. Secondly, the vesting in the Governor with the executive power of the State Government does not create any embargo for the legislature of the State from making and/or enacting any law conferring functions on any authority subordinate to the Governor. It is also held therein that once a law occupies the field, it will not be open to the State Government in exercise of its executive power under Article 162 of the Constitution to prescribe in the same field by an executive order. However, in matters relating to a particular subject, in absence of any parliamentary legislation on the said subject, the State Government has the jurisdiction to act and to make executive orders. The executive power of the State would, in the absence of legislation, extend to making rules or orders regulating the action of the executive. But, such orders cannot offend the provisions of the Constitution and should not be repugnant to any enactment of the appropriate legislature. Subject to these limitations, such rules or orders may relate to matters of policy, may make classification and may determine the conditions of eligibility for receiving any advantage, privilege or aid from the State. In addition, the powers of executive are not limited merely to the carrying out of the laws. In a welfare State, the functions of the executive are ever widening, which cover within their ambit various aspects of social and economic activities. Therefore, the executive exercises power to fill up gaps by issuing various departmental orders. The executive power of the State is coterminous with the legislative power of the State Legislature. In other words, if the State Legislature has jurisdiction to make law with respect to a subject, the State executive can make regulations and issue government orders with respect to it, subject, however, to the constitutional limitations. However, such administrative rules and/or orders shall be inoperative if the legislature has enacted a law with respect to the subject."
6. On the other hand, Mr.A.L.Somayaji, learned Advocate General, appearing for the respondents would submit that issuance of orders and indents to the manufacturers is based on the sales and the closing balance of the concerned brand in the depots and the stock in transit. He would also argue that when sufficient stock is available, the fourth respondent cannot place orders and indents against its own interest and the interest of the Government and also the consumers and, therefore, it is not obligatory on the part of the respondents to take delivery of all the end products of the petitioner company without taking into account of the market demand, choice of the consumers and earlier liquidation, which would otherwise lead to loss of revenue to TASMAC as well as the Government. He would cite the following authorities :
(i) State of A.P. v. McDowell & Co., (1996) 3 SCC 709 :
"39. The contention that a citizen of this country has a fundamental right to trade in intoxicating liquors refuses to die in spite of the recent Constitution Bench decision in Khoday Distilleries2. It is raised before us again. In Khoday Distilleries2, this Court reviewed the entire case-law on the subject and concluded that a citizen has no fundamental right to trade or business in intoxicating liquors and that trade or business in such liquor can be completely prohibited. It held that because of its vicious and pernicious nature, dealing in intoxicating liquors is considered to be res extra commercium (outside commerce). Article 47 of the Constitution, it pointed out, requires the State to endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and all drugs which are injurious to health. For the same reason, the Bench held, the State can create a monopoly either in itself or in an agency created by it for the manufacture, possession, sale and distribution of liquor as a beverage. The holding is emphatic and unambiguous. Yet an argument is sought to be built upon certain words occurring in clauses (e) and (f) of the summary contained in para 60 of the decision. In these clauses, it was observed that creation of a monopoly in the State to deal in intoxicating liquors and the power to impose restrictions, limitations and even prohibition thereon can be imposed both under clause (6) ofArticle 19 or even otherwise. Seizing upon these observations, Shri Ganguly argued that this decision implicitly recognises that business in liquor is a fundamental right under Article 19(1)(g).If it were not so, asked the learned counsel, reference to Article 19(6) has no meaning. We do not think that any such argument can be built upon the said observations. In clause (e), the Bench held, a monopoly in the State or its agency can be created under Article 19(6) or even otherwise . Similarly, in clause (f), while speaking of imposition of restrictions and limitations on this business, it held that they can be imposed both under Article 19(6) or otherwise . The said words cannot be read as militating against the express propositions enunciated in clauses (b), (c), (d), (e) and (f) of the said summary. The said decision, as a matter of fact, emphatically reiterates the holding in Har Shankar3 that a citizen has no fundamental right to trade in intoxicating liquors. In this view of the matter, any argument based upon Article 19(1)(g) is out of place.
