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TMI Blog1986 (10) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rupe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents in the first two writ petitions were not aware at that time that it was a writ petition which was filed by M/s Doongaji Co. They thought that it was merely an intervention application since no notice was served upon them and they had also no opportunity of filing an affidavit in reply to that writ petition. All these three writ petitions were disposed of by a common judgment delivered by a Division Bench of the High Court consisting of Acting Chief Justice J.S. Verma and Justice B.M. Lal. Both the learned Judges, by separate judgments, substantially set aside the policy decision dated 30th December, 1984. Since the decision of the High Court for all practical purposes went against the respondents, they preferred Civil Appeals Nos. 1622 to 1639 of 1986 before this Court by special leave. M/s Doongaji Co. and Nand Lal Jaiswal also, to the limited extent that they did not succeed, filed special leave petitions Nos. 6206 and 7440 of 1986. That is how the present appeals and special leave petitions have come up before us. The facts giving rise to these appeals and special leave petitions are material and need to be stated in some detail. But, before we advert to the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of a distillery or brewery; (d) establish or licence a warehouse, wherein any intoxicant may be deposited and kept without payment of duty, but subject to payment of such fees as the State Government may direct; and (e) discontinue any such warehouse We may then refer to section 17 which provides inter alia that no intoxicant shall be sold except under the authority and subject to the terms and conditions of a licence granted in that behalf. The State Government obviously has the monopoly in regard to manufacture, possession and sale of liquor as held in several decisions of this Court. Section 18 recognises the power of the State Government to "lease to any person, on such conditions and for such period as it may think fit the right--(a) of manufacturing or of supplying by wholesale, or of both, or (b) of selling by wholesale or by retail, or (c) of manufacturing or of supplying by wholesale, or of both, and selling by retail, any liquor or intoxicating drug within any specified area." There are no other sections in the Act material for our purpose until we come to section 62 which confers on the State Government the power to make Rules for the purpose of carrying out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cence fee or such other manner as the State Government may by general or special order direct. These four different modes are alternative to one another and any one of them may be resorted to for the purpose of disposing of a licence. It is not necessary that the mode of disposal by tender must first be resorted to and if that cannot be acted upon, then only the mode of disposal by auction and failing that and not otherwise, the third mode of disposal by fixed licence fee and only in the event of it not being possible to adopt the first three modes of disposal, the last mode, namely, 'such other manner as the State Government may by general or special order direct'. This would seem to be plain and incontrovertible but Mr. Justice B.M. Lal has rather curiously in his judgment held that these four modes of disposal are inter-related and "failing in one of the clauses, the next is to be acted upon and for applying the fourth clause, it is incumbent for the State to specify the manner by general or special order and this also includes "specifying how and why the other three clauses are not possible to be acted upon which compels to take resort to the fourth clause". This view taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of both the licences is co-terminus. But, though a person cannot be granted a licence in Form D-1 unless he also obtains licence in Form D-2, the converse does not hold true. A licence in Form D-2 can be granted to a person under Rule V even though he does not hold a licence in Form D-1. Where a person is granted a licence in Form D-2 for working a distillery under Rule V, without having a licence in Form D-1 for wholesale supply of country liquor to retail vendors, he cannot make wholesale supply of country liquor manufactured by him to retail vendon but he can supply such country liquor to a person holding licence in Form D-1(s) or he can manufacture ractified spirit, denatured spirit or foreign liquor as contemplated in condition 3 of the licence in Form D-2. It is not necessary that a person holding a licence in Form D-2 must also simultaneously have a licence in Form D1. It is in the context of these provisions of the Act and the Rules that we must consider the facts of this case. There were at all material times in the State of Madhya Pradesh nine distilleries for the manufacture of spirit, which were established long back by the State Government under a licence iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esale supply of country liquor in that area. The person whose tender was accepted for any particular distillery was given a D-2 licence for working the distillery and also a D-1 licence for wholesale supply of country liquor manufactured in that distillery to retail vendors in the area attached to the distillery. These licences in Forms D-1 and D-2 were ordinarily issued for a period of five years. Respondent Nos.5 to 11 in the writ petition of Nandlal Jaiswal were the holders of D-1 and D-2 licences in respect of these distilleries for the period ending 31st March, 1986. There were two districts, however, which were not attached to any distillery, namely, Jabalpur and Betul and so far as these two districts were concerned, a licence in Form D-1(s) to make wholesale supply of country