@JUDGMENTTAG-ORDER
Shivashankar Bhat, J.@mdashThe petitioners before us include, manufacturers, wholesale dealers, retail vendors, importers, consumers etc., of liquors. They assert that they are affected by the enforcement of certain Rules, made under the provisions of the Karnataka Excise Act, 1965 (referred as ''the Act'', hereinafter). The Rules, under challenge are:--
(1) Karnataka Excise (Distillery and Warehouse) Amendment Rules, 1989;
(2) Karnataka Excise (Brewery) (Amendment) Rules, 1989;
(3) Karnataka Excise (Manufacture of Wine from Grapes) (Amendment) Rules, 1989;
(4) Karnataka Excise (Sale of Indian and Foreign Liquors) (Amendment) Rules, 1989; and
(5) Karnataka Excise (Bottling of Liquor) (Amendment) Rules, 1989.
2. The main attack is against the provisions now made for licencing of a sole distributor, which is to be a Government owned or controlled company as may be specified by the Stale Government. The relevant Rule is introduced by substituting clause (11) to Rule 3 by the Karnataka Excise (Sales of Indian and Foreign Liquors) (Amendment) Rules, 1989 (for short, referred as ''IFL Rules'')- The added provision reads as follows:--
"(11) Distributor Licence -- (a) A licence shall be granted by the Excise Commissioner for the whole of the State or any part thereof to deal in the products of all distilleries or breweries or wineries in the State or to import liquor from outside the State for the purpose of distribution or sale within the State or as the case may be or part thereof or to export liquor outside the State. The licenses shall establish not less than one depot in each district within the State or, as the case may be, within the part of the State, as the Excise Commissioner may specify in this behalf.
(b)The licence under this clause shall be issued only to such company owned or Con trolled by the State Government as the State Government may specify.
(c) The licence shall be in Form CL. 11 and shall be subject to renewal each year at the discretion of the Excise Commissioner.
(d) The Excise Commissioner may also permit the licencees to sell foreign liquor.
Notwithstanding anything contained in this clause, the licenses under this clause granted for the year 1989-90 shall be valid until the licence is surrendered or cancelled or withdrawn under Sections 29, 30 and 31 of the Act and with same terms and conditions already prescribed."
3. Simultaneous amendments to other ''relevant Rules were also made. By virtue of these amendments, the licencees under the Brewery Rules, Distillery and Warehouse Rules, Manufacture of Wine from Grapes Rules, are barred from selling liquor, beer or wine, as the case may be, to any person other than one holding a distributor licence or export liquor outside the State. Exception is made for the sale directly to the military. In the case of wine manufacturers, the amended Rule, permits the licencees to sell bulk wine to a person holding a retail wine licence or to a governmental pharmaceutical unit which is engaged in manufacture of tonic utilising bulk wine. A beer manufacturer, is also permitted to sell draught beer to a person holding retail vend of beer licence.
4. IFL Rules provide for licencing of various dealers. Licence in Form CL. 1 pertains to "wholesale licence for vend of Indian Liquors other than arrack or foreign liquor or both". Earlier, this licence provided for purchase of the liquor by the licencee only from licenced distillery brewery/wines, located within the State and/or from a licenced distributor having CL. 11 licence (vide condition No. 3 of the earlier Form CL. I) and CL. 1 licenses-shall sell liquor to persons holding CL. 2, CL-. 4 to CL/7B, CL. 9 and CL. 10 licencees.. Cl. 2 is the form of the licence for retail shop for vend of Indian liquor. Clause (11) of the Rule 3 provided for the licencing of a Bonder Warehouse, add this clause was replaced in June 1988, by providing for a distributer''s licence in Form CL. 11 This again, is now replaced by the substituted clause, extracted already. Condition-2 in the new Form CL. 11 provides for this distributor to purchase liquor from distilleries/breweries/wineries located in Karnataka or import from outside the State. Similarly, condition N6.3: provides for the distributor to sell the liquor only to a person holding CL. 1 licence in the State or export liquor to a person outside the State, who is holding a valid licence to deal in liquor.
5. As per licence in Form CL. 1, the said licencee shall carry on business only within the area specified in the licence and sell only the approved brands of liquor.
Thus, it is clear that import of liquors from outside the State (subject to Sec. 8 and another Rule governing the import) or export from the State of Karnataka, can take place only through the distributor licenced under the amended Rules. Similarly, all liquors (governed by the several aforesaid Rules) could enter the market only through the distributor. The first stage in the internal marketing operation regarding these goods, in Karnataka, will be with the distributor; in other words, the goods would enter the stream of trade only through the distributor in this State. The onward journey of the liquor, to the consumers in the State or outside the State, is to be only through the distributor.
6. The sole distributor, which is to be a Government controlled corporation appointed in this case is the Mysore Sales International Ltd. (for short, ''MSIL'').
7-8. However, the amending clause in IFL Rules saves current CL. 11 licenses during the year 1989-90; unless those licenses are surrendered or cancelled, or withdrawn under Sections 29, 30 and 31 of the Act. This provision for surrender, cancellation or withdrawal is there, obviously, to clarify that the continuation of the current licenses does not give them any higher protection than the one, they had prior to the amendment. Thus, it is clear that the existing CL. 11 licence holders are permitted to operate during 1989-90. To illustrate :---
By virtue of the amendment made to Brewery Rules notified on 16th March 1989, the licencee under the Brewery Rules had to sell beer only to persons holding a distributor licence or a wholesale licence (including a licence holder for wholesale of any other State); certain exception was made regarding the sale of bulk beer (draught beer). Under the impugned Rules, which amended the Brewery Rules now (in September 1989) Rule 3A is introduced, which says that no licencee under the Brewery Rules shall sell beer to any person other than the one holding a distributor licence or export liquor outside the State {certain exceptions ate made regarding draught beer and sale to the military). Therefore, during the year 1989-90 there is no bar against the sale by the holder of a licence under the Brewery Rules, to any of the CL. 11 licencee (subject to other conditions found in those licenses); no compulsion is imposed on the manufacturers to sell the liquor only to the governmental agency which holds the CL. 11 licence during 1989-90. To the same effect are the impugned amendments made to other two Rules called (i) Karnataka Excise (Distillery and Warehouse) Amendment Rules, and (ii) Karnataka Excise (Manufacture of Wine from Grapes) (Amendment) Rules. Therefore, till the end of the year 1989-90, the existing CL. 11 licencees also continue to be the ''distributors''. The exclusiveness of the MSIL as the distributor would, in effect, come into operation only from the excise year 1990-91.