40. For the sake of completeness, and without prejudice to the above holding, we may examine the alternate line of thought. In Cooverjee Bharucha19, a Constitution Bench of this Court expressed its wholehearted concurrence with the opinion of Field, J. in Crowley v. Christensen27 to the effect that:
There is no inherent right in a citizen to thus sell intoxicating liquors by retail; it is not a privilege of a citizen of the State or of a citizen of the United States. As it is a business attended with danger to the community, it may, as already said, be entirely prohibited, or be permitted under such conditions as will limit to the utmost its evils. The manner and extent of regulation rest in the discretion of the governing authority. While laying down the said proposition, Mahajan, C.J., speaking for the Court, referred generally to the position obtaining under Article 19(1)(g) and clause (6) of the article. The learned Chief Justice said that the reasonableness of the restriction has to be determined having regard to the nature of the business and the conditions prevailing in that trade. The learned Chief Justice said:
The nature of business is, therefore, an important element in deciding the reasonableness of the restrictions. These observations, it may be noted, were not made with particular reference to trade in intoxicating liquors but are general in nature. Indeed, it is after making these general observations that the Bench proceeded to refer to and express its concurrence with the observations of Field, J. referred to above. The said observations cannot be read as recognising a fundamental right to trade in intoxicating liquors. Any such proposition would run counter to the main holding in the decision referred to above. It is true that in Krishna Kumar Narula v. State of J&K28, Subba Rao, C.J., speaking for the Constitution Bench, adopted a slightly different approach, viz., every trade is a trade; even the trade in intoxicating liquor is a trade; however, the nature and character of the business is relevant for determining the extent of restrictions that can be placed on such trade or business; inasmuch as intoxicating liquors are inherently harmful to the individuals consuming them and to the society as a whole, it can even be prohibited but it cannot be said that trade or business in intoxicating liquors is not a trade or business within the meaning of Article 19(1)(g). Even adopting this approach, it would be evident and the decision in Krishna Kumar Narula28 recognises it that the trade and business in intoxicating liquors can be restricted, severely curtailed or even prohibited. The fact that Article 47 of the Constitution expressly speaks of the obligation of the State to endeavour to bring about prohibition of the consumption of intoxicating drinks is itself a clear and definite pointer in this direction. Imposing prohibition is to achieve the directive principle adumbrated in Article 47. Such a course merits to be treated as a reasonable restriction within the meaning of clause (6) of Article 19."
(ii) Krishnan Kakkanth v. Govt. of Kerala, (1997) 9 SCC 495 :
"26. After giving our careful consideration to the facts and circumstances of the case and submissions made by the learned counsel for the parties, it appears to us that the fundamental right for trading activities of the dealers in pumpsets in the State of Kerala as guaranteed underArticle 19(1)(g) of the Constitution has not been infringed by the impugned circular. Fundamental rights guaranteed under Article 19 of the Constitution are not absolute but the same are subject to reasonable restrictions to be imposed against enjoyment of such rights. Such reasonable restriction seeks to strike a balance between the freedom guaranteed by any of the clauses underArticle 19(1) and the social control permitted by clauses (2) to (6) under Article 19.
32. It may be indicated that although a citizen has a fundamental right to carry on a trade or business, he has no fundamental right to insist upon the Government or any other individual for doing business with him. Any Government or an individual has got a right to enter into contract with a particular person or to determine a person or persons with whom he or it will deal."
