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2019 (2) TMI 930 - SC - VAT and Sales TaxVires of Rule 24(i-eeee) of the Haryana Liquor License Rules 1970 (as amended by the Haryana Liquor License (Amendment) Rules 2017) - Punjab Excise Act, 1914 - single L-1BF license for the entire State to deal in imported foreign liquor, bottled outside India and imported into the country in a bottled form - creation of a monopoly by the State in favour of a private entity, to trade in liquor - Article 19(6) of the Constitution of India - Difference of Opinion. Held that - While Section 71 confers power on the State Government to make rules there is no provision akin to Section 59 of the Punjab Excise Act which confers power on any other authority in which case it could not possibly be contended that sub-section (2) of Section 71 would in any manner cut down the width of the general power of Section 71(1) for the State Government to make rules for the purpose of the Act. The Financial Commissioner has power to decide upon the number of licenses. Appeal dismissed.
Issues Involved:
1. Constitutionality of Rule 24(i-eeee) of the Haryana Liquor License Rules, 1970. 2. State's monopoly in favor of a private entity and its compliance with Article 19(6) of the Constitution of India. 3. Competence of the Financial Commissioner under Section 59(a) of the Punjab Excise Act, 1914, to amend Rule 24(i-eeee). 4. Alleged discrimination under Article 14 of the Constitution. 5. Procedural fairness and market dynamics in the grant of the L-1BF license. Issue-Wise Detailed Analysis: 1. Constitutionality of Rule 24(i-eeee) of the Haryana Liquor License Rules, 1970: The appellant challenged the constitutionality of Rule 24(i-eeee) as ultra vires the Punjab Excise Act, 1914. The Supreme Court analyzed whether the state government is competent to issue licenses for a local area alone under Section 58(2)(e) of the Act, while the Excise Commissioner, a sub-delegate of the Financial Commissioner, is competent under Section 13(b) read with Section 59(a) to issue an L-1BF license for the entire state. The Court concluded that the Financial Commissioner was not competent to amend the Rules regarding the number of licenses for the entire state, which is a power exclusive to the State Government under Section 6 read with Section 13(a) and 58(2)(e) of the Act. Consequently, Rule 24(i-eeee) was struck down as ultra vires. 2. State's Monopoly in Favor of a Private Entity and Compliance with Article 19(6): The appellant argued that the creation of a monopoly by the State in favor of a private entity to trade in liquor is contrary to Article 19(6) of the Constitution of India. The Supreme Court referenced previous judgments, including Akadasi Padhan vs. State of Orissa and Khoday Distilleries Ltd. vs. State of Karnataka, to affirm that once the State parts with its privilege to trade in liquor in favor of private individuals, the rigors of Article 14 continue to apply to ensure equal opportunity. The Court held that the State's policy of auctioning the license through e-bidding does not create a monopoly as it is open to participation by all eligible entities. 3. Competence of the Financial Commissioner under Section 59(a) of the Punjab Excise Act, 1914: The core issue was whether the Financial Commissioner had the authority to amend Rule 24(i-eeee) under Section 59(a) of the Act. The Supreme Court found that the Financial Commissioner's regulatory power under Section 59(a) is limited to ensuring compliance with the conditions of the license and does not extend to determining the number of licenses for the entire state. The Court emphasized that such an interpretation would grant the Financial Commissioner wider powers than the State Government itself, which is not the legislative intent. Therefore, the amendment by the Financial Commissioner was deemed ultra vires. 4. Alleged Discrimination under Article 14 of the Constitution: The appellant contended that the single monopolistic L-1BF license was discriminatory and violative of Article 14 of the Constitution, as no similar requirement was stipulated for wholesale trade in Indian-made foreign liquor or country liquor in the State. The Supreme Court did not find it necessary to delve into this ground of challenge after striking down Rule 24(i-eeee) as ultra vires. 5. Procedural Fairness and Market Dynamics in the Grant of the L-1BF License: The appellant argued that the absence of sufficient checks and balances gives untrammeled and uncanalized powers to the sole licensee, which is constitutionally impermissible. The Court acknowledged the concerns about potential market distortions and the monopolistic position of the sole licensee. However, it held that the State's policy of auctioning the license through e-bidding, with a reserve price of ?50 crores, was a transparent and fair process open to all eligible participants. Separate Judgment by K.M. Joseph, J.: Justice K.M. Joseph expressed his disagreement with the majority judgment, arguing that the Financial Commissioner had the power to decide upon the number of licenses under Section 59 of the Act. He emphasized the distinction between "local area" and the entire state, arguing that the power to regulate the number of licenses for the entire state falls within the Financial Commissioner's domain. Justice Joseph also addressed the issues of monopoly and procedural fairness, ultimately concluding that the State's policy was justified and did not violate constitutional provisions. He dismissed the appeal with no order as to costs.
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