9. The amendment made to the Bottling of Liquor Rules, provides for affixation of the excise adhesive label on the sealed bottle. The cost of affixation has to be borne by the licencee and to he affixed in the presence of the Warehouse Officer. This is challenged as an unreasonable one; this also results in increasing the cost of liquor. Since sealing of the bottle sufficiently safeguards the interest of the Revenue, labelling in this manner, is attacked as superfluous and the impugned Rules are attacked as arbitrary. This contention on the face of it is unacceptable and hence we are not considering it further. Affixation of excise label is a recognised mode of safeguarding the interest of the revenue. Even when bottles are sealed, affixation of an adhesive label would, to a very large extent, enable the prevention of evasion of payment of tax. The cost per bottle in this regard, is not only insignificant, but also irrelevant.
10. The main contentions urged in support of these writ petitions may be broadly stated as follows : --
(I) The fundamental right to trade and do business in liquor is affected adversely by the impugned Rules. Further these Rules offend the provisions of Articles 301 and 304 of the Constitution.
(II) The Rules are ultra vires the provisions of the Act. Creating an exclusive distributorship is a matter of major policy which should be evolved and effectuated only by a law enacted by the legislature. There is no nexus between the objects and reasons behind the making of the Rules and the actual Rules made. The Rules do not advance any social purpose and hence unwarranted.
(III) The Rules are violable of Article 14 of the Constitution, as, they are arbitrary, unreasonable and are a colourable exercise of power. When there is no elected "popular government" in office, making of the rules and their enforcement are constitutionally improper, and this factor should be taken into consideration while testing the reasonableness of the rules and the background to the exercise of the power to make the Rules.
The appointment of MSIL as the distributor, without any Rules or scheme to guide its functioning, is arbitrary. MSIL has neither the expertise nor the infrastructure to carry out the enormous task of the sole distributorship in the State.
The Rules are unreasonable and hence arbitrary. The Rules are made to destroy a particular manufacturer of liquor in the State.
(IV) Rules take away the right accrued to the existing licencees, by diverting the said right in favour of the sole distributor (MSIL) and no compensation whatever is being paid to the existing licencees. The impugned Rules, offend Article 300-A of the Constitution of India.
The State Government is estopped from making and enforcing the impugned Rules, during the currency of the existing licenses issued to various petitioners. The enforcement of the Rules should be postponed till after the expiry of the period of the existing licenses.
Vesting of distributorship in the State owned Corporation, results in the State indulging in an activity in contravention of Art. 47 of the Constitution.
(V) A few incidental questions.
Re. Contention No. I.
11. This involves the consideration as to whether dealing in liquor is a ''trade'', ''business'' or ''commerce'', in terms of the Indian Constitution:
In
"Laws prohibiting trades in noxious or dangerous goods or trafficking in women cannot be held to be illegal as enacting a prohibition and not a mere regulation. The nature of the business is, therefore, an important element in deciding the reasonableness of the restrictions. The right of every citizen to pursue any lawful trade or business in obviously subject to such reasonable conditions as may be deemed by the governing authority of the country essential to the safety, health, peace, order and morals of the community. Some occupations by the noise made in their pursuit, some by the odours they engender, and some by the dangers accompanying them, require regulations as to the locality in which they may be conducted. Some, by the dangerous character of the articles used, manufactured or sold, require also special qualifications in the parties permitted to use, manufacture or sell them."
Thereafter, the Court held:--
"Elimination and exclusion from business is inherent in the nature of liquor business and it will hardly be proper to apply to such a business principles applicable to trades which all could carry. The provisions of the regulation cannot 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 in liquor."
"We, therefore, hold that dealing in liquor is business and a citizen has a right to do business in that commodity; but the State can make a law imposing reasonable restrictions on the said right, in public interests."
12. However, subsequently, the Supreme Court expressed a definite and different view in several decisions. It is sufficient, if two of them are referred here.
In
"Recently, in
Again, after 3, few sentences:
"Since
(Underlining is ours)
In the decision reported in
13. Applicability of Art. 14 is under a different context. The right flowing out of Art. 14 is by virtue of the requirements of fairplay, reasonableness, unarbitrariness, equality etc., in any State action. The State cannot pick and choose for the conferment of the privilege to trade in liquor, arbitrarily. The choice has to be based on reasonable norms. But, while testing the legality and reasonableness of such a State action, the scope of judicial scrutiny is limited, as observed at p. 279 (in Nandalal''s case):
"But, while considering the applicability of Article 14 in such a case, we must bear in mind that, 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 licenses 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 licenses for manufacture and sale of liquor would essentially be a matter of economic policy where the court would hesitate to intervene and strike down what the State Government had done, unless it appears to be plainly arbitrary, irrational or mala fide."
After some discussion, and reference to R. K. Garg''s case AIR 1981 SC 2138, the Supreme Court proceeded to observe (at p. 280, para 33):
"What we said in that case in regard to legislation relating to economic matters must apply equally in regard to executive action in the field of economic activities, though the executive decision may not be placed on as high a pedestal as legislative judgment in so far as judicial deference is concerned. We must not forget that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call ''trial and error method'' and, therefore, its validity cannot be tested on any rigid ''a priori'' considerations or on the application of any strait-jacket 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 problems of Government'' as pointed out by the Supreme Court of the United States in Metropolis Theatre Company v. State of Chicago (1912) 57 Law ed. 730 ''are practical ones and may justify, if they do not require, rough accommodations, illogical, it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not discernible, the wisdom of any choice may be disputed or condemned. Mere errors of Government are not subject to our judicial review. It is only its palpably arbitrary exercise which can be declared void''. The Government, as was said in Permian Basin Area Rate cases (1968) 20 Law ed 2d 312, is entitled to make pragmatic adjustments which may be called for by particular circumstances. The Court cannot 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. It is against the background of these observations and keeping them in mind that we must now proceed to deal with the contention of the petitioners based on Article 14 of the Constitution."(Underlining is ours)
14. As to the nature of the liquor trade, this Court observed in
"All kind rights to deal in intoxicants (which is also referred here as liquor) this, basically belong to the State. By granting a licence to deal in liquor, a privilege is conferred on the licencee to deal in liquor to the extent permitted by the licence, A person, in possession of Or dealing in any liquor without any licence from the State, indulges himself in an activity which he is not entitled in any manner and such a person, is deemed to exercise a privilege which exclusively vest in the State. It is a grave misconduct, enormity of which requires severe deterrent to prevent repetition of such an activity by the said person and others."
(Underlining is ours)
It is, thus clear that none has a fundamental right to trade or do business in liquor. As in the case of gambling activities, though dealing! in liquor has "the external forms, formalities and instruments of trade", the activities are in fact "extra-commercium", (as observed, regarding gambling activities in
Relying on D. Nettakallu v. State of Mysore ILR (1964) Mys 697 it was argued that, assuming that there is no fundamental right to trade in liquor, the right accrues to a licencee as and when the State parts with its privilege and permits others to trade in liquor. In such a situation, since the State permits trading in liquor as lawful, it would necessarily follow that it is a fundamental right.
This contention ignores the nature of a fundamental right. It is a right which inheres! every person in the country and recognised by the Constitution; fundamental right cannot: be created by a statute. A right or privilege created by the legislature or by a statute will be a statutory right; it cannot have the status; of a fundamental right.
