1986 (10) TMI 321 - SC - Central Excise

Whether under the policy decision dated 30th December 1984, D-2 licence was to be granted to each of respondent Nos.5 to 11 only for a limited period of 5 years commencing from 1st April 1986 or it was to be granted for a minimum period of five years with a clause for automatic renewal from year to year after the expiration of the period of five years? Held that - A the first place, the Ratlam Alcohol plant was unable to supply the requirements of even Jabalpur and Betul districts and during the period ending 31st March 1986 Sagar Aggarwal himself had to purchase liquor from outside at higher rates in order to satisfy the requirements of these two districts for which he held D-1(S) licence. If that be so, how could Ratlam Alcohol plant which could not produce more than 60 lakh proof litres at the outside, possibly supply liquor for the whole of the territory of the State. If Ratlam Alcohol plant could be made to supply the requirement of the entire State there would be no need for any other distillery at all. But obviously the capacity of the Ratlam Alcohol plant was very limited and it was not able to achieve production on up to this capacity. Secondly, it was decided that the Ratlam Alcohol plant would manufacture only ractified spirit for making masala liquor which was more popular and which brought greater revenue to the State and obviously therefore Ratlam Alcohol plant could not be available for producing ordinary liquor for supply to the retail vendors. Thirdly, it is difficult to understand how the learned Judge could assume that Sagar Aggarwal would continue to get liquor from Ratlam Alcohol plant at the rate of ₹ 1.80 per proof litre. The rate for supply of liquor by the Ratlam Alcohol plant would naturally depend upon varying market conditions. And lastly we fail to understand how the learned Judge could proceed on the assumption that a rate of ₹ 4 per proof litre would be fixed by the Export Committee for supply of liquor by the existing contractors from the new distilleries. We do not know what rate would be fixed by the Expert Committee. That would depend upon diverse considerations and of course one of the considerations would certainly be that Sagar Aggarwal had offered minus 2.31 rupees per proof litre while taking D-1(S) licences for Jabalpur and Betal districts. The figure of ₹ 56 crores put forward by Sagar Aggarwal and accepted by the learned judge was clearly hypothetical and based on assumptions which were totally unwarranted. We do not think that the learned Judge was right in observing that the public exchequer would incur a loss of ₹ 56 crores by the policy decision dated 30th December, 1984 and that the policy decision was therefore vitiated by mala fides or under-hand dealing or improper or corrupt motive. We must therefore hold that the High Court was in error in allowing the writ petitions even to a limited extent. We accordingly allow the appeals of the State Government and respondents Nos. 5 to 11 and dismiss the writ petitions.

Issues Involved:
1. Validity of the policy decision dated 30th December 1984.
2. Delay in filing the writ petitions.
3. Grant of D-1 and D-2 licences to existing contractors.
4. Allegations of mala fides, corruption, and underhand dealings.
5. Applicability of Article 14 of the Constitution.
6. Compliance with the Madhya Pradesh Excise Act, 1915 and related rules.

Issue-wise Detailed Analysis:

1. Validity of the Policy Decision Dated 30th December 1984:
The policy decision was challenged on the grounds of arbitrariness and irrationality, and for allegedly violating Article 14 of the Constitution. The court held that the policy decision was a single integrated decision and could not be split into parts for judicial review. The court found that the policy decision was made after detailed inquiries, fact-finding efforts, and deliberations over a period of more than a year and a half. It was determined that the policy was neither arbitrary nor irrational and was made in the public interest to address issues like pollution, inadequate production capacity, and the need for modern plant and machinery.

2. Delay in Filing the Writ Petitions:
The court emphasized that the petitioners were guilty of gross delay in filing the writ petitions, which were filed almost 11 months after the policy decision. During this period, the respondents had already incurred significant expenditure towards setting up the distilleries. The court held that unexplained delay and the creation of third-party rights in the interim period disentitled the petitioners from relief under Article 226 of the Constitution.

3. Grant of D-1 and D-2 Licences to Existing Contractors:
The court found that the grant of D-1 and D-2 licences to the existing contractors was an integral part of the policy decision. It was noted that the existing contractors had made significant investments in setting up new distilleries based on the policy decision. The court held that the grant of licences was not arbitrary or discriminatory and was justified by the circumstances, including the need for modern distilleries and the limited time available before the existing licences expired.

4. Allegations of Mala Fides, Corruption, and Underhand Dealings:
The court found that there was no foundation in the pleadings for the allegations of mala fides, corruption, and underhand dealings. The court observed that the policy decision was made after open and transparent deliberations and was based on sound administrative considerations. The court strongly disapproved of the disparaging remarks made by Justice B.M. Lal against the State Government, finding them to be unjustified and unwarranted.

5. Applicability of Article 14 of the Constitution:
The court reiterated that while there is no fundamental right to trade in liquor, the State must still comply with the equality clause of Article 14 when granting licences. However, the court found that the policy decision did not violate Article 14 as it was made in the public interest and was not arbitrary or discriminatory. The court emphasized that in matters of economic policy, the State is entitled to a large measure of latitude and judicial interference is warranted only if the policy is patently arbitrary, discriminatory, or mala fide.

6. Compliance with the Madhya Pradesh Excise Act, 1915 and Related Rules:
The court held that the policy decision and the subsequent grant of licences were in compliance with the Madhya Pradesh Excise Act, 1915, and the related rules. The court found that there was no requirement for new rules to be made to give effect to the policy decision. The existing rules, including Rule XXII, provided sufficient legal basis for the grant of licences in the manner decided by the State Government.

Conclusion:
The Supreme Court allowed the appeals of the State Government and respondents Nos. 5 to 11, dismissing the writ petitions. The court found that the policy decision dated 30th December 1984 was valid, justified, and made in the public interest. The court also dismissed the special leave petitions of M/s. Doongaji & Co. and Nand Lal Jaiswal, making no orders as to costs.

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