2016 (6) TMI 603 - HC - Indian Laws

Liquor licences - power/authority to add, delete or cancel any kind of category of licence in the Excise policy without amending the relevant Acts and the Rules where there is a chart of liquor licences - Held that - (i) The respondent is empowered to incorporate sub clause (ii) of clause 2.14 in the Excise Policy 2016-17 but the same is held to be invalid and inoperative to the extent it does not prescribe the manner and the method of its issuance by the manufacturers or the distilleries. It shall be open to the respondent-authorities to make appropriate amendment and prescribe necessary guidelines to the manufacturers/distilleries for issuing consent/authority letter to eligible applicants either by draw of lots, auction or any other mode providing equal opportunities in a transparent and objective manner. It shall, however, be open for the respondents to retain such right with the concerned authority, if so required. - (ii) If after taking corrective measures and inviting fresh applications/offers, in case no fresh offer or application comes forth, the allotments, if any, already made shall continue for the rest of the period.

Summary

Issues Involved:
1. Fundamental Right to Trade in Liquor
2. State's Discretion in Liquor Trade and Judicial Review
3. Legal Validity of Clause 2.14 in the Excise Policy 2016-17

Detailed Analysis:

1. Fundamental Right to Trade in Liquor:
The court examined whether citizens have a fundamental right to trade or business in liquor as a beverage. The judgment referenced several Constitution Bench decisions, including State of Bombay vs. F.N. Balsara and Har Shankar vs. Deputy Excise and Taxation Commissioner, which collectively established that there is no fundamental right to trade in intoxicants. The court reiterated that the State has the power to prohibit or regulate the liquor trade entirely, as liquor is considered inherently harmful and res extra commercium (outside commerce). The court concluded that citizens cannot claim a fundamental right to trade in liquor, and the State can impose restrictions or even create monopolies in this trade.

2. State's Discretion in Liquor Trade and Judicial Review:
The court addressed whether the State can discriminate between citizens in the liquor trade and the scope of judicial review in such matters. It cited State of M.P. vs. Nandlal Jaiswal and Khoday Distilleries Ltd. vs. State of Karnataka, emphasizing that while the State has broad regulatory powers, including creating monopolies and imposing restrictions, it must comply with Article 14 when granting trade privileges. The court highlighted that any State action must be non-arbitrary, transparent, and fair. The court also noted that policy decisions, especially in economic matters, are generally deferred to the executive unless they are patently arbitrary, irrational, or mala fide.

3. Legal Validity of Clause 2.14 in the Excise Policy 2016-17:
The court examined the legality of the newly added Clause 2.14 in the Excise Policy for 2016-17, which created the L-1A category of licenses. The petitioners argued that this clause was arbitrary and monopolistic, lacking transparency and criteria for issuing consent letters. The court noted that the L-1A license category was legally valid as it was incorporated into the Punjab Liquor Licence Rules, 1956, through a notification before the policy's enforcement date. However, the court found sub-clause (ii) of Clause 2.14 problematic because it did not prescribe a transparent method for manufacturers to issue consent letters, thus failing the test of reasonableness under Articles 14 and 19(1)(g).

The court concluded that while the creation of the L-1A license category was within the State's power, sub-clause (ii) of Clause 2.14 was invalid to the extent it lacked transparency and fairness. The court directed the State to amend this sub-clause to include clear guidelines for issuing consent letters, ensuring a level playing field for all applicants.

Conclusion:
The court upheld the State's power to regulate the liquor trade, including creating the L-1A license category, but struck down sub-clause (ii) of Clause 2.14 in the Excise Policy 2016-17 for lacking transparency and fairness. The State was directed to amend the policy to include clear guidelines for issuing consent letters.