(iii) Arun Kumar Agrawal v. Union of India, (2013) 7 SCC 1 :
"41. We notice that ONGC and the Government of India have considered various commercial and technical aspects flowing from the PSC and also its advantages that ONGC would derive if the Cairn and Vedanta deal was approved. This Court sitting in the jurisdiction cannot sit in judgment over the commercial or business decision taken by parties to the agreement, after evaluating and assessing its monetary and financial implications, unless the decision is in clear violation of any statutory provisions or perverse or taken for extraneous considerations or improper motives. States and its instrumentalities can enter into various contracts which may involve complex economic factors. State or the State undertaking being a party to a contract, have to make various decisions which they deem just and proper. There is always an element of risk in such decisions, ultimately it may turn out to be correct decision or a wrong one. But if the decision is taken bona fide and in public interest, the mere fact that decision has ultimately proved to be wrong, that itself is not a ground to hold that the decision was mala fide or taken with ulterior motives.
42. Matters relating to economic issues, have always an element of trial and error, so long as a trial and error is bona fide and with best intentions, such decisions cannot be questioned as arbitrary, capricious or illegal. This Court in State of M.P. v. Nandlal Jaiswal8 referring to the judgment of Frankfurter, J. in Morey v. Doud9 held that: (Nandlal Jaiswal case8, SCC p. 605, para 34) 34. We must not forget that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call trial and error method and, therefore, its validity cannot be tested on any rigid a priori considerations or on the application of any straitjacket formula.
(iv) Gail (India) Ltd. v. Gujarat State Petroleum Corpn. Ltd.,(2014) 1 SCC 329 :
"17. The respondent challenged communications dated 4-5-2012 and 24-1-2013 in Special Civil Application No. 2362 of 2013 filed before the Gujarat High Court and prayed that a direction be issued to the appellant to engage itself in a bona fide manner to arrive at the price of gas to be effective from 1-1-2014. In the affidavit filed on behalf of the respondent, it was averred that even though Article 15.5 of the GSA contains arbitration clause, the same was not being resorted to because its complaint did not relate to any breach of the agreement but was against the arbitrary action of the appellant in fixing the price of gas. The respondent referred to the Letter dated 6-3-2007 of the Government of India, the second price side letter, the correspondence exchanged between the parties in 2011, 2012 and January 2013 and pleaded that the action of the appellant seeking to terminate the GSA is violative of Articles 14, 19(1)(g) and 301-A of the Constitution. The respondent further pleaded that the price of gas should be based on the pooled price mechanism prescribed by the Ministry of Petroleum and Natural Gas.
18. In the counter-affidavit filed on behalf of the appellant, several objections were taken to the maintainability of the special civil application including the following:
18.1. The subject-matter of the special civil application is in the realm of a private contract and is not amenable to judicial review under Article 226 of the Constitution.
18.2. The GSA signed by the parties is purely a commercial contract and the dispute emanating from the GSA can be decided only by way of arbitration."
(v) Ratnagiri Gas and Power (P) Ltd. v. RDS Projects Ltd., (2013) 1 SCC 524 :
"25. Even otherwise the findings recorded by the High Court on the question of mala fides do not appear to us to be factually or legally sustainable. While we do not consider it necessary to delve deep into this aspect of the controversy, we may point out that allegations of mala fides are more easily made than proved. The law casts a heavy burden on the person alleging mala fides to prove the same on the basis of facts that are either admitted or satisfactorily established and/or logical inferences deducible from the same. This is particularly so when the petitioner alleges malice in fact in which event it is obligatory for the person making any such allegation to furnish particulars that would prove mala fides on the part of the decision-maker. Vague and general allegations unsupported by the requisite particulars do not provide a sound basis for the court to conduct an inquiry into their veracity.
