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TMI Blog1975 (1) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... lants holding licences in Form Nos. L-3, L-4 and L-5 became liable to pay fixed fees up to ₹ 20,000 per annum in addition to fees assessed under rule 31. The grievance of those appellants is that since their licences were renewed in January 1968, the amendments made in March 1968 cannot apply to them and therefore the ,demand made on the basis of amended rules is illegal. It is true that the amendments under which the appellants have been called upon to pay fixed fees were made after the licences were renewed. But the licences, though renewed in January 1968, were lo be effective from April 1, 1968. The amendments having come into force before April 1 would govern the appellants' licences and they are, therefore, liable to pay the fixed fees under the amended Rules. The payments due from the' appellants holding licences in Form L-14A are also due to the Government on account of any contract relating to the excise revenue" as provided in section 60(1)(c) of the Act. It is therefore open to the Government to recover its dues in the manner authorized by section 60. Appeal dismissed. - Civil Appeals Nos. 365, 366, 485, 1102, 1260 to 1263, 1385, 1537, 1548 to 1551, 1553 to 155 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. vs. State of Haryana Ors.). Following an earlier judgment in Bhajan Lal vs. State of Punjab (Civil Writ No. 528 of 1966 decided on February 6, 1967), the High Court took the view that the licence fee realised through the medium of auctions was really in the nature of "still-head duty" and that licences could not be called upon by the Government to pay still-head duty on the liquor quota which, under the terms of auctions, they were bound to lift but which in fact was not lifted by them. On March 21, 1969 a meeting of the, State Excise Officers was. held under the chairmanship of the Financial Commissioner to evolve a new formula for leasing the right to sell liquor so as to meet the judgment in Jage Ram's case. The new policy containing fresh terms and conditions of auction was announced on the 22nd and the impugned auctions in pursuance of that policy were held immediately thereafter. On March 23, 1968 the first respondent-the Deputy Excise and Taxation Commissioner Jullundur-held an auction for granting the right to sell country liquor at the 'Town Hall Vend' and the Kailash Cinema Chowk Vend', Ludhiana. The appellants gave bids in the sum of Rs. 34,01,000 and Rs. 12,02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply of liquor to him but he is not entitled to any compensation or damages for the short supply. By Condition No. 24, the maximum price at which the spiced country liquor may be sold by the licensee is fixed at Rs. 10.00 per Quart, Rs. 5.25 per Pint and Rs. 2.75 per Nip. The Town Hall Vend was auctioned on the basis of the fixed quota of 1,50,560 proof liters which is equivalent to 4,01,000 bottles per year. The Kailash Cinema Chowk Vend was auctioned on the basis of the fixed quota of 50,506 proof liters which is equivalent to 1,34,685 bottles per year. The appellants deposited Rs. 1,41,708 for the Town Hall Vend and Rs. 50,091 for the Kailash Cinema Chowk Vend being 1/24th of the licence fee required to be deposited by way of security. They were, however, unable to meet their obligations under the conditions of auction and fell in arrears. The State Government demanded the payment, threatened to cancel the licences granted to the appellants and declared its intention to resell the vends a the risk of the appellants. On August 22, 1968 the appellants filed their writ petition in the High Court of Punjab and Haryana. They prayed for three reliefs out of which only two were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y could not possibly be justified under item 66. (7) The rule fixing the maximum price at which a licence could sell a bottle of liquor was ultra vires of the rule,-making powers of the Financial Commissioner under Section 59 of the Act. The High Court negatived all of these contentions. It held that the State Legislature was competent to regulate the business of vending intoxicating liquors, that various provisions of the Act showed that the State Government had the exclusive right to manufacture or sell intoxicants, that the Financial Commissioner had the jurisdiction to determine the method of disposal of country liquor vends, that the rules under which the impugned auctions were held are substantially different from those under which the auctions challenged in Jage Ram's case were held, that section 34 of the Act is not an instance of delegated legislation and that the fixation of the maximum price of country liquor was a part of the power to regulate the trade in liquor. On the main contention that the levy in the shape of licence fee was unconstitutional, the High Court held that licences granted for regulating trade in intoxicating liquors stand in a class by themselves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot by their writ petitions, be permitted to wriggle. out of the contractual obligations arising out of