Amitava Lala, J.@mdashThis Revenue Bench of the High Court has been flooded with several writ petitions made by the purported holders of licence to run the respective retail liquor shops challenging the new excise policy of the State made in the year 2009, followed by the respective rules and the notifications, for the purpose of allotment of licence of retail liquor shops for the excise year 200910. Some of the writ petitions are made by the licence holders of the retail shops falling within the special zone constituted by the Uttar Pradesh Demarcation and Regulation of Special Zones for Exclusive Privilege of Excise Shops Rules, 2009 (hereinafter in short called as the ''Demarcation Rules, 2009''), their cases are segregated and categorised as ''special zone category''. The other petitioners, whose existing retail shops are not within such zone but in the zone governed by the Uttar Pradesh Excise (Settlement of Licences for Retail Sale of Country Liquor) (Fourth Amendment) Rules, 2009 (hereinafter in short called as the ''Rules, 2009''), are segregated and categorised as ''general zone category''. Some of the writ petitioners are aggrieved by the Uttar Pradesh Excise (Settlement of Retail Licences for Model Shop of Foreign Liquor) (Third Amendment) Rules, 2009 (hereinafter in short called as the ''Model Shop Rules, 2009''), their cases are segregated and categorised as ''model shop category''.
2. Basic grievance of all such writ petitioners is for renewal of their existing licences for the excise year 200910. To that extent they are similarly placed and are similarly affected.
3. It appears from the Demarcation Rules, 2009 that the special zone has been constituted for the following objects and reasons:
"Whereas out of various zones of Excise department in Uttar Pradesh namely Varanasi, Lucknow, Meerut and Agra, the Meerut zone having maximum population density does not have per capita revenue from Country liquor in comparison to its bordering States. The reason thereof is that certain people of this State often visit bordering State of Haryana, Delhi and Uttarakhand for consuming liquor, bring with them personally from such States and as such the liquor is being smuggled at large scale.
The enforcement work upto December, 2008 also confirm this fact in which there were 260 cases of interstate smuggling in Meerut Zone. Besides the loss of revenue, this situation is also detrimental to public health and safety, public interest and public order as well."
5.As per Rule 2(c) of the Demarcation Rules, 2009, ''Apex Cooperative Body'' means a cooperative body wherein the share of the State Government is not less than fifty one percent and shall also include any joint venture partnership of such society for the purpose of these rules. The apex cooperative body has been formed. It has made its joint venture partnership with one M/s. Amethyst Town Planners Private Limited, respondent no. 5 herein, for the excise year 200910 on deposit of Rs. 400 crores. So far as general zone is concerned, selection has been directed to be made by public lottery upon inviting fresh applications for the excise year 200910. So far as model shop is concerned, fresh applications are also invited for allotment of such shops for the excise year 200910. All the notifications were issued during the excise year 200809 sometimes in the month of February, 2009 but admittedly no representations were made for the purpose of renewal of their respective licences. According to the petitioners, when notifications were being published for the purpose of grant of new licence for the excise year 200910, they thought it fit that applications for renewal will be futile attempt, hence invoked the writ jurisdiction of this Court directly. However, petitioners were not debarred from carrying on their business upto the expiry of the excise year 200809 on 31st March, 2009 since when the tenure of respective licences were existing.
6. Against this background, firstly let us go back to the constitutional scheme of controlling and/or governing the business with regard to liquors by the State. We find from Entry8 of List IIState List of Seventh Schedule under Article 246 of the Constitution of India that the State has a power in respect of the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. If we read such Entry8 with Entry51 under the said list, we shall find that the State has power to make rules with regard to duties of excise on the alcoholic liquors for human consumption manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India. Therefore, the governing Act i.e. The United Provinces Excise Act, 1910 (hereinafter in short called as the ''Act''), as then promulgated and amended upto 2001, can be said to be within the constitutional scheme. The objects and reasons of the said Act are as follows:
"Whereas it is expedient to consolidate and amend the law in force in the United Provinces relating to the import, export, transport, manufacture, sale and possession of intoxicating liquor and intoxicating drugs;
And whereas in order to promote, enforce and carry into effect the policy of prohibition, it is necessary to authorize the State Government to prohibit the import, export, transport, manufacture, sale and possession of liquor and intoxicating drugs in the United Provinces or in any specified area or areas thereof:"
6. Having regard to the power under the Constitution and the law, by making rules the State can enforce its policy amongst others in the entire State or in any specified area or areas thereof.
7. Three sections, being Sections 24, 24A and 24B of the Act are very important for all practical purposes. Aforesaid Section 24A was inserted by U.P. Act 30 of 1972, which was reenacted by U.P. Act 5 of 1976. For the sake of convenience, all the aforesaid sections are set out chronologically as under:
"24. Grant of exclusive privilege of manufacture, etc.Subject to the provisions of Section 31, the Excise Commissioner may grant to any person a licence for the exclusive privilege :
(1) of manufacturing or of supplying by wholesale, or of both, or
(2) of selling by wholesale or by retail, or
(3) of manufacturing or of supplying by wholesale, or of both, and of selling by retail, any country liquor or intoxicating drug within any local area."
"24A. Grant of exclusive or other privilege in respect of foreign liquor.(1) Subject to the provisions of Section 31, the Excise Commissioner may grant to any person a licence or licences for the exclusive or other privilege :
(a) of manufacturing or of supply by wholesale, or of both; or
(b) of manufacturing or of supplying by wholesale, or of both and selling by retail; or
(c) of selling by wholesale (to wholesale or retail vendors); or
(d) of selling by retail at shops (for consumption ''off'' the premises); any foreign liquor in any locality.
(2) the grant of licence or licences under clause (d) of subsection (1) in relation to any locality shall be without prejudice to the grant of licences for the retail sale of foreign liquor in the same locality in hotels and restaurants for consumption in their premises.
(3) Where more licences than one are proposed to be granted under clause (d) of subsection (1) in relation to any locality for the same period, advance intimation of the proposal shall be given to the prospective applicants for every such licence.
(4) The provisions of Section 25, and proviso to Section 39 shall apply in relation to grant of a licence for an exclusive or other privilege under this section as they apply in respect of the grant of a licence for an exclusive privilege under Section 24."
"24B. Removal of doubts.For the removal of doubts, it is hereby declared :
(a) that the State Government has an exclusive right or privilege of manufacture and sale of country liquor and foreign liquor;
(b) that the amount described as licence fee in clause (c) of Section 41 is in its essence the rental or consideration for the grant of such right or privilege by the State Government;
(c) that the Excise Commissioner as the head of the Excise Department of the State shall be deemed, while determining or realising such fee, to act for and on behalf of the State Government."
8. From the plain reading of Section 24B (c) of the Act it appears to us that the Excise Commissioner is a representative of the State Government. State Government has exclusive privilege to settle any shop by auction or inviting tenders or otherwise on the basis of sales made or quota lifted under the licence, etc. Section 40 of the Act is giving the rule making power to the State Government relating to excise revenue. Section 40 (2)(e) of the Act gives a power to the State to regulate the periods and localities for which, and the persons to whom, licences for the vend by wholesale or by retail of any intoxicant may be granted. Similarly, Section 41 gives a power to the Excise Commissioner, subject to the previous sanction of the State Government, to make rules to regulate the manufacture, supply, storage or sale of any intoxicant, and to prescribe the scale of fees or manner of fixing the fees payable for any licence, permits or pass including any consideration for the grant of any exclusive or other privilege granted under Section 24 or Section 24A or for storing of any intoxicant particularly as per Clause (c) therein, as deemed to be substituted by the U.P. Act No. 5 of 1976. Clause(c)(2) under Section 41 of the Act prescribes that the manner of fixing such fee or consideration includes any one or more of the following manners, namely :
(i) auction,
(ii) invitation of tenders,
(iii) assessment on the basis of sales made or quota lifted under the licence, permit or pass.
This part of the section i.e. Clause (c)(2) was substituted by the U.P. Act 13 of 1979.
9. Admittedly there is no dearth of power. The real controversy is with regard to exercise of power. Mr. S.P. Gupta and Mr. Keshari Nath Tripathi, learned Senior Counsel appearing for the petitioner/s, took the leading role in advancing the arguments on behalf of the petitioners.
10. Mr. S.P. Gupta has made his introductory general submission but basically he has pointed out with regard to creation of special zone. According to him, selection of the U.P. Sugar Federation Cooperative Society as apex cooperative body under the Demarcation Rules, 2009 made for the special zone is camouflage to provide benefit of business to one by creating monopoly. Therefore, the policy and the Demarcation Rules, 2009 are wholly arbitrary and liable to be quashed. In support of his contention, he relied upon a five Judges'' Bench judgement of the Supreme Court reported in AIR 1967 SC 1368 (Krishan Kumar Narula Vs. State of Jammu and Kashmir and others) to establish that like other business, liquor business is also a business but the State can only make reasonable restrictions on the said right in public interest i.e. economic and moral grounds. He further said that the Excise Commissioner should act with the prior approval of the State Government. Such approval can not be mechanical without any objective exercise. Even to that extent he cited a decision of the Supreme Court reported in AIR 1970 SC 1896 (The Purtabpur Company Ltd. Vs. Cane Commissioner of Bihar and others), which factually relates to allotment of cane area by the Cane Commissioner with the direction of the Chief Minister but not in conformity with the statute to determine the allotment on the basis of the objective criteria. Hence, such allotment was found bad. The Supreme Court was pleased to allow the appeal and quash the orders impugned even with costs.
11. Mr. K.N. Tripathi has supported the contentions of Mr. S.P. Gupta, but at the same time he has basically made his submission with regard to general zone category based on the judgement reported in 2002 (7) SCC 104 (Secretary to Govt., T.N. and another Vs. K. Vinayagamurthy). On the strength of such judgement he contended that to change the policy, augmentation of excise revenue, if any, can not be equated with the right of renewal of licence. Right of renewal if annulled arbitrarily, the same can be challenged. Mr. Tripathi has further submitted that their expectation is neither mere nor bare but more than the legitimate expectation.
12. We are of the view that such judgement is factually distinguishable with the present case. In that case, a block period of 200104 had been fixed by the State Government even then renewal was annulled. Hence, the Court held that it is arbitrary. In the instant case, there is no question of any block period which has been interfered with by the State. On the contrary, the petitioners are allowed to carry on business till the expiry of the excise year on 31st March, 2009 though we did not feel ourselves convinced to pass any interim order on the basis of such introductory submissions made by the respective counsel.
13. Mr. Jaideep Narain Mathur, learned Additional Advocate General of the State of Uttar Pradesh, has made pr�cised submissions particularly on the strength of Section 36A of the Act, which has been inserted by the U.P. Act No. 2 of 1923. Section 36A of the Act is as follows:
"36A. Bar to right of renewal and compensation. No person to whom a licence has been granted under this Act shall have any claim to the renewal of such licence or any claim for compensation on the determination or nonrenewal thereof."
14 He said that licence holders have no right of renewal perpetually. Rules by virtue of enabling provision consider individual case on exigency for further one year period in maximum and no more than that period. Therefore, they have no locus to challenge the future policy and the rules made for the excise year 200910. As per the provision of the Rules, 2009, any individual case can be considered, if represented, that too only for the next excise year. Such provision is enabling provision. Under no circumstances, any right can be claimed in general. Mr. Mathur has argued that when several modes are provided under the rules to allot licence for carrying on liquor business, the modes of auction or tender are far more accurate. When the renewal is prohibited by the above section, the State, being the privileged authority under the Act, can not be compelled to renew the licences. It is to be remembered that sales tax and excise are two major revenue earning sources of the State of Uttar Pradesh.
15. Mr. Mathur has relied upon a Full Bench judgement of this High Court reported in 2003 U.P.T.C.53 (Brij Bhushan Chaudhary and others Vs. State of U.P. and others). The relevant questions, amongst others, before the Full Bench were as follows:
"3(a). If the rules framed by the Excise Commissioner being Rules of 2000, 2001 and 2002 for country liquor, foreign liquor and beer on the basis of which, it has been contended by the respondents that grant of excise licence for the periods 20002001, 20012002 and 20022003 was made, are valid in the eye of law?"
"4. Are the petitioners entitled to the renewal of licence or for grant of new licence since they filled up the forms and paid the deposits as asked for by the respondent authorities?"
16. Such questions were answered by the Full Bench in paragraphs74 and 75 of the judgement, which are as follows:
"74. So far as Question No. 4 is concerned, that is, if the petitioners are entitled to the renewal of licence, it is not disputed that the petitioners do not have any Fundamental Right to trade or business in liquor, which is, in fact, the exclusive privilege of the State. In this behalf, Section 36A of the U.P. Excise Act is also very clear in that respect. Section 36A provides as follows:
"36A. Bar to right of renewal and compensation. No person to whom a licence has been granted under this Act shall have any claim to the renewal of such licence or any claim for compensation on the determination or nonrenewal thereof."
75. The grant of licence being an exclusive privilege of the State, under the Rules, the State Government has been conferred power to renew the licence on such terms and conditions, as it deems fit and proper. A bare perusal of the provisions contained in the Rules makes it clear that the State Government has the privilege to deal with case of licenses. The Rules, in effect, have to be read in consonance with Section 36A. In our view, the Rules do not provide for any right on the petitioners to claim renewal as a matter of right or course. If the State Government decides to renew the licences, in that even, it has to follow the Rules. The same, however, does not take away the power of the State Government to take a decision that no renewal of licence be granted for a particular year. That apart, irrespective of the fact as to from when the Rules of 2002 come into force, the same shall apply prospectively in regard to the applications for renewal, i.e., to say for those who will obtain licence under the said Rules for this year and they shall be entitled to renewal in accordance with the Rules but those who have been granted licence under the earlier Rules and those who have already granted renewal, (as is the case of most of the writ petitioners), they cannot claim the benefit of renewal under the Rules of 2002, once the earlier Rules ceased to be operative. In the instant case, assuming that the Rules have come into force with effect from 3rd April, 2002, that does not confer any right on the petitioners or others who are continuing on the basis of Rules of 2000 and 2001 to have further renewal on the basis of Rules of 2002. In that view of the matter, in our view, the writ petitioners cannot claim any specific right of renewal and the writ petitioners, on that ground alone, cannot succeed."
17. Incidentally he said that even in respect of new allottees of general zone category, mode of selection by public lottery from amongst the equally placed candidates has been adopted under the new Rules.
18. According to us, process of public lottery is not alien to the rules. Rule 10 of the Uttar Pradesh Excise (Settlement of Licences for Retail Sale of Country Liquor) Rules, 2002 (hereinafter in short called as the ''Rules, 2002'') provides for selection of licensee. It has been specified therein that in case more than one applicants are found eligible for any particular shop, the committee shall select the licensee for such shop by public lottery. As per Section 13 (2) of the General Clauses Act, 1897, singular includes plural and vice versa, hence, the word ''shop'' is applicable to ''shops'' also.
19. Mr. Tripathi further said that the Rules, 2002 is no more in existence and it has been replaced by the Rules, 2009. They are the beneficiaries under the new Rules. He said that as per Rule1 thereof, it shall come into force at once. Therefore, it will have the effect on and from 11th February, 2009 itself when such rules came into force. It is imperative that the then licence holders are to be affected, therefore, they have right of renewal. The Rules, 2009 has made a radical change. Rules5 i.e. renewal or extension of licence as in Rules, 2002 and Rules, 2009 can be compared side by side to see the change:
Existing Rule 5 as per Rules, 2002
Rule 5 as substituted by Rules 2009
5. Period of Licence
The period of licence shall be for an excise year or part thereof for which the licence has been granted. The licence may be renewed or extended with consent of licensee for next excise year or part thereof on such terms and conditions as may be decided by the State Government.
5. Period of Licence
The period of licence shall be for an excise year or part thereof for which the licence has been granted, but the licence may be renewed or extended on the desire of the licensee for the next excise year on such restrictions and conditions as may be decided by the State Government.
20. Rule5 as operative now is on the ''desire'' of the licensee for the next excise year. New rules make further stand to the legitimacy of the existing licence holders. An existing licensee of the year, when the rule was introduced, can get renewal as per the ''desire'' for the next excise year i.e. 200910. Language of this rule and the language of the other relevant rules required in respect of the excise of the State were amended introducing the similar averments like "desire" or "wish" of the licensee.
21. Rule5 of the Uttar Pradesh Excise Settlement of Licences for Retail Sale of Foreign Liquor (Excluding Beer and Wine) Rules, 2001 as amended by the Uttar Pradesh Excise Settlement of Licences for Retail Sale of Foreign Liquor (Excluding Beer) (Eighth Amendment) Rules, 2009 are compared hereunder side by side, as follows:
Existing Rule 5 as per Uttar Pradesh Excise Settlement of Licences for Retail Sale of Foreign Liquor (Excluding Beer and Wine) Rules, 2001.
Rule 5 as substituted by Uttar Pradesh Excise Settlement of Licences for Retail Sale of Foreign Liquor (Excluding Beer) (Eighth Amendment) Rules, 2009.
5. Period of LicenceThe period of licence shall be for an excise year or part thereof for which the licence has been granted. The licence may be renewed or extended with consent of licensee for next excise year or part thereof on such terms and conditions as may be decided by the State Government.
5. Period of LicenceThe period of licence shall be for an excise year or part thereof for which the licence has been granted, but the licence can be renewed or extended on the wish of the licensee for the next year on such restrictions and conditions as decided by State Government.
22. Similarly, Rule6 of the Uttar Pradesh Excise (Settlement of Retail Licences for Model Shop of Foreign Liquor) Rules, 2003 has also been amended and substituted by new Rule6 by the Model Shop Rules, 2009. Such old and new Rule6 are compared side by side as under:
Existing Rule 6 as per Uttar Pradesh Excise (Settlement of Retail Licences for Model Shop of Foreign Liquor) Rules, 2003.
Rule 6 as substituted by Uttar Pradesh Excise (Settlement of Retail licences for Model Shop of Foreign Liquor) (Third Amendment) Rules, 2009.
6. Period of licenceThe period of licence shall be for an excise year or part thereof for which the licence has been granted. The licence may be renewed or extended with consent of licensee for next excise year or part thereof on such terms and conditions as may be decided by the State Government.
6. Period of licenceThe period of licence shall be for an excise year or part thereof for which the licence has been granted, but the licence can be renewed or extended on the will of the licensee for the next year on such restrictions and conditions as decided by State Government.
23. Therefore, "wish" or "desire" of the licensee is a predominant factor for the purpose of renewal of licence. Moreover, Rule5 of the Rules, 2009 is distinct and different from Rule7, which is made for grant of new licence in an area or locality by inviting applications making wide publicity through daily newspapers having circulation in that area. Grant of new licence falls under Rule7 and is different from renewal. The State has made publicity for grant of new licence totally ignoring the right of renewal existing at the relevant point of time. If provision of renewal of licence is incorporated in the rules as per the ''desire'' or ''wish'' of the licensee, the same can not be ignored by the State so lightly. This is a right or privilege to the licensee to get renewal of the licence for the next excise year as per such rule. Such right or privilege can not only be equated with the legitimate expectation but more than the same, such as qualified fundamental right. He relied upon a three Judges'' Bench judgement of the Supreme Court reported in AIR 1992 SC 1 (Mohan Kumar Singhania and others Vs. Union of India and others) to establish that in construing a statute, the Court has to ascertain the intention of the law making authority in the backdrop of the dominant purpose and the underlying intendment of the said statute and that every statute is to be interpreted without any violence to its language and applied as far as its explicit language admits consistent with the established rule of interpretation. Rule5 of the Rules, 2009 is not repugnant. Some sort of relaxation is given under Rule5. The provision of renewal is always available. It is a substantive provision. Who are interested to make application for grant of fresh licence and who are interested to make application for renewal of licence, are two different classes under the same set of rules i.e. Rule5 and Rule7. On account of repugnancy he cited a three Judges'' Bench judgement of the Supreme Court reported in AIR 1978 SC 995 (M/s. Punjab Beverages Pvt. Ltd. Chandigarh Vs. Suresh Chand and another). It is a well settled rule of construction that no one section of a statute should be read in isolation, but it should be construed with reference to the context and other provisions of the statute, so as, as far as possible, to make a consistent enactment of the whole statute. Such principle was followed in AIR 1985 SC 1034 (M/s. Philips India Ltd. Vs. Labour Court, Madras and others). It was held by the Supreme Court that no canon of statutory construction is more firmly established than that the statute must be read as a whole. This is a general rule of construction applicable to all statutes alike which is spoken of as construction ex visceribus actus. This rule of statutory construction is so firmly established that it is variously styled as ''elementary rule''. In 1979 (3) SCC 431 (M. Karunanidhi Vs. Union of India and another) a five Judges'' Bench of the Supreme Court held that on account of repugnancy following propositions emerge:
"1. That in order to decide the question of repugnancy it must be shown that the two enactments contain inconsistent and irreconcilable provisions, so that they cannot stand together or operate in the same field.