26. The legal position in this regard is fairly well settled by a long line of decisions of this Court. We may briefly refer to only some of them:
26.1. In State of Bihar v. P.P. Sharma4 this Court summed up the law on the subject in the following words: (SCC p. 260, paras 50-51) 50. Mala fides means want of good faith, personal bias, grudge, oblique or improper motive or ulterior purpose. The administrative action must be said to be done in good faith, if it is in fact done honestly, whether it is done negligently or not. An act done honestly is deemed to have been done in good faith. An administrative authority must, therefore, act in a bona fide manner and should never act for an improper motive or ulterior purposes or contrary to the requirements of the statute, or the basis of the circumstances contemplated by law, or improperly exercised discretion to achieve some ulterior purpose. The determination of a plea of mala fide involves two questions, namely, (i) whether there is a personal bias or an oblique motive, and (ii) whether the administrative action is contrary to the objects, requirements and conditions of a valid exercise of administrative power.
51. The action taken must, therefore, be proved to have been made mala fide for such considerations. Mere assertion or a vague or bald statement is not sufficient. It must be demonstrated either by admitted or proved facts and circumstances obtainable in a given case. If it is established that the action has been taken mala fide for any such considerations or by fraud on power or colourable exercise of power, it cannot be allowed to stand. (emphasis supplied) 26.2. We may also refer to the decision of this Court in Ajit Kumar Nag v. Indian Oil Corpn. Ltd.5 where the Court declared that allegations of mala fides need proof of high degree and that an administrative action is presumed to be bona fide unless the contrary is satisfactorily established. The Court observed: (SCC p. 790, para 56) 56. It is well settled that the burden of proving mala fide is on the person making the allegations and the burden is very heavy . (Vide E.P. Royappa v. State of T.N.6) There is every presumption in favour of the administration that the power has been exercised bona fide and in good faith. It is to be remembered that the allegations of mala fide are often more easily made than made out and the very seriousness of such allegations demands proof of a high degree of credibility. As Krishna Iyer, J. stated in Gulam Mustafa v. State of Maharashtra7 (SCC p. 802, para 2): It (mala fide) is the last refuge of a losing litigant.
7. I have heard the learned counsel for the parties and also gone through the records as well as the citations relied upon.
8. An analysis of the records would authenticate that the petitioner company was granted prior approval by the second respondent for setting up of a new IMFL manufacturing unit to manufacture IMFL spirits in accordance with the provisions laid down in Rule 7 of Tamil Nadu IMFL Spirits (Manufacture) Rules 1981, in short, "the Rules" vide G.O.Ms.No.56, dated 13.10.2010. Thereafter, by proceedings dated 20.10.2010, the third respondent granted privilege for setting up of new IMFS unit. Subsequently, by another proceedings, dated 29.12.2010, the third respondent, after receipt of Rs.6,00,000/- under Rule 21 of the Rules, on the basis of the report of Collector, Thiruvarur District, and other authorities about completion of construction and compliance of requirements, including obtaining NOC, water analysis report, local body resolution, structural stability certificate, consent letter from TNPCB, approval from Chief Inspector of Factories, NOC from Fire Department etc., granted licence in Form No.2 valid up to 31.03.2011 under Rule 7 (1).
9. By letter dated 31.12.2010, the petitioner company requested the fourth respondent to permit them to introduce 11 own brands; 3 brands with collaboration with M/s.Radico Khaitan Ltd. and 3 brands with M/s.Khoday India Ltd. The fourth respondent recommended to introduce the brands of the petitioner to the third respondent, who by his proceedings dated 11.01.2011, accorded permission under Rule 25 (3-B) for introduction of the said brands; directed the petitioner to remit a registration fee of Rs.2.00 lakhs per brand and stated that the said brands had to be introduced within a period of six months from the date of issue of the order. It was also informed that a label approval fee of Rs.5,000/- per pack would be levied at the time of approval/renewal of label.
10. The fourth respondent, by letter dated 12.01.2011, sought for certain details to fix the manufacturer's price. By G.O.Ms.No.45, dated 14.02.2011, the second respondent granted RL-3 Licence for possession limit of Extra Neutral Alcohol (ENA)/Rectified Spirit under Tamil Nadu Rectified Spirit Rules,2000, to an extent of 4.01,70,000 bulk litres in a year. However, the third respondent, based upon the request of the company to possess the required quantity of ENA, has issued proceedings for every quarter in advance. Thus, with the above licences and permission granted by the second respondent and respondents 3 and 4, the petitioner commenced manufacturing IMF Spirits from March,2011, in the brands of ordinary, medium and premium, by giving employment to about 600 persons, both directly and indirectly.