liquor to retail vendors in these two districts was being given and for the period ending 31st March, 1986 it was issued in favour of Sagar Aggarwal. The country liquor required by Sagar Agarwal for supply to retail vendors in Jabalpur and Betul Districts was being obtained by him from the Ratlam Alcohol plant at the rate of Rs. 1.80 per proof litre but, as will be presently seen, the supply of country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty by the State Government. The State Government, in order to meet the requirement of the consuming public, had actually to purchase liquor from other States at a higher price. Moreover, the consumption of liquor was growing from year to year and it was estimated that by the year 1991, the total consumption to country liquor would be likely to be in the neighbourhood of 482.36 lacs proof litres and by the turn of the century it was expected to be in the neighbourhood of 1696.80 lacs proof litres. Obviously, the existing 9 distilleries were totally inadequate to meet this growing demand for country liquor. Furthermore, the buildings in which these distilleries were housed had become old and were in a state of disrepair and it was not easy for the State Government to maintain them in good condition without incurring heavy expenditure every year. The plant and machinery were also old and antiquated and it was necessary to instal new and modern plant and machinery having increased capacity 'to manufacture country liquor. Moreover, it seems that though at the time of construction, these distilleries were away from the city or town, what had happened was that with the growth of popul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to new sites in view of the problem of pollution and the question of transfer of distilleries to private ownership was itself an important policy issue, the Separate Revenue Department referred the matter to the Chief Minister with a suggestion that a high level committee should be appointed for the purpose of examining the various issues. The State Government accordingly under the orders of the Chief Minister constituted a Cabinet Sub-Committee consisting of Ministers of Separate Revenue Department, Major and Minor Irrigation Department, Commerce and Industry Department and Rehabilitation and Environment Department and four highly placed officers, namely, Chief Secretary, Secretary, Separate Revenue Department, Secretary Finance Department and Excise Commissioner were directed to assist the Cabinet Sub-Committee. The Separate Revenue Department submitted a note for the consideration of the Cabinet Sub-Committee and this note formulated various issues arising for consideration and set-out various aspects relating to these issues so as to form the basis for. discussion. These issues may be summarised as follows: (1) Whether the transfer of ownership of Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the M.P. Consultancy Organisation and the valuation of the lands and buildings of Gwalior and Dhar distilleries, which according to the Vijayvargi Report, were not necessary to be shifted to new sites, should also be got done by the Collectors concerned on the basis of prevailing market rates. It was also directed by the Cabinet Sub-Committee that an estimate of sales of country liquor projected in the next 20 years should be got made and it should also be examined whether such future demand could be met by the present distilleries and on this basis how many' distilleries in the public cooperative and private sectors would be necessary to be established. Pursuant to this direction, an estimate of the cost likely to be incurred in establishment of Bhopal, Ujjain, Badwaha, Seoni and Bhilai distilleries at the new sites including purchase of land, construction of buildings, setting up of modern plant and machinery and arrangement for lagoon for polluted water thrown out by the distilleries, was prepared by the Excise Commissioner and the Report made by the Excise Commissioner showed that, according to this estimate, the likely cost would be in the neighbourhood of Rs.20 crores 60 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outsiders. Some suggestion was also made on behalf of these representatives that compensation should be paid by the State Government, to the existing contractors for the expenditure incurred by them in construction of roads, molasses collection pits, wharehouses etc. These suggestions were considered and examined by the Cabinet Sub--Committee. Before the next meeting of the Cabinet Sub-Committee was held on 20th September 1984, a letter dated 10th Sept. 1984 was submitted by the Finance Department in which two points were raised by the Finance Department. One was that "transfer of distilleries should be made by getting the comparative bids offered and it should be given to the highest bidder" and the other was whether on transfer to private ownership the distillers "would be required to obtain any permission under the Industries Development and Regulation Act and if permission is not granted, whether any problem would arise out of it." The Cabinet Sub-Committee at the meeting held on 20th September 1984 discussed these two points and so far as the first point was concerned, the Cabinet Sub-Committee came to the conclusion that "the transfer of distilleries should be made only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter receiving the same from the distilleries and no concession should be given therein. (3) There should be an agreement with the Distillers who are allotted lands for establishing distilleries at the new sites to the effect that the Government will be bound to 'issue them D-2 licence after the construction of buildings and fitting of plant, on fulfilling all terms and conditions. B. Allotment of lands for construction of distilleries at the new places (4) Generally a principle should be accepted in connection with