2. That there can be no repeal by implication unless the inconsistency appears on the face of the two statutes.
3. That where the two statutes occupy a particular field, but there is room or possibility of both the statutes operating in the same field without coming into collision with each other, no repugnancy results.
4. That where there is no inconsistency but a statute occupying the same field seeks to create distinct and separate offences, no question of repugnancy arises and both the statutes continue to operate in the same field."
24. In 1997 (1) SCC 373 (Sultana Begum Vs. Prem Chand Jain) the Supreme Court has held that the rule of interpretation requires that while interpreting two inconsistent, or, obviously repugnant provisions of an Act, the courts should make an effort to so interpret the provisions as to harmonise them so that the purpose of the Act may be given effect to and both the provisions may be allowed to operate without rendering either of them otiose.
25. Mr. Manish Goyal, learned Counsel independently appeared in support of some of the petitioners and cited the judgements reported in [1968] 2 All E.R. 351 (R. Vs. Leicester Licensing Justices, Ex parte Bisson) and [1983] 2 All E.R. 551 (R. Vs. Windsor Licensing Justices, ex parte Hodes) and enlightened us by saying that in R. Vs. Windsor Licensing Justices, ex parte Hodes (supra) it was held that grant of new licence or renewal to such properly qualified persons as they think fit and proper is a power expressed in permissive terms, which is exercisable or not at their discretion. The Court of appeal also followed the ratio of the judgement of the Queen''s Bench reported in [1957] 1 All ER 112 [R. Vs. County Licensing (Stage Plays) Committee of Flint CC, ex p Barrett], wherein the case was arising out of use of intoxicating liquor and tobacco in a theatre by the existing licence holder. From such judgement of Queen''s Bench we find that factually in a case of laying down general principle as to the effect of proximity of other premises where liquor can be obtained, the proper course is to consider each case on its merits. By citing 1995 Supp (1) SCC 596 (Jilubhai Nanbhai Khachar and others Vs. State of Gujarat and another) he further says that right of renewal is a right to property in legal sense, which means an aggregate of rights which are guaranteed and protected by law. It extends to every species of valuable right and interest, more particularly, ownership and exclusive right to a thing, the right to dispose of the thing in every legal way, to possess it, to use it, and to exclude everyone else from interfering with it. The dominion or indefinite right of use or disposition which one may lawfully exercise over particular things or subjects is called property. The exclusive right of possessing, enjoying and disposing of a thing is property in legal parameters. Therefore, the word ''property'' connotes everything which is subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable value or which goes to make up wealth or estate or status. Property, therefore, within the constitutional protection, denotes group of rights inhering citizen''s relation to physical thing, as right to possess, use and dispose of it in accordance with law. The term property has a most extensive signification, and, according to its legal definition, consists in free use, enjoyment, and disposition by a person of all his acquisitions, without any control or diminution, save only by the laws of the land. However, we find that in other part of the judgement it has been held that the word ''property'' used in Article 300A of the Constitution must be understood in the context in which the sovereign power of eminent domain is exercised by the State and property expropriated. No abstract principles could be laid. Each case must be considered in the light of its own facts and setting. The phrase "deprivation of the property of a person" must equally be considered in the fact situation of a case. Deprivation connotes different concepts.
26. On the anticipation that the word ''may'' in the Rule5 may stand in the way, Mr. Tripathi has relied upon various judgements to establish that word ''may'' should be read as ''must'' or ''shall'' but not ''may''. From AIR 1963 SC 1618 (State of Uttar Pradesh Vs. Jogendra Singh) we find a three Judges'' Bench of the Supreme Court held that the word "may" is capable of meaning "must" or "shall" in the light of the context. It is also clear that where a discretion is conferred upon a public authority coupled with an obligation, the word "may", which denotes discretion, should be construed to mean a command. Sometimes, the Legislature uses the word "may" out of deference to the high status of the authority on whom the power and the obligation are intended to be conferred and imposed. In AIR 1965 SC 1222 (Sardar Govindrao and others Vs. The State of Madhya Pradesh) a five Judges'' Bench of the Supreme Court observed similarly and held that the word "may" is often read as "shall" or "must" when there is something in the nature of the thing to be done, which makes it the duty of the person on whom the power is conferred to exercise the power. In AIR 1977 SC 740 [The Official Liquidator Vs. Dharti Dhan (P) Ltd.] the Supreme Court held that the principle laid down has been followed consistently that the word "may" carries with it the obligation to exercise the power in a particular manner or direction. In such a case, it is always the purpose of the power which has to be examined in order to determine the scope of discretion conferred upon the donee of the power. From AIR 1977 SC 1516 [Shri Rangaswami, The Textile Commissioner and others Vs. The Sagar Textile Mills (P) Ltd. and another] we find that ratio of Jogendra Singh (supra) has been followed.
27. Additionally he said that if a statute invests a public officer with authority to do an act in a specified set of circumstances, it is imperative upon him to exercise his authority in a manner appropriate to the case when a party interested and having a right to apply moves in that behalf and circumstances for exercise of authority are shown to exist as per the ratio of the judgement reported in AIR 1971 SC 33 (L. Hriday Narain Vs. IncomeTax Officer, Bareilly).
28. As against the query of the Court whether Rule5 of the Rules, 2002 and Rules, 2009 made for general zone category is an enabling provision or not, Mr. Tripathi answered that even if the words used in the statute are prima facie enabling, the Courts will readily infer a duty to exercise power which is invested in aid of enforcement of a rightpublic or privateof a citizen. However, additionally he submitted that Rule5 of the Rules, 2009 can not be said to be enabling provision on the part of the State or its machinery. Renewal is a legitimate expectation of licensee to get the licence renewed from the licensor. In case of any refusal, he can have the remedy under Rule5 itself. Therefore, the rule is remedial provision but not enabling provision. By referring a part of the judgement reported in 1994 (5) SCC 509 (Madras City Wine Merchants'' Association and another Vs. State of T.N. and another) he said that the Courts also distinguish, for example in licensing cases, between original applications, applications to renew and revocations: a party who has been granted a licence may have a legitimate expectation that it will be renewed unless there is some good reason not to do so, and may therefore be entitled to greater procedural protection than a mere applicant for a grant.
29. However, from paragraph52 of the said judgement we find that the rule is a subordinate legislation in exercise of powers under the Act. The rules have been repealed by exercise of power under the Act. Therefore, this is a case of legislation. The doctrine of legitimate expectation arises only in the field of administrative decisions. If the plea of legitimate expectation relates to procedural fairness, there is no possibility whatever of invoking the doctrine as against the legislation.
30. On being questioned by the Court how the petitioners, in one hand, can challenge the policy and the Rules, 2009 made by the State and on the other hand, raise voice to get the benefit of the amended Rule5 of the Rules, 2009. In answer to that, Mr. Tripathi has categorically contended that the petitioners are not challenging the Rules, 2009 but they are restricting their reliefs only with regard to renewal or extension of the retail licences for carrying on the business of liquor for the excise year 200910. Therefore, our endeavour is restricted only to the extent whether the petitioners are entitled to get the benefit of renewal or not. Even on that score we are of the view that such relief can not be granted in rem. It is dependable upon the facts and circumstances of each case. If "desire" or "wish" is formally expressed to the State, the State is empowered to apply its discretion to extend the period in certain unforeseen circumstances. Such right of representation for renewal, if any, can not be construed right in rem but in personem depending upon the circumstances of each case. If we propose to pass a general order, it will be effective not only to the petitioners before this Court but also to the persons who have not invoked the jurisdiction of this Court, as a whole. This is neither the scope nor the ambit of Rule5 of the Rules, 2002 or Rule5 of the Rules, 2009. Substituted Rule5 can not give any better right than the earlier Rule5. So far as renewal is concerned, the earlier rule speaks about the renewal or extension with the ''consent'' of licensee when the new rule is based on the ''desire'' or ''wish'' of the licensee. Therefore, action on the part of the licensees would be either to give consent or to express their ''desire'' or ''wish'' to the State to act upon such ''consent'' or ''desire'' or ''wish''. Unless both the parties agreed upon the prevailing circumstances, there is no scope for automatic extension by the State irrespective of incorporation of any word either ''desire'' or ''wish'' or ''consent''. Hence, we do not find any magic in the substituted word ''desire'' or ''wish'' to give a better or greater right to the existing licensees to have renewal of their licences if not as a matter of course but at least as a qualified fundamental right.
31. According to us, publication of notification is required for the purpose of allotment of new liquor shops by public lottery for the nonspecial zone. Any body can apply under it. He can be a newcomer or person or enterprise doing business in the earlier year or years. What is the predicament not to apply under the notification is unknown to this Court. The only apprehension might be not to become successful in the public lottery. The same can not be any legal or equitable ground to get relief under Article 226 of the Constitution of India. We are of the view that the petitioners have no right to carry on business as a matter of course perpetually adopting the method of renewal. They have to do the business as per the licence to be granted by the State on excise year to year basis. In other words, following the ratio propounded by the Supreme Court in 1981 (2) SCC 205 (State of Tamil Nadu Vs. M/s. Hind Stone and others) an application for the renewal of a lease (here let it be read as licence) is, in essence an application for the grant of a lease for a fresh period. Therefore, when Rule7 is the Rule, Rule5 is an exception depending upon individual exigency otherwise such Rule is likely to be declared as de hors the Section 36A of the Act. Moreover, the rule under which the renewal was continued, now repealed and replaced by the new rule, therefore, there can not be any existing right of renewal of the petitioners under the old Rule. The petitioners are continuing with the business for a considerable period of time and even thereafter seeking renewal of their respective licences for the next excise year. On the other hand, the aspirants for new allotment have not yet obtained the licence to carry on the business.
32. Moreover, some of the businesses are not to be treated as business under Article 19(1)(g) of the Constitution of India i.e. business with regard to intoxicant. Doctrine of res extra commercium clearly applies in such case. Hence, it is far more difficult to accept the plea of the petitioners that though the business is of such nature, yet they are entitled to extension or renewal of period as a matter of course. The State, either for earning revenue or for moral purpose, is entitled to make a policy. The rules, which have been framed hereunder, are reflection of the policy of the State Government. It is further significant to note that although the Rules, 2009 came into force with immediate effect but the petitioners were not disturbed in carrying on the business till the expiry of the tenure by 31st March, 2009. Any prospective application of renewal may arise only where allotment is made under the Rules, 2009. The word "may" in the rule can not be regarded as ''must'' or ''shall'' at all.
33. Therefore, on the facts and circumstances of the case and upon being guided by the Full Bench decision of this Court in re Brij Bhushan Chaudhary (supra), we can not hold that the stand of the petitioners is sustainable either legally or equitably. Hence, no relief can be granted to the petitioners.
34. So far as dispute with regard to allotment of model shop is concerned, the same is to be governed by the Uttar Pradesh Excise (Settlement of Retail Licences for Model Shop of Foreign Liquor) Rules, 2003 (hereinafter in short called as the ''Rules, 2003'') as made in the selfsame Act and the same will be applicable in respect of the cases of model shop category. The premises of model shop as prescribed under Rule5 of the Rules, 2003 is as follows:
"5. Premises of Model shop.The premises of Model shop shall be in the commercially approved area of the Corporation city or Municipal city. The premises of Model shop shall be at least 600 square feet of carpet area. It should be fully air conditioned. A toilet is compulsory in the model shop. There should be sufficient place for parking."
35. The period of licence as per Rule6 of the Rules, 2003 is as follows:
"6. Period of licence.The period of licence shall be for an excise year or part thereof for which the licence has been granted. The licence may be renewed or extended with consent of licensee for next excise year or part thereof on such terms and conditions as may be decided by the State Government."
36. Rule4 of the Rules, 2003 provides for application of model shop, whereas Rule3 thereof prescribes for settlement of licences for retail sale. Both the sections, being Sections 3 and 4 of the Rules, 2003, are as follows:
"3. Settlement of licences for retail sale.(a) Subject to the provisions of these rules and subject to the payment of licence fee and security amount of the Model shop for retail sale of foreign liquor, licence shall be settled or resettled by fixed licence fee system as specified herein.
(b) The licence shall be granted in the Form F.L.4 (a) for retail sale of foreign liquor in sealed bottles off the premises and draught beer for consumption "on" the premises.
(c) The Excise Commissioner in consultation with the State Government shall fix licence fee from time to time under section 24A of the Act for the whole excise year or part thereof:
Provided that if such shop is settled after 30th of September, the licence fee shall be half of the amount so fixed as licence fee for the year.
(d) Security amount in cash shall be deposited in Government Treasury as interest free security refundable after the final settlement of all the claims and dues of the State Government."
"4. Application for Model shop. The licensing authority, under the direction issued by the Excise Commissioner from time to time with the prior approval of State Government, shall invite application for Model shop in the form prescribed by Excise Commissioner in the Corporation city and Municipal city after giving wide publicity through daily news papers having circulation in that area."
37. Mr. Mukesh Prasad, learned Counsel appearing for the petitioners in respect of model shop category, has cited a three Judges'' Bench judgement of the Supreme Court reported in AIR 1980 SC 1992 (M/s. Kasturi Lal Lakshmi Reddy, etc. Vs. The State of Jammu & Kashmir and another) to establish that where any governmental action fails to satisfy the test of reasonableness and public interest discussed above and is found to be wanting in the quality of reasonableness or lacking in the element of public interest, it would be liable to be struck down as invalid. It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State; such an action would be both unreasonable and contrary to public interest.
38. However, we do not find any justification of such cause of citation since the petitioners themselves were private parties and wanted to get benefit of renewal by invalidating the statutory rules made under new excise policy of the State.
39. Moot point of argument on behalf of the petitioners is that a Model Shop is virtually a Bar. Therefore, renewal clause is to be interpreted in the context of Bar. In other words, renewal clause of the rule is to be read with the law applicable for Bar. Rules promulgated herein can not be made applicable in isolation. Save and except such submission they adopted the arguments of the petitioners under the general zone category and thereby supported renewal and opposed new allotment by public lottery.
40. Against this background, let us understand the factual position in the cases of model shop. Model shop is a retail shop to sell the liquor in bottle unlike the bar, where it sells the liquor with other beverages as per the requirements of the consumer. However, to avoid the public nuisance they are allowed to consume the same within the facilitated model shop. This wellsettled position continues with the model shop for a considerable period as per the terms and conditions of settlement and Rule5 as above. Under no circumstances, such shop/s can be said to be a bar and will be governed by the law applicable to a bar. Admittedly, the retail shop owners have to have their licence/s under the aforesaid Rules, 2003 and the Rules framed thereafter uniformly not under the rules, if any, framed for the purpose of granting licence for bar. Having so, if any policy has been adopted by the State under the relevant Rules for lottery or any other system, the licence holders can not be allowed to take shelter of the relevant provisions made for Bar. Hence, we can not deviate from the laying down principle as adopted for general zone category. The process of allotment by lottery within the scope and ambit of the law can not be said to be nontransparent in nature. Therefore, though the contentions of the writ petitioners under model shop category are specifically placed, they can not get any better relief than the petitioners under general zone category being similarly placed in connection with allotment of shops by public lottery.
41. So far as special zone category is concerned, the petitioners, being aspirants to have the renewal of licences for the next excise year i.e. 200910 want to say that by allowing joint venture partnership with the apex cooperative body under Rule 2(c) of the Demarcation Rules, 2009, the State Government has parted with the privilege to outsider and/or created monopoly and as such reasonable restrictions as under Article 19(1)(g) of the Constitution of India if can not be attracted, at least Article 14 of the Constitution can not be said to be inapplicable. The whole purpose of the State Government is to facilitate a private company which is malafide and/or colourable exercise of power. The transaction between the cooperative body and the company is a sham transaction. Though the petitioners opposed the system of public lottery for the other zone but surprisingly, in the same breath the petitioners pressed for public lottery in the alternative of renewal. It appears to us that petitioners are interested to get the renewal of licence by hook or by crook. We have already gone through the objects and reasons initially, now let us go through relevant provisions of the Demarcation Rules, 2009, as quoted hereunder:
"2(c) ''Apex Cooperative Body'' means a cooperative body wherein the share of the State Government is not less than fifty one percent and shall also include any joint venture partnership of such society for the purpose of these rules."
42. For the sake of convenience, Rule5 of the Demarcation Rules, 2009, which deals with transfer of exclusive privilege, is also quoted below:
"5. Transfer of Exclusive Privilege: For the vend by wholesale or by retail of any intoxicant in the demarcated special zones and bordering areas, the exclusive privilege as given in sections 24, 24A and 24B of the Act may be transferred to apex Cooperative body/Corporation, in a manner different from remaining districts of the State by the Excise Commissioner with prior approval of the State Government."
43. We have already gone through the objects and reasons of the Act and found that the State Government is empowered to apply policy of prohibition either in the entire State or in any specified area or areas thereof. However, before going into the submissions of the respondents and the references, we want to go through further legal provisions with regard to part with privilege and we find that as per Sections 26 and 27 of the Act there is no dearth of power even to that extent. Such sections of the Act are quoted hereunder:
"26. Grantee of exclusive privilege may let or assign.Subject to the conditions of his licence the grantee of any exclusive privilege may let or assign the whole, or any portion of his privilege; but no lessee or assignee of such privilege or portion of a privilege shall exercise any rights as such unless and until a licence has been granted to him by the Excise Commissioner on application made by the grantee.
27. Recovery by grantee of exclusive privilege of sums due to him.Any grantee, lessee or assignee as aforesaid may recover from any person holding under him any money due to him in his capacity of grantee, lessee or assignee as if it were an arrear of rent recoverable under the law for the time being in force with regard to landholder and tenant:
Provided that nothing contained in this section shall affect the right of any such grantee, lessee or assignee to recover by civil suit any such amount due to him from any such person as aforesaid."
44. Upon going through the aforesaid provisions it is crystal clear that the State is empowered to grant its exclusive privilege to one which is actually a grant of licence to do the business but nothing more or nothing less, which can be construed as parting of control and management of the State over the business. If the State wants to do business through its own instrument, it is far more stringent apparently.
45. However, we have called upon Mr. Rakesh Dwivedi, learned Senior Counsel, to submit on behalf of the respondent no. 5 i.e. joint venture company because it is at the receiving end of the attack of the petitioners. Mr. Dwivedi, in turn, submitted before us that there are two premises of the dispute herein. One is factual and the other is legal. So far as factual part is concerned, he contended that the petitioners herein are asking the relief with regard to renewal of their respective licences to run liquor shops for the excise year 200910 but not interested about the tender or auction and it is far to say about the public lottery. So far as legal premises is concerned, it is exclusive privilege of the State to secure and protect its revenue. Neither the petitioners have any right under Article 19(1)(g) of the Constitution nor they are privileged to question anything with regard to the transaction under Article 14 of the Constitution. The petitioners are not the competitors of the respondent no. 5, who has made joint venture partnership with the apex cooperative body on payment of heavy amount i.e. Rs. 400 crores for the special zone. They are small traders only insisting for relief of renewal of respective licences, which have expired. Therefore, they have no locus standi to challenge the policy and the rules and the notifications for granting licence in favour of the apex cooperative body with the respondent no. 5 following the process of tender. Above all, it is an agreement between the apex cooperative body and a private body which can not be challenged in the manner as proposed by the petitioners in this case. He has drawn our attention to Section 30 (1) & (2) of the Act in this regard, which is as follows:
"30. Payment for exclusive privileges.(1) Instead of or in addition to any duty leviable under this Chapter, the State Government or on its behalf the Excise Commissioner may accept payment of a sum in consideration of the grant of licence for any exclusive or other privilege under Section 24 or Section 24A.