11. For introduction of two new IMFS brands by the petitioner company, the same was approved by the third respondent in its proceedings dated 26.02.2011. For another premium brand introduced by the petitioner, the second respondent issued G.O.Ms.No.58, dated 16.11.2012, approving the said brand and, consequently, the fourth respondent, by his letter, dated 20.11.2012, issued his approval letter for the supply to be effected.
12. RL-3 licence granted was renewed periodically and every time the petitioner paid the required fee. The last renewal of RL-3 licence was on 16.04.2013, which is valid up to 31.03.2014. That apart, the licence for manufacture of IMFL was renewed for the period from 01.04.2013 to 31.03.2014, vide proceedings, dated 31.05.2012, based upon the second respondent's order in G.O.Ms.No.100, dated 31.05.2013, and after receipt of brand renewal fee for 13 brands.
13. In the year 2003, by an Act 31 of 2003, Section 17-C of the Tamil Nadu Prohibition Act,1937, was amended and Section 17-C (1-B) was inserted. Under the amended provisions of the said Act, the fourth respondent was statutorily empowered with exhaustive privilege of selling, by retail, IMFL for the whole of State of Tamil Nadu and no other person shall be entitled to any privilege of selling, by retail, IMFL in whole or any part of the State and the fourth respondent was also entitled to open as many shops for carrying on the business of sale, by retail, of IMFL and fix the number of shops depending upon the population of locality, needs of locality and other factors.
14. The second respondent, by G.O.Ms.No.20, dated 25.02.2011, approved four more brands of the petitioner. Totally, there are 18 brands, which are manufactured by the petitioner. Earlier, for 17 brands, the fourth respondent, by his proceedings, dated 25.02.2011, fixed the manufacturer's price and MRP, which include 7 premium brands manufactured by the petitioner company.
15. When the petitioner launched its first brand Tropicana in Medium segment in March 2011, due to model code of conduct, the fourth respondent did not issue supply and indent order to other brands. Hence, the petitioner approached this Court by filing W.P.No.7710 of 2011 and the First Bench, by its order, dated 26.04.2011, directed the Election Commission to issue release orders for introducing of other brands. The petitioner, by its letter dated 05.12.2011, sought to delete 3 brands (ordinary and medium) and the fourth respondent, by his letter dated 02.07.2012, accepted to delete the said 3 brands. Out of 13 brands, which are now manufactured by the petitioner, the petitioner is concerned with placing of supply and indent for 7 premium brands viz., (1) Le Charante XO French Brandy,(2) Saint Louis French Brandy, (3) Royal Napoleon VSOP Brandy, (4) Stallion Stride Dark Rum, (5) Florence XO Premium Brandy, (6) Gold Finger Premium Brandy and (7) Peter Scot Premium Malt Whisky.
16. There are 11 IMFL licence holders, who manufacture IMF Spirits and supply to the fourth respondent, including the petitioner. The fourth respondent, by virtue of amendment ofProhibition Act,1937, is the sole agency to sell in market and distribute IMFL in the entire State of Tamil Nadu. However, the fourth respondent does not involve in manufacturing of IMFL. Therefore, the fourth respondent has been purchasing IMFL from 11 IMFL licence holders, including the petitioner, in the State of Tamil Nadu, by placing supply orders and later by lifting the stock by issuing indent orders. However, it is seen that there is no rationale or basis for placing supply and indent orders with various IMFL manufacturers. There are no fixed guidelines as well in that regard. The fact also remains that other than the fourth respondent, the petitioner cannot sell its products anywhere in Tamil Nadu or outside the State nor could it export its products.