the price of land to be allotted to the distillers at those five places whose distilleries are to be transferred at any other place that if the land to be allotted is a Government land, its market value plus 20% of its market price and the amount so arrived at should be treated as the premium of that land and on that basis ground rent should be fixed as per rules. The land should be given on 30 years' lease. (5) If the land to be allotted is a non-Government land and if it is to be allotted after acquisition, then as a result of acquisition the compensation to be paid plus 20% and the amount that would be arrived at should be treated as premium of that land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing liquor from Mahuwa also should be established by the distillers for manufacturing liquor from Mahuwa in all the distilleries in the State so that, if it is necessary, liquor should be manufactured from Mahuwa and the Mahuwa produced in the State should be properly used within the state only and they should get reasonable ,price for the Mahuwa purchased by them at the support price of MARPED or Vano Upaj Vyaper Sangh. For each distillery 71/2% liquor should be manufactured from Mahuwa of its total productive capacity and it should be mentioned in D-2 licence. G. Period of D-2 licences (15) In the beginning D-2 licence (Distillery Licence) should be granted for five years and thereafter there should be a provision for its renewal. Necessary amendment in the Excise Act or Rules for the same should be made. H. Fixation of liquor price (16) The Sub-Committee was apprised of the system of fixation of cost of liquor in the State of U.P., West Bengal and Maharashtra States. Prices fixed in Uttar Pradesh by calling tenders whereas in Maharashtra under Eythule Alcohol Price Control Order on the recommendation of the State Government, the prices of liquor are fixed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red at the new sites and their construction and establishment in the private ownership. Hence, the question of transfer of land and buildings of these distilleries does not arise. It is clear that the lands and buildings of the present five distilleries will be of the State Government and they can be used for Government purposes. So far as the transfer of Gwalior and Dhar distilleries and their lands and buildings are concerned, the said distillers have made applications to the State Government that they also intend to establish distilleries at the new sites. If the State Government decides to establish these distilleries at other places, the question of transfer of lands and buildings of these distilleries does not arise. Point No. 2 A serious thought should be given to the question that the State Government should give an undertaking to the distillers that the State Government shall purchase liquor from them forever and for that purpose no tender will be invited. Answer With regard to this point, it would be proper to make mention of the fact that the distillers whom the land will be allotted for the construction of new distilleries, they will only be granted D-2 licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Chartered Accountant, a cost accountant and a senior Officer of the Excise Department. The Finance Department has suggested that in this Committee, representatives of the Finance Department and the Separate Revenue Department and the representative of the Separate Department should be its Chairman which would fix the rates on the basis of principles. Answer This suggestion is capable of being accepted. It may be pertinent to mention here that the Sub-Committee was apprised of the different systems adopted by different States with regard to supply rates. The Sub-Committee has recommended the system prevalent in West Bengal because the Sub Committee felt that this system is more scientific and fit. The Sub Committee has also mentioned that after obtaining further information about this system, action should be taken and after transfer of the distilleries into private ownership the prices should be fixed every year. Presently, the prices of liquor are fixed for a period of five years. Point No. 5 There should be competition which can be achieved through tender system. Hence, for fixing prices, tender system should be adopted and nobody should be given to say that the rates h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of India. (c) The licence shall be further subject to renewal every year' on payment of a licence fees of Rs. Five thousand in advance and subject to due observance of the provisions of the Excise Act and rules made thereunder and conditions of the licence. The licensee to whom the Letter of Intent was issued was required under Clause 2 of the Letter of Intent to construct the distillery on the land approved by the State Government and the M.P. Pollution Board. It was provided by Clause 12 of the Letter of Intent that the licensee shall make proper arrangements for treatment of effluents discharge under a scheme duly approved by the M.P. Pollution Board and that any direction issued by the Excise Commissioner in this regard shall be binding on the licensee. Clause 14 of the Letter of Intent stipulated that the licensee shall be bound to complete construction of distillery and installation of plant and machinery as required by the Excise Commissioner well before 1st April 1986. The Letter of Intent was followed by a Deed of Agreement dated 2nd February 1985 executed by and between the Governor of Madhya Pradesh acting through the Excise Commissioner and each of res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs for housing the distillery and placed orders for purchase the plant and machinery to be installed in the distillery. Some of the plant and machinery started arriving and it began to be installed in the distillery. There was some dispute between the parties as to how much