(2) The sum payable under subsection (1) may either be fixed by auction or inviting tenders or otherwise or be assessed on the basis of the sales made or quota lifted under the licence or partly fixed and partly assessed in the aforesaid manner."
46. He has further averred as with Mr. Mathur that there is bar of renewal of licence under Section 36A of the Act. He also stated that as per Section 40 of the Act, the State Government may make rules for the purpose of carrying out the provisions of this Act or other law for the time being in force relating to excise revenue. Power of the Excise Commissioner is also described under Section 41 of the Act specially with regard to Clause (c) therein, which says about prescription of scale of fees or manner of fixing the fees payable for any licence, permits or pass including any consideration for the grant of any exclusive or other privilege granted under Section 24 or Section 24A or for storing of any intoxicant. Auctions and invitation of tenders are necessary modes for the purpose of selection of the candidate and the respondent no. 5 has been choosen in that manner. It is true to say that no socialistic policy has been adopted by the State. It has adopted open market policy. But for such reason it can not be said that the policy is bad. The petitioners have not challenged the selection of the apex cooperative body but they have challenged the joint venture selection, which is not open for the petitioners to challenge. A writ petition can not be the basis of questioning the process of selection. Whether the State will do business through joint venture or not, can not be the domain of challenge. Moreover, formation of apex cooperative body is not for the first time. The Uttar Pradesh Foreign Liquor Retail Vend Licence (Prohibition Area) Rules, 1991 speaks about formation of apex cooperative society. Under the Uttar Pradesh Excise (Retail Vend of Country Liquor, Foreign Liquor and Beverages) Rules, 1992 the apex society has been formed. So far as joint venture is concerned, the respondent no. 5 has its Directors and shareholders. They are the necessary parties. The company is not aware who is respondent no. 4. He is neither Director nor shareholder of the company. On the other hand, the Apex Cooperative Society is also run by its members. Therefore, there is no question of involvement of the respondent no. 4. Moreover, it is also not open for the writ Court to make roving or fishing enquiry about the functioning of the company. The Court is only called upon to enquire about validity of the policy and/or the Demarcation Rules, 2009 at the instance of aspirants for renewal of licence to run liquor shops in the special zone but not beyond the same. The respondent no. 5company was not made party initially. When allegations are made against it, the Court directed to implead the respondent no. 5 as party respondent formally.
47. The State has added its argument by saying that wide publication with regard to smuggling etc. had been notified by the excise authorities by way of proposal dated 06th February, 2009. It has been specifically stated in the policy that for the revenue and public health due to inflow of the liquor from outside a big problem has been created in the State of Uttar Pradesh. Loss of revenue is apparent. That apart, licence for renewal can be available for a maximum period of two years and that too depending upon the individual cases, otherwise it will create perpetuity in general. There is no fundamental right of a person to trade in liquor being res extra commercium.
48. We find the description of res extra commercium from certain sources, as under:
"Extra commercium.Beyond commerce. This is said of things which cannot be bought or sold, such as public roads, rivers, titles of honour, &c. [FromTrayner''s Latin Maxims, Fourth Edition (page211)]
Res extra commercium, (Latin). Thing or things outside of business or commercial transactions. [FromInternet]
Res extra commercium(lat. "a thing outside commerce") is a doctrine originating in Roman law, holding that certain things may not be the object of private rights, and are therefore insusceptible to being traded. In some contexts, it can refer to areas beyond national borders, such as space and the seabed; "these regions are subject to a common freedom of exploitation without exercising national sovereignty." If one conceives of a world community made up "of sovereign, territorial states ... [the implication is] that the space between these states is res extra commercium, a space that, because of its position and function within this community, is disassociated from the full package of rights to possession, exclusion, and alienation that normally may be claimed by holders of property. [FromInternet (Wikipedia, the free encyclopedia)]
Res extra commercium Matter beyond the ambit/field/scope of commerce/trade/business."
49. However, if we go back to the five Judges'' Bench judgement of the Supreme Court reported in 1954 SCR 873 (Cooverjee B. Bharucha Vs. The Excise Commissioner and the Chief Commissioner, Ajmer, and others), we shall get certain answers in this regard. It was held therein that Article 19(1)g) of the Constitution guarantees that all citizens have the right to practise any profession or to carry on any occupation or trade or business, and clause (6) of the article authorises legislation which imposes reasonable restrictions on this right in the interest of general public. It is not disputed that in order to determine the reasonableness of the restriction regard must be had to the nature of the business and the conditions prevailing in that trade. It is obvious that these factors must differ from trade to trade and no hard and fast rule concerning all the trades can be laid down. Laws prohibiting trades in noxious or dangerous goods or trafficking in women can not be held to be illegal as enacting a prohibition and not a mere regulation. The nature of business is, therefore, an important element in deciding the reasonableness of the restrictions. That apart, the manner and extent of regulation rest in the discretion of the governing authority. The provisions of the regulation purport to regulate trade in liquor in all its different spheres and are valid. The contention that the effect of some of these provisions is to enable Government to confer monopoly rights on one or more persons to the exclusion of others and that creation of such monopoly rights could not be sustained under Article 19(6) is again without force. Elimination and exclusion from business is inherent in the nature of liquor business. The provisions of the regulation can not be attacked merely on the ground that they create a monopoly. Properly speaking, there can be a monopoly only when a trade, which could be carried on by all persons, is entrusted by law to one or more persons to the exclusion of the general public. Such, however, is not the case with the business of liquor. When the contract is thrown open to public auction, it can not be said that there is exclusion of competition and thereby a monopoly is created. In 1972 (2) SCC 36 (State of Orissa and others Vs. Harinarayan Jaiswal and others) following the earlier judgement of Cooverjee B. Bharucha (supra) it was held that one of the important purpose of selling the exclusive right to sell liquor in wholesale or retail is to raise revenue. Excise revenue forms an important part of every State''s revenue. The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. Hence, quite naturally, the Legislature has empowered the Government to see that there is no leakage in its revenue. It is for the Government to decide whether the price offered in an auction sale is adequate. While accepting or rejecting a bid, it is merely performing an executive function. The correctness of its conclusion is not open to judicial review. How the plea of contravention of Article 19(1)(g) or Article 14 of the Constitution can arise in these cases, is unknown to the Court. Privileges could be sold by public auction. Public auctions are held to get the best possible price. The High Court''s order is erroneous to the extent that the Government is bound to satisfy the Court that there was collusion between the bidders. The High Court is not sitting on appeal against the order made by the Government. The inference of the Government that there was a collusion amongst the bidders may be right or wrong, but that is not open to judicial review so long as it is not proved that it was a makebelieve one. In 1972 (2) SCC 442 (Amar Chandra Chakraborty Vs. The Collector of Excise, Government of Tripura and others) a five Judges'' Bench of the Supreme Court has held that trade or business in country liquor has from its inherent nature been treated by the State and the society as a special category requiring legislative control which has been in force in the whole of India since several decades. In view of the injurious effect of excessive consumption of liquor on health this trade or business must be treated as a class by itself and it can not be treated on the same basis as other trades while considering Article 14. This classification is founded on an intelligible differentia having a rational relation to the object to be achieved by the control imposed on the trade or business in country liquor. Article 14, it may be pointed out, only forbids class legislation but reasonable classification does not come within the prohibition. Nothing convincing is argued at the bar to attract the prohibition embodied in Article 14. In 1975 (1) SCC 29 (Nashirwar and others Vs. State of Madhya Pradesh and others) a three Judges'' Bench of the Supreme Court on factual aspect of holding of public auctions in respect of grant of licence for foreign liquor held that the Government can hold a public auction to grant lease. The State Legislature is authorised to make a provision for public auction by reason of power contained in Entry8 of ListII of the Constitution. That entry empowers the State Government to legislate with regard to intoxicating liquor, that is to say, production, manufacture, possession, transport, purchase and sale of intoxicating liquor. Cooverjee B. Bharucha (supra) lays down three propositions. First, that there is no inherent right of citizens to carry on trade in intoxicating liquors. Second, the auction sale of liquor shop is a method by which carrying on particular trade in liquor is regulated and one of the purposes of regulation is to raise revenue. Third, there can be a monopoly only when a trade which could be carried on by all persons is entrusted to one or more persons to the exclusion of the general public. That is not the case with the business of liquor. In Hari Narayan Jaiswal (supra) it has been held that the right to trade in intoxicating liquor is subject to regulations and restrictions and upheld the public auction of the right or privilege of selling liquor as an attribute of collection of State revenue. Thereafter possibly for the first time the Supreme Court was to introduce the principle of res extra commercium in such business and held that dealing with articles or goods, which are prohibited by such principle, could not have been intended to be permitted by Article 19 (1)(f) and (g) of the Constitution relating to fundamental rights to trade or business. The excise revenue arising out of manufacture and sale of intoxicating liquor is one of the sources of the State exchequer. However, we find categorical observations of the Supreme Court in this regard in paragraphs 35 to 38 of Nashirwar (supra), as follows:
"35. Trade in liquor has historically stood on a different footing from other trades. Restrictions which are not permissible with other trades are lawful and reasonable so far as the trade in liquor is concerned. That is why even prohibition of the trade in liquor is not only permissible but is also reasonable. The reasons are public morality, public interest and harmful and dangerous character of the liquor. The state possesses the right of complete control over all aspects of intoxicants, viz., manufacture, collection, sale and consumption. The State has exclusive right to manufacture and sell liquor and to sell the said right in order to raise revenue. That is the view of this Court in Bharucha''s case (supra) and Jaiswal''s case (supra). The nature of the trade is such that the State confers the right to vend liquor by farming out either in auction or on private treaty. Rental is the consideration for the privilege granted by the Government for manufacturing or vending liquor. Rental is neither a tax nor an excise duty. Rental is the consideration for the agreement for grant of privilege by the Government.
36. This Court in A.B. Abdulkadir v. State of Kerala [(1962) Supp 2 SCR 741 : AIR 1962 SC 922] said that in British India there used to be public auction of the right to possess and sell excisable goods like country liquor, ganja and bhang and the amount realised was excise revenue. The auction system which was in force was said by this Court in Abdulkadir''s case to be only a method of realising duty from the grant of licences to those who made the highest bid at the auctions.
37. The grant of a lease either by public auction or for a sum is a regulation pertaining to liquor. One of the purposes of regulation is to raise revenue. Revenue is collected by the grant of contracts to carry on trade in liquor. These contracts are sold by auction. The grantee is given a licence on payment of auction price. [See Bharucha''s case (supra).]
38. For these reasons we hold that the State has the exclusive right or privilege of manufacturing and selling liquor. The State grants such right or privilege in the shape of a licence or a lease. The State has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease."
50. In 1975 (1) SCC 737 (Har Shankar and others Vs. The Dy. Excise and Taxation Commr. and others) a Constitution Bench of the Supreme Court held that these unanimous decisions of five Constitution Benches uniformly emphasized after a careful consideration of the problem involved that the State has the power to prohibit trades which are injurious to the health and welfare of the public, that elimination and exclusion from business is inherent in the nature of liquor business, that no person has an absolute right to deal in liquor and that all forms of dealings in liquor have, from their inherent nature, been treated as a class by themselves by all civilized communities. The contention that the citizen had either a natural or a fundamental right to carry on trade or business in liquor thus stood rejected. The true position governing dealings in intoxicants is as stated and reflected in the Constitution Bench decisions of the Supreme Court in State of Bombay Vs. F.N. Balsara [1951 SCR 682 : AIR 1951 SC 318], Cooverjee''s case (supra), State of Assam Vs. A.N. Kidwai, Commissioner of Hills Division and Appeals, Shillong [1957 SCR 195 : AIR 1957 SC 414], Nagendra Nath Bora Vs. Commissioner of Hills Division and Appeals, Assam [1958 SCR 1240 : AIR 1958 SC 398], Amar Chandra Chakraborty''s case (supra) and the State of Bombay Vs. R.M.D. Chamarbaugwala [1957 SCR 874 : AIR 1957 SC 699], as interpreted in Harinarayan Jaiswal''s case (supra) and Nashirwar''s case (supra). There is no fundamental right to do trade or business in intoxicants. The State, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to intoxicantsits manufacture, storage, export, import, sale and possession. In all their manifestations, these rights are vested in the State and indeed without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants. In "American Jurisprudence", Volume 30 it is stated that while engaging in liquor traffic is not inherently unlawful, nevertheless it is a privilege and not a right, subject to governmental control. This power of control is an incident of the society''s right to selfprotection and it rests upon the right of the State to care for the health, morals and welfare of the people. Liquor traffic is a source of pauperism and crime. The power of the Government to charge a price for parting with its rights and not the mode of fixing that price is what constitutes the essence of the matter. Nor indeed does the label affixed to the price determine either the true nature of the charge levied by the Government or its right to levy the same. Therefore, the argument that the Government can not by contract do what it can not do under a statute must fail. No statute forbids the Government from trading in its own rights or privileges and the statute under consideration, far from doing so, expressly empowers the Government to grant leases of its rights and to issue the requisite licences, permits and passes on payment of such fees as prescribed by the concerned Commissioner. In 1994 Supp (1) SCC 8 (State of U.P. and others Vs. Sheopat Rai and others) we find that the term ''licence fee'' in the context of the U.P. Excise Law connotes the idea of it being the consideration in money receivable by the Government from a private person by grant of a licence (contract), for parting in such person''s favour, its exclusive privilege or right of carrying on certain activities in respect of the country liquor or drugs under ''auction system'' in public auctions, and the term ''fixed fee'' is a fee determined by the Excise Commissioner, in lieu of ''licence fee''. In 1995 (1) SCC 574 (Khoday Distilleries Ltd. and others Vs. State of Karnataka and others) again a Constitution Bench of the Supreme Court held as follows:
"60. We may now summarise the law on the subject as culled from the aforesaid decisions.
(a) The rights protected by Article 19(1) are not absolute but qualified. The qualifications are stated in clauses (2) to (6) of Article 19. The fundamental rights guaranteed in Article 19(1)(a) to (g) are, therefore, to be read along with the said qualifications. Even the rights guaranteed under the Constitutions of the other civilized countries are not absolute but are read subject to the implied limitations on them. Those implied limitations are made explicit by clauses (2) to (6) of Article 19 of our Constitution.
(b) The right to practise any profession or to carry on any occupation, trade or business does not extend to practising a profession or carrying on an occupation, trade or business which is inherently vicious and pernicious, and is condemned by all civilised societies. It does not entitle citizens to carry on trade or business in activities which are immoral and criminal and in articles or goods which are obnoxious and injurious to health, safety and welfare of the general public, i.e. res extra commercium, (outside commerce). There cannot be business in crime.
(c) Potable liquor as a beverage is an intoxicating and depressant drink which is dangerous and injurious to health and is, therefore, an article which is res extra commercium being inherently harmful. A citizen has, therefore, no fundamental right to do trade or business in liquor. Hence the trade or business in liquor can be completely prohibited.
(d) Article 47 of the Constitution considers intoxicating drinks and drugs as injurious to health and impeding the raising of level of nutrition and the standard of living of the people and improvement of the public health. It, therefore, ordains the State to bring about prohibition of the consumption of intoxicating drinks which obviously include liquor, except for medicinal purposes. Article 47 is one of the directive principles which is fundamental in the governance of the country. The State has, therefore, the power to completely prohibit the manufacture, sale, possession, distribution and consumption of potable liquor as a beverage, both because it is inherently a dangerous article of consumption and also because of the directive principle contained in Article 47, except when it is used and consumed for medicinal purposes.
(e) For the same reason, the State can create a monopoly either in itself or in the agency created by it for the manufacture, possession, sale and distribution of the liquor as a beverage and also sell the licences to the citizens for the said purpose by charging fees. This can be done under Article 19(6) or even otherwise.
(f) For the same reasons, again, the State can impose limitations and restrictions on the trade or business in potable liquor as a beverage which restrictions are in nature different from those imposed on the trade or business in legitimate activities and goods and articles which are res commercium. The restrictions and limitations on the trade or business in potable liquor can again be both under Article 19(6) or otherwise. The restrictions and limitations can extend to the State carrying on the trade or business itself to the exclusion of and elimination of others and/or to preserving to itself the right to sell licences to do trade or business in the same, to others.
(g) When the State permits trade or business in the potable liquor with or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make discrimination between the citizens who are qualified to carry on the trade or business.
(h) The State can adopt any mode of selling the licences for trade or business with a view to maximise its revenue so long as the method adopted is not discriminatory.
(i) The State can carry on trade or business in potable liquor notwithstanding that it is an intoxicating drink and Article 47 enjoins it to prohibit its consumption. When the State carries on such business, it does so to restrict and regulate production, supply and consumption of liquor which is also an aspect of reasonable restriction in the interest of general public. The State cannot on that account be said to be carrying on an illegitimate business.
(j) The mere fact that the State levies taxes or fees on the production, sale and income derived from potable liquor whether the production, sale or income is legitimate or illegitimate, does not make the State a party to the said activities. The power of the State to raise revenue by levying taxes and fees should not be confused with the power of the State to prohibit or regulate the trade or business in question. The State exercises its two different powers on such occasions. Hence the mere fact that the State levies taxes and fees on trade or business in liquor or income derived from it, does not make the right to carry on trade or business in liquor a fundamental right, or even a legal right when such trade or business is completely prohibited.
(k) The State cannot prohibit trade or business in medicinal and toilet preparations containing liquor or alcohol. The State can, however, under Article 19(6) place reasonable restrictions on the right to trade or business in the same in the interests of general public.
(l) Likewise, the State cannot prohibit trade or business in industrial alcohol which is not used as a beverage but used legitimately for industrial purposes. The State, however, can place reasonable restrictions on the said trade or business in the interests of the general public under Article 19(6) of the Constitution.
(m) The restrictions placed on the trade or business in industrial alcohol or in medicinal and toilet preparations containing liquor or alcohol may also be for the purposes of preventing their abuse or diversion for use as or in beverage."