The words ''trade'' and ''commerce'' or ''business'' used in the Constitution, should be applicable only to those classes of dealings or activities which are recognised as subjects of fundamental rights.
In view of the ''sea change'' undergone in the law on the subject, as observed by the Supreme Court, the earlier decisions cannot be followed as binding precedents.
To reiterate, we hold that the business in liquor is not per se lawful except when carried on under licence or permit and thus no right inheres in any individual to carry on trade in noxious or dangerous drugs. A licence granted for carrying on trade in such noxious drugs allows the person or licencee to carry on the activity of dealing in liquor. But grant of licence to carry on such activity does not by itself take away the pernicious character of the activity as such. As it is not possible to eradicate this evil, it is tolerated by the grant of licence. Neither the inherent obnoxious quality of the activity is erased nor a socially acceptable characteristic injected into it, by the licence. The moment the licence expires, cancelled or withdrawn the right or privilege gets extinguished. Therefore, such a privilege granted cannot be elevated to the status of a right either for the purpose of Art. 19(1)(g) or for the purpose of Art. 301. The State may completely prohibit the trade or impose severe restrictions on such business. Only those persons who are ready and willing to comply with such strict, severe and stringent conditions are enabled to carry on the activity. This position is made clear by the Supreme Court itself in
15. A distinction was however sought to be made between the freedoms guaranteed under Articles 19(1)(g) and 301 of the Constitution. It was submitted that while the right available under Art. 19(1)(g) is a fundamental right of a citizen, though there may be no such right in view of the decisions referred to above, the protection offered by Art. 301 is entirely different; object behind Article 301 was to ensure the economic unity of the country by guaranteeing freedom of trade, commerce and intercourse throughout India. It is submitted that Art. 301 deals with the question as to how trade, commerce and intercourse is to he carried on between one place and another, inside or outside the State. Art, 301 protects the collective rights of trade or business as a whole while Art. 19(1)(g) speaks of a freedom guaranteed to a citizen. We are unable to accept this contention. In the decision known as
In
"We have no doubt that there arc certain activities which can under no circumstance be regarded as trade or business or commerce although the usual forms and instruments are employed therein. To exclude those activities from the meaning of those words is not to cut down their meaning at all but to say only that they are not within the true meaning of those words. Learned counsel has to concede that there can be no ''trade'' or ''business'' in crime but submits that this principle should not be extended and that in any event there is no'' reason to hold that gambling does not fall within the words ''trade'' or ''business'' or ''commerce'' as used in the Articles under consideration.
The question arises whether our Constitution makers ever intended that gambling should be a fundamental right within the meaning of An. 19(1)(g) or within the protected freedom declared by Art. 301."
Thereafter, at para-42, it was held:
It will be abundantly clear from the foregoing observations that the activities which have been condemned in this country from ancient times appear 10 have been equally discouraged and looked upon with disfavour in England, Scotland, the United States of America and in Australia in the cases referred to above.
We find it difficult to accept the contention that those activities which encourage a spirit of reckless propensity for making easy gain by lot of chance, which lead to the loss of the hard earned money of the undiscerning and improvident common man and thereby lower his standard of living and drive him into a chronic state of indebtedness and eventually disrupt the peace and happiness of his humble home could possibly have been intended by our Constitution makers to be raised to the status of trade, commerce or intercourse and to be made the subject matter of a fundamental right guaranteed by Art. 19(1)(g).
We find it difficult to persuade ourselves that gambling was ever intended to form any part of this ancient country''s trade, commerce or intercourse to be declared as free under Art 301. It is not our purpose nor is it necessary for us in deciding this case to attempt an exhaustive definition of the word ''trade, ''business'' or ''intercourse''''.
We are, however, clearly of opinion that whatever else may or may not be regarded as falling within the meaning of these words, gambling cannot certainly be taken as one of them. We are convinced and satisfied that the real purpose of Arts. 19(1)(g) and 301 could not possibly have been to guarantee or declare the freedom of gambling. Gambling activities from their very nature and in essence are extra commercium although the external forms, formalities and instrument? of trade may be employed and they are not protected either by Art. 19(1)(g) or Art. 301 of our Constitution."
The reasoning equally applies to dealings in liquor and in fact
Therefore, a licence to deal in liquor cannot result in the creation of a fundamental right to trade under Article 19(1)(g) of the Constitution, nor, the said licence result in elevating the activity of dealing in liquor to the status of constitutionally recognised trade or business.
16.
17. While invoking Articles 301 and 304 of the Constitution, a decision reported in Vijaya Wine Stores v. State of Karnataka (1975) 1 Kar LJ 170 was cited. The petitioner therein obtained a permit at Mahale (not in Karnataka State) to transport liquor from Pondicherry to Mahale. The route passed through Karnataka. While in transit, at Mysore, the goods were seized, as there was no valid permit for transportation issued by this State''s authority. This Court permitted the petitioner to make an application for the appropriate permit; but the Excise Commissioner rejected the application. Hence a writ of mandamus was sought for the permit.
The Excise Commissioner suspected the permit issued by the authority at Pondicherry; however, the genuineness of the permit was, in fact, not verified. This Court found, that the said permit was a genuine permit. The contention of the Excise Commissioner, that there is no fundamental right in a citizen to carry on the trade and business in liquor, was negatived by relying on
"As observed by the Supreme Court, the fact that the goods are dangerous may give a guidance with regard to the nature of restrictions that may be imposed, but it cannot limit the scope of the right. Any restriction that is imposed must sub-serve some public interest. It is only then it may be said that the restriction is a reasonable one. I do not understand what public interest S. 12 has to subserve if it is to be interpreted that a person carrying liquor through the State of Karnataka should go to the Deputy Commissioner in each District, through which he passes, for obtaining a permit. Even if Section 12 is to be held as imposing a restriction, I am of the view that the said restriction is unreasonable and it is liable to be struck down under Article 19(1)(g) of the Constitution. It is the ordinary rule of interpretation of the Constitution and the laws that if it is possible by reading down a particular provision of law to save it from the mischief of unconstitutionally, the Court should do so. ''Reading down has the practical effect that where an Act is expressed in a language of generality which makes it capable, if read literally, of applying to matters beyond the relevant legislative power, the Court will construe it in a more limited sense so as to keep it within power'', (see Howard on Australian Federal Constitutional Law, 1968, page 8). Read in that way, it has to be held that Sec. 12 applies only to movement or transport between the places in the Slate and not to a case of inter-State movement of transport. 1 am. therefore, of the view that the case of the petitioners does not fall within the scope of S. 12. No other provision of law has been brought to my notice by the respondents, which entitles them to seize the goods in question."