the acceptance of their bids. This objection is wellfounded and must be accepted. Those interested in running the country liquor vends offered their bids voluntarily in the auctions held for granting licences for the sale; of country liquor. The terms and conditions of auctions were announced before the auctions were held and the bidders participated in the auctions without a demur and with full knowledge of the commitments which the bids involved. The announcement of conditions governing the auctions were in the nature of an invitation to an offer to those who were interested in the sale of country liquor. The bids given in the auctions were offers made by prospective vendors to the Government. The Government's acceptance of those bids was the acceptance of willing offers made to it. On such acceptance, the contract between ,,he bidders and the Government became concluded and a. binding agreement came into existence between them. The successful bidders were then granted licences evidencing the terms of contract between them and the Government, under which they became entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term. The two reliefs which the appellants asked for in the writ petitions are that the auctions held by the Government for granting liquor licences and the bids offered therein by the prospective licensees should be quashed and secondly that a direction should be issued to the respondents restraining them from enforcing the obligations arising under the bids. It is interesting that except in the title of the petition showing that it was filed "Under Article 226 of the Constitution of India", the representative Writ Petition (No. 2646 of 1968) does not even refer to so much as, any provision of the Constitution, much less to the infringement of any Constitutional rights. Apart from this, in the view which we are disposed to take on the main contention, no question of the waiver of a "fundamental right" can arise. The appellants objected to the preliminary contention of the respondents on the ground that in their counter affidavit filed in the 'High Court, respondents had not pleaded that there was any contract 'between the parties or that the writ jurisdiction of the High Court was inappropriate for the enforcement of contractual rights. This submission overlooks the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance. in other words, the court examines all the circumstances to see if the one party may be assumed to have made a firm ,,offer" and if the other may likewise be taken to have 'accepted" that offer. These complementary ideas present a convenient method of analysing a situation, provided that they are not applied too literally and that facts are not sacrificed to phrases." Analysing the situation here, a concluded contract must be held to have come into existence between the parties. The appellants have displayed ingenuity in their search for invalidating circumstances but a writ petition is not an appropriate remedy for impeaching contractual obligations. In Civil Appeals Nos. 485 and 2205 of 1969, filed respectively by Northern India Caterers (P) Ltd., and M/s. Green Hotel, Bar and Restaurant and Others, the appellants hold licences in Form Nos. L-3 L-4 and L-5 for the retail vend of foreign liquor in a hotel, restaurant and in a bar attached to a restaurant. No auctions were held for granting these licences and therefore the reasoning that acceptance of bids brought into existence a concluded contract between the successful bidders and the Government will not apply to the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions brought by them. We have heard the appeals fully and since the points involved are of general public importance, we would like to deal with the appeals on merits. The main and the real focus of controversy is the power, of the Government to levy and realise large licence fees either through the medium of auctions or on scales fixed under the rules. The country liquor contractors offered incredibly high bids in the auctions which on the whole netted a revenue of rupees twentynine odd crores to the 'State Government. Licensees like the Northern India Caterers and M/s. Green Hotel who run hotels, restaurants or bars were asked under the amended rules to pay, besides assessed fees, fixed fees varying between Rs. 7500 and Rs. 20,000 for the year. Apprehending 'that it was fruitless to do business on these terms and fearing the resort 'by the Government to coercive measures for the recovery of the amounts due to it, the appellants filed writ petitions in the High Court soon after 'the commencement of the term of their respective licences. Liquor licensing has a long history. Prior to the passing of the Indian Constitution, the licensees mostly restricted their challenge to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be constructed or worked except under the, authority and subject to the terms and conditions of a licence granted by the Financial Commissioner. Section 24 provides that no person shall have in his possession any intoxicant in excess of such quantity as the State Government declares to be the limit of retail sale, except under the authority