1989 (11) TMI 316 - HC - Indian Laws

Summary

Issues Involved:
1. Fundamental right to trade and do business in liquor.
2. Ultra vires the provisions of the Act.
3. Violation of Article 14 of the Constitution.
4. Taking away rights accrued to existing licensees without compensation.
5. Incidental questions.

Issue-wise Detailed Analysis:

Re. Contention No. I:

The petitioners argued that their fundamental right to trade and do business in liquor was adversely affected by the impugned Rules and that these Rules violated Articles 301 and 304 of the Constitution. The court referenced several Supreme Court decisions, including *Cooverjee B. Bharucha v. Excise Commissioner* and *Krishan Kumar Narula v. State of Jammu & Kashmir*, which initially assumed the applicability of Article 19(1)(g) to the liquor trade but allowed for extensive government regulation. However, subsequent Supreme Court decisions, such as *Sat Pal & Co. v. Lt. Governor of Delhi* and *State of M.P. v. Nandalal*, established that there is no fundamental right to trade or business in liquor, as it is considered a noxious and dangerous commodity. The court concluded that dealing in liquor cannot be considered a trade, business, or commerce within the constitutional sense, and thus, Articles 301 and 304 are not applicable.

Re. Contention No. II:

The petitioners contended that the Rules were ultra vires the provisions of the Karnataka Excise Act, 1965, arguing that creating an exclusive distributorship should be a matter of major policy enacted by the legislature. The court referred to the Supreme Court's decision in *Indian Express Newspapers (Bombay) Pvt. Ltd. v. Union of India*, which outlined the grounds on which subordinate legislation could be questioned. The court held that the Act's provisions, including Sections 13, 14, 15, and 71, did not preclude the creation of a sole distributorship. It was noted that the State has the inherent privilege to deal in liquor, and the Rules were within the scope of the Act's purposes. The court also cited the Kerala High Court's decision in *Mrs. Moni Senan v. State of Kerala*, which upheld a similar exclusive distributorship by a State-owned corporation.

Re. Contention No. III:

The petitioners argued that the Rules were arbitrary, unreasonable, and made in a colorable exercise of power. They claimed that the appointment of Mysore Sales International Ltd. (MSIL) as the sole distributor was arbitrary and lacked proper guidelines. The court rejected these contentions, noting that MSIL, as a State-controlled corporation, was presumed to act fairly and reasonably. The court also dismissed the argument that the Rules were made to destroy particular manufacturers, finding no evidence to support such allegations. The court emphasized that the State's intention was to prevent tax evasion and channelize the liquor trade through a governmental agency.

Re. Contention No. IV:

The petitioners claimed that the Rules took away rights accrued to existing licensees without compensation, violating Article 300-A of the Constitution. The court held that there is no fundamental right to trade in liquor and that the existing licenses were not affected as manufacturers could still sell their products to the distributor, and other dealers could obtain goods from the distributor. The court also noted that the Rules saved current CL. 11 licenses for their duration, and any reduction in trade volume was not a sufficient ground to nullify the State's action.

Re. Contention No. V:

The petitioners raised incidental questions, including alleged discrimination between exporters and importers and the impact on industrial users of alcohol. The court found no merit in these arguments, stating that import and export regulations were governed by specific provisions of the Act and the Rules. The court also clarified that the Rules did not ignore industrial users of alcohol, as other relevant Rules remained in force.

Conclusion:

The court dismissed the petitions, holding that:
1. There is no fundamental right to trade in liquor under Article 19(1)(g) or Articles 301 and 304 of the Constitution.
2. The impugned Rules were within the scope of the Act and did not require legislative enactment.
3. The Rules were not arbitrary or unreasonable and did not violate Article 14 of the Constitution.
4. The existing licenses were saved for their duration, and no compensation was required.
5. The Rules were enforceable immediately upon being made and did not require prior laying before the Legislature.

The court also rejected an oral application for a certificate of fitness to appeal to the Supreme Court and denied an interim stay of the Rules' enforcement.