(Emphasis is ours)
The above decision was based on the observations in Krishnakumar Narula''s case, which, we have already noticed, is not the present law as accepted by the Supreme Court subsequently. The conclusion reached in Vijaya Wine Store''s case, no doubt, is justifiable by the application of Art. 261 of the Constitution read with Sec. 12 of the Act. The impugned action and the inaction of the Excise Commissioner in Vijaya Wine Store''s case, also could DC, stigmatised as arbitrary and unreasonable.
18. Assuming Arts. 301 & 304 are attracted, we are of the view that, the law here is enacted by the Legislature which has received the assent of the President. Under Art. 304(b) of the Constitution, the restrictions on the freedom of trade, commerce or intercourse, in the public interest may be imposed by the ''legislature of a State by law''. The contention urged was that a subordinate legislation is not a law made by the legislature of the State and therefore the restrictions imposed by the impugned Rules contravene Art. 304(b) of the Constitution (on the assumption that the said Article is attracted to the liquor trade). We do not accept this contention. A subordinate legislation, if valid, and treated as if enacted in the Act, has the same force as the statute which enabled its making. When making of such a Rule falls within the statutory purposes, the restrictions imposed, by such a Rule has to be held as the one imposed by the law made by the legislature. Sec. 71(3) of the Act declares the rule to have effect as if enacted in the Act. It reads:
"71(3): A rule under this Act may be made with retrospective effect and when such a rule is made the reasons for making the rule shall be specified in a statement laid before both Houses of the State Legislature. Subject to any modification made under sub-section (4), every rule made under this Act shall have effect as if enacted in this Act."
19. At least, in two decisions, the Supreme Court held that the law contemplated by Art. 304(b) includes such a statutory Rule. In
"This rule was made by the Governor in the exercise of power conferred on him under S. 19 of the Act and would therefore have statutory force, in fact sub-s. (5) of S. 19 provides that the rules shall have effect as if enacted in the Act. We therefore do not agree that R. 16 is not a law which would fall within a law made by the State Legislature."
In
"Rule SC has been made by the State Government by notification in the official Gazette, pursuant to the power conferred upon it by Section 15 of the Act. A statutory rule, while ever subordinate to the parent statute, is, otherwise, to be treated as part of the statute and as effective. ''Rules made under the 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''.
Thereafter, the Supreme Court proceeded to distinguish
Therefore, having regard to the language of Sec. 71(3) of the Act and its effect, a valid Rule made under the Act has to be treated, for all purposes, as a law made by the State legislature and consequently the contention based on this aspect of Art. 304(b) of the Constitution, is liable to be rejected.
20. Since
(i) Making a Rule which is perfectly in order cannot be by itself, considered as a misuse of the Rule making power, if it advances the interest of a State, which really means the people of the State. The contention, that, the Rule created a monopoly in the State, is based on the self-interest of the State, was negatived (vide para-6).
(ii) Whenever there is a switchover from "private sector'' to ''public sector'', it does not necessarily follow that the change of policy requiring express legislative sanction is invoive''d. It depends on the subject and the statute (vide para-9).
(iii) The concept or ''Regulation'' envisaged by the Statute, would comprise within it, the power to ''prohibit''. Much depends on the context in which the expression is used in the statute and the object sought to be achieved by the contemplated regulation. "In modern Statutes concerned as they are with economic and social activities, ''regulation'' must, if necessary, receive so wide an interpretation that in certain situations, it must exclude competition to the public sector from the private sector" --- (vide para-10).
Therefore, entrusting the sole ''distributorship'' to a governmental company, by itself as a principle of law, cannot be held to be arbitrary; not the policy behind it, as a major shift in the ''policy'' which, only the State legislature could evolve and effectuate.
21. By referring to Black''s Judicial Dictionary and a treatise "Jural relations", Sri Janardhan contended that, liquor is a commercial commodity and dealing in it is trade or commerce. Reference was also made to certain observations in a decision of Madras High Court.
(22) We have already referred to the recent; decisions of the Supreme Court and opined that, the dealing in liquor cannot be considered as a trade or business for purposes of Art. 19 of the Constitution. We are also of the view that, for purposes of Art. 301 dealing in liquor cannot be extended the status of ''trade'' or ''commerce''. Dealing in liquor in all its aspects is the inherent privilege of the State and when the State exercise an aspect of the privilege of dealing in liquor, any incidental effect of such State dealing cannot be held as attracting the provisions of Art. 301 or 304 of the Constitution. Here, State has reverted to itself the privilege to deal in liquor in the State, as a ''distributor''. Any one who has to send the intoxicant into this State has to respect and abide by the State''s privileges. The free flow of dealings, i.e., trade and commerce which are sought to be protected by Art. 301, cannot be extended to dealings in goods which are inherently dangerous to health and morality of the people and hence cannot be considered as recognised articles of trade.
23. It cannot be said that the retention of its exclusive privilege to deal as a distributor of liquor, by having the privilege retained by it exclusively is not in public interest. The effect of the Rules is to activise the functioning of the State in the sphere of its own privileges. The resulting restriction, if any, on the alleged rights of others, cannot be held to be unreasonable, nor as against the public interest. Its effect on the inter-State trade, commerce or intercourse assuming Art. 301 is attracted, is only incidental, remote and not direct.
RE. CONTENTION NO. II.
24. Before considering the contentions falling under this category, it is necessary to refer to the decision of the Supreme Court in Indian Express News Papers (Bombay) Pvt. Ltd. v. Union of India AIR 1989 SC 515 from which the scope of testing a subordinate legislation, may be culled out as follows: (Paras 73 and 76)
(i) "A piece of subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a competent legislature. Subordinate legislation may be questioned on any of the grounds on which plenary legislation is questioned. In addition it may also be questioned on the ground that it does not conform to the statute under which it is made. It may further be questioned on the ground that it is contrary to some other statute. That is because subordinate legislation must yield to plenary legislation. It may also be questioned on the ground that it is unreasonable, unreasonable not in the sense of not being reasonable but in the sense that it is manifestly arbitrary.
(ii).....On the facts and circumstances of a case, a subordinate legislation may be struck down as arbitrary or contrary to statute if it fails to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the Statute or say, the Constitution. This can only be done on the ground that it does not conform to the statutory or constitutional requirements or that it offends Art. 14 or Article 19(1)(a) of the Constitution. It can not, no doubt, be done merely on the ground that it is not reasonable or that it has not taken into account relevant circumstances which the Court considers relevant."
In the instant cases, however, Art. 19(1)(g) will not be attracted, as has already been held by us earlier.
26. The petitioners contend that, the Act nowhere provides for the creation of monopoly of distributorship; it was contended that the Act, in fact contemplates grant of several licenses for the sate of intoxicating liquor. For this purpose, particularly Sections 13, 14, 15 and 71 were referred. It was also pointed out that the object of the Act is only to provide for a uniform Excise law in the State of Karnataka, and no other social objective is stated in the preamble to the Act.