51. In 2003 (5) SCC 669 (Government of Maharashtra and others Vs. Deokar''s Distillery) a three Judges'' Bench of the Supreme Court held that the liquor licensee does not have a fundamental right to deal in liquor. Under Entry 8 List II in the Seventh Schedule to the Constitution of India and thereby under Sections 49 and 143(2)(u) of the Prohibition Act, the State has the exclusive right/privilege in respect of potable liquor and the State can charge any reasonable expenses or even consideration for permitting such activity by grant of licence and that the respondents ought to comply with all reasonable orders, as undertaken by them while obtaining the licence. The establishment charges demanded are in the nature of price for parting with the privilege to permit manufacture and sale of liquor, and the privilege exclusively vests with the Government. In 2003 (12) SCC 738 (Prohibition & Excise Supdt., A.P. and others Vs. Toddy Tappers Coop. Society, Marredpally and others) again a three Judges'' Bench of the Supreme Court consisting of same set of Judges per majority has taken the same view. In 2006 (5) SCC 112 (State of Maharashtra and others Vs. Nagpur Distillers, Nagpur and another) it has been held by the Supreme Court that the only purpose for which the State undertakes liquor trade, notwithstanding the mandate of Article 47 of the Constitution of India, is the revenue that it generates. This aspect can not be lost sight at the time of considering the balance of convenience. The only excuse for the State for not following the mandate of Article 47 of the Constitution is that huge revenue is generated by this trade and such revenue is being used for meeting the financial needs of the State. What is more relevant here is to notice that the monopoly in the trade is with the State and it is only a privilege that a licensee has in the matter of manufacturing and vending liquor. In 1986 (4) SCC 566 (State of M.P. And others Vs. Nandlal Jaiswal and others) it has been held by the Supreme Court 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 intoxicantsits 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 can not 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 can not escape the rigour of Article 14 of the Constitution. It can not act arbitrarily or at its sweet will. However, having regard to the nature of the trade or business, the Court would be slow to interfere with the policy laid down by the State Government for grant of licences for manufacture and sale of liquor. The Court would, in view of the inherently pernicious nature of the commodity, allow a large measure of latitude to the State Government in determining its policy of regulating manufacture and trade in liquor. Moreover, the grant of licences for manufacture and sale of liquor would essentially be a matter of economic policy. In complex economic matters every decision is necessarily empiric and it is based on experimentation or ''trial and error'' method and, therefore, its validity can not be tested on any rigid a priori considerations or on the application of any straitjacket formula. The Court must while adjudging the constitutional validity of an executive decision relating to economic matters grant a certain measure of freedom or ''play in the joints'' to the executive. The Court can not strike down a policy decision taken by the State Government merely because it feels that another policy decision would have been fairer or wiser or more scientific or logical. The Court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide. In 1992 (3) SCC 293 [M/s Lilasons Breweries (Pvt.) Ltd. and another Vs. State of Madhya Pradesh and others] it is further reiterated that the State has the exclusive right or privilege of manufacture or sale of liquor. This is the settled position of law. In 2001 (3) SCC 635 (Ugar Sugar Works Ltd. Vs. Delhi Administration and others) a three Judges'' Bench of the Supreme Court held that Courts, in exercise of their power of judicial review, do not ordinarily interfere with the policy decisions of the executive unless the policy can be faulted on grounds of mala fide, unreasonableness, arbitrariness or unfairness etc. Indeed, arbitrariness, irrationality, perversity and mala fide will render the policy unconstitutional. However, if the policy can not be faulted on any of these grounds, the mere fact that it would hurt business interests of a party, does not justify invalidating the policy. In tax and economic regulation cases, there are good reasons for judicial restraint, if not judicial deference, to judgement of the executive. The Courts are not expected to express their opinion as to whether at a particular point of time or in a particular situation any such policy should have been adopted or not. It is best left to the discretion of the State.
52. It has been contended before this Court that the claim of the petitioners for renewal of their licences, as a matter of right, can be considered from two angles. Firstly, in relation to the renewal with regard to general trade, where fundamental right is available, and the other is to consider the claim in the light of the liquor business, which is res extra commercium. Right of renewal can not be permanent in nature.
53. In 1997 (1) SCC 650 (Gajraj Singh and others Vs. State Transport Appellate Tribunal and others) a three Judges'' Bench of the Supreme Court has held that right to get renewal of a permit under the Act (not in respect of the excise) is not a vested right but a privilege subject to fulfilment of conditions precedent enumerated in the Act. There is a distinction between the right acquired or accrued, and privilege, hope and expectation to get a right. In 2003 (5) SCC 437 (Union of India and another Vs. International Trading Co. and another) the Supreme Court has held that a claim based on merely legitimate expectation without anything more can not ipso facto give a right. For legal purposes, expectation is not the same as anticipation. Legitimacy of an expectation can be inferred only if it is founded on the sanction of law. Article 14 of the Constitution applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. The basic requirement of Article 14 is fairness in action by the State and nonarbitrariness in essence and substance is the heartbeat of fair play. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities and adopt trade policies. The ultimate test is whether on the touchstone of reasonableness the policy decision comes out unscathed. Reasonableness of restrictions is to be determined in an objective manner and from the standpoint of interests of the general public and not from the standpoint of the interests of the persons upon whom the restrictions have been imposed or upon abstract consideration. A restriction can not be said to be unreasonable merely because it operates harshly. The claim of renewal of licence in the field of liquor is much more tenuous as it is a claim in the field of exclusive privilege of the State. Since liquor is an exclusive privilege of the State, renewal would also be a matter of absolute privilege subject only to the statutes, rules and policies. It is further contended that Krishna Kumar Narula (supra) is the only case where a Constitution Bench of the Supreme Court held that dealing in liquor is business and a citizen has a fundamental right to do that business under Article 19(1)(g) of the Constitution, but at the same time it has also been held that the State can make a law imposing the reasonable restrictions on the right in public interest under Article 19(6) of the Constitution. In Madras City Wine Merchants'' Association (supra) the Supreme Court has categorically held that legitimate expectation may arise(a) if there is an express promise given by a public authority; or (b) because of the existence of a regular practice which the claimant can reasonably expect to continue; (c) such an expectation must be reasonable. However, if there is any change in policy or in public the position is altered by a Rule or Legislation, no question of legitimate expectation would arise. It is further held that the doctrine of legitimate expectation arises only in the field of administrative decisions. If the plea of legitimate expectation relates to procedural fairness, there is no possibility whatever of invoking the doctrine as against the legislation.
54. So far as the point of judicial review on policy decision is concerned, we have gone through certain judgements herein. In 1981 (4) SCC 675 (R.K. Garg Vs. Union of India and others) a five Judges'' Bench of the Supreme Court has held that Article 14 forbids class legislation but permits classification, if founded on an intelligible differentia having a rational relation to the object sought to be achieved by the Act. The presence of some characteristics in one class which are not found in another is the difference between the two classes. The differentia, i.e., the basis of classification, and the object of the Act are distinct things and if the basis of classificatioin is on the face of it arbitrary in the sense that it is palpably unreasonable, it is not possible to call the differentia intelligible. The terms like "the reasonable", "just" or "fair" derive their signification from the existing social conditions. An action which an informed, intelligent, justminded, civilised man could reasonably favour, would be called reasonable. The concept of reasonableness does not exclude notions of morality and ethics. In the circumstances of a given case considerations of morality and ethics may have a bearing on the reasonableness of the law in question. In 1996 (2) SCC 405 (Delhi Science Forum and others Vs. Union of India and another) a three Judges'' Bench of the Supreme Court has held with regard to the economic policy as follows:
"7. What has been said in respect of legislation is applicable even in respect of policies which have been adopted by Parliament. They cannot be tested in Court of Law. The courts cannot express their opinion as to whether at a particular juncture or under a particular situation prevailing in the country any such national policy should have been adopted or not. There may be views and views, opinions and opinions which may be shared and believed by citizens of the country including the representatives of the people in Parliament. But that has to be sorted out in Parliament which has to approve such policies. Privatisation is a fundamental concept underlying the questions about the power to make economic decisions. What should be the role of the State in the economic development of the nation? How the resources of the country shall be used? How the goals fixed shall be attained? What are to be the safeguards to prevent the abuse of the economic power? What is the mechanism of accountability to ensure that the decision regarding privatisation is in public interest? All these questions have to be answered by a vigilant Parliament. Courts have their limitationsbecause these issues rest with the policymakers for the nation. No direction can be given or is expected from the courts unless while implementing such policies, there is violation or infringement of any of the constitutional or statutory provision...."
55. As per the ratio of a three Judges'' Bench judgement of the Supreme Court reported in 1996 (10) SCC 104 [Dalmia Cement (Bharat) Ltd. and another Vs. Union of India and others] class legislation based on geographical features is valid. In 1998 (7) SCC 26 (SIEL Ltd. and others Vs. Union of India and others) it has been held by the Supreme Court that an essential matter of economic policy can not be subject matter of challenge under Article 19(1)(g) of the Constitution. In examining the reasonableness of an economic measure, the State should have more latitude in formulating economic policy as well as appropriate legislation in comparison to legislation relating to fundamental rights. In 2002 (2) SCC 333 [Balco Employees'' Union (Regd.) Vs. Union of India and others] a three Judges'' Bench of the Supreme Court held that wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. In matters relating to economic issues, the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona fide and within limits of authority. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts. In 2007 (8) SCC 418 [Dhampur Sugar (Kashipur) Ltd. Vs. State of Uttaranchal and others] in considering the question of good governance it was held that Court is not oblivious of the fact that in order that the modern State should function the Government must be armed with very large powers. But the High Court does not interfere with the exercise of those powers. The High Court only interferes when it finds that those powers are not exercised in accordance with the mandate of the legislature. Allegations of mala fide are serious in nature and they essentially raise a question of fact. It is, therefore, necessary for the person making such allegations to supply full particulars in the petition. If sufficient averments and requisite materials are not on record, the Court would not make fishing or roving inquiry. Mere assertion, vague averment or bald statement is not enough to hold the action to be mala fide. It must be demonstrated by facts. Moreover, the burden of proving mala fide is on the person levelling such allegations and the burden is "very heavy".
56. On a question of applicability of Article 14 of the Constitution and the monopoly it has been urged before us that an action on the part of the State in selection of joint venture by the federation and operation of different schemes in special zone and nonspecial zone is exclusive privilege of the State in dealing with the liquor business. Article 14 of the Constitution does not prevent classification and differentiation. It only requires that the classification should be based on rational criteria and the same should have nexus with the objects sought to be achieved.
57. In AIR 1958 SC 538 (Shri Ram Krishna Dalmia Vs. Shri Justice S.R. Tendolkar and others) a five Judges'' Bench of the Supreme Court has held that it is now well established that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. In 1979 (1) SCC 380 in re The Special Courts Bill, 1978, it was also held that if the classification is valid and its basis bears a reasonable relationship with the object of the Bill, no grievance can be entertained under Article 14 of the Constitution. In R.K. Garg (supra) per majority it has been held that it is clear that Article 14 of the Constitution does not forbid reasonable classification of persons, objects and transactions by the legislature for the purpose of attaining specific ends. What is necessary in order to pass the test of permissible classification under Article 14 is that the classification must not be arbitrary, artificial or evasive but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the legislature. The question to which we must therefore address ourselves is whether the classification made by the Act in the present case satisfies the aforesaid test or it is arbitrary and irrational and hence violative of the equal protection clause in Article 14. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and, therefore, it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid.
58. So far as the issue of monopoly is concerned, when the tender was called to participate for the purpose of selection of joint venture, selection of one can not be said to be creation of monopoly. In 2005 (1) SCC 679 (Association of Registration Plates Vs. Union of India and others) a three Judges'' Bench of the Supreme Court has held that the notice inviting tender is open to response by all, and even if one single manufacturer is ultimately selected for a region or State, it can not be said that the State has created a monopoly of business in favour of a private party. Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. Nonqualification of any person to participate in the tender can not satisfy the question of monopoly.
59. Creation of joint venture in the field of intoxicating liquor can not be said to be creation of monopoly for two reasons. Firstly, it is a matter of exclusive privilege of the State. Secondly, as a consequence thereof, auction and tender are statutorily recognized mode for determining consideration of exclusive privilege. It is true to say that two different schemes have been framed in two areas in the province of the Uttar Pradesh, one special policy for the extended zone of Meerut and the other is a similar to earlier except that there is a fresh draw of lots based on higher Minimum Guaranteed Quantity (hereafter in short called as ''M.G.Q.''). In the extended Meerut zone it has been decided to give to an apex cooperative body to have a joint venture partner. The reason of creation of special zone has been given in the objects and reasons. Geographical classifications have been upheld by the Supreme Court.
60. In AIR 1959 SC 626 [M/s. Diwan Sugar & General Mills (Private) Ltd. and others Vs. The Union of India] a five Judges'' Bench of the Supreme Court held that there is no discrimination, in effect, by the fixation of sugar prices (as factually in that case) in three regions. The question of discrimination is purely theoretical in view of the economic factors which control the price of sugar in this country. In AIR 1964 SC 370 (Gopal Narain Vs. State of Uttar Pradesh and another) it was held that as different parts of a municipality may require special treatment in the matter of provisions of amenities, it would be reasonable to collate the power of taxation in a part of a municipality with such separate treatment. A municipality can impose a tax in one part because of its peculiar situation. In 1992 Supp (1) SCC 16 (Goodwill Paint and Chemical Industry Vs. Union of India and another) the question of regulation of possession and sale of specified poison was discussed. The Supreme Court held that a substance may be a deadly poison or a valuable medicine according to how and how much is taken. It is also necessary that the same substance should be declared as poison for the entire country. The notification and its application to any area would depend on the necessity to declare the substance as poison on the particular facts and situation prevailing in that area. No question of discrimination can arise in such circumstances. Further the State can legislate or lay down the policy for an area where evil or adverse impact is experienced the most and the solution experimented need not be spread out in the entire area of the State. With the success of the experiment, the solution can be extended to other parts of the State, if necessary. These can always be set right by the legislature by passing the amendments. In 1983 (1) SCC 147 (Sanjeev Coke Manufacturing Company Vs. M/s. Bharat Coking Coal Limited and another) again a Constitution Bench of the Supreme Court held that in the process of nationalisation (as therein) some units are left out in the early stages either because it is not planned or because of some mistake, it should not necessarily be construed that there has been violation of Article 14 of the Constitution nor it can draw any inference of discrimination from the circumstances that subsequently some others have been allowed to come up. In 1988 (2) SCC 433 (L.N. Mishra Institute of Economic Development and Social Change, Patna Vs. State of Bihar and others) in dealing with the question of nationalisation, the Supreme Court has held that the nationalisation in a phased manner contemplates that by and by the object of nationalisation will be taken over. In implementing the nationalisation of private institutions in a phased manner, the legislature has started with the Institute. Therefore, the question of singling out the Institute or treating it as a class by itself does not arise. In 2003 (8) SCC 369 (Javed and others Vs. State of Haryana and others) it has been held that the implementation of policy decision in a phased manner is suggestive neither of arbitrariness nor of discrimination. In 2005 (4) SCC 53 (State of T.N. Vs. M. Krishnappan and another) following the earlier judgement of the Supreme Court reported in 1974 (4) SCC 656 (State of Gujarat Vs. Shri Ambica Mills Ltd.) held that where size is an index, discrimination between large and small is permissible. Article 14 does not require that every regulatory statute should apply to each and every one equally in the same business. Therefore, the State of U.P. has not faulted in adopting a special mode in creating the special zone of Meerut and that too on experimental basis in order to protect the revenue by preventing smuggling and also by enhancing M.G.Q. at a higher rate as compared to other zones. In the special zone the M.G.Q. has been enhanced by 8%, whereas in other zones it has been enhanced by 7%. The other advantage to the State is that all the shops in the special zone stand settled at once and the licence fee/basic licence fee is realized entirely and immediately, whereas in other zones the settlement of the shops is done on individual basis and the settlement of all the shops may take considerable time causing delay in flow of revenue. The delay also results in loss of revenue as until the shop is settled, there is no sale of liquor. To the extent the shops are not settled, the Government may have to reduce the M.G.Q. to enable settlement of shops.
61. So far as the question of selection of apex cooperative society is concerned, it will hold the governmental share minimum 51%. Even in the U.P. Cooperative Sugar Factories Federation, the Government is holding about 76% shares. Here, the apex cooperative society is limb of the State Government. If the State selects that apex cooperative society which has experience, no one can possibly have any objection. Even in other States for certain areas special modes for granting licences have been adopted. State of Rajasthan had earlier adopted a policy of granting licences only to sugar mills, which were government undertaking. In 2000 (4) SCC 347 (State of Rajasthan and others Vs. Anil Kumar Sunil Kumar & Party and another) and in 2005 (11) SCC 1 (State of Kerala and others Vs. Maharashtra Distilleries Ltd. and others) such question has also been considered.
62. So far as selection of joint venture partner is concerned, the writ petitioners have not asserted that they possess the capability of submitting financial bid for the sale of 122 lakh cases of liquor and above it, as per the financial bid, or they had the capacity to provide the security for Rs. 25 crores and the financial capability to the tune of Rs. 100 crores. The writ petitioners have a capability certificate from scheduled bank for running small liquor shops. They are interested about renewal rather than they claim a right to participate in a tender for selection of jointventure partner. The tender notice has four important aspects. First is deposit of security of Rs.25 crores. Second is submission of financial capability certificate from a scheduled bank for Rs.100 crores. Third is a capability to bid for 122 lakh cases and above. Fourth is minimum turn over of Rs.400 crores from sale of liquor. All these are financial conditions imposed by the apex cooperative society for selecting joint venture partners. Once the society decides to apply for a license for whole of special zone, it has to ensure that the joint venture partners has necessary financial capability, so that the financial liabilities with respect to grant of exclusive privilege by the State can be met in time, and the objective of preventing smuggling can be ensured. Imposition of such conditionality is a normal feature in large scale contracts. It may be noted that the State Government is expected to realize the revenue of approximate Rs.1800 Crores from the licensees of special zone. In the circumstances, these financial conditions have direct relevance and nexus with the object to select jointventure partner. Such conditionality has been upheld by the Supreme Court in Association of Registration Plates (supra).
63. The next question is whether the tender conditions can be challenged. Fixation of value is entirely within the purview of the executive. Unless it is arbitrary or unreasonable, the Courts have no role to play. To enter into contracts inviting tenders is a fair method as held by the Supreme Court in Association of Registration Plates (supra), 2004 (11) SCC 485 (Jespar I. Slong Vs. State of Meghalaya and others), 1994 (6) SCC 651 (Tata Cellular Vs. Union of India), 1999 (1) SCC 492 (Raunaq International Ltd. Vs. I.V.R. Construction Ltd. and others) and 2005 (4) SCC 435 (Global Energy Ltd. and another Vs. Adani Exports Ltd. and others).
64. So far as colourable legislation is concerned, the whole doctrine resolves itself into the question of competency of the particular legislature/executive to enact a law. If competency is there, the motive which impels action are really irrelevant, thereby he referred a judgement reported in 1998 (2) SCC 109 [Naga People Movement of H.R. Vs. Union of India]. It has been further contended that the object of the State is to grant licence in special zone through a special mode. There is no lack of competency.
65. So far as malafide exercise of power is concerned, the only submission has been made that the policy and the rules were amended at the behest of respondent no.4 with a view to give benefit to him in some clandestine manner through the respondent no. 5, who has been subsequently added as party respondent and is the actual joint venture partner. In one of the writ petitions filed by Ashok Kumar Jaiswal (Civil Misc. Writ Petition No. 582 of 2009) an amendment application has been filed only making certain allegations against the respondent no. 5 i.e. the company being joint venture partner. The said amendment application asserts that for the year 200708 the company had a paid up capital of only Rs.1 lac, it did no business in the said year and suffered loss. There is no true joint venture partnership. Except receiving huge sum from the company, the cooperative body i.e. Sugar Federation is not to do anything. It has been further said that a fraud has been played by the State Government in collusion with Sugar Federation and the Company in the name of public interest, public health and safety and that this shows that respondent no.4 was behind the entire excise policy for the special zone and the policy has been framed to support his business for extraneous reasons. It has been said that the company is a fake company and the agreement is not at all a joint venture agreement. It is said that the respondent no.4 will be giving excise shops to individuals as it is impossible for the respondent no. 4 to do the entire business himself or through his henchmen.
66. As against the aforesaid allegations Mr. Rakesh Dwivedi has submitted that the jointventure partner is registered under the Indian Companies Act. The respondent no.4 is neither a Director nor a shareholder of the Company. It is settled law that if allegations of fraud and mala fide are made against certain persons then they must be impleaded by name as opposite parties, so that they can respond. The company, which is a colicensee with the U.P. Cooperative Sugar Factory Federation Limited, has neither been made a party nor the particular person in the government, who are said to have colluded and favoured the company. Therefore, such type of vague allegations required to be ignored and the petition should be dismissed without scrutiny of the issue.