amount each of respondent Nos. 5 to 11 had expended by the time the first writ petition came to be filed by Nand Lal Jaiswal but it could not be seriously contested that considerable amount of money had already been spent by respondent Nos. 5 to 11 in acquiring land, constructing buildings. placing orders for purchase of plant and machinery and taking other necessary steps before 28th November 1985 when Nand Lal Jaiswal filed the first writ petition. There is evidence to draw that considerable more progress had been made by respondent Nos. 5 to 11 in this direction by the time the second writ petition came to be filed by Sagar Agarwal. Each of them had, on a conservative estimate, spent over one or two crores of rupees by the time Nand Lal Jaiswal and Sagar Agarwal filed these writ petitions challenging the policy decision dated 30th December 1984. On the filing of these writ petitions, an application for stay w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the State Government to grant D-2 licence beyond the maximum period of 5 years and that the provision in regard to renewal from year to year was to operate within this period of 5 years. The learned counsel appearing on behalf of the petitioners, however, urged that this concession made on behalf of the State Government and respondent Nos.5-11 was of no avail, since it was contrary to the terms of the policy decision dated 30th December 1984 and the provision in the Letter of Intent and, in any event, the validity of the policy decision dated 30th December 1984 could be tested only on its own terms and if it was otherwise invalid, the concession made on behalf of the State Government and respondent Nos.5-11 could not save it. We do not think that this contention urged on behalf of the petitioners is well-founded. It is undoubtedly true that the recommendations of the Cabinet Sub-Committee which were accepted by the Cabinet in the policy decision dated 30th December 1984 provided that in the beginning, D-2 licence shall be granted for a period of 5 years and thereafter there shall be a provision for its renewal and for this purpose, necessary amendment in the M.P. Excise Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court and particularly the Judgment of the Acting Chief Justice J. S. Varma with Justice B.M. Lal divided the policy decision dated 30th December 1984 into two parts. The first part according to the High Court related "to the grant for construction Of the new distilleries by the existing contractors" and the other part related "to the grant of licence for manufacture and wholesale supply of liquor with effect from 1st April 1986 to the existing contractors on construction of new distilleries by them". The High Court first took up for consideration the question of validity the first part and held that having regard to the inordinate delay in the filing of the writ petitions no interference was "called for with the grant to this extent". The High Court observed and we are quoting here in full what the High Court has said in regard to the first part since that contains the finding of the High Court on the question of delay:- "In our opinion, the delay in bringing these petitions to challenge the grant made to the existing contractors who are respondents in these petitions for construction of the new distilleries, is not adequately explained and, therefore, it would not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uor under D-1, D-2 licences could be manufactured and supplied only from those distilleries, the High Court evolved a new formula namely, that the persons to whom D-1, D-2 licences may be granted on the basis of tender or auction should be entitled to take over the distilleries constructed by respondent Nos.5 to 11 at a proper value assessed by the. State Government. The High Court accordingly allowed the writ petitions to this limited extent and directed that each party shall bear and pay its own costs of the writ petitions. The questions is whether this view taken by the High Court is correct. Before we proceed to consider this question, we may point out that Acting Chief Justice, J.S. Verma, who delivered the main judgment in the writ petitions, did not make any comments against the conduct of the State Government in granting to the existing contractors the right to construct distilleries and manufacture and make wholesale supply of country liquor from such distilleries but merely proceeded to invalidate what he called the second part of the policy decision dated 30th December 1984 on the ground that it violated Article 14 of the Constitution. But Justice B.M. Lal delivered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d dealing to the State Government. Are they justified by the record, is a question which we have to consider. We may first consider the question of laches or delay in filling the writ petitions because that is the question which has been decided by the High Court against the petitioners and the petitioners have challenged the correctness of the finding reached by the High Court of this point. The policy decision impugned in the writ petitions was taken 30th December, 1984. The Letter of Intent was issued in favour of each of respondent Nos. 5 to 11 on 1st February 1985 and the Deed of Agreement was executed on 2nd February 1985. Each of respondents nos. 5 to 11 thereafter proceeded to purchase land where the new disilleries were to be located and incurred large expenditure in purchase of such land and security deposit in a fairly large amount was also paid by each of respondents Nos.5 to 11. Thereafter civil construction work for putting up the distillery buildings was entrusted to reputed builders and various steps were taken by each of respondents Nos.5 to 11 for obtaining requisite permission/consent from Madhya Pradesh Pradushan Nivaran Mandal. The construction of the distill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay intervene and if the writ jurisdiction is excercised on a writ petition filed after unreasonable delay, it may have the effect of inflicting not only hardship and inconvenience but also injustice on third parties. When the writ jurisdiction of the High Court is invoked, unexplained delay coupled With the creation of third party rights in the meanwhile is an important factor which always weighs with the High Court in deciding whether or not to exercise such jurisdiction. We do not think it necessary to burden this judgment with reference to various decisions or this Court where it has been emphasised time and again that where there is inordinate and unexplained delay and third party rights are created in the intervening period, the High Court would decline tO interfere, even if the State action complained of is unconstitutional or illegal. We may only mention in the passing two decision of this Court one in Ramanna Dayaram Shetty v. International Airport Authority of India Ors., [1979] 3 SCR 1014 and the other in Ashok Kumar Mishra Ant. v. Collector Rajput Ors., [1980] 1 SCR 491, We may point out that in R.D. Shetty's case (supra), even though the State action was held to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iderable discussion and deliberation that the policy decision was' arrived at on 30th December 1984. The petitioners were, on their own showing, liquor contractors by profession and they were "associated with the trade of country liquor in the State since the last several years" and it would be wholly unrealistic and naive to suppose that the petitioners were not aware of the change in the policy which was being discussed at various levels over a period of almost 12 months and which was ultimately brought about by the policy decision dated 30th December 1984. Those who are in the liquor trade would immediately know what is happening and whether any change is taking place in the policy in regard to grant of licences for manufacture and wholesale supply of country liquor. It is also difficult to believe that the petitioners did not know that new distilleries were being constructed at new sites by respondent Nos.5 to 11. The reigned ignorance of the petitioners is completely exposed by the letter dated 1st April 1985 addressed by Sagar Agarwal to the Commissioner of Excise where it has been stated categorically:-- "I have learnt that in order to prevent pollution the Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another letter to the Prime Minister on 7th November 1985 in which they once again complained that the distilleries were being made 'permanent' to the existing contractors. Now if Sagar Agarwal and M/s Doongaji Company knew as far back as April 1985 that the distilleries were being given in private ownership to the existing contractors, it is difficult to believe that Nand Lal Jaiswal who is also in the liquor trade for years did not known about it. In fact, every person in the liquor trade would have know about this change in policy which had been made by the State Government under the policy decision dated 30th December 1984. We do not therefore see any reason to up set the finding of the High Court that the petitioners were guilty of enormous delay in filing the writ petitions and that in the meanwhile, during the intervening period, the rights of third parties had intervened in that respondent Nos.5 to 11, acting on the basis of the policy decision dated 30th December 1984, had incurred huge expenditure towards setting up the distilleries. If the policy decision dated 30th December 1984 were now to be set aside at the instance of the petitioners, it would work immense hardsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution. This view taken by the High Court is in our opinion plainly erroneous. The policy decision dated 30th December 1984 was a single integrated decision arrived at by the State Government taking a holistic view of all the aspects involved in the decision and it is difficult to appreciate how the High Court could sustain one part of the policy and strike down the other. Either the policy as a whole could be sustained or as a whole, it could be declared to be invalid, but certainly one part could not be sustained, whatever be the ground and the other pronounced invalid. That would be making a new policy for the State Government which it was not competent for the High Court to do. Once the High Court came to the conclusion that on account of delay or laches in the filing of the writ petitions or the creation of third party rights in the meanwhile, the Court would not interfere with one part of the policy decision, the Court could not interfere with the second part of the policy decision as well. The consequence of sustaining one part of the policy decision and striking down the other would not only be to create a new policy for the State Government but it would also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject matter of that policy would not be the old distilleries of which the land and building belonged to the State Government and the plant and machinery was subject to transfer at a valuation but the new distilleries constructed by the existing contractors with their own monies and resources under the Letter of Intent dated 1st February 1985 and the Deed of Agreement dated 2nd February 1985, neither of which provided for transfer of the land and building or the plant and machinery to any other person who might be granted D-1 and D-2 licences as a result of auction or tender. The entire policy of the State Government contained in the policy decision dated 30th December 1984 would be frustrated and a new policy would be made out which patently the High Court has no jurisdiction or power to do. Secondly, it is obvious that respondent Nos. 5 to 11 took tremendous trouble by way of acquiring land, constructing buildings, purchasing and installing plant and