The preamble states that,--
".....it is expedient to provide for a uniform law relating to the production, manufacture, possession, import, export, transport, purchase and sale of liquor and intoxicating drugs and the levy of duties of excise thereon, in the State of Karnataka, and for certain other matters hereinafter appearing",
26. The purpose of any excise law, includes, an object to regulate the manufacture and dealing in liquor and control of other activities connected with the intoxicating liquor. These objects need not be elaborated specifically in the preamble. Though, excise, primarily mean taxation, concept of an excise law comprises within it, any law pertaining to production, and other subjects such as possession, import, export, transport, purchase and sale of liquor etc. The word ''law'' used here, itself is of a wide amplitude. As observed in
27. Section 13 of the Act says that no person shall manufacture etc., of excisable article except under a licence. It was argued that this does not refer to the sale of liquors; it was also argued that this section does not envisage a State monopoly in respect of the subjects covered by it. Section 15 governs the sale of excisable articles and requires licence for the sale of any intoxicant. The learned counsel for the petitioners contended that, here, again, creation of a monopoly for the sale of liquor was not contemplated. By referring to Sec. 15(2) it was contended that the licence for sale shall be granted, by the authorities stated therein and the word ''shall'' imposes an obligation to grant the licence for sale of intoxicants. Proviso to Sec. 15(2) was relied on to contend that a licence for sale granted under the Excise law in force in any other State nay be deemed to be a licence under the Act, subject to such conditions as may be determined by the Excise Commissioner. Sec. 16 was referred to point out that whenever, State has to establish a distillery, sa''me was specifically provided for. Regarding Sec. 17, which vests a power in the State Government to lease to any person the exclusive or other right of manufacturing of supplying liquor by wholesale or of both, it was contended that, it requires a lease of the right and under the said provision, a licence cannot be granted straightway by the Excise Commissioner; it was argued that, concept of lease requires, terms of lease to be specified including the period of lease, consideration for the lease, manner of working out the terms by the lessee and incorporation of all these terms in a deed. Since exclusive right of supplying by wholesale of any Indian liquor could be only by a lease, creation of such an exclusive right by invoking the Rule making power, was attacked, as not maintainable. Section 71 is the provision governing the Rule making power. While Sec. 71(1) empowers the making of Rules to carry out the purposes of the Act, sub-section (2) enumerates some of the subjects in respect of which Rules may be made. Sec. 71(2) was read and great emphasis was laid on clauses (d) and (e) thereof, while urging that, Sec. 71(2) contemplates several licencees and monopoly or exclusiveness in the matter of selling the liquor was not contemplate.
28. The various incidents, or activities pertaining to the manufacture and sale of liquor, are matters of privilege to be granted, by the State. The Act, provides for the grant of such privileges, but nowhere, it has barred the State from exercising its own inherent privilege either to manufacture or sell the intoxicant liquors. The purpose of the Act, has to be read as inclusive or making a regulation, governing the sale of liquor. The object flows out of the very nature of the liquor and the exclusive privileges vesting in the State in this regard. Therefore, Sec. 71(1), which empowers the making of the rule to carry out the purposes of the Act, cannot be read narrowly, so as to exclude a power in the State, to make a rule to channelise the marketing of the liquor in the State in a particular manner. Sec. 71(2) cannot and, in fact, does not in any manner cut down the scope of Sec. 71(1). The enumerations under sub-section (2) is "without prejudice to the generality" of Sec. 71(1), as expressly stated. This apart, if rule of interpretation, derived from the provisions of Karnataka General Clauses Act is imported, it can safely be said that plurality means singular also and therefore Sec. 71(2)(d) and (e) can be read as empowering the framing of a rule to create a single licencee for the distribution of or wholesale dealing in the intoxicants in the State.
29. Under Sec. 17 of the Act the exclusive right of supplying by wholesale any Indian liqueur or intoxicating drug may be leased out. Definition of India liquor as per Sec. 2(15) read with Sec. 2(18) is quite wide. The concept of lease referred in Sec. 17 has nothing to do with the provisions of the Transfer of Property Act. Whenever, any exclusive right or privilege of the State is conveyed to another, for any consideration, the act of such conveyance is called as leas-sing, farming out, letting, or licensing. Immoveable and factories could be ''leased''; so also, articles and machineries are ''leased''. But the concept, manner and the workings of such leases may differ from subject to subject. It is not possible for us to agree with the contention of the petitioners that, lease unde Sec. 17 of the Act, requires, prior elaboration of the terms of lease, and documentation of those terms, especially, when, the lease is granted to a company owned or controlled by State. Under cl.(11) of Rule 3 of the IFJ Rules as now substituted, the distributor is chosen by the State Government itself as per sub-clause (b) of clause (11). If this is understood as the grant of a lease, we fail to understand as to how, it would not satisfy the requirements of Sec. 17(1), which empowers the State Government ''to lease'' inter alia, the right of supplying by wholesale or selling by wholesale the Indian liquor. Sec. 17(2) requires the Excise Commissioner to grant licence to such a lessee under Sec. 17(1). This is also satisfied by Clause 11(a) which directs the Excise Commissioner to grant the licence to the person specified by the State Government. When an executive action of granting the lease is permitted by Sec. 17(1), it cannot be said that such a power is not included in the power of making subordinate legislation under Sec. 71.
30. Almost a similar case for consideration by the Kerala High Court in
By the amendment of the statutory Rules, a State owned Corporation was given the exclusive licence to deal wholesale in liquor in Kerala. The challenge to this was negatived by the High Court, by reiterating the exclusive-ness of State''s privilege in the matter of liquor trade. The ratio of the said decision is that, right of the private individuals, flows, only out of the permission/licence granted by the State to deal in liquor; question of a fundamental right to trade in liquor does not arise; barring others from dealing and vesting an exclusive right in the State owned Corporation need not be by an Act of legislature; provisions in the Act as to issuance of licenses for local area would not bar, issuance of the licence to one licence to one entity for the entire State; the attack against a public Corporation that it cannot run effectively and on commercial lines cannot be sustained; the vesting of the privilege in the State owned Corporation is only a mode of exercising the inherent exclusive privilege of the State to deal in liquor.
31. The ratio decision, with which we agree respectfully, equally applies to the instant cases. Question of advancement of any social purpose by the impugned Rules cannot arise, in the context of State taking over to itself to exercise one of its exclusive privileges. This apart, the State has explained in its statement of objections to the writ petitions, that, channelisation of liquor for marketing purposes enable the prevention of tax evasion. Liquor trade and the excise law, operate in the sphere of economic activities and the State has a very wide latitude to experiment with the laws and regulations in this sphere, as observed in Garg''s case (AIR 1981 SC 2138 ) and
Section 15(2) cannot be read as vesting a right in any one for the licence, with a duty in the Deputy Commissioner or the Excise Commissioner to grant the licencees; it has to be read as defining the respective jurisdiction of the two authorities, to grant the licenses under Sec. 15 of the Act, in case, anyone is, otherwise entitled to obtain the licence.