67. It is further stated that various clauses of the agreement of joint venture will show that this is a genuine agreement. The joint venture partnership is selected through the mode of tender in a transparent manner. Wide publicity had been made with respect to the tender process in several national newspapers, namely, Economic Times, Indian Express, Business Standard, Times of India, Hindustan Times, Dainik Jagran and Amar Ujala. The advertisement was also placed in the website of the federation. The advertisement was published in 52 editions of these newspapers having wide circulation throughout the country. A five members high powered committee was constituted by the federation for selecting the joint venture partner. Four entities submitted tenders, out of which the final bid was opened with respect to two and the bid of the respondent no.5company was higher and, therefore, it was selected. In re: Ashok Kumar Jaiswal''s case (Civil Misc. Writ Petition No. 582 of 2009) the petitioner himself has stated that no private businessman of every category engaged in retail vend of liquor has and can be expected to have a turnover of Rs.400 crores nor can he furnish a certificate of scheduled bank for Rs.400 crores financial capacity or to the security of Rs.25 crores. The tender process was not confined to State of Uttar Pradesh. Both in the State of Uttar Pradesh and in the other States, there are large number of firms and companies operating in the field of liquor having turnover of more than Rs.400 crores. None of the writ petitioners has, however, asserted that in whole of the country there is no other person with a turnover of Rs.400 crores in the field of liquor.
68. In Nand Lal Jaiswal (supra) it has been held that there must be specific pleadings regarding mala fides on the basis of which court can arrive at its conclusion. Mere use of words such as ''mala fide'', ''corruption'' and ''corrupt practice'' is not enough. It is necessary to give full particulars of such allegations and to set out the material facts specifying the particular person against whom such allegations are made so that he may have an opportunity of controverting such allegations. In absence of such allegations in the pleadings, court cannot make any observations in regard to mala fides. In 1985 (1) SCC 523 (K. Nagraj and others Vs. State of Andhra Pradesh and another) a three Judges'' Bench of the Supreme Court has held that the burden to establish mala fides is a heavy burden to discharge. Vague and casual allegations suggesting that a certain act was done with an ulterior motive cannot be accepted without proper pleadings and adequate proof. Besides that, the legislature, as a body, cannot be accused of having passed a law for an extraneous purpose. Even assuming that an executive, in a given case, has an ulterior motive in moving a legislation, that motive cannot render the passing of the law mala fide. This kind of "transferred malice" is unknown in the field of legislation. In 2008 (7) SCC 53 (Girias Investment Private Limited and another Vs. State of Karnataka and others) it has been held by the Supreme Court that it is no doubt open to the Court to go into the question of mala fides raised by a litigant but in order to succeed, much more than a mere allegation is required.
69. So far as question of direction for renewal under Article 226 of the Constitution of India is concerned, in a Constitution Bench judgement of the Supreme Court reported in AIR 1960 SC 321 (Y. Mahaboob Sheriff and sons Vs. Mysore State Transport Authority, Bangalore and others) it has been held that giving direction for renewal by the Court will be substituting itself in place of the authority and acting as if it was the Authority itself, which is beyond the scope of judicial review. The writ Court will be slow in passing an order of renewal of licence. In 1987 (1) SCC 213 (Ambica Quarry Works Vs. State of Gujarat and others) it has been held by the Supreme Court that the words "lease ... may be granted" cannot be construed as "lease ... shall be renewed." Often when a public authority is vested with power, the expression "may" has been construed as "shall" because power, if the conditions for exercise are fulfilled, is coupled with duty. But while there was a power to grant renewal, it might have cast a duty to grant such renewal in the facts and circumstances of the case. Renewal cannot be claimed as a matter of right.
70. It has been contended before us that even if the Demarcation Rules, 2009 is struck down, neither renewal nor in the alternative public lottery will revive automatically. From the said policy several rules were framed. It will hit the Rules, 2009 based on the governmental policy. Nomenclature of the several Rules, framed out of such policy, are as follows:
(I) The Uttar Pradesh Excise (Settlement of Licences for Wholesale of Foreign Liquor) (Fifth Amendment) Rules, 2009;
(II) The Uttar Pradesh Excise (Settlement of Licences for Retail Sale of Country Liquor) (Fourth Amendments) Rules, 2009;
(III) The Uttar Pradesh Excise (Settlement of Retail Licences for Model Shop of Foreign Liquor) (Third Amendment) Rules, 2009;
(IV) The Uttar Pradesh Excise (Settlement of Licences for Retail Sale of Beer) (Seventh Amendment) Rules, 2009; and
(V) The Uttar Pradesh Excise Settlement of Licences For Retail Sale of Foreign Liquor (Excluding Beer) (Eighth Amendment) Rules, 2009.
71. In AIR 1963 SC 928 (Firm A.T.B. Mehtab Majid and Co. Vs. State of Madras and another) a Constitution Bench of the Supreme Court held that where substituted statutory rule is held invalid, the old rule does not get revived. Once the old rule has been substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid. In AIR 1965 SC 1430 (B.N.Tewari Vs. Union of India and others) another Constitution Bench of the Supreme Court has held that when carry forward rule are ceased to exist and substituted by a future carry forward rule in that place, the earlier rule cannot exist. In 1985 (1) SCC 641 [Indian Express Newspapers (Bombay) Private Ltd. and others Vs. Union of India and others] it has been held that quashing of subsequent notification would not effect in revival of the earlier notification in whose place subsequent notification was issued. The legal effect on an earlier law when the later law enacted in its place is declared invalid does not depend merely on the use of words like, ''substitution'', or ''supersession''. Such ratio was constantly followed. Even in 2002 (2) SCC 645 (West U.P. Sugar Mills Assn. And others Vs. State of U.P. and others) it has been again held that when old rule was deleted and came to be substituted by new rule and if it is declared that new rule ceased to be operating, the old rule cannot revive.
72. Mr. Dinesh Dwivedi, learned Senior Counsel appearing for the companyrespondent no.5 in the case of Anand Rathore (Civil Misc. Writ Petition No. 487 of 2009) has adopted the arguments of Mr. Rakesh Dwivedi and further given his emphasis on the points of colourable exercise of powers, reasonable restrictions, etc. He contended on the strength of the judgement reported in JT 1995 (3) SC 93 (State of M.P. Vs. Mahalaxmi Fabric Mills Limited and others) that a colourable legislation would not strictly apply while judging the legality of the exercise of the legislative function. There it was held with regard to minerals of the State saying that the mineral belongs to the States, and so, if the Central Government has taken into consideration the fact that the States revenues are required to be recompensated on account of the loss suffered by them in their abortive efforts to escalate the royalty it cannot be considered to be an irrelevant consideration. Therefore, any notification if issued in connection thereto, cannot be said to be a colourable devise and was issued for extraneous purpose or issued for an alien purpose.
73. On the question of reasonable restrictions with regard to applicability of Articles 14 and 16 of the Constitution of India he relied upon a three Judges'' Bench judgment of the Supreme Court reported in 1981 (4) SCC 335 (Air India Vs. Nergesh Meerza and others) to establish that where unequals are treated differently, the equality clause is not violated. It applies only in case of unreasonable and hostile discrimination among members of the same class. He further referred a five Judges'' Bench judgement of the Supreme Court reported in 1974 (4) SCC 3 (E.P.Royappa Vs. State of Tamil Nadu and another) to establish that the basic principle which, therefore, informs both Articles 14 and 16 is equality and inhibition against discrimination. These Articles strike at arbitrariness in State action and ensure fairness and equality of treatment. They require that State action must be based on valid relevant principles applicable alike to all similarly situated and it must not be guided by any extraneous or irrelevant considerations because that would be denial of equality.
74. Mr. Ravi Kant, learned Senior Counsel specially engaged by the State of Uttar Pradesh, with the able assistance of Mr. S.P. Kesarwani, has elaborated all the points as formulated by Mr. Jaideep Narain Mathur, learned Additional Advocate General, at the initial stage as well as made further submissions as follows:
(i) There being a word of difference between a policy statement and Subordinate Legislation; the petitioners having failed to impugn the delegated legislation and having focused their attack only on the policy, writ petitions are bound to be dismissed. A governmental policy statement is not statutory. It is mere administrative/executive instruction. It traces its genesis to Article 162 of the Constitution of India. On the other hand, legislation like Demarcation Rules, 2009 for the special zone is a statutory document. Admittedly, the same has been enacted pursuant to the powers bestowed on the State Government under Section 40 of the Act. Therefore, the policy statement looses its efficacy as soon as the law is promulgated. In further, it can, at best, be said guidelines for the purpose of formation of law which cannot be enforced in the Courts of law. Therefore, challenge to the aforesaid policy document has become otiose. From 2004 (2) SCC 510 (Union of India Vs. Naveen Jindal and another) we find that what is "law". Whether an executive instruction is law ? As per Article 13 (3)(a) of the Constitution of India, "law" includes any ordinance, order, byelaw, rule, regulation, notification, custom or usage having in the territory of India the force of law. Executive instruction would not fall within the aforesaid category. Such executive instruction may have the force of law for some other purposes; as for example those instructions which are issued as a supplement to the legislative power in terms of clause (1) of Article 77 of the Constitution of India.
From 2007 (13) SCC 154 (Poonam Verma and others Vs. Delhi Development Authority) we find that guidelines per se do not partake of the character of the statute. Such guidelines in absence of the statutory backdrop are advisory in nature. Guidelines being advisory in character per se do not confer any legal right. Again in 2008 (3) SCC 279 (New India Assurance Company Limited Vs. Nusli Neville Wadia and another) it has been held by the Supreme Court that the guidelines not being controlled by the statutory provisions are advisory in character, thereby no legal right is conferred on the basis of such document.
(ii) It being well settled that so far as Article 14 is concerned, burden rests heavily on the petitioners to demonstrate to the hilt that legislation offends Article 14, viz. it does not bear a reasonable nexus with the object sought to be achieved and that such discrimination is not based on any intelligible differentia or rationale. Mere bald statements that the legislation is arbitrary or discriminatory are not suffice. Legislation has presumption to know the need of the people. It has to be adjudged by drawing resources from common knowledge, antecedents of history, nature of rights involved and nature of trade etc. The Court will have to pull out all strings to uphold it. In any event the Court cannot substitute its view or opinion for that of the legislation. Article 14 forbids class legislation and not reasonable classification. It has been reiterated before us that greater latitude will be given to the economic legislation to play with the experimentation of the State. The petitioners will have to lay factual foundation for assailing the validity of the statute.
In 1974 (1) SCC 19 (The State of Jammu and Kashmir Vs. Shri Triloki Nath Khosa and others) a Constitution Bench of the Supreme Court has held that discrimination is the essence of the classification and does violence to the constitutional guarantee of equality only if it rests on an unreasonable basis. It is, therefore, incumbent upon the parties assailing the discrimination, if any, to plead. This has been reaffirmed by the Supreme Court in the judgement reported in 2007 (5) SCC 447 (Southern Petrochemical Industries Co. Ltd. Vs. Electricity Inspector & Etio and others). In 1996 (3) SCC 709 (State of A.P. and others Vs. McDowell & Co. and others) the Supreme Court following the ratio of Khoday Distilleries Ltd. (supra) held that 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. A legislation can be struck down by the Courts on two grounds viz., (i) lack of legislative competence, and (ii) violation of any fundamental rights guaranteed in Part III of the Constitution or any other constitutional provision. There is no third ground. No enactment can be struck down by just saying that it is arbitrary or unreasonable. Some or the other constitutional infirmity has to be found before invalidating an Act. An enactment cannot be struck down on the ground that the Court thinks it unjustified. Parliament and the legislatures, composed as they are representative of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them. The Court cannot sit in judgment over their wisdom. In this connection it should be remembered that even in the case of administrative action the scope of judicial review is limited to three grounds, viz., (i) unreasonableness, which can more appropriately be called irrationality, (ii) illegality, and (iii) procedural impropriety. It is one thing to say that a restriction imposed upon a fundamental right can be struck down if it is disproportionate, excessive or unreasonable and quite another thing to say that the Court can strike down enactment if it thinks it unreasonable, unnecessary or unwarranted. In 1997 (2) SCC 453 (State of Bihar and others Vs. Bihar Distillery Ltd. and others) the Supreme Court held that presumption is always in favour of constitutionality of an enactment, and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. Where the validity of a law made by a competent legislature is challenged in a Court of law, that Court is bound to presume in favour of its validity. An act cannot be struck down merely by saying that it is arbitrary. In 2002 (4) SCC 34 (Ashutosh Gupta Vs. State of Rajasthan and others) a three Judges'' Bench of the Supreme Court held that where the challenge is made to a statutory provision as discriminatory, allegations in writ petition must be specific, clear and unambiguous. There must be proper pleadings and averments in the substantive petition. There is always a presumption in favour of the constitutionality of enactment and this presumption stems from the wide power of classification which the legislature must, of necessity possess in making laws operating differently as regards different groups of persons in order to give effect to policies. It must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience. The concept of equality before law does not involve the idea of absolute equality amongst all, which may be a physical impossibility. All that Article 14 guarantees is the similarity of treatment and not identical treatment. However, what amount of dissimilarity would make the people disentitled to be treated equally, is rather a vexed question. Mere differentiation or inequality of treatment does not per se amount to discrimination within the inhibition of the equal protection clause. When a law is challenged as violative of Article 14, it is necessary in the first place to ascertain the policy underlying the statute and the object intended to be achieved by it. Thereafter, the court has to apply a dual test in examining the validity viz. whether the classification is rational and based upon an intelligible differentia which distinguished persons or things grouped together from those left out of the group, and whether the basis of differentiation has any rational nexus or relation with its avowed policy and objects. Moreover, the inequality complained of must arise under the same piece of legislation or under the same set of laws which have to be treated together as one enactment. Inequality resulting from two different enactments made by two different authorities in relation to the same subject will not be liable to attack under Article 14. In 2002 (6) SCC 16 (Dhanna Lal Vs. Kalawatibai and others) the Supreme Court has held that in absence of proper pleading the Court cannot enter into the constitutional validity on the ground of being violative of Article 14 of the Constitution. In 2008 (5) SCC 580 (Seema Silk & Sarees and another Vs. Directorate of Enforcement and others) the Supreme Court has held that no factual foundation having been pleaded, no case has been made out for declaring a provision as ultra vires to the Constitution. There factually the Supreme Court has held that a domestic trader and an exporter stand on different footings. A discrimination on the ground of valid classification, which answers the test of intelligible differentia, does not attract the wrath of Article 14 of the Constitution of India. Factually, the classifications have been upheld in several cases. In 2007 (10) SCC 684: AIR 2007 SC 2747 (Indian Airlines Officers'' Association Vs. Indian Airlines Ltd. & others) different yardsticks for absorption of employees of Vayudoot and Indian Airlines in Air India were upheld. In 2008 (7) SCC 231 (State of Bihar and others Vs. Bihar State ''Plus2'' Lecturers Association and others) and 2006 (8) SCC 399 (Confederation of Exservicemen Association and others Vs. Union of India and others) nonextension of medical facility to retiring employees like serving employees was upheld. In 2004 (13) SCC 390 (Jai Prakash and others Vs. State of U.P. and others) distinction between private vehicle and State vehicle was upheld. In 2005 (2) SCC 762 [State of Bihar and others Vs. Shree Baidyanath Ayurved Bhawan (P) Ltd. and others] the Supreme Court held that discrimination between small and large is always there, therefore, it was upheld. In Bihar State ''Plus2'' Lecturers Association (supra) difference between untrained teachers and trained teachers was upheld by the Supreme Court by saying that classification is reasonable and is based on intelligible differentia which distinguishes one class (trained) included therein from the other class (untrained) which is left out. The Supreme Court further held therein that what Article 14 prohibits, is discrimination and not classification if otherwise such classification is legal, valid and reasonable. It is well settled and cannot be disputed that Article 14 of the Constitution guarantees equality before the law and confers equal protection of laws. It prohibits the State from denying persons or class of persons equal treatment; provided they are equals and are similarly situated. It, however, does not forbid classification. It is clear that every classification to be legal, valid and permissible, must fulfil the twin test, namely, (i) the classification must be founded on an intelligible differentia which must distinguish persons or things that are grouped together from others leaving out or left out; and (ii) such a differentia must have rational nexus to the object sought to be achieved by the statute or legislation in question. While the article forbids class legislation in the sense of making improper discrimination by conferring privileges or imposing liabilities upon persons arbitrarily selected out of a large number of other persons similarly situated in relation to the privileges sought to be conferred or the liability proposed to be imposed, it does not forbid classification for the purpose of legislation, provided such classification is not arbitrary.
(iii) Since the State has got exclusive privilege in liquor and liquor is res extra commercium, no person has a right to trade in it. State has got absolute choice to pick up a person with whom it would prefer to trade.
(iv) Since trade in liquor is injurious to public health and pernicious to public interest, Articles 14 and 19 of the Constitution are out of play.
In dealing with both the aforesaid points we find that in 2007 (4) SCC 480 (Cooperative Company Limited Vs. Commissioner of Trade Tax, U.P.) trade in liquor has been held to be res extra commercium. The State has exclusive privilege to trade in liquor. It has been held in 2004 (11) SCC 26 (State of Punjab and another Vs. Devans Modern Breweries Ltd. and another) that Articles 14 and 19 cannot be applied. State can create monopoly in itself. Nobody has fundamental right to trade in liquor. Articles 14 and 19 are out of play in the trade of liquor. State has exclusive privilege and that one of the purposes of the Excise Act is to maximize revenue. State has unfettered right to impose restriction. It has been further held that Articles 14 and 19 (1)(g) of the Constitution are irrelevant in the context. It is well settled that nobody can insist the State to trade with it. The Government has liberty to determine a person with whom it will choose to deal with.
(v) It is further said that even assuming without admitting that Article 14 does apply, nonetheless, discrimination based on territorial, historical and geographical considerations are reasonable. The imposition of reasonable restriction cannot be castigated as offending Article 14 of the Constitution.
From AIR 1955 SC 795 (Kishan Singh and others Vs. State of Rajasthan and others) we find a Constitution Bench of the Supreme Court has held that a classification may properly be made on territorial basis if that is germane to the purposes of the enactment. In AIR 1956 SC 298 (Ram Chandra Palai and others Vs. State of Orissa and others) it has been held that if any zonal or territorial or geographical division is made having regard to the situation as it thus obtained, no challenge could be made against it on the ground of discrimination or the denial of equal protection of laws. In AIR 1959 SC 609 (Gopi Chand Vs. Delhi Administration) creation of two zones of same province for the purpose of application of temporary law in one zone showing dangerously disturbed was not regarded as violation of Article 14 of the Constitution. From AIR 1963 SC 222 (Lachhman Dass on behalf of firm Tilak Ram Ram Bux Vs. State of Punjab and others) we find a Constitution Bench of the Supreme Court per majority held that if different laws apply to different parts of the State due to historical reasons, that has always been recognized as proper basis of classification under Article 14 of the Constitution. In AIR 1964 SC 1590 (Narottam Kishore Deb Varman and others Vs. Union of India and another) a Constitution Bench of the Supreme Court has held that discrimination is justified having regard to the historical and legislative background. In 1973 (3) SCC 435 (Anakapalle CoOp. Agrl. And Industrial Society Ltd., etc. etc. Vs. Union of India and others) a Constitution Bench of the Supreme Court was unable to hold that while classifying zones on geographicalcumagroeconomic consideration, any discrimination can be said to be made or that the price fixation according to each zone taking into account all the relevant factors would give rise to such discrimination as would attract Article 14 of the Constitution. In 1979 (4) SCC 642 (H.H. Shri Swamiji of Shri Amar Mutt and others Vs. Commissioner, Hindu Religious and Charitable Endowments Department and others) a Constitution Bench of the Supreme Court per majority held that dissimilar treatment does not necessarily offend against the guarantee of equality contained under Article 14 of the Constitution. The rider is that there has to be a valid basis for classification and the classification must bear nexus with the object of the impugned provision. In 1989 (3) SCC 191 (V.Markendeya and others Vs. State of Andhra Pradesh and others) in dealing with different classes of employees the Supreme Court held that classification of two classes of employees when is valid on the basis of historical reasons, does not offend Articles 14 and 16 of the Constitution.