and in accordance with the terms and conditions of a licence or permit. Sub-section (4) of section 24 empowers the State Government to prohibit the possession of any intoxicant or restrict its possession by imposing such conditions as it may prescribe. Section 26 prohibits the sale of liquor except under the authority and subject to the terms and conditions of a licence granted in that behalf. Section 27 of the Act empowers the State Government to "lease" on such conditions and for such period as it may deem fit or retail, any country liquor or intoxicating drug within any specified local area. On such lease being granted the Collector, under sub-section (2), has to grant to the lessee a licence in the form of his lease. Section 34(1) of the Act provides that every licence, permit or pass under the Act shall be granted (a) on payment of such f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iquor in a bar attached to a restaurant. Northern India Caterers (P) Ltd., and M/s. Green Hotel, Bar and Restaurant, who are appellants in Civil Appeals No. 485 and 2205 of 1969 respectively hold licences in Form Nos. L-3, L-4 and L-5. The Collector is designated as the authority to grant and renew these licences. Prior to March 22, 1968 licences in Forms L-3, L-4 and L-5 used to be granted on assessed fees only as provided in Rule 28. The assessed fees were quantified in accordance with scale of fees prescribed under Rules 30 and 31. The scale of fees was raised in 1965 by a Notification dated April 15, 1965. Under the revised rates the following fixed fees were prescribed. "Indian made spirit Rs. 25 .00 Imported spirit Rs. 31 .25 per bulk Wine Rs. 6.25 litre Indian Beer Rs. 0 .63 Imported Beer Rs. 1 /25 On March 22, 1968 the second respondent (the Excise and Taxation Commissioner) issued a notification in the exercise of powers conferred by section 59 of the Act whereby a new Rule 30 was substituted for the old Rule 30. By this notification, the Table under Rule I was amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it unlawful to manufacture export, import, transport or sell intoxicating liquor except in accordance with a licence. permit or pass granted in that behalf. The Bombay Abkari Act 1878: the Bombay Prohibition Act 1949; the Bengal Excise Act-, of 1878 and 1909; the Madras Abkari Act 1886; the Laws and Rules contained in the Excise Manual United Province, the Eastern Bengal and Assam Excise Act 1910; the Bihar and Orissa Excise Act 1'915; the Cochin Abkari Act as amended by the Kerala Abkari Laws Act 1964; and the Madhya Pradesh Excise Act 1915, are instances of State legislations by which extensive powers are conferred on the State Government in the matter of liquor licensing. The power of the State Government under section 17 of the Act to prohibit absolutely the import, export or transport of any intoxicant; its power under section 20 to prohibit the manufacture or collection of an intoxicant or the construction or working of a distillery or a brewery except under the authority and subject to the terms and conditions of a licence granted in that behalf, its power under section 24(4) to prohibit the possession of any intoxicant; and its power under section 27 to lease on such con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eglect of business and waste of property and general democratisation, it affects those who are immediately connected with and dependent upon him By the general concurrence of opinion of every civilized and Christian community, there are few sources of crime and misery to society equal to the drain shop, where intoxicating liquors, in small quantities, to be drunk at the time. are sold indiscriminately to all parties applying. The statistics of every State show a greater amount of crime and misery attributable to the use of ardent spirits obtained at these retail liquor saloons than to any other source. The sale of such liquors in this way has, therefore, been, at all times, by the courts of every State, considered as the proper subject of legislative regulation. Not only may a licence be exacted from the keeper of the saloon before a glass of his liquors can be thus disposed of, but restrictions may be imposed as to the class of persons to whom they may be sold, and this of the day, and the days of the week on which the saloons may be opened. Their sale in that form may be absolutely prohibited. It is a question of public expediency and public morality, and not of federal law. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hills Division and Appeals, Shillong,( [1957]S.C.R.295) Das C.J., speaking for a Constitution Bench, observed while rejecting a challenge to some of the provisions of Assam Act No. 4 of 1948, that a perusal of the Act and the rules framed thereunder made it clear that "no person has any absolute right to sell liquor and that the purpose of the Act and the rules is to control and restrict the consumption of intoxicating liquors, such control and restriction being obviously necessary for the preservation of public health and morals, and to raise revenue." In The State of Bombay and Anr. v. F. N. Baisara,([1951] S.C.R. 682) the constitutional validity of the Bombay Prohibition Act, 1949 was challenged. On the question of legislative competence of the State legislature to enact the statute, reliance was placed upon entry I of List II which relates to "Public Order". Fazl Ali J., speaking for a Constitution Bench, observed that though at first sight it may appear to be farfetched to bring the subject of intoxicating liquor under "Public Order" yet it had to be noted that there was a tendency in Europe and America to regard alcoholism as a menace to public order. The learned Judge the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equiring legislative control which has been in force in the whole of India since several decades. In view of the injurious effect of excessive consumption of liquor on health this trade or business shall be treated as a class by itself and it cannot be treated on the same basis as other trades while considering Art. 14." The, contention as I regards the violation of Article 19 was rejected on the ground that in dealing with reasonable restrictions no abstract standard 'or general pattern could be laid down and that in each case regard had to be had to the nature of trade or business and the other circumstances. In the case of country liquor, according to the Court, due weight had to be given to the increasing evils of excessive consumption of country liquor in the interests of health and social welfare. For................ "Principles applicable to trades which all persons carry on free from regulatory controls do not apply to trade or business in country liquor, this is so because of the impact of the trade on society due to its inherent nature." These unanimous decisions of five Constitution Benches uniform by emphasised after a careful consideration of the problem involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itutional validity of section 20 was not challenged in the High Court, this Court assumed without deciding that section 20 did not infringe Article 19 (1) (g) In the State of Bombay vs. R. M. D. Chamarbaugwala,( [1957] S.C.R. 874) one of the contention raised was that the restrictions imposed by the Bombay Lotteries and Prize Competition Control and Tax Act, 1948, on the trade or business of the respondents contravened the fundamental right guaranteed to them under Article 19(1)(g) of the Constitution. It was urged that even if the prize competitions constituted gambling transactions they were nevertheless trade or business activities. On the other hand it was contended on behalf of the State of Bombay that as prize competitions were opposed to public policy there could be no trade or business of promoting a prize competition and therefore the question of infraction of the respondents' fundamental right under Article 19(1) (g) did not arise. This contention was described by the Court as raising a question "of a very farreaching nature". Speaking, for the Constitution Bench, Das C.J. after examining several Australian and American cases observed "We have no doubt that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver else may or may not be regarded as falling within the meaning of these words, gambling cannot certainly be taken as one of them. We are convinced and satisfied that the real purpose of Arts. 19(1) (g) and 301 could not possibly have been to guarantee or declare the freedom of gambling. Gambling activities from their very nature and in essence are extracommercium although the external forms, formalities and instruments of trade may be employed and they are not protected either by Art. 19 (1 ) (g) or Art. 301 of our Constitution." This decision was also cited before the Court in Krishna Kumar's case but it said "This decision only lays down that gambling is not business or trade. We are not concerned in this case with gambling". With great respect, the reasons mentioned by Das C.J. for holding ,that there can be no fundamental right to do trade or business in an activity like gambling apply with equal force to the alleged right to trade in liquor and those reasons may not be brushed aside by restricting them to gambling operations. In State of Orissa and Ors. v. Harinarayan Jaiswal and Ors.( [1972] 3 S. C. R. 784) the highest bidder in an auction. held for granting the exclusiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of intoxicating liquor. Article 47 states that the State shall endeavor to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health. Third, the history of excise law shows that the State has the exclusive right or privilege of manufacture or sale of liquor." In our opinion, the true position governing dealings in intoxicants is as stated and reflected in the Constitution Bench decisions of this Court in Balsara's case, Cooveriee's case, Kidwai's case, Nagendra Nath's case, Amar Chakraborty's case and the R.M.D.C. case, as interpreted in Harinarayan Jaiswal's case and Nashirwar's case, There is no fundamental right to do trade or business in intoxicants. The State, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to intoxicants-its manufacture, storage, export, import, sale and possession. In all their manifestations, these rights are vested in the State and indeed