Social purpose, like the concept of "public interest" or "public policy" is incapable of precise definition and its identification does not upon any particular mark. While testing the validity of a law or a subordinate legislation, the Court cannot apply the standards governing the quasi judicial orders. Test of relevancy and purpose applicable to measure up the validity of a subordinate legislation, should primarily be taken out of the subject of the statute under which the Rule is made, the objects behind the statute and its scheme.
32. The main object behind the Rules are stated to prevent tax evasion as the tax evaded liquors called ''seconds'' are found in the market, in plenty.
Petitioners contend that tax evasion is the result of inefficiency of the Excise authorities and that it is impossible for any manufacturer to take out liquors from the place of manufacture in view of the stringent provisions; every stage of production and bottling is controlled and supervised by the authorities and it is asserted that so far none of the licensed manufacturer has been found guilty of evasion of tax under the Excise law.
Assuming that these licenced manufacturers do not contribute to the ''seconds'' in the market, question is not whether the existing Rules (before the impugned Rules were made) were sufficient to safeguard the interest of the revenue. The State has thought it a better and. advantageous system, to have an exclusive distributor (which is a Government company) through which entire liquor flow in the State should be channelised; since the flow has to spring out of a particular source (the Distributor), it will be easier and convenient to locate and prevent spurious and tax evaded liquors in the market. This scheme evolved by the State Government, therefore, cannot be brushed aside as irrelevant to the alleged objects sought to be achieved. The contention that there is no nexus between the ''end'' to be reached and the ''means'' adopted, cannot be accepted.
33. Dr. Chitale argued that, having regard to the provisions of Sec. 71(3) of the Act, laying the Rules before the Houses of Legislature is a mandatory procedure. It was pointed out that by virtue of the Presidential Proclamation under Art. 356(1) of the Constitution, power of the State legislature vested in the Parliament and therefore Rules had to be placed before the Parliament. The Rules were published in the Gazette dated 13th September, 1989 and the Rules direct their coming into force with effect from 30th September, 1989; in the meanwhile, no attempt was made to place the Rules before the Parliament.
Section 71(3) and (4) read as follows:--
"71(3): A rule under this Act may be made with retrospective effect and when such a rule is made the reasons for making the rule shall be specified in a statement Jaid before both Houses of the State Legislature. Subject to any modification made under sub-section (4), every rule made under this Act shall have effect as if enacted in this Act.
(4) Every rule made under this section shall be laid as soon as may be after it is made, before each House of the State Legislature while it is in session for a total period of thirty days, which may be comprised in one session or in two or more successive sessions and if before the expiry of the session in which it is so laid or the sessions immediately following, both Houses agree in making any modification in the rule or both houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so however that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule."
The last sentence in Sec. 71(3), in clear terms says that every rule shall have effect as if enacted in the Act; therefore, the rules have greater sanctity than rules made under other statutes; in view of this specially, it was contended, that laying the rules before the Legislature was mandatory.
34. No doubt, sub-section (4) of Sec. 71 mandates that every Rule shall be laid before each House of the Legislature. But, no provision in Sec. 71 prescribes any particular period within which the Rules should be placed before the Houses of Legislature, except indicating that it should be done expeditiously, by using the words "as soon as may be". The phrase "as soon as may be" cannot be understood to mean at the first session of the Legislature which meets immediately after the Rules were made. This phrase only suggests that the Rules shall be placed before the Legislature as early as possible, taking into consideration several relevant facts, such as the volume of business likely to be transferred by the Legislature at the particular session, other Important work;: and business to be attended to on priority basis by the Government and the Legislature etc. The fact that the rule becomes effective from the date of its enforcement, without a need to await for its being placed before the Legislature, is also clear from the phraseology of sub-section (4), which says that, if the Legislature modifies the rule thereafter the modified rule shall be enforced and till then, whatever was done earlier under the unmodified rule, shall he valid. A Bench of this Court in State of Karnataka v. Anjanappa and Co. ILR (1983) Kar 1695 held :
".....It is quite evident that the intention of the Legislature was to make the rules effective from the date they are sought to be enforced by the Government and not from the date after the expiry of the 30 days after laying them before both the Houses. In, case the rules were to become effective only after the expiry of 30 days after laying their, before both the Houses, then making a provision that any modification or annulment made by the Legislature shall not prejudice or validly affect anything previously done under the rules, would have no meaning.
Further if the Legislature had intended that the rules should not take effect till they had the sanction of the two Houses, it would have expressly said so by employing negative language. The Section does not say that the rule would not be effective fill it is laid before the two Houses. What really it provides is that in the event of the two Houses modifying the rule, it is the modified rule which would be effective and in the event of the two Houses annulling the rules, the rules would be ineffective. In this view of the matter the only irresistible conclusion that can be arrived at is that it is from the date on which the Government decides to make the rules effective, that they come into force, and not after the expiry of 30 days after they are placed before both the Houses of the Legislature."
To the same effect are two more decisions of this Court (though of learned single Judges) -
(i)
(ii)
Apart from the legal position, as stated above, on facts, it has to be noted that, the Parliament met only for a very short duration after the Rules were made.
35. Dr. Chitale cited several decisions to contend that the word ''shall'' in Sec. 71(4) makes it a mandatory provision and having regard to the status conferred on the rules by the last sentence of Sec. 71(3), laying the Rules before the Legislature should be construed as a mandatory requirement. It is unnecessary to refer to the several decisions. Requirement of laying before the Legislature certainly, is a mandatory requirement, but, cannot be construed as a condition precedent for the enforcement of the Rules. Sec. 71 does not say that the Rules could be enforced only after a laying of 30 days before the Houses of Legislature; it does not even provide for the withdrawal of or ceasing to have effect, of the Rules, in case the Rules are not so placed within any particular time. In these circumstances, we have no hesitation to reject the contention urged by the learned counsel. According the contention is rejected.
Re. Contention No. III
36. As to how and to what extent the impugned Rules ate arbitrary, unreasonable and are made in colourable exercise of power, is not clear from the petitioner?'' contentions. The petitioners are now made to deal with the State-controlled Corporation. The said Corporation (MSIL) in its statement of objections, has specifically declared that, it would buy any quantity of the liquors manufactured and offered to it for purchase by the manufacturers in due course of the business. It has already taken steps to strengthen its infrastructure to carry on the enterprise entrusted to it. The State Government also has issued guidelines as to how MSIL should function, by an executive order.
It was contended that during the President''s rule, and in the absence of the elected Legislature functioning in the State, the State Government should not have changed the policy and that the impugned Rules were made to destroy the business of particular manufacturers in the State. This allegation, prima facie, looks to us as unworthy of acceptance. As to why any of the manufacturers should be destroyed out of the liquor business, and the motive behind such an attempt are not stated by anyone. The State Government''s intention has been explained by it as the channelisation of the business through the governmental agency to prevent tax evasions; entire liquor in the State has to, hereinafter, commence its journey into the market, through MSIL. Here, the State has not favoured any other private persons; it has only kept to itself, its exclusive privilege of dealing in liquor. The timing of the making and enforcement of the Rules, is essentially for the State Govt. to decide. There is no constitutional bar against the enforcement of such Rules by the State Government during the President''s Rule. Political propriety or ethics in this regard, is irrelevant for our purposes.