(vi) It is further said that it being well settled that one of the purpose to trade in liquor is to raise excise revenue, State can always experiment and depending on failure or success extend the pattern devised in regard to Special Zones or other zones or withdraw it altogether. No offence can be taken to such gradual implementation of State policy. Reference has been made in respect of the judgments reported in 1996 (3) SCC 407 [Union of India Vs. Paliwal Electricals (P) Ltd. and another] and Shree Baidyanath Ayurved Bhawan (P) Ltd. (supra).
(vii) Discriminations in favour of cooperative societies in which State''s stake exceeds 50% or State owned Corporation have always been upheld by Apex Court as being absolutely reasonable.
From a Constitution Bench judgement of the Supreme Court reported in 1974 (2) SCC 196 (S. Chandra Sekharan and others Vs. Govt. of Tamil Nadu and others) we find that in dealing with question of right of one to carry on the business of the levy sugar to be supplied by the Government, the Supreme Court held that such right of the petitioners is not a legal right but a contractual right. If State formulates a policy to distribute the levy sugar through the cooperative societies for its appropriate purposes, the State Government can not be blamed. From 1981 (4) SCC 535 (Madhya Pradesh Ration Vikreta Sangh Society and others Vs. State of Madhya Pradesh and another) we find that the Court while considering the case of consumers'' cooperative societies held that it forms a distinct class by themselves. Benefits and concessions granted to them ultimately benefit persons of small means and promote social justice in accordance with the directive principles. There is an intelligible differentia between the retail dealers who are nothing but traders and the consumers'' cooperative societies. In 1986 (3) SCC 398 (Hindustan Paper Corpn. Ltd. Vs. Government of Kerala and others) the Supreme Court held that preference shown to government companies under the Act therein can not be considered to be discriminatory as they stand in a different class altogether and the classification made between government companies and others for the purposes of the Act is valid one. In further, with regard to discrimination in favour of State owned corporation/societies in 1984 (1) SCC 619 (Viklad Coal Merchant, Patiala and others Vs. Union of India and others) we find that the Supreme Court held a Government is a class by itself for the purpose of Article 14 of the Constitution. Though Article 19(1)(g) of the Constitution is not applicable there but even then it can be said that the Government is armed with power to accord priority in larger public interest. From 1989 Supp (2) SCC 201 (M.Jhangir Bhatusha and others Vs. Union of India and others) we find a Constitution Bench of the Supreme Court has held that though the State dons the robes of a trader when it enters the field of commercial activity, and ordinarily it can claim no favoured treatment, but there may be clear and good reason for making a departure. In 1991 Supp (2) SCC 86 (Shah Devchand & Co. and another Vs. Union of India and another) it has been held by the Supreme Court that in the larger public interest of the economy of the country and in public interest if any action is taken by the Government, the same can not be in violation of Article 14 of the Constitution. In 1992 Supp (1) SCC 91 (Indian Metals and Ferro Alloys Ltd. Vs. Union of India and others) the Supreme Court has held similarly with regard to question of arbitrariness and malafide. From 1995 (2) SCC 402 (State of T.N. Vs. M.P.P. Kavery Chetty) we find the Supreme Court held that valid differentia exists between the State Government companies and corporations on the one hand and private parites on the other hand.
(viii) He further said that discrimination or distinction having been made in favour of two persons, viz., Apex Cooperative society or State owned Corporation, it is nothing but an extension of State monopoly as conceived by Article 19(6)(ii) of the Constitution of India. The provision for Joint Venture Corporation is mere enabling provision and that too is contingent upon the need or volition of the State owned Corporation or Cooperative society. It is clear that so far as the State is concerned, it deals with only two persons, viz., Apex Cooperative Society and State Owned Corporation. The facility of joint venture corporation is only enabling provision. They may voluntarily opt for joint venture corporation. Such corporation is not obligatory or mandatory. Therefore, no offence can be taken to the aforesaid association. It is to be remembered that the Apex Cooperative Society and the State Owned Corporation have limited resources. They are enjoined to adjudge primacy to the object for which they have been created. Thus, in case they experience paucity of funds, they can associate as joint venture partners. There are two dominant articles about the selection of joint venture partners; one is experience in trade and another is turnover of Rs.400 crores approx in three preceding financial years. Therefore, the joint venture partners cannot be man of straw. Joint venture organizations having turnover of Rs.400 crores will necessarily be economically sound party. In case of huge deployment of money, they will regardlessly see to it that investment made by them yields positive result. The Apex Cooperative society and the State owned Corporation are arms of the State within the meaning of Article 12 of the Constitution. They would be, in fact, trading in the field of liquor business. This will ensure eradication of malpractice e.g. boot legging, illicit import of liquor from bordering States and supply of portable liquor. It goes without saying that it will necessarily ensure public health and maximization of revenue, for which the impugned policy has been enacted. The policy has been adopted on experimental basis. Its continuance in succeeding years depends upon the success or failure.
However, the Court can not substitute their own view on supposition that it may not lead to maximum of State revenue or supply of portable liquor or illicit import of liquor or boot legging. The Court does not sit as Court of appeal to scan the correctness or propriety of the policy or peep into wisdom of policy maker. The State is only the best judge of it. The Court is only concerned with the illegality or unconstitutionality of such policy. It has been further held by the Supreme Court that any law creating monopoly in favour of the State is immune from challenge in view of the provisions of Article 19(6)(2) of the Constitution of India as held in 2004 (1) SCC 712 (Dharam Dutt and others Vs. Union of India and others).
(ix) At any rate, provision for Joint Venture Corporation can be justified on the basis of the theory of globalization and economic considerations. According to the recent judicial trend, while adjudging legality of economic policy, economic considerations which prevailed with the State and concept of globalization have to be kept in view. From a socialistic economy, in which private venture was a taboo, shift has been on globalization i.e. market economy. Principal ingredient of such globalization is promotion of joint venture participation and gradual withdrawal of the State from trade or commerce. In this context, reliance has been placed on the judgement of the Supreme Court reported in 2007 (8) SCC 1 (Reliance Energy Ltd. and another Vs. Maharashtra State Road Development Corpn. Ltd. and others). State has created an agent and they can do business with private party.
(x). At any rate, the petitioners have no right of renewal of license. Renewal of license is merely discretionary and consensual. No obligatory duty is cast upon the State to renew the license; hence no writ of mandamus can be issued for renewal of license. So far as issue of renewal is concerned, Mr. Ravi Kant has adopted the arguments as advanced by Mr. Rakesh Dwivedi, learned Senior Counsel appearing for the respondent no. 5Company.
75. Mr. U.N. Sharma, learned Senior Counsel appeared on behalf of the U.P. Sugar Federation/apex cooperative body, selected by tender, and contended that the process of selection is totally transparent in nature. A plea has been taken against them how the federation came to know that it will be selected, so that can create a joint venture agreement with a private party on apprehension. He said that there is no bar in the tender notice i.e. when the joint venture agreement will be executed. It is an admitted position that the sugar federation corporation, being an apex cooperative society, has no much sum to compete. Therefore, it had necessitated to execute a joint venture partnership with a private body for the purpose of funding. It may be done by the cooperative society even before on the basis of its expectation to become successful in the tender. It may also be done on the same day when it has been selected or even thereafter. This is an internal arrangement between the cooperative society and a private party, which can not be questioned by the small traders interested only about the renewal of their licences. Question of malafide of the State can, at best, be challenged by the petitioners in framing the rules, which, according to them, facilitated one ignoring their grievance of renewal. The attack has not been made in respect of parting with privilege, if any, with the cooperative society, an instrument of the State, by the State itself. Attack is only with regard to the joint venture agreement. According to him, it is an arrangement between them and a private party. A contract has been executed. Nature of contract and the terms and conditions amongst themselves can not be challenged by the writ petition nor the Court is called upon for such purpose. The simplicitor case of the cooperative society is that it wants to run the liquor business with the help of a private party and necessary arrangements were made for the purposes of funding a sum of Rs. 400 crores. Government is to be benefited by it. When concept of privatisation is no bar and open market economy can not be opposed, arrangement can not be treated as camouflage. High Powered Committee was formed amongst high ranking officials of the Federation and the State Government to select the most suitable joint venture partner. Two parties, one M/s Royal Beverages and the respondent no. 5 fulfilled the eligibility criteria of a minimum turnover of Rs.400 crores per year and, therefore, after clearance of their technical bids their financial bids were opened. Since the bid of the respondent no. 5company was much higher than that quoted bid of M/s. Royal Beverages and it has sufficient experience with the liquor trade, the High Powered Committee approved their selection as the joint venture partner by its letter dated 20th February, 2009.
76. According to us, though public policy of termination of service by way of contract between the employer and the employee having been in unequal bargaining position was discouraged by the Supreme Court in AIR 1986 SC 1571 (Central Inland Water Transport Corporation Ltd. and another Vs. Brojo Nath Ganguly and another) but it specifies that the Contract Act does not define the expression "public policy" or "opposed to public policy". From the very nature of things, the expressions "public policy", "opposed to public policy", or "contrary to public policy" are incapable of precise definition. Public policy, however, is not the policy of a particular government. It connotes some matter which concerns the public good and the public interest. The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time. As new concepts take the place of old, transactions which were once considered against public policy are now being upheld by the courts and similarly where there has been a wellrecognized head of public policy, the courts have not shirked from extending it to new transactions and changed circumstances and have at times not even flinched from inventing a new head of public policy. In this case, the policy and/or the rules were challenged but the question was raised even with regard to acting upon such rules by way of contract, therefore, it is far more difficult to construe that the petitioners can be allowed to extend the scope of relief to that extent.
77. However, he further said that in the year 200809 licence fee was Rs.792.54 crores wherein for the year 200910 retail vend will be Rs. 921.60 crores, resulting in revenue increase of Rs.129.06 crores. In terms of percentage, the figure would be 16.28% for country liquor only. It is significant to note that in the apex cooperative society the State Government has 51% stake. Thus, the State Government itself through its agency is in charge of retail sale in this region. The State is going to be enriched by Rs. 4900 crores as against a sum of Rs.4500 crores in the previous year. The M.G.Q. this year for the Meerut special zone is fixed at 8% which is much higher than what was actually achieved in the previous years by the State. The increase in revenue is likely to be more than 20% and this includes foreign liquor, country liquor as well as beer. The Sugar Federation is apex level society of 28 Cooperative Sugar Factories and 7 distilleries of cooperative sector. Out of 7 distilleries, 4 are owned by the Sugar Federation and 3 distilleries are associated with the Cooperative Sugar Factories. Sugar Federation is involved in liquor business since the installation of the first distillery, namely, Bajpur Distillery, Udham Singh Nagar since 1976, which has now been separated after creation of State of Uttaranchal in 2000. Now there are 7 distilleries and 28 cooperative sugar factories of the State are managed by the Sugar Federation. In the year 199293 Sugar Federation was assigned with the business to do retail business of liquor in Allahabad region, in which it suffered loss but subsequently in the years 199596, 199697, 199798, 199899, 19992000 and 200001 the Sugar Federation was assigned responsibility to do the business of liquor in Kumaun and Garhwal Mandal of State of Uttaranchal with the joint venture partner and result has been very encouraging and profitable. In the year 200708 under the change of excise policy Sugar Federation was assigned responsibility to do the wholesale business of country liquor and foreign liquor and only in 9 months the Sugar Federation had earned good profit. State Government has changed the excise policy for the year 200910 and created a special zone with exclusive privilege.
78. Mr. Tripathi, in reply, attacked the respondents in different line. He said that Rule5 of the Rules, 2009 made for the nonspecial zone does not say that it will not apply to special zone. Mr. Tripathi has drawn our attention in respect of the policy decision dated 04th March, 2008 for the excise year 200809, which has been annexed as Annexure1 to the supplementary affidavit filed on behalf of the petitioner in Civil Misc. Writ Petition No. 574 of 2009, to establish certain parameters. Clauses (2) & (6) of such policy decision, which have been got translated, are quoted hereunder:
"(2). The settlement of the shops, whose settlement can not be made through renewal, and of newly created shops shall be made through public lottery like that of last year 20072008. For the settlement of shops, it would be proper to maintain the existing arrangement for obtaining application forms from the offices of District Magistrate/District Excise Officer, Incharge Deputy Commissioner, Joint Excise Commissioner of Zone and the Excise Commissioner, U.P., Allahabad. For restricting monopoly and maintaining transparency in the settlement of shops, it would be proper to maintain the arrangement for submission of forms with the office of Excise Commissioner in year 200809, along with the aforesaid arrangement. Such applications shall be made available to the district concerned after the last date of the submission of forms and the lapse of the time.
(6) For restricting the evasion of revenue, the Excise Department made arrangement from the month of July, 2007 for supply of foreign liquors/country made liquors and beer, to the wholesaler through the U.P. Cooperative Sugar Mills Association and not directly from distilleries, but by their arrangement desired increase in revenuereceipt was not achieved, but certain difficulties also arose in supply of liquors. Hence, ceasing this arrangement for year 20082009, it has been decided to supply the country made liquor/foreign liquor and beer, as per earlier arrangement (existing prior to July, 2007)."
79. Mr. Tripathi has drawn our attention to page34 onwards of the supplementary affidavit filed by the petitioners in Civil Misc. Writ Petition No. 582 of 2009 (Ashok Kumar Jaiswal and others Vs. State of U.P. and others) to establish that there is no much of difference between the companyrespondent no. 5 and its competitor. It has resolved to carry on the business of liquor including foreign liquor, country liquor, beverage, alcohol, wine and other similar products only on 12th January, 2009. The settlement as made with the respondent no. 5 is zonewise but not shopwise. No condition can be said to be imposed about the retail but on wholesale. Section 24 of the Act says that grant of exclusive privilege of manufacture etc. will be restricted within any local area. The action, which has been taken by the authority, is colourable exercise of power only to exclude the eligible candidates. It itself indicates for an appropriate enquiry. Record of the company, as indicated above, shows that it has no business and loss was more than Rs. 100 crores. He said like Mr. Gupta that as per Rule3 of the Demarcation Rules, 2009 prior approval should not be mechanical but objective. He further said that consumption of foreign liquor is the cause of nonconsumption of country liquor but not the entry of country liquor from other States. Even if the same is there and even if so called smuggling is there, it is a matter of law and order of the State which can not be obstructed in the clandestine manner as proposed. In addition to his submissions with regard to the judgements as referred above, he wanted to cite certain judgements even in reply. However, since the respondents have no objection, he has been allowed to cite for his satisfaction. He cited before us AIR 2006 SC 2382 (Ashok Lenka Vs. Rishi Dikshit and others) to establish that when a law is made, having regard to the phraseology used in Part IV of the Constitution of India, it is expected that law made or actions taken would be in furtherance thereof. In terms of the Directive Principles of State Policy, the State is bound to make endeavours to promote public health which is one of its primary duties of the State. One important component of the said directions was regulation and control over the trade in intoxicating drinks so as to enable the State to curb or minimize, as far as possible, the consumption thereof. The State may or may not prohibit manufacture, sale or consumption of liquor but it is vital that while parting with its exclusive privilege to deal with intoxicating liquor, the provisions of the Act and the Rules for which the same had been enacted must be strictly complied with. The State should not treat its right of parting with its privilege only as a means of earning more and more revenue. It may certainly earn revenue but only upon fulfilment of its constitutional and statutory obligations. There exists a strong underlying notion of public health and welfare when the matter comes to retention of the exclusive privilege and/or parting therewith either in whole or in part. Article 47 of the Constitution of India says that the State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and, in particular, the State shall endeavour to bring about prohibition of the consumption except for medical purposes of intoxicating drinks and of drugs which are injurious to health.
80. Therefore, we have gone through several judgements to come to a definite conclusion in this respect. Reference of 2006 (4) SCC 327 (Kerala Samsthana Chethu Thozhilali Union Vs. State of Kerala and others) is common between Mr. Mathur and Mr. Tripathi. Mr. Mathur has further contended that while parting with the privilege the State can impose any condition and it is for the licensee to take it or to leave it. Dealing in liquor is res extra commercium and thereby following the principle laid down by the Supreme Court in Har Shankar (supra) it was held that the licensee could not have contended that the condition imposed for grant of licence was onerous. It is true to say that Article 14 of the Constitution would be attracted even in the matter of trade in liquor. Thereafter followed the principles of Nandlal Jaiswal (supra) and Khoday Distilleries Ltd. (supra). On the other hand, from paragraph30 of said judgement i.e. Kerala Samsthana Chethu Thozhilali Union (supra) we find that the Court following the earlier judgement of the Supreme Court held that by reason of any legislation, whether enacted by the legislature or by way of subordinate legislation, the State gives effect to its legislative policy. Such legislation, however, must not be ultra vires to the Constitution. A subordinate legislation apart from being intra vires the Constitution, should not also be ultra vires the parent Act under which it has been made. A subordinate legislation, it is trite, must be reasonable and in consonance with the legislative policy as also give effect to the purport and object of the Act and in good faith. From the other part of such judgement, as is being referred by Mr. Tripathi, we find that "take it or leave it" argument has been rejected and it has been held by the Supreme Court that the State while parting with its exclusive privilege can not take recourse to the said doctrine having regard to the equity clause enshrined under Article 14 of the Constitution. The State in its dealings must act fairly and reasonably. The bargaining power of the State does not entitle it to impose any condition it desires. It is trite that the State in all its activities must not act arbitrarily. Equity and good conscience should be at the core of all governmental functions. It is now well settled that every executive action which operates to the prejudice of any person must have the sanction of law. The executive can not interfere with the rights and liabilities of any person unless the legality thereof is supportable in any court of law. In 2003 (3) SCC 186 (Cellular Operators Association of India and others Vs. Union of India and others) the Supreme Court followed the judgement reported in 2001 (8) SCC 491 (Union of India and others Vs. Dinesh Engineering Corporation and another) to hold that even while exercising its power of judicial review, the Supreme Court laid down the law as follows:
"There is no doubt that this Court has held in more than one case that where the decision of the authority is in regard to a policy matter, this Court will not ordinarily interfere since these policy matters are taken based on expert knowledge of the persons concerned and courts are normally not equipped to question the correctness of a policy decision. But then this does not mean that the courts have to abdicate their right to scrutinize whether the policy in question is formulated keeping in mind all the relevant facts and the said policy can be held to be beyond the pale of discrimination or unreasonable, bearing in mind the material on record." (emphasis supplied)
81. In AIR 2006 SC 2652 (Kuldeep Singh Vs. Govt. of NCT of Delhi) the Supreme Court held that the State had made a change in its policy decision on opening the doors to the private entrepreneurs evidently with a view to earn more revenue. It represented to the applicants that their cases would be considered on their own merits. Such consideration was, thus, required to be fair and reasonable. Although dealing in liquor is not a fundamental right, but indisputably the equality clause contained in Article 14 of the Constitution of India would apply. No one can claim as against the State the right to carry on trade or business in liquor and the State can not 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 can not escape the rigour of Article 14. Legitimate expectation is also required to be determined keeping in view the larger public interest. Claimants'' perceptions would not be relevant therefor. The State actions indisputably must be fair and reasonable. Nonarbitrariness on its part is a significant facet in the field of good governance. The discretion conferred upon the State yet again cannot be exercised whimsically or capriciously. But where a change in the policy decision is valid in law, any action taken pursuant thereto or in furtherance thereof, cannot be invalidated. In a case of this nature where State has the exclusive privilege and the citizen has no fundamental right to carry on business in liquor, the policy which would be applicable is the one which is prevalent on the date of grant and not the one, on which the application had been filed. Article 14 of the Constitution carries with it a positive concept. Equality cannot be claimed in illegalities. In Dhampur Sugar (Kashipur) Ltd. (supra) with regard to malafide exercise of power it has been held that every action of the public authority must be based on utmost good faith, genuine satisfaction and ought to be supported by reason and rationale. It is, therefore, not only the power but the duty of the Court to ensure that all authorities exercise their powers properly, lawfully and in good faith. If powers are exercised with oblique motive, bad faith or for extraneous or irrelevant considerations, there is no exercise of power known to law and the action can not be termed as action in accordance with law. A Court of law is not expected to propel into "the unchartered ocean" of government policies. Once it is held that the Government has power to frame and reframe, change and rechange, adjust and readjust policy, the said action cannot be declared illegal, arbitrary or ultra vires the provisions of the Constitution only on the ground that the earlier policy had been given up, changed or not adhered to. It also cannot be attacked on the plea that the earlier policy was better and suited to the prevailing situation.