machinery and procuring and utilising large resources in setting up new distilleries with a view to working them and manufacturing liquor for wholesale supply at such rate or rates as may be fixed by the Expert Committee appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to purchase liquor from outside the State at higher prices in order to satisfy the demand of the consuming public, resulting in loss of licence fee as well as excise duty. Even if the person to whom D-1 and D-2 licences may be granted agrees to set up a new distillery, it would take considerable time and during the period taken up in the construction of the new distillery, the State Government would lose revenue. Of course, it may be urged that if respondent Nos. 5 to 11 are not granted D-1 and D-2 licences but such licences are granted to any other person or persons who offer a more acceptable bid or tender, respondent Nos. 5 to 11 would be constrained to transfer the new distilleries to such other person or persons because otherwise the new distilleries in their hands would remain idle investment. But the State Government cannot wait for such chance to materialise and in the meanwhile, lose public revenue. We have therefore no doubt that the High Court was not at all justified in splitting up the policy decision dated 30th December 1984 into two parts and in striking down the second part, while sustaining' the first. The Policy decision dated 30th December 1984 was one integrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, auction or fixed licence fee or in such other manner as the State Government may by general or special order direct. It does not enable the State Government without publishing the rules to licence construction and working of a distillery under a changed policy: i.e. a policy which does not involve tender, auction or fixed licence fee. Any other construction would-render the last clause of Rule XXII as ultra vires section 62(2)(h) and section 63 read with section 7(c)." The learned counsel also urged that "the decision of the Cabinet in a meeting of the Cabinet is not an Order" within the meaning of Rule XXII and since no order under that Rule was produced, the Letter of Intent and the Deed of Agreement were without the authority of law as being in contravention of that Rule. We do not think this contention has any substance. It is a contention of despair. It is difficult to understand why the policy decision dated 30th December 1984 cannot be given effect to without any new Rules being made by the State Government. There is nothing in the policy decision dated 30th December 1984 which is contrary to the Rules made under the Act. It is true that D-2 licence in its existing form d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y futile. When the policy decision dated 30th December 1984 was arrived at by the State Government itself, there could be no need for separate general or special order to be made by the State Government in that behalf. This would seem to be clear on principle, but we find that there is a dedsion of this Court in State of Orissa Ors. v. Harinarayan Jaiswal Ors., [1972] 3 SCR 784 where the same view has been accepted. There, the section which came up for consideration was section 29 of the Bihar and Orissa Excise Act, 1915. Subsection (2) of this section provided that the sum payable to the State Government in consideration of the grant of an exclusive privilege to manufacture and supply or liquor shall be determined as follows: "by calling tender or by auction or otherwise as the State Government may, by general or special order, direct." The State Government adopted the method of selling the exclusive privilege by private negotiations and this was challenged on behalf of the petitioners on the ground that the Government could sell the exclusive privilege by private negotiations only if an order was made under section 29 sub-section (2) that the privilege in question shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51. The argument of the learned counsel was that respondent Nos. 511 were not entitled to set up new distilleries at the new sites without obtaining a licence from the Central Government under Section 11 of this Act and since there was nothing to show that they had obtained such licence before setting up the new distilleries, their action in setting up the new distilleries was illegal and could not give rise to any rights in their favour. But, this contention is also unsustainable. In the first place, no such contention was raised in the writ petitions and neither the State Government nor respondent Nos. 5-11 had any opportunity of answering such contention. This contention is based on facts and we cannot permit the petitioners to raise it for the first time in the present appeals. The foundation for this contention should have been laid in the writ petitions and the necessary facts should have been pleaded in support of it. No such plea having been raised and no such facts having been pleaded in the writ petitions, we cannot allow this contention to be raised before us. Moreover, it is obvious from section 11 read with the definitions of 'factory' and 'industrial undertaking' cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two very effective answers to it given by the learned Attorney General and the learned counsel for Respondent Nos. 5-11 and we shall immediately proceed to discuss them. But, before we do so, we may at this stage conveniently refer to a contention of a preliminary nature advanced on behalf of the State Government and respondent Nos. 5-11 against the applicability of Article 14 in a case dealing with the grant of liquor licences. The contention was that trade or business in liquor is so inherently pernicious that no one can claim any fundamental right in respect of it and Article 14 cannot therefore be invoked by the petitioners. Now, it is true, and it is well