38. It was then contended that modalities of the functioning by the distributor (i.e., MSIL) are not enumerated and the distributor is likely to favour one manufacturer as against the other; that MSIL (i.e., its employees) may purposely refuse to supply a particular brand of liquor, or create hurdles in its supply, to the detriment of a particular manufactures; possibility of abuse of its exclusive privillege, is thus inherit in this licensing system. This apprehension overlooks the fact that the distributor is an instrumentality of the State and there is a strong j presumption that ii would act fairly, rea reasonably and relevantly. Any abuse of its power and privileges is subject to judicial correction. Possibility of abuse of power or privilege is not a ground to nullify the instrument of powers and privileges to a governmental agency. As to how the distributor should function, does not require elaboration, because, the distributor has to function like any other distributor in the line. The Act and the Rules framed thereunder, read with their objects, would govern the distributor. The law, regarding the scope of judicial scrutiny of administrative and contractual actions of the State and its instrumentalities has developed sufficiently to curb any abuse of powers and privileges on the part of the State and its instrumentalities. In this context, a passage from
"In considering whether the officers would be discriminating between one set of persons and another, one has got to take into account normal human behaviour and not behaviour which is abnormal. It is not every fancied possibility of discrimination but the real risk of discrimination that we must take into account. This is not one of those cases where discrimination is writ large on the face of the statute. Discrimination may be possible but is -very improbable. And if there is discrimination in actual practice this Court is not powerless."
The attributing of mala fides and the assertion that Rules are made to destroy any particular manufacturers, are devoid of force; the'' allegations lack in material particulars; they are vague and are mere assertions.
Consequently, the contention in this regard is rejected.
Rs. Contention No. IV.
39. We have already held that there is no fundamental right in any of the petitioners to de in liquor. The licenses granted them to deal in liquor, in fact, is not affected, because-- (I) the manufacturer can still sell his goods to the distributor; (ii) other dealers could get the goods from the distributor; (iii) the existing distributor''s licenses are saved for the duration of the said licenses, by virtue of the non obstante clause to clause (11) of Rule 3 of IFL Rules. The dilution of the privilege conferred earlier, to such a licensee, is a risk involved in the very nature of the trade as, observed in
40. It was contended that a licence creates an interest, which like any other proprietary right cannot be taken away without any compensation. This is purely a Hypothec cal argument without reference to the facts. Though several learned Advocates argued for various petitioners, none has explained as to how and in what manner any of the petitioners would legally suffer by the entertainment of distributorship to the Government agency. A possibility of reduction in the volume of trade of those licensees during the remaining period of the licenses is not a ground to nullify the action taken by the Government to restore to itself the exclusive privilege of distributorship or wholesale dealing in liquor in the State.
41. It was further contended that by the State taking over the liquor trade, it has contravened the provisions of Art. 47, which is one of the directive principles of State policy. But, Art, 47, does not bar the State from involving itself in liquor trade. Article 47 requires the State to evolve a policy to bring about a total prohibition. Till such ''prohibition'' is effectuated, replacing one kind of private dealership by a State instrumentality, in no way would contravene Art. 47 of the Constitution.
42. Smt. Nalini Chidambaram, the learned Counsel appearing in one of the writ petitions, pleaded for an innovative judicial approach; the learned Counsel argued that this Court should direct the postponement of the enforcement of Rules till the date of the expiry of the current licenses. As in the case of applying the doctrine of prospective overruling, it was contended that, this Court, could direct the postponement of the enforcement of the Rules, to avoid undue hardship to the existing licensees; in this context, the possibility of an elected Government being formed soon in the State, was also pointed out.
43. If the Rules are unreasonable, ultra vires or unconstitutional, this Court has to declare them to be so and nullify them. This Court cannot cause a partial eclipse of the Rules for any particular period. It is true that by the interim orders, enforcement of the Rules has been stayed. But such an interim order is incidental to the exercise of the power to judicially scrutinise the validity of the Rules. Having exercised the power of scrutiny, this Court cannot paralyse the enforcement of a valid law, by fixing any future date for its enforcement. The observations of Chief Justice Subba Rao in
44. The decision of the Supreme Court in
No particular principle having a general application was evolved or stated in the said decision. The cases of toddy tappers and their co-operative societies, are not comparable to that of the petitioners who are having Cl. 11 licenses. At any rate, the non obstante clause in clause (11) of Rule 3 of I.F.L. Rules saves the current licenses during their stated period of life.
Re. Contention No. V.
45. Sri Santosh Hegde contended that there is a discrimination, writ large, between the exporters and importers. While export can take place only through the licenced distribution, import can be effected by any other licence-holder. Reference was made to Karnataka Excise (Possession, Transport, Import and Export of Intoxicants) Rule, 1967. Rule 2(d) defines ''licence'' as a licence granted under any of the Rules made under the Act. Therefore, a licencee under form Cl. 2 also is a licencee under this Rule. Reading this with Rule 9 of the said Rules, it was contended that even a retailer-licensee can import from outside the State; it was further contended, a similar benefit was not available to a Cl. 1 licensee, in view of the amendment of condition No. 3 of Cl. 1 licence.
Here, Sec. 3 of the Act is relevant. The main relevant portion of S. 8(1) reads :
"8. Import of intoxicant: -- (I) No intoxicant shall be imported except under a permit granted by the Deputy Commissioner on payment of such countervailing duty and fees, as may be levied under this Act and on such other terms as may be prescribed."
(rest omitted as unnecessary)
Thus, permit from the Deputy Commissioner is required to import the intoxicants. None, as a matter of right, could import any intoxicant from outside the State. While considering an application for the permit, the Dy. Commissioner has to consider all the provisions of the Act and various Rules made thereunder and exercise his power in such a way, so as not to discriminate amongst similarly situated persons. Apart from Sec; 8, Rule 11 of the ''Import Rules'' envisages consideration of several factors by the Dy. Commissioner before granting the import ''permit.
46. The restriction governing the import, thus existed already, by a specific provision of the Act. A similar provision regarding export is found in Sec. 9 of the Act. We fail to appreciate as to how the resultant position is discriminatory. Even otherwise, exports and imports cannot be treated on par; they form different classes. Hence we are unable to accept the contention of the learned Counsel.