82. Mr. Ravi Kiran Jain, learned Senior Counsel, with the able assistance of Mr. Ashok Mehta, learned Counsel appearing for the petitioners, appeared in three matters i.e. Civil Misc. Writ Petition (Tax) No. 611 of 2009 (Narendra Kumar and others Vs. State of U.P. and others), Civil Misc. Writ Petition (Tax) No. 514 of 2009 (Ombir Singh and others Vs. State of U.P. and others) and Civil Misc. Writ Petition (Tax) No. 515 of 2009 (Smt. Madhubala and others Vs. State of U.P. and others) and adopted the contentions of the petitioners. All the three writ petitions are made either for special zone or general zone or model shop. He has brought our attention to the definitions of apex cooperative body and corporation under the Demarcation Rules, 2009. According to him, Rule2(c) of such Rules prescribes for ''apex cooperative body'', wherein Rule 2(d) of the Demarcation Rules, 2009 defines ''corporation''. Both are distinct and different. In the present joint venture partnership we find that U.P. Cooperative Sugar Factories Federation Limited, being an apex cooperative body, made a joint venture with a company, namely, M/s. Amethyst Town Planners Pvt. Ltd. Therefore, the moot point is whether the same is permissible under the rules itself or not.
83. Relying upon Kerala Samsthana Chethu Thozhilali Union (supra) he contended that when Article 14 of the Constitution would be attracted even in the matter of trade in liquor, the State can not act arbitrarily or at its sweet will. Its power, therefore, was to make rules only for the purpose of carrying out the purposes of the Act and not dehors the same. In other words, rules can not be framed in matters which are not contemplated under the Act. That apart, he further contended that public interest might be the revenue but if attached to public health and safety then it can not be said to be public interest. Therefore, such part can also be taken into consideration by the Court.
84. Mr. Manish Goyal also made his submissions in respect of special zone category in addition to his earlier submissions with regard to general zone category. He said that the rule, which is also known as ''purposive construction'' or ''mischief rule'', enables consideration of four matters in construing an Act:
(i) What was the law before making of the Act?
(ii) What was the mischief or defect for which the law did not provide?
(iii) What is the remedy that the Act has provided?
(iv) What is the reason of the remedy?
85. He cited the judgement reported in AIR 1963 SC 1047 (Akadasi Padhan Vs. State of Orissa and others) to establish that agency which can be legitimately allowed under Article 19 (6)(ii) is agency in the strict and narrow sense of the term; it includes only agents who can be said to carry on the monopoly at every stage on behalf of the State for its benefit and not for their own benefit at all. All that such agents would be entitled to would be remuneration for their work as agents. That being so, the extended meaning of the word "agent" in a commercial sense is wholly inapplicable in the context of Article 19(6)(ii). He has also referred the judgement reported in AIR 1990 SC 1031 (Mahabir Auto Stores and others Vs. Indian Oil Corporation and others) to establish that the State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercise of power. Therefore, the action of the State organ can be checked under Article 14. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. Rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens. Even through the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and nondiscrimination. It is well settled that there can be "malice in law". Existence of such "malice in law" is part of the critical apparatus of a particular action in administrative law. Indeed "malice in law" is part of the dimension of the rule of relevance and reason as well as the rule of fair play in action. It was pleaded that in private law field there was no scope for applying the doctrine of arbitrariness or malafides. A plea of arbitrariness malafides as being so gross cannot shift a matter falling in private law field to public law field. To permit otherwise would result in anomalous situation that whenever State is involved it would always be public law field, this would mean all redress against the State would fall in the writ jurisdiction and not in suits before Civil Courts. Whether public law or private law rights are involved, in a case, depends upon the facts and circumstances of the case. The dichotomy between rights and remedies cannot be obliterated by any strait jacket formula. It has to be examined in each particular case. We also find that ratio of Mahabir Auto Stores (supra) has been followed by the Supreme Court in 1991 (1) SCC 212 (Kumari Shrilekha Vidyarthi and others Vs. State of U.P. and others). However, in Dinesh Engineering Corporation (supra) though the Supreme Court has held that where the decision of the authority is in regard to a policy matter, the Court will not ordinarily interfere, but then this does not mean that the courts have to abdicate their right to scrutinise whether the policy in question is formulated keeping in mind all the relevant facts and whether the said policy can be held to be beyond the pale of discrimination or unreasonableness, on the basis of the material on record.
86. By citing JT 1995 (4) SC 366 (L.I.C. Of India & anr. Vs. Consumer Education & Research Centre & ors.) Mr. Goyal further contended that when public element is involved in the activities of the Government then there should be fairness and equality. If the State does enter into a contract, it must do so fairly without discrimination and without unfair procedure. A contractual obligation can not divest the claimant''s right guaranteed under Article 14 of the Constitution of nonarbitrariness at the hands of the State in any of its actions. An unfair and untenable or irrational cause in a contract is also unjust amenable to judicial review. In today''s complex world of giant corporations with their vast infrastructural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances. By referring JT 2007 (1) SC 125 (M/s. Ashoka Smokeless Coal Ind. P. Ltd. & ors. Vs. Union of India & ors.) he stated that good governance and good corporate governance are distinct and separate. Whereas good governance would mean protection of the weaker sections of the people; so far as good corporate governance is concerned, the same may not be of much relevance. Any change in the policy decision for cogent and valid reasons is acceptable in law, but the same must satisfy the requirements of constitutional as also the statutory schemes. In 2003 (2) SCC 673 (Onkar Lal Bajaj and others Vs. Union of India and another) it has been held by the Supreme Court that the expression "public interest" or "probity in governance" can not be put in a straitjacket. "Public interest" takes in its fold several factors. There can not be any hardandfast rule to determine what is public interest. The circumstances in each case would determine whether government action was taken in public interest or was taken to uphold probity in governance. The role model for governance and decision taken thereon should manifest equity, fair play and justice. The cardinal principle of governance in a civilized society based on rule of law not only has to base on transparency but must create an impression that the decisionmaking was motivated on the consideration of probity. The Government has to rise above the nexus of vested interests and nepotism and eschew windowdressing. The act of governance has to withstand the test of judiciousness and impartiality and avoid arbitrary or capricious actions. Therefore, the principle of governance has to be tested on the touchstone of justice, equity and fair play and if the decision is not based on justice, equity and fair play and has taken into consideration other matters, though on the face of it the decision may look legitimate but as a matter of fact the reasons are not based on values but to achieve popular accolade, that decision can not be allowed to operate. From 2004 (7) SCC 68 (Godawat Pan Masala Products I.P. Ltd. and another Vs. Union of India and others) we get that it is an accepted canon of construction of statutes that a statute must be read as a whole and one provision of the Act should be construed with reference to other provisions of the same Act so as to make a consistent, harmonious enactment of the whole statute. The court must ascertain the intention of the legislature by directing its attention not merely to the clauses to be construed, but to the scheme of the entire statute. The attempt must be to eliminate conflict and to harmonise the different parts of the statute for it cannot be assumed that Parliament had given by one hand what it took away by the other. In 2008 (2) SCC 672 (Delhi Development Authority and another Vs. Joint Action Committee, Allottee of SFS Flats and others) it has been held by the Supreme Court that when a contract emanates from a statute or is otherwise governed by the provisions thereof, the superior courts can also exercise the power of judicial review. Although the superior courts ordinarily would not interfere in the price fixation but there does not exist any absolute ban. He further said that fixation of price is different from imposing tax.
87. We have given extensive hearing and anxious thought to portray correct picture. From the exhaustive arguments as advanced by the respective parties we find that some of the submissions are legally good and some are academically good. But we did not restrain anybody from expressing their views particularly when market economy and involvement of the State is a new dimension and any academic discussion thereto may give light on the issue. We refrain ourselves from reiterating the observations made by us in the earlier part excepting which are necessitated.
88. By the passage of time the country has faced various economic policies i.e. (i) socio economic policy; (ii) mixed economic policy; and (iii) market economic policy. Introduction of the Demarcation Rules, 2009 obviously supports the market economic policy. Therefore, before going into such question, we have to see whether there is any dearth of rule making power of the Government or not. In dealing with the cases of general zone and model shop categories, we have already discussed that there is no dearth of rule making power of the State under the Excise Act, 1910, as amended upto date. Therefore, we do not want to reiterate but to follow our observation therein in coming to conclusion hitherto. Hence, our endeavour is to know about the extent of the power and whether replacement of new rule i.e. Demarcation Rules, 2009 in the place and instead of Uttar Pradesh (Settlement of Licences for Retail Sale of Country Liquor) Rules, 2002, is malafide exercise of power or not.
89. The Excise Act, 1910 has categorically made two sets of rule making powers. Section 40 of the Act gives power to the State Government to make rules, wherein Section 41 of the Act gives power to the Excise Commissioner to make rules. Thus, when rule is made as per Section 40 of the Act, the same has to be declared as statutory rules made by the State Government itself, which is obviously treated to be of the people, by the people and for the people. Section 40 of the Act categorically speaks that the State Government may make rules for the purpose of carrying out the provisions of this Act or other law for the time being in force relating to excise revenue, wherein Section 41 of the Act says that the Excise Commissioner subject to the previous sanction of the State Government may make rules. Under Section 40 (2)(e) of the Act, the State Government can regulate the periods and localities for which, and the persons to whom, licences for the vend by wholesale or by retail of any intoxicant may be granted. Section 41 of the Act speaks for regulating the manufacture, supply, storage or sale of any intoxicant, scale of fees for any licence, permits including grant of any exclusive or other privilege under Section 24 or 24A or for storing of any intoxicant. By virtue of the proviso to Section 41 (c) of the Act, nothing contained in this clause shall prevent the State Government from levying by notification made from time to time, any fee, including vend fee, as part of consideration for grant of any privilege. Section 41 (2) further provides power of(i) auction, (ii) invitation of tenders, and (iii) assessment on the basis of sales made or quota lifted under the licence, permit or pass. The Excise Commissioner proposed, the State Government made a policy followed by rules. Therefore, it can be safely presumed that the Excise Commissioner in active consultation with the State Government issued the notification for allotment of licence. Hence, there is no question of any individual action of an executive. Plurality is exposed.
90. If we go one step further with Section 10(2) of the Act, we shall be able to find that the State Government may by notification applicable to the whole of Uttar Pradesh or to any district or local area comprised therein appoint an Excise Commissioner, who shall subject to the orders of the State Government have the control of the administration of the excise department. The State Government may delegate its powers under Section 10 (2)(f) of the Act to the Excise Commissioner all or any of its powers under this Act, except the power conferred by Section 40 to make rules. Excise revenue is part and parcel of statutory power, whereas invitation of tenders or auction or other modes are under the powers of the Excise Commissioner by way of delegation.
91. Incidentally a question arose about incorporation of two words in two provisions. Section 24 of the Act deals with business of country liquor, can be made to a local area whereas Section 24A deals with business of foreign liquor, can be done in any locality. It has also been urged before us that as per Section 4(52) of the Uttar Pradesh General Clauses Act, 1904, any reference to a revenue division, district or subdistrict, or to a local area under the jurisdiction of a local authority, shall be construed as a reference to such revenue division, district or subdistrict or to such local area with its limits as altered from time to time. It has been specifically contended that local area is controlled by locality, therefore, it can not be said to be a division. We can not appreciate such submission at all because as per such definition itself, revenue division is similarly placed, which can be made and altered time to time. Therefore, the submission of the petitioners seems to be hypertechnical. This can be further clarified by the objects and reasons of the Act. As per the objects and reasons of the Act itself, as quoted earlier, the State Government, for the sake of promotion, enforcement and carrying out into effect the policy of prohibition etc., has power to enforce it for the entire State or in any specified area or areas thereof. Thus, it is proved beyond doubt that for the sake of excise revenue the State Government by introduction of rules can demarcate an area of the State. Hence, creation of special zone by the State Government for the sake of excise revenue can not be said to be invalid at all.
92. All these have been done with the power of superintendence under Article 298 of the Constitution of India. It is a general power given to the Government that in case the Government feels that any rule or byelaw framed is not reasonable or detrimental to the public interest or there is any good ground available, it can repeal or modify any of such rule or byelaw. The power could not have been exercised to suit the needs of an individual case. Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act, and are to be judicially noticed for all purposes of construction or obligation.
93. As per the petitioners themselves, the leading cases of the special zone category are Civil Misc. Writ Petition No. 815 of 2009 (Rajesh Gupta Vs. State of Uttar Pradesh and others), Civil Misc. Writ Petition No. 487 of 2009 (Anand Rathore and others Vs. The State of U.P. and others), Civil Misc. Writ Petition Nos. 574 of 2009 and 582 of 2009, both, (Ashok Kumar Jaiswal and others Vs. State of U.P. and others). We have particularly seen prayers of all the four writ petitions. We find that in all the writ petitions excise policy of 200910 of the State has been challenged. Only in re: Rajesh Gupta challenge has also been thrown about introduction of the Demarcation Rules, 2009 along with various other prayers. Additionally, in re: Ashok Kumar Jaiswal a prayer has been made for a direction to resort to the policy of lottery system in that zone. However, common prayers of all the writ petitions are with regard to renewal of their licences for the excise year 200910. Hence, it is important to see whether the petitioners have come with clean hands to avail the relief of quashing policy and/or rules or not. A composite argument has been made for renewal everywhere but for general zone category and model shop category public lottery system was opposed and for special zone category public lottery was proposed in the alternative of renewal at least in the two cases. Such inconsistent stand can not be the foundation of Article 14 of the Constitution of India. Even assuming they have not proposed for public lottery at all but for renewal, the question would be how their licences can be renewed in perpetuity and in rem. Law is specific under Section 36A of the Act that no person have any right of renewal. Only in the rules enabling provision is made to accommodate one on its individual case on exigency. Under no circumstances, such enabling provision can be converted to a remedial provision to override the Act and make applicable in rem irrespective of nonfiling of any individual representation. If any order is passed in rem without consideration of the individual cases, who are not even party to the writ petitions will also be benefited.
94. In further, Rules for general zone and special zone are outcome of same excise policy. But the petitioners in the same breath supported the new Rules, 2009 made for general zone and opposed the Demarcation Rules, 2009 made for the special zone. Though the rules were introduced in February, 2009 with immediate effect but the State Government did not disturb business of any existing licence holder till the expiry of the excise year on 31st March, 2009. After 31st March, 2009 the petitioners have no right. The State Government has every right to change its policy for its prospective application i.e. for the excise year 200910. It has exclusive privilege in dealing with intoxicant being res extra commercium. This can not be overrided by the petitioners'' expectation for renewal. The petitioners'' positive case is legitimate expectation and negative case is malafide exercise of power by the State Government. If the petitioners'' legitimate expectation can not withstand, their challenge of malafide exercise of power is futile in nature. Malafide exercise of power can be challenged provided the petitioners have bonafide expectation. The negation of a legitimate expectation is too nebulous to form a basis for invalidating the exercise of power when its exercise otherwise accords with law. Moreover bonafide or legitimate expectation can arise against an executive action but not against introduction of statutory rules. Both the policy and the rules are tuned on the same tone. As per the policy, the special zone will be formed and in such special zone apex cooperative body/corporation controlled by the State of U.P. can also apply in joint venture partnership but the selection of such joint venture shall be through transparent procedure keeping in mind the safety of excise revenue. By the introduction of statutory rules, policy has been merged with it. The Demarcation Rules, 2009 says apex cooperative body will hold 51% share of the State Government, meaning thereby control and management of the State will be there in the business through its own instrument. No challenge has been thrown about formation of apex cooperative body. Therefore, the conjoint reading of both the policy and the rules is that by keeping 51% share, the State Government wanted to do business by itself through its instrument for the safety of the excise revenue and such instrument can be able to make a treaty or contract or arrangement with any private party to get the financial help. Selection of such private party is made through tender. The business of publicprivate duo with the control of the State is the present trade policy. As against financial help the private party may earn some more profit. Market economy runs in such manner otherwise why they will do business. Corporate law stands on a different footing. They are interested about their own purpose but the Government is interested about other purpose i.e. of public exchequer. The State Government approved it. Therefore, how such approval will be disapproved by the Court at the instance of some persons interested about the renewal of their respective licences after its expiry, is unknown to us. It is open for the Government to take a decision whether it will follow the socio economy or mixed economy or market economy. The decision would be one of many choices but it is for the State Government to choice and the Court can not substitute its view.
95. Now, the question is what is the purpose of making demarcation of rules. The same is available from the objects and reasons of the Demarcation Rules, 2009 itself. The objects and reasons categorically says that Meerut zone having maximum population density does not have per capita revenue from country liquor in comparison to its bordering States. From the bordering States liquor is smuggled at a large scale. 260 cases of interState smuggling were found and besides the loss of revenue, the situation is also detrimental to public health and safety, public interest and public order as well. The State as per its economical policy framed the rules. Objects and reasons are available for the purpose of making such rules. We can not probe into the reasons of the reasonableness. If the Court of law adopts such practice then there will be a floodgate of litigations and no Government will be able to work. It is to be remembered that we are dealing with the exclusive privilege of the State in respect of res extra commercium. It is well settled by now that policy of a State should not be interfered with by the Court ordinarily. Far more relaxation has to be given in respect of the economic policy. Market economy is more liberal. Therefore, when the Government took a decision to adopt policy of market economy on trial basis in respect of its res extra commercium having exclusive privilege, law court should not interfere with the same. Indisputably, public interest has to prevail over private interest. We can borrow the observation of the Supreme Court in this regard in 1991 (3) SCC 91 (G.B. Mahajan and others Vs. Jalgaon Municipal Council and others) that in the world of politics, the Court''s opinion on policy are naturally less likely to reflect the popular view than the policies of a democratically elected government or of expert administrators. Moreover, here we are not dealing with public interest but private or personal interest of the litigants. They are neither belonging to weaker section of the people nor they can be treated to sympathy of the public health.
96. In association with the judgement of the Supreme Court reported in 1997 (9) SCC 495 (Krishnan Kakkanth Vs. Government of Kerala and others) we hold that to ascertain unreasonableness and arbitrariness in the context of Article 14 of the Constitution, it is not necessary to enter upon any exercise for finding out the wisdom in the policy decision of the State Government. It is immaterial whether a better or more comprehensive policy decision could have been taken. It is equally immaterial if it can be demonstrated that the policy decision is unwise and is likely to defeat the purpose for which such decision has been taken. Unless the policy decision is demonstrably capricious or arbitrary and not informed by any reason whatsoever or it suffers from the vice of discrimination or infringes any statute or provisions of the Constitution, the policy decision can not be struck down. It should be borne in mind that except for the limited purpose of testing a public policy in the context of illegality and unconstitutionality, courts should avoid "embarking on uncharted ocean of public policy". We also hold in association with the Supreme Court judgement reported in 2005 (1) SCC 625 (Bannari Amman Sugars Ltd. Vs. Commercial Tax Officer and others) that reasonableness of restriction is to be determined in an objective manner and from the standpoint of interests of the general public and not from the standpoint of the interests of persons upon whom the restrictions have been imposed or upon abstract consideration. A restriction can not be said to be unreasonable merely because in a given case, it operates harshly. On the basis of the ratio of 1981 (2) SCC 270 (Om Prakash Sud and others Vs. State of J & K and others) we hold that rule of equality under Article 14 of the Constitution does not mean mathematical equality and that it permits of practical inequalities. Therefore, when selection or differentiation is not arbitrary but through a statutory process of the Government, irrational basis to offend Article 14 of the Constitution is unfounded.