settled by several decisions of this Court including the decision in Har Shanker Ors. etc. v. Deputy Excise Taxation Commissioner Ors., [1975] 3 SCR 254 that there is no fundamental right in a citizen to carry on trade or business in liquor. The State under its regulatory power has the power to prohibit absolutely every form of activity in relation to intoxicants--its manufacture, storage, export, import, sale and possession. No one can claim as against the State the right to carry on trade or business in liquor and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Morey v. Dond, (354 US 457): "In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the 'experts, and the number of times the judges have been overruled by events-self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability." What we said in that case in regard to legislation relating to economic matters must apply equally in regard to executive action in the field of economic activities, though the executive decision may not be placed on as high a pedestial as legislative judgment in so far as judicial deference is concerned. We must not forget that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call 'trial and error method' and, therefore, its validity Cannot be tested on any rigid a 'priori' consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asking for similar licences. But this view, in our opinion, is based on a misreading of the policy decision dated 30th December 1984. It ignores clause 2 of the policy decision which clearly provides that "if some such 'similar matters are put up, the department on the basis of the principles recommended by the Cabinet SubCommittee should take decisions". It is clear from this clause that the State Government envisaged the possibility of other liquor contractors making similar applications for licences to construct new distilleries and to manufacture and supply liquor from such new distilleries and hence provided that if any such applications are made, they should be disposed of by the Excise Department on merits on the basis of the principles "recommended by the Sub-Committee" that is, on the basis of the same principles on which the licences were decided to be granted to the existing contractors. It is therefore impossible to see how it can at all be contended that other contractors were excluded from consideration for the grant of licences for new distilleries. If any liquor contractor makes an application for a licence to construct a new distillery on the same terms on which l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pared by the separate Revenue Department for the consideration of the Cabinet Sub-Committee as also the Report of the Vijayvargi Committee clearly showed that there was considerable air and water pollution on account of dirty water flowing out of the distilleries and fouling air and water. There was not enough space at the old sites for constructing lagoons for removal of the polluted water coming out of the distilleries. It was therefore necessary to transfer the distilleries to new sites which would be away from human habitation and. where the distilleries could be constructed keeping in mind the standards fixed by the M.P. Pradushan Nivaran Mandal for removal of polluted water and keeping the environment dean and wholesome. Moreover, the total capacity of the distilleries including Ratlam Alcohol plant and Nowgaon distillery was only 203 lakhs proof litres and even this quantity of production was not being reached largely on account of old plant and machinery. The result was short supply of country liquor leading to loss of licence fee as well as excise duty on the part of the State Government. Moreover, the estimated consumption of liquor in the State was likely to be around 48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the event of construction of the new distilleries being entrusted to private entrepreneurs, maintenance of buildings as well as plant and machinery would become their responsibility and moreover they would have real interest in keeping and maintaining them in good condition. And lastly, the land and buildings in which the distilleries were then housed would become available to the State Government for sale and, situated as they were in thickly populated areas, they would fetch a very handsome price which would go to augment the resources of the State Government. The State Government for these reasons thought it desirable that the construction of new distilleries should be in the private sector and, after discussion with the M.P. Distillers Association the State Government decided to entrust the construction of new distilleries to the existing contractors who had already offered to take over the distilleries. There was also one other factor which, according to the State Government and respondent Nos. 5 to 11, weighed with the State Government in arriving at the decision to entrust the construction of new distilleries to the existing contractors instead of inviting offers by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to put up new distilleries, the State Government did not wish to create a monopoly in favour of the existing contractors and the State Government therefore, when entering into the Deed of Agreement, limited the duration of D-2 licence to be granted to each of the existing contractors to five years and also left it open to other distillery contractors to come in on the same terms. In fact the learned Attorney General frankly stated that if M/s Doongaji Co. made an application for a licence to construct a new distillery on the basis as others, his application would be considered by the State Government. We fail to appreciate how in these circumstances it can at all be contended that the policy decision dated 30th December, 1984 taken by the State Government was arbitrary or irrational so as to be violative of Article 14 of the Constitution. We