17. It is also seen that the petitioner brands were manufactured for all types of class of people in order to reach common man at affordable prices. Further, all the brands manufactured and supplied by the petitioner are of good quality and liked by consumers. The premium brands supplied by the petitioner are also popular among elite class. In other words, as could be seen from the records, it is evident that the premium brands were mostly liked by the consumers and there was more demand and hence the fourth respondent was placing supply and indent orders regularly up to June,2013.
18. Be that as it may, the fourth respondent, from July,2013, changed its purchase pattern and drastically reduced issuing of indent orders to the petitioner company. From July 2013 onwards, the issue of indent order did not match up with the supply order. Surprisingly, for the month of November,2013, no indent order was issued by the fourth respondent. However, for December,2013, and January,2014, the fourth respondent placed very less indent order. Since July 2013 till December 2013, the petitioner company was able to get orders only to the tune of 28300 cases of premium brands and other IMFL companies were able to receive orders for premium brands to the tune of 1000000 cases in six months.
19. If the power of the Government in a democratic set-up to deal in trade or commerce, be it liquor or any other commodity, be traced to Article 298 of the Constitution, it goes without saying that the same would be subject to all constitutional limitations applicable in relation thereto. The State while exercising its constitutional power under Article 298 cannot itself be an extra-constitutional authority so as to violate the constitutional provisions.
20. A State may either completely prohibit a trade or business in liquor and create monopoly either in itself or in any other agency and, furthermore, it can, for the purpose of issuing the licence, adopt any mode with a view to maximise its revenue, but, while doing so, it must not act arbitrarily. The State, while carrying on business by way of parting with its privilege or distribution of largesse, must conform to the equality clause enshrined in Article 14 of the Constitution.
21. Largesse and instrumentality of the State are the wealth of the nation. It shall be the duty of the public authority to give equal opportunity to the citizens to enjoy their rights guaranteed under the Constitution. If so, the respondent Corporation, having a largesse over the supply of liquor after getting due purchase from all concerned in equal manner, may not be justified to have their own whims and fancies of keeping certain things in their domain and do certain things without any guidelines. Therefore, the power of the authorities has to be exercised fairly and reasonably affording equal rights to the stakeholders of the business.
22. The right of trade guaranteed under Article 19 (1) (g) of the Constitution has to be evenly distributed among all citizens, particularly the persons, who are the stakeholders of their rights in the parameters and the procedures, for which fair play and reasonableness are to be displayed with utmost care and caution without any kind of discrimination.
23. Having regard to the provisions of Article 14 of the Constitution of India, a State, within the meaning of Article 12, cannot distribute its largesse at its own sweet will, in which regard the Court can ensure that the statutory functions are not carried out at the whims and caprices of the officers of the Government or local body in an arbitrary manner. Nothing should be done by them which gives an impression of bias, favouritism or nepotism.
24. Where a Corporation is an instrumentality or agency of the Government, it would, in the exercise of its power or discretion, be subject to the same constitutional or public law limitations as Government. The rule inhibiting arbitrary action by Government must apply equally where such Corporation is dealing with the public, whether by way of giving jobs or entering into contracts or otherwise, and it cannot act arbitrarily and enter into relationship with any person it likes, but its action must be in conformity with some principle which meets the test of reason and relevance. This rule also flows directly from the doctrine of equality embodied in Article 14.
25. It is well-settled that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle, which is non-discriminatory. It must not be guided by any extraneous or irrelevant considerations, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory.
26. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade and, at the same time, it has the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person, who is on the approved list, is unable to enter into advantageous relations with the Government because of the order of blacklisting. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling. It must, therefore, follow as a necessary corollary from the principle of equality enshrined in Article 14 that though the State is entitled to refuse to enter into relationship with any one, yet, if it does so, it cannot arbitrarily choose any person it likes for entering into such relationship and discriminate between persons similarly circumstanced, but it must act in conformity with some standard or principle which meets the test of reasonableness and non-discrimination and any departure from such standard or principle would be invalid, unless it is supported or justified on some rational and non-discriminatory ground.