97. The next question is with regard to parting with privilege to apex cooperative body and by it to a private body. Firstly, we have to make a note hereunder that there is no challenge about selection of apex cooperative body. Hence, we are not answerable about selection of cooperative body even remotely. The petitioners contended that apex cooperative body has been directed to make joint venture partnership of such society for the purpose of the rules not with private party. If it does so, right of the petitioners under Article 19(1)(g) of the Constitution, if not, under Article 14, will be available to the petitioners to challenge the same. It is further argued that by such process, a monopoly has been created debarring the petitioners. Therefore, it is a colourable exercise of power. We find a seven Judges'' Bench of the Supreme Court in 1977 (4) SCC 98 (R.S. Joshi, Sales Tax Officer, Gujarat and others Vs. Ajit Mills Limited and another) even borrowing international references has categorically held that Courts should not substitute their social and economic beliefs for the judgement of the legislative bodies in construing statutes. Moreover, there is a presumption of constitutionality of statutes. The professed object of the law is clear. The motive of the legislature is irrelevant to castigate an Act as a colourable device. For the time being let us assume that there is no existence of joint venture partnership between a private party and the apex cooperative body and when in further no challenge has been thrown in respect of formation of apex cooperative body in the statutory rule, whether a question of monopoly can be raised. Our answer is"No". The selected cooperative society is an apex body under Section 2(a4) of the U.P. Cooperative Societies Act, 1965. An apex cooperative body can undertake any business in accordance with the law laid down herein without disturbing the service to be rendered to its member cooperative societies following the principle of Section 123A of the Act, 1965. An apex cooperative society and a primary cooperative society are distinct and different. Only for some administrative exigencies apex cooperative society controls primary societies as per Section 123A and such apex cooperative society is controlled by the Government. It undertakes any business if the State calls upon as per the law promulgated for its benefit. We want to say that the relevant rule permits joint venture partnership of such society with others without clarifying the position whether it is society or corporation, body corporate, firm or company, etc., which can not be construed as cooperative society alone. When such insertion is not there, it can be safely construed that it can do the business with any body, provided the cooperative body is satisfied with the joint venture partner. It is the satisfaction of the apex cooperative body. No body can interfere with it. Being an instrument of the State Government, if the cooperative body is satisfied to do the business without sharing any control and management as per the policy and statutory rules but for the economical growth of the State, no body has any right to say anything in this regard. It is an experimental economic policy of the State with its privilege for the excise year 200910 with the present outlook of the society and in future the Government may rethink and proceed accordingly. Sales tax and excise revenue are the main source of earning of the State exchequer admittedly. Therefore, trial and error method of the Government for the economical growth is not required to be interfered with. In the case of economic policy of the State, judicial restraint is obvious.
98. Out of various apex cooperative societies, M/s. U.P. Cooperative Sugar Factories Federation Limited has been selected amongst others by the State Government. No body opposed the factum that the State Government is holding 76% share in the selected Apex Cooperative Body. The State Government has its prerogative to select one of its instrument to do business. Intention of the State Government is to do business directly through its instrument holding at least 51% share so that control and safety of the excise revenue can not be loosen. There is no question of parting with privilege as such since it is Government''s own instrument. It is open for the State Government whether it will do business through several licences or one licence i.e. its own instrument. Petitioners have no locus standi to challenge the same. In other words, privilege, if any, is parted with its own instrument i.e. the apex cooperative body of the State not with any outsider. Parting with privilege is permissible under Section 26 of the Act. But by allowing apex cooperative body with joint venture partner, the State might have parted with privilege to do business but never intended to part with control and management. Since it is a case of Government or its instrument, it was necessitated to incorporate aspect of joint venture partnership with private party in the policy and statutory rules. Had it not been the case of Government or its instrument, there was no necessity to incorporate such part in the statutory rule. For an example, when the petitioners/licensees were allowed to do business, the Government never enquired about persons behind the screen or giving financial support on their back because it was not necessary for the Government. But when Government itself wanted to do business in same manner having clarified the position in the body of the statutory rule, no question can be raised by them. It is far more transparent. The selected apex cooperative body has categorically contended that it has no adequate fund for the purpose of carrying on such business. Hence, as per the Demarcation Rules, 2009 it can select a joint venture partner. It has selected M/s. Amethyst Town Planners Pvt. Ltd. for the same. The State Government is supposed to receive Rs.400 crores or more from them through the apex cooperative body. The money will go to the State exchequer on anticipation of carrying on business for the excise year 200910 on experimental basis unlike the other years when they have to collect the excise revenue for the entire year from several comparatively smaller traders which might be hazardous. Therefore, earning of such revenue by the State exchequer or doing business in the manner as proposed can not be called as colourable exercise of power but a different policy and statutory rule of Government which can not be questioned by the traders unlike other trades not covered by res extra commercium. Moreover, in absence of joint venture partnership if they can not question about selection of apex cooperative body, question of monopoly can not also be raised by them because such private party has not been allowed to do business independently but being part of it. Since the instrument of the Government has no much of money, it has made an understanding with a joint venture as per the statute itself. The petitioners being the licensees either before or after obtaining the licence or at the time of grant of such licence can take a private financial help to do the business without disclosing their identity and nature of finance. There is no bar. Therefore, why there should be a bar to the apex cooperative society when the statute itself permits to do so. At least identity of the private party will be disclosed and amount of financial help will be known. Answer to this fundamental question is absent in the entire argument advanced by the petitioners. There is an apprehension in the mind of the petitioners. Is it the apprehension that in case the apex cooperative body with joint venture partnership can not do the retail business for the entire special zone, they may engage themselves under them and if it is done, negotiable rates might be higher and perpetuity of the business might not be allowed. If it is so, we can not extend our hands to that extent.
99. In respect of selection of joint venture partnership following allegations are categorically made against an individual in the leading writ petitions i.e. in paragraph25 of Civil Misc. Writ Petition No. 815 of 2009 (Rajesh Gupta Vs. State of U.P. and others), paragraph15 of Civil Misc. Writ Petition No. 487 of 2009 (Anand Rathore and others Vs. The State of U.P. and other), and paragraphs9 of Civil Misc. Writ Petition Nos. 574 of 2009 and 582 of 2009 both (Ashok Kumar Jaiswal and others Vs. State of U.P. and others), as under:
"25. That the action of the State Government is nothing but capricious and colourful exercise of power tainted with malafide, which is aimed to illegally enrich the respondent no. 4, with whom there may be certain extraneous commitment for siphoning of the funds to the higher ups in the party, which is in power and it is the only reason as to why such a Policy has been drawn up."
"15. That from the perusal of the aforesaid policy, it is clear that respondents with some vested interest and in a very calculative manner created a separate special zone for justifying their arbitrary, malafide and illegal actions and give benefit to the members of the old liquor syndicate mafias on extraneous considerations."
"9. That Apex Cooperative Society/Corporation has given liberty in the new excise policy for the special Meerut Zone with Bareilly charge to create joint venture, implying thereby that any private individual/liquor Mafia may be associated with such Apex Cooperative Society/Corporation...."
"9. That Apex Cooperative Society/Corporation has given liberty in the new excise policy for the special Meerut Zone with Bareilly charge to create joint venture, implying thereby that any private individual/liquor Mafia may be associated with such Apex Cooperative Society/Corporation...."
100. So far as paragraph25 of writ petition of Rajesh Gupta as aforesaid is concerned, the supporting affidavit says that the statement in such paragraph is based on the personal knowledge of the petitioner. With regard to the statement made in paragraph15 of the writ petition of Anand Rathore the supporting affidavit speaks that it is on the basis of the information received. So far as paragraph9 of C.M.W.P. No. 574 of 2009 in re: Ashok Kumar Jaiswal is concerned, the supporting affidavit says that such statement is based on perusal of record and legal advice when the similar statement in paragraph9 of C.M.W.P. No. 582 of 2009 in re: Ashok Kumar Jaiswal is based on record only.
101. Initially the individual against whom the allegations are made, was made party respondent no. 4 in three writ petitions excepting the writ petition of Anand Rathore, but subsequently when the joint venture company was made party and when they have submitted that such private party is neither Director nor shareholder of the company and as such unnecessary party, attack has been switched over by the petitioners towards the joint venture company. According to us, irrespective of the question of privilege of the State with regard to res extra commercium whenever there is a question of fiscal policy of the State, apprehension of fraud, connivance, clandestine act and malafide exercise of power are usual allegations. It is very easy to allege but it is very difficult to prove such allegations. It requires full particulars. The writ Court can not make roving or fishing enquiry. In other words, mere fact that it will hurt the business interest of the petitioners, will not be enough for the purpose of invalidating the policy. If there is any change in the policy or the position of the rule or legislation is altered, no question of expectation will arise far to say it is legitimate. In effect, in this case having no legal right the petitioners have challenged the legal right of the State Government, which can not be sustained. We can not unnecessarily become proactive and start lifting veil on the basis of apprehension and that too at the instance of the writ petitioners who have personal interest. The only point has been raised that when there was no good background of the company for the earlier years, how the company enriched itself for such huge amount to do the business. This submission itself is based on apprehension. We are keen to give an example in such a situation. Few years back a fiscal policy was adopted by the Government of India to disclose the undisclosed money by the assesses under the Income Tax Act. Many people disclosed the sum and thereby the Government was enriched. Had it been the case for the income tax authority at that juncture that disclosure will be allowed but at the same time there should be identity of the source, such people would not have disclosed those amounts and no question would have arisen for enriching the Government. In this case the tendered or contractual amount of Rs. 400 crores is disclosed amount unlike the above example, therefore, the Court can not make probe wherefrom such sum came to the company because same is the out of scope. Coming back to this case, there are various ways of enquiries if any body is suspected. Both, Central and State investigating agencies are available. Appropriate forums under the Companies Act, 1956 are available. Floor of legislature for deliberation is available. If advised, appropriate public interest litigation can be pursued. But the case before hand, as it is, can not prescribe any such methodology to be adopted by this Court in this proceeding particularly in the teeth of policy of the State about the res extra commercium, which is exclusive privilege. We repeat and say that we should not become proactive in respect of economic policy of the State Government mainly based on excise and sales/trade tax, which are prime source of State exchequer. No trader of liquor continuing with the business for a considerable period can become representative of the weaker section of the people nor any of them acted solely but as syndicate of liquor business. If there is any question of good governance, we have to say it is a relative term and depend upon the nature of the work of the Government on the particular issue for the benefit of the State. It should not be judged on the individual image of any body or on common knowledge. A Government, as a whole, can not be the party to any illegal activity. It is a collective effort. Plurality should be respected.
102. A question has been raised that when proposal was given by the Excise Commissioner on 06th February, 2009 to the State Government and the policy decision has been taken on 11th February, 2009, which has been followed by the statutory rules with immediate effect, and the necessary notification was issued on 12th February, 2009 for the purpose of selection, the State Government has acted in hot haste. Therefore, we have to know what prejudice has been caused to the petitioners by such action. It appears to us, though the rule was made effective immediately but the petitioners have not been affected by any governmental action till expiry of the existing right of the licensees for the entire excise year 200809 on 31st March, 2009 in spite of filing writ petitions before and even not having any interim order from this Court. They have no right after 31st March, 2009. Therefore, proposal, policy, rules and notifications made by the State Government in February, 2009 are in hot haste or urgent need to avoid forthcoming hazard of renewal, is a matter of debate. When the debate exists, a question will also arise what right do they accrue to raise such debate.
103. Economical reform is the order of the day. Indications of selling 49% share to the public in the wake of market economy is welcoming situation. We can refer the speech of the President of India in the inaugural session of the newly elected Government of India. Reflection of the same is there in the budget of the year. It seems that the State Governments are followers of the same irrespective of their political ideology. The Court of law can not counter to put a spanner on the governmental policy. Therefore, publicprivate partnership having majority of the public share is not unknown now. In re: Balco Employees'' Union (supra) a three Judges'' Bench of the Supreme Court held that Courts are not intended to and nor should they conduct the administration of the country.
104. An argument has been advanced even to the extent that partnership between the apex cooperative body and a private party is not in accordance with the Indian Partnership Act, 1932. According to us, the words "joint venture partner" in the Demarcation Rules, 2009 is a nomenclature to refer the other party to any contract or agreement or arrangement or understanding or treaty. Under no stretch of imagination it can be said that unless the Indian Partnership Act, 1932 applies, such type of contract or agreement or arrangement or understanding or treaty will not be acceptable in the eye of law.
105. It is well settled by now that Article 19(1)(g) of the Constitution of India can not be applicable in respect of the exclusive privilege of the State in dealing with the business of intoxicated liquor being res extra commercium. Elimination and exclusion from business is inherent in the nature of liquor business. It can not be attacked merely on the ground of monopoly. Moreover, monopoly can be created in favour of a person excluding other similarly placed persons. Creation of cooperative body by statutory rules to do business with any private joint venture partnership can not be said to be similarly placed persons with the petitioners, who are only interested about renewal of their own liquor business with their limited resources. Joint venture partner has been selected by the selection process i.e. tender. The State can create a monopoly either in itself or in the agency created by it. State itself by its policy and statutory rules wanted to do business with the cooperative body having been controlled and managed by the State. Article 19(6) of the Constitution prescribes a reasonable restriction in this regard. In association with the Constitution Bench judgement of the Supreme Court as reported in AIR 1961 SC 82 (J.Y. Kondala Rao and others Vs. Andhra Pradesh State Road Transport Corporation and others) we hold that under subclause (ii) of Article 19(6), the State can make a law relating to the carrying on by the State or by a corporation, owned or controlled by the State, of any particular business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise. Article 19(6) is only a saving provision and the law made empowering the State to carry on a business is secured from attack on the ground of infringement of the fundamental rights of a citizen to the extent it does not exceed the limits of the scope of the said provision. Subclause (ii) is couched in very wide terms. Under it the State can make law for carrying on a business or service to the exclusion complete or partial or citizens or otherwise. The law, therefore, can provide for carrying on a service to the exclusion of all the citizens; it may exclude some of the citizens only; it may do business in the entire State or a portion of the State, in a specified route (as in the case therein) or a part thereof. Therefore, there is only hope of applicability of Article 14 of the Constitution. Article 14 of the Constitution speaks that the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. Therefore, we have to give an anxious thought whether the same has been done by the State Government or not. Equality before law will be applicable when the persons are equally placed and require equal protection. But intelligible differentia amongst the parties are not restricted. The petitioners are not equally placed with the instrument of the Government itself, which can do business with full freedom along with a private party following the policy of market economy. The Government has made a policy to do the business in such way. In 1997 (7) SCC 592 (M.P. Oil Extraction and another Vs. State of M.P. And others) a question of legitimate expectation arose as against the policy of the Government and consequently applicability of Article 14 of the Constitution in adopting tender, public auction, etc., the Court held that in matters of economic rights and policy decision, the scope of judicial review is limited and circumscribed. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. Moreover, the petitioners have no legal right to get the renewal of their liquor business for the prospective year/s. The very locus standi of the petitioners for renewal of the licences is doubtful. They are continuing liquor business for a considerable period i.e. years after years when Section 36A of the Act totally prohibits and the enabling provision of the rules only permits only one excess year on the basis of individual exigency. Interestingly no participants in the tender has challenged the selection process of the selection. The petitioners never intended to participate in the selection. The petitioners having no legal right in respect of carrying on their liquor business, can not ask for equal protection. In other words, in the instant case the applicability of Article 14 of the Constitution is not independent of Article 19(1)(g) of the Constitution. Article 14 of the Constitution only forbids class legislation but reasonable classification does not come within the prohibition. The citizens have no inherent right to carry on trade of such intoxicant and the same has to be regulated by the State to rise revenue apart from the public health and safety, public interest and public order as well is part and parcel of objects and reasons of the new rules. However, the petitioners are not interested about public health and safety, public interest and public order like public spirited persons but for the business of liquor. Therefore, no question of public health and others in this regard lies in their mouth. The petitioners are trying to catch every straw to escape from drowning.
106. In respect of economic policies, as per the ratio of a nine Judges'' Constitution Bench judgement of the Supreme Court reported in 1997 (5) SCC 536 (Mafatlal Industries Ltd. and others Vs. Union of India and others), the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation (as in such case), if it does so reasonably. The Courts view the laws relating to economic activities with greater latitude than other matters. This view has repeatedly been held by the Supreme Court in other cases also reported in AIR 1962 SC 316 (Collector of Customs Vs. Nathella Sampathu Chetty), AIR 1964 SC 925 (Khyerbari Tea Co. Ltd. Vs. State of Assam), R.K. Garg (supra), 1994 (6) SCC 349 (Gauri Shanker Vs. Union of India) and 1996 (3) SCC 465 : AIR 1996 SC 1219 (Union of India Vs. Sanyasi Rao). Moreover, Mafatlal Industries Ltd. (supra) has followed the ratio of a twelve Judges'' Constitution Bench judgement of the Supreme Court reported in 1973 (4) SCC 225 (His Holiness Kesavananda Bharati Sripadagalvaru Vs. State of Kerala and another), wherein it was held as follows:
"In exercising the power of judicial review, the Courts cannot be oblivious of the practical needs of the government. The door has to be left open for trial and error. Constitutional law like other mortal contrivances has to take some chances. Opportunity must be allowed for vindicating reasonable belief by experience."
107. In association with Mafatlal Industries Ltd. (supra) we hold and say that power under Article 226 of the Constitution has to be exercised to effectuate the regime of law and not for abrogating it. The power under Article 226 is conceived to serve the ends of law and not to transgress them. Every word of the Constitution has to be treated as sacrosanct and respected and obeyed by the State and the legislature and enforced by the Court. If we go through the judgement reported in 1984 (4) SCC 251 (Prabodh Verma and others Vs. State of Uttar Pradesh and others), we shall find the meaning of ''certiorari'', which is a late Latin word being the passive form of the word ''certiorare'' meaning ''inform''. It was essentially a royal demand for information. But a writ of certiorari can never be issued to call for the record or papers and proceedings of an Act or Ordinance and for quashing such Act or Ordinance. Therefore, we have to ascertain in this case whether writ of mandamus can be issued or not. In association with the judgements of the Supreme Court reported in AIR 1962 SC 1183 (Kalyan Singh Vs. State of U.P.) and JT 2002 (3) SC 304 (Director of Settlements, A.P. & ors. Vs. M.R. Apparao & anr.) we also hold that the powers of the High Courts under Article 226 of the Constitution though are discretionary and no limits can be placed upon their discretion, it must be exercised along recognised lines and subject to certain selfimposed limitations. The expression ''for any other purpose'' in Article 226, makes the jurisdiction of the High Courts more extensive but yet the court must exercise the same with certain restraints and within some parameters. One of the conditions for exercising power under Article 226 for issuance of a mandamus is that the Court must come to the conclusion that the aggrieved person has a legal right, which entitles him to any of the rights and that such right has been infringed. In other words, existence of a legal right of a citizen and performance of any corresponding legal duty by the State or any public authority, could be enforced by issuance of a writ of mandamus far to say about the wednesbury reasonableness being basis of the legitimate expectation as held by the Supreme Court in numerous judgements inclusive of one reported in 1999 (4) SCC 727 (Punjab Communications Ltd. Vs. Union of India and others). The decisionmaker has the choice in the balancing of the pros and cons relevant to the change in policy. It is, therefore, clear that the choice of policy is for the decisionmaker and not the Court.
108. Therefore, in totality, when the balance of convenience is tilted in favour of the respondents, the petitioners can not be held to be successful either in general zone category or in model shop category or in special zone category. Accordingly, all the writ petitions are dismissed, however, without imposing any cost.
109. In any event, passing of this order will no way affect redressal of grievance of any individual on account of any exigency by the appropriate authority in accordance with law.
110. the writ petition is dismissed, however, without imposing anyu cost.
I agree.
(Justice Rajes Kumar)