may also point out that when the State Government is granting licence for putting up a new industry, it is not at all necessary that it should advertise and invite offers for putting up such industry. The State Government is entitled to negotiate with those who have come up with an offer to set up such industry. This principle was clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthcoming and then after considering all offers, decide whether I should let you set up the industry". It would be most unrealistic to insist on such a procedure ...............The State must be free in such a case to negotiate with a private entrepreneur with a view to inducing him to set up an industry within the State and if the State enters into a contract with such entrepreneur for providing resources and other facilities for setting up an industry, the contract cannot be asailed as invalid so long as the State had acted bona fide, reasonably and in public interest. If the terms and conditions of the contract or the surrounding circumstances show that the State has acted mala fide or out of improper or corrupt motives or in.order to promote the private interests of some one at the cost of the State, the Court will undoubtedly interfere and strike down State action as aribitrary, unreasonable or contrary to public interest. But so long as the State action is bona fide and reasonable, the Court will not interfere merely on the ground that no advertisement was given or publicity made or tenders invited." Here, in the present case, the pre-dominant purpose of the policy decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities" for getting the licences. But no such allegation was at any time made by the petitioners and when the petitioners did not make any such allegation in the pleadings, nor even stated as to which authority took monies by way of illegal gratification, it is difficult to understand how the learned Judge could possibly make such an observation. The petitioners also did not make any specific imputation of under hand dealing in the writ petitiones and yet the learned Judge inexplicably came to the conclusion that the State Government was guilty of 'sinister underhand dealing'. The learned Judge was clearly not justified in doing so. But, quite apart from this objection based on lack of proper and adequate pleading, we think that even on merits the observations made by B.M. Lal, J. were clearly unjustified. There is not an iota of evidence to establish or even as much as to indicate that the State Government was actuated by any collateral purpose or was guility of any 'sinister underhand dealing' or was prompted by any currupt motive in reaching the policy decision dated 30th December, 1984. What the learned Judge has said is based entirely on conjecture and suspicion and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which the recommendations were made and it was after considering these recommendations that the Cabinet reached the policy decision. The entire proceedings show that there was complete openness of discussion and deliberation. There was no suddenness of decision, no impulsive caprice or arbitrariness in reaching the decision. The policy decision was plainly and avowedly an informed and institutionalised decision and the manner in which it was reached is clearly indicative that it was neither mala fide nor guided by any corrupt or collateral considerations. We have already discussed the circumstances under which the policy decision dated 30th December, 1984 came to be made. We need not repeat what we have said in the preceding paragraphs in regard to the making of the policy decision and the circumstances under which it was made. These circumstances plainly and unmistakably point to the bona fides of the policy decision. It is not possible to discern any mala fides or any improper or corrupt motive on the part of the State Government in reaching the policy decision. It is significant to note that the State Government did not concede whatever was demanded by the existing contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cabinet Sub-Committee was guilty of any mala fides or underhand dealing or was actuated by any corrupt motive. The Cabinet merely accepted the recomendations made by the Cabinet Sub-Committee and in fact when the deed of Agreement came to be executed with each of the existing contractor the State Government actually introduced a provision that D-2 licences would be given only for a period of five years. We are therefore unable to appreciate how B.M. Lal, J. could possibly pass strictures against the State Government attributing mala fides, under-hand dealing and corruption to the State Government. We may also in this connection refer to an allegation made by Sagar Aggarwal that by reason of the policy decision dated 30th December. 1984 the State Government would incur a loss of about Rs. 56 crores. This allegation did not find favour with Acting Chief Justice J.S. Verma but it seemed to have impressed B.M. Lal, J. because he categorically stated in paragraph 17 of his concurring opinion that even if D-1 licences were granted to respondent Nos. 5 to 11 only for a period of five years the State Government would suffer a loss of Rs. 56 crores. We find it difficult to understand how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail to understand how the learned Judge could proceed on the assumption that a rate of Rs.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 Rs.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 Rs.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 may observe in conclusion that Judges should not use strong and carping language while criticising the conduct of parties or their witnesses. They must act with sobriety, moderation and restraint. They must ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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