2017 (5) TMI 1657 - HC - Companies Law

Quashing of clause 9.5.1.2 of the excise policy and to set aside the notice dated 17.03.2017 inviting tenders - Validity of appointment of respondent No.3 as an exclusive L-1BF licensee - Haryana Liquor License (Amendment) Rules, 2017 - Held that - The Financial Commissioner had the power to make rules regulating the number of wholesale licences in the State of Haryana as a composite whole. It did so by making rule 24(i-eeee), which prescribes that there would be only one wholesale licence for the State of Haryana. The Financial Commissioner has by the impugned provisions in the policy and the rules protected the revenue by providing for a single wholesale licence. He cannot be faulted for that. The total revenue including licence fees and the levies under the Act in the previous Excise Year 2016-17 was only about ₹ 22 crores, whereas, under the present policy, the revenue already generated is over ₹ 62 crores - This brings us to the petitioners apprehension. It was submitted on behalf of the petitioners that the amended rule and the stipulation in the policy that there would be only one wholesale licence in the entire State of Haryana adversely affects the rights of the petitioners and those similarly situated. The prejudice, according to them, is that that the sole wholesaler can pick and choose and dictate commercial terms at will. If there were more licensees the competition would safeguard the sellers and buyers interests as well. The State, we will presume, even in the trade and business of liquor must act fairly and impartially and not arbitrarily. We will presume that in granting liquor licences and permits the State cannot adopt a pick and choose policy and must throw the field open to all those who are otherwise eligible. In the present excise policy, the State has permitted every eligible party to bid. It has not discriminated against or in favour of any party. The essential criteria for the appointment of the wholesaler is the value of the bid - The challenge to the policy and to the rule on the ground that the appointment of a sole wholesaler in respect of an L-1BF Licence would adversely affect the commercial interests of those who he deals with or those who must deal with him, such as, the petitioners is not well founded. As we noted earlier, theoretically it is possible that the commercial interests of certain dealers and manufacturers will be affected, in as much as, the sole wholesaler will have the choice of who it would deal with. The sole wholesaler would also be entitled to grant better facilities to some of the dealers. That, however, would not render the policy illegal - The contractor is not bound to consider the application of every party for the supply of material required for the construction of the buildings. The contractor is entitled to obtain the material from such parties as it desires and on such terms and conditions that the contractor desires. The suppliers of the material would not be entitled to compel the contractor to afford them an opportunity of supplying the material. The rules of the game that apply to a State or an instrumentality of the State do not apply to such contractors. The State is entitled to deal in liquor to the exclusion of all others. We will presume that when it parts with its privilege it is bound to consider the claims of all the parties who are eligible to acquire this privilege. Once the State parts with this privilege and vests it in a private party, the rules of the game that apply to the State cease to operate. The licensees are thereafter entitled to operate the licences as they please so long as they do not violate any provision of law and so long as they abide by all the terms and conditions of the licences. The State Government may impose conditions upon the licensees. However, so long as the State does not place any such restriction, the licensee is entitled to procure the stock from and sell it to any party and on any terms and conditions, save those stipulated in the policy or the licence. Petition dismissed.

Summary

Issues Involved:
1. Challenge to the provision in the excise policy and rule stipulating only one L-1BF license.
2. Insufficient time for bidders to submit a valid bid.
3. Prospective effect of the amended rule 24(i-eeee).
4. Locus standi of the petitioners.
5. Jurisdiction of the Financial Commissioner to stipulate the number of wholesale licenses.
6. Legality of appointing a sole wholesaler.

Detailed Analysis:

1. Challenge to the Provision in the Excise Policy and Rule Stipulating Only One L-1BF License:
The petitioners challenged clause 9.5.1.2 of the excise policy and the amended rule 24(i-eeee) which provided for only one L-1BF license in the State. They argued that the wholesale business should not be entrusted to a single licensee. The court examined the preface and relevant clauses of the excise policy, which aimed at balancing the interests of various stakeholders, optimizing revenue, and addressing social considerations. The court found that the policy's aim of maximizing government revenue and ensuring transparency justified the provision for a single L-1BF license.

2. Insufficient Time for Bidders to Submit a Valid Bid:
The petitioners contended that the time provided for submitting bids was insufficient. The court noted that the petitioners and their members were not bidders and had no intention to bid even if fresh tenders were invited. Therefore, they lacked the locus standi to challenge the tender process on this ground.

3. Prospective Effect of the Amended Rule 24(i-eeee):
The petitioners argued that the amended rule introduced on 29.03.2017 should have only prospective effect and that the clause in the excise policy announced on 06.03.2017 was illegal. The court found this issue to be academic since the petitioners' grievance was with the decision to have only one L-1BF licensee, which would not be redressed by the prospective effect of the rule.

4. Locus Standi of the Petitioners:
The court addressed the respondents' preliminary objection regarding the petitioners' locus standi. It was established that the petitioners, being representative bodies of international spirits and wines companies and hotel and restaurant owners, had commercial interests that could be adversely affected by the sole wholesaler's ability to dictate commercial terms. Therefore, they had the locus standi to maintain the writ petitions.

5. Jurisdiction of the Financial Commissioner to Stipulate the Number of Wholesale Licenses:
The petitioners contended that only the State Government had the power to stipulate the number of licenses, not the Financial Commissioner. The court examined the relevant provisions of the Punjab Excise Act, 1914, and concluded that the Financial Commissioner had the power to make rules regulating the number of wholesale licenses for the entire State. Section 58(2)(e) of the Act restricted the State Government's power to regulate the number of licenses to local areas only, while section 59(a) empowered the Financial Commissioner to regulate the sale of intoxicants, including the number of licenses.

6. Legality of Appointing a Sole Wholesaler:
The petitioners argued that the sole wholesaler could pick and choose parties to deal with, adversely affecting their commercial interests. The court acknowledged the potential for a sole wholesaler to dictate terms but found that the policy and rules aimed at optimizing revenue and ensuring transparency were not illegal. The court held that once the State parts with its privilege and vests it in a private party through a transparent bidding process, the private party is entitled to operate the license as it pleases, subject to compliance with the law and license terms.

Conclusion:
The court dismissed the writ petitions, upholding the provision in the excise policy and the amended rule stipulating only one L-1BF license in the State. The court found that the Financial Commissioner had the jurisdiction to regulate the number of licenses, and the policy aimed at optimizing revenue and ensuring transparency was not illegal. The petitioners' concerns about the sole wholesaler's ability to dictate terms did not render the policy or the rule illegal.