27. Equality of opportunity is an essential requirement in a democracy, where the people are supreme, and all official acts must be actuated by public interest and should inspire public confidence.
28. Also, Article 19(1)(g) of the Constitution guarantees that all citizens shall have the right to practise any profession or to carry on any occupation, trade or business. However, in terms ofArticle 19(6), this right can be restricted by a statute imposing reasonable restrictions. A combined reading of clauses (1) and (6) of Article 19 makes it clear that a citizen has a fundamental right to carry on any trade or business and the State can make a law imposing reasonable restrictions on the said right in the interest of the general public. It is, therefore, obvious that unless dealing in liquor is excluded from trade or business , a citizen has a fundamental right to deal in that commodity.
29. In the instant case, the petitioner, having been granted all licences and renewals by the authorities, cannot be subjected to any kind of inequality and imbalances among others, that too in matters of business, like IMFL. Therefore, this Court is of the considered opinion that the action of the authorities in not placing the supply orders and indents to the petitioner on par with others is arbitrary, unreasonable and against the Constitutional provisions. Further, no guidelines or yardstick is framed by the respondents to issue supply or purchase orders to lift IMFL from the manufacturers. The petitioner, who is one of the IMFS manufacturers, should be given equal treatment in business opportunity like that of others and cannot be singled out or discriminated. In any sale of consumables, which is monopolistic in nature, it is the choice of the consumer that has to prevail and not the fourth respondent. There should be a-la-carte system and consumer, who is the master of his choice, should be allowed to purchase according to his wishes. The consumer should have a choice which may vary based upon the quality of IMFL brands. Hence, all IMFL brands should be made available in the fourth respondent shops across the counter, permitting the consumers to select the brands of their own choice.
30. Fourth respondent being the sole marketing agency in the State of Tamil Nadu, the very existence of the petitioner is only on the basis of supply orders and equal indent to be issued to its premium brands. The fourth respondent being also a State has to be fair and transparent in its approach and particularly should have a scientific and commercial data on the basis of the consumer choice and liking for placing the orders with various IMFL manufacturers and they cannot act in an arbitrary and discriminatory manner. Hence, proper guidelines on the basis of commercial and scientific data and on the basis of consumer choice in a most transparent manner have to be framed and implemented by the fourth respondent in the matter of placing supply orders and indent for purchasing the premium brands.
31. Accordingly, the fourth respondent is directed to take the average monthly retail sale of each of petitioner's premium brands right from the date of launching till October,2013, and to place the difference of backlog of supply and indent orders from July 2013 onwards and continue to place supply and indent orders on the average monthly sale basis. Moreover, in the interest of all the manufacturers of IMFL, stakeholders and consumers and to avoid further controversies, the fourth respondent is directed to frame necessary guidelines as to the issuance of orders and indents to the manufacturers, to maintain equality.
32. Writ Petitions are allowed. No costs. Consequently, the connected M.P.No.1 of 2014 is closed.
Index : Yes 12-03-2014 Internet : Yes dixit Note to Office : Issue Order Copy on 13.03.2014 To 1.The Chairman, Tamil Nadu State Marketing Corporation Ltd. (TASMAC) 4th Floor, CMDA Tower-II, Gandhi Irwin Bridge Road, Egmore, Chennai-600 008. 2.Principal Secretary, State of Tamil Nadu, Home, Prohibition and Excise Department, Secretariat, Fort St.George, Chennai. 3.The Commissioner, Prohibition and Excise, Chepauk, Chennai-600 005. 4.Managing Director, Tamil Nadu State Marketing Corporation Ltd.(TASMAC) 4th Floor, CMDA Tower-II, Gandhi Irwin Bridge Road, Egmore, Chennai-600 008.
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