47. It was also contended that by virtue of proviso to Sec. 15(2), licence issued under the Excise Law in force in any other State, becomes a statutory licence under the Act and therefore the right to deal, such as, to purchase from or sell into, the State of Karnataka flowing out of those licenses of other States are affected by the Rules and hence the Rules are ultra vires. This contention is the result of a misreading of the proviso to S. 15(2). Said proviso does not automatically deem outside, licenses, as licenses under the Act. The proviso empowers the Excise Commissioner to impose such conditions as may be determined by him, under which the licenses issued by other States ''may'' be deemed to be a licence granted under this Act. A discretion is conferred to deem "outside licenses" as the licenses under the Act and while exercising the discretion, Excise Commissioner may impose relevant conditions. It is implicit in| the very power conferred on the Excise Commissioner, that, he should consider all relevant law operating in the State (mainly the, provisions of the Act and the Rules made! thereunder) while imposing the conditions; further, something which is not recognized under the Act and the Rules, cannot be, ''deemed'' at all The deeming can be stretched only to an extent, so long as the deemed thing has a place under the Act and the Rules. Something which cannot be granted (i.e., any particular licence which has no place under the Act and (he Rules) cannot be deemed to have been granted by reference to the licenses issued under an ''Excise Law in force in any other State. Any other interpretation would nullify this provisos violative ''of Art. 14 of the Constitution: It will be discriminatory as against those who seek licenses under the Act, but could not be granted the licenses in view of its provisions and the Rules, while, extending such a non-available privilege to those who are licenced elesewhere. elsewhere.
48. There was an argument that the impugned Rules ignore the requirements of industrial users of alochol.
Clause (II) to Rule 3 now introduced provides for distributor''s licence which enables the licensee to deal in the products of all distilleries, breweries or wineries in the State or to import liquor from outside the State. As per condition No. 3, the licensee shall sell liquor only to a person holding Cl. 1 licence in the State or export to a person outside the State who is holding a valid licence to deal in liquor. One of the petitioners who is a retired Excise Commissioner made a grievance that those provisions do not provide for the sale of industrial alcohol and similar spirituous liquor by the manufacturer to the industrial units directly, and the holder of a CL 11 licensee (distributor) has to sell those goods only to a Cl. 1 licensee. Cl. 1 licensee is a wholesale dealer; and as per a condition in Cl, 1 licence, such a licensee shall sell liquor to other licensees such as retailers, chemists and druggists etc. Karnataka Excise (Rectified Spirit) Rule, 1967 provide for licenses to be issued to any person for bona fide possession and use of rectified spirit for medicinal, industrial, scientific, educational etc., purposes. licenses to be issued are in RS(1) or RS(2) forms as envisaged by the said Rules. Rule 7 of the said Rules provides for the purchase of rectified spirit by such a licensee. Therefore, it cannot be said that the rule-making authority has failed to provide for these matters, under the impugned Rules. To the extent the impugned Rules do not touch other Rules, those Rules in force would govern the situation.
49. Therefore, we are of the view that,--
(i) there is no fundamental right in any person to deal in liquor falling within Article 19(1)(g) of the Constitution and such a dealing is not a trade, business or commerce in the constitutional sense. Articles 301 and 304 are also not attracted to a dealing in liquor.
(ii) A statutory Rule treated as if enacted in the Act is a law made by the Legislature and therefore, such a rule, if otherwise not invalid need not be sanctioned or assented to by the President for the purposes of Art. 304 of the Constitution, when the Act, under which the rule is made has already received the sanction or assent of the President.
(iii) Every kind of dealing in liquor is the exclusive privilege of the State. Retaining such a privilege in itself and withdrawal of the provisions which earlier enabled the grant of such a privilege to others, do not require any special explanation by the State. Creation of a State agency to exercise any aspect of the dealing in liquor by the State, and thus retaining a monopoly in that aspect (such as exclusiveness of distributorship being retained by the State) cannot be attached as arbitrary and monopolistic; in such a case, the change effected is not a shift in the policy, requiring direct and immediate pre-consideration by the Legislature. This is a case where the State has reverted to itself its exclusive privilege to deal in liquor, as a distributor, by withdrawing the provisions regarding the grant of distributorship to others.
(iv) The Rules, which make the State or its instrumentality an exclusive'' distributor, is liable to be tested by reference 10 Article 14 of the Constitution. The Rules also may be examined io see whether they are ultra vires the provisions of the Act.
The impugned Rules, in the instant case, are in no way irrational, or arbitrary and hence do not offend Art. 14 of the Constitution,
The impugned Rules fall within the purposes of the Act and are intra vires.
(v) licenses granted under the amended Rules, create a privilege under the Act; that privilege in no way gets the protection of Art. 19(1)(g) of the Constitution. Since the existing licenses are saved during the current year (i.e., during their current period) no further question of hardship and irrationality in enforcing the Rules, arises.
(vi) The Rules arc enforceable immediately they are made; for their enforcement, laying before the Legislature (or the Parliament) is not a condition precedent.
(vii) The distributor licence being given to a State owned Corporation (MSIL), there is a presumption that the said Corporation would act rationally, being guided by the relevant factors which would guide any other distributor in the line; it is not possible to attack the choice of the distributor as arbitrary; similarly, it cannot be held that the said distributor would indulge in undue favouritism while functioning as the distributor.
In the result, for the reasons stated above, these petitions fail and are dismissed, without any order as to costs.
Rules issued, stand discharged.
Before pronouncing the judgment in these cases for which purpose the matters were posted today, Ms. Nalini Chidambaram sought our leave to raise an argument based on the recent decision of the Supreme Court in Synthetics & Chemicals Ltd. v. State of U. P. (W.P. No. 182 of 1980). The judgment was rendered by the Supreme Court on 25th October, 1989 (reported in 1989 (4) JT 267 ). From the said decision, the learned Counsel tried to derive support for the contention that dealing in liquor involves a right guaranteed under Art. 19(1)(g) of the Constitution and further that Art.-30l also is attracted for the trade and commerce involved in liquor. We have carefully gone through the aforesaid decision of the Supreme Court and we are not convinced as to the acceptability of the contention of the learned Counsel. The question involved before the Supreme Court was the right of State to levy vend-fee or duties in respect of industrial alcohol. The subject of legislation before the Supreme Court was only a commodity called ''industrial alcohol''. The matter which was interpreted also pertains to the legislative entries and had nothing to do with Art. 19 or 301 of the Constitution. The question pertaining to potable alcohol was specifically left out of consideration by the Supreme Court after referring to
Order on Oral Application (Under Art. 134-A of the Constitution of India)
Shivashankar Bhat, J.
Oral applications are made under Art. 134A of the Constitution seeking certificate of fitness to file appeal before the Supreme Court. We have followed the decisions of the Supreme Court and applied the principles stated therein and therefore we are of the view that these matters do not involve any substantial question of law of general importance requiring consideration by the Supreme Court. The oral applications are, therefore, rejected.
A very persistent plea is made before us for an interim order of stay at least for a few days so that, parties may approach the Supreme Court. Having upheld the impugned Rules and in the background of our finding that the existing licensees are saved during this excise year, we do not think that it is proper to gram the interim prayer of the petitioners; hence i, is rejected.
51. Petitions dismissed