without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants. In "American Jurisprudence", Volume 30 it is stated that while en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal right to trade or carry on business in the properties or rights belonging to the Government, nor can there be any infringement of Article 14, if the Government tries to get the best available price for its valuable. rights." Section 27 of the Act recognises the right of the Government to grant a lease of its right to 'manufacture, supply or sell intoxicants. Section 34 of the Act read with section 59(d) empowers the Financial Commissioner to direct that a licence, permit or pars be granted under the Act on payment of such fees and subject to such restrictions and on such conditions as he may prescribe. In such a scheme, it is not of the essence whether the amount charged to the licensees is predetermined as in the appeals of Northern India Caterers and of Green Hotel or whether it is left to be determined by bids offered in auctions held for granting those rights to licensee,,. The power of the Government to charge a price for parting with its rights and not the mode of fixing that price is what constitutes the essence of the matter. Nor indeed does the label affixed to the price determine either the true nature of the charge levied by the Government or its right to levy the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... The, higher the fee imposed for a license, it is sometimes said, the better the regulation, as the effect of a high fee is to keep out of the business those who are undesirable, and to keep within reasonable limits the number of those who may engage in it." In the view we have taken, the argument that the Government cannot by contract do what it cannot do under a statute must fail. ,No statute forbids the Government from trading in its own rights ,or privileges and the statute under consideration, far from doing so, expressly empowers it by sections 27 and 34 to grant lease of its right to issue the requisite licences, permits or passes on payment of such fees as may be prescribed by the Financial Commissioner. The argument that in Cooveriee's case the impugned power having been exercised in respect of a centrally administrated area, the power was not fettered by legislative lists loses its relevance in the view we ,:are taking. It is true that in that case it was permissible to the court to find, as in fact it did, that the fee imposed on the licencees was ,'more in the nature of a tax than a licence fee". As the authority which levied the fee had the power to exact a tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the High Court of Punjab and Haryana in Jage Ram v. State of Haryana (C.W. No. 1376 of 1967 decided on March12, 1968). The argument is that this decision is based on the earlier decision of the High Court in Bhajan Lal v. State of Punjab (C.W. No. 538 of 1966 decided on February 6, 1967), that the decision in Bhajan Lal's case was confirmed in appeal by this Court (C.A. Nos. 1042 and 1043 of 1968 decided on August 21, 1972), that there is no material difference, between the rules and the procedure adopted in the instant cases and those which were struck down in Bhajan Lal's. case and therefore the rules and the procedure followed herein must also be struck down for the same reasons. This argument overlooks the significant difference between the rules struck down in Bhajan. Lal's case and in Jage Ram's case, and the amended Rules now in force. Under the old Rule 36 (23-A) still-head duty which was admittedly in the nature of excise-duty was payable by the licensee even on quota not lifted by him. The Rule and Condition No. 8 founded on it were therefore struck down in Bhajan Lal's case as being beyond the scope of entry 51 of List II, the taxable event under the impugned Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed fee. No order for renewal can be made after January 20 in respect of licences to be valid for the following financial year, except with the special sanction of the Financial Commissioner. The appellants holding licences for sale of Foreign Liquor applied duly for renewal of their licences any orders granting renewals were passed before January 20. Later the Rules were amended on March 22 and March 30, 1968 under which the appellants holding licences in Form Nos. L-3, L-4 and L-5 became liable to pay fixed fees up to Rs. 20,000 per annum in addition to fees assessed under rule 31. The grievance of those appellants is that since their licences were renewed in January 1968, the amendments made in March 1968 cannot apply to them and therefore the ,demand made on the basis of amended rules is illegal. It is true that the amendments under which the appellants have been called upon to pay fixed fees were made after the licences were renewed. But the licences, though renewed in January 1968, were lo be effective from April 1, 1968. The amendments having come into force before April 1 would govern the appellants' licences and they are, therefore, liable to pay the fixed fees unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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