STATE OF MADHYA PRADESH & ORS. v. NANDLAL JAISWAL AND ORS. 1986 SCC (4) 566

CASE BRIEF

APPELLANT- The State of Madhya Pradesh and Ors.

RESPONDENT- Nandlal Jaiswal and Ors.

Decided on- 24 October, 1986

CASES REFERRED-

1. Frankfurter, J. in Morey v. Dond, (354 US 457)
2. Har Shankar & Ors. etc. v. Deputy Excise & Taxation Commissioner & Ors., [1975] 3 SCR 254
3. Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir, [1980] 3 SCR 1338
4. L.G. Chaudhari v. Secre- tary, L.S.G. Deptt., Govt. of Bihar & Ors., AIR 1980 SC 383
5. Ramanna Daygram Shetty v. International Airport Authority of India & Ors., [1979] 3 SCR 1014
6. R.K. Garg etc. v. Union of India & Ors. etc. [1982] 1 SCR 947
7. State of Orissa & Ors. v. Harinarayan Jaiswal & Ors., [1972] 3 SCR 784

STATUTES REFERRED-

1. Constitution of India
2. Distillery Warehouse Rules
3. Industries (Development and Regulation) Act, 1951
4. Madhya Pradesh Excise Act, 1915
5. Madhya Pradesh Excise Rules

FACTS OF THE CASE-

1. That there were nine distilleries in Madhya Pradesh for manufacture of liquor under license given by the Excise Commissioner. Out of the nine, seven distilleries stood on government lands, but over the course of time, its machineries were replaced by the D-2 license holders.
2. That the excise department used to invite tenders for wholesale supply of liquor and usually, the lowest rates were accepted.
3. That a D-2 license was issued to the person whose tender was accepted, for working the distillery and a D-1 license for wholesale supply of such liquor was issued alongwith it for a period of 5 years and respondents no. 5 to 11 were holders of these licenses till 31 March, 1986.
4. That 2 districts, namely Jabalpur and Betul did not have distilleries, therefore a D-1(s) license was issued to Mr. Sagar Aggarwal for supply of liquor and he acquired it from Ratlam Plant.
5. That the production capacity of the existing units was not enough and the govt had to purchase liquor from other states at higher prices. Also, the buildings and machinery of the distilleries were becoming old and required reconstruction and replacement.
6. That even the people of the neighbourhood were complaining about water and environmental pollution. So, the members of the M.P. Distillers’s Association who held the D-2 license of these distilleries offered to invest their own funds in the process of shifting and reconstruction of the distilleries.
7. That after careful perusal of the application of the holders by the State Government at different levels, a policy decision was taken to privitize the liquor distilleries and a Letter of Intent was issued on 1 February, 1985 in favor of the Respondents no. 5 to 11.
8. That a deed of agreement was entered into between them with effect from 1 April 1986 and the Respondents no. 5 to 11 started the purchase of land, equipment and contruction of the distilleries pursuant to it.
9. That the policy decision was challenged in the High Court by a writ petition filed by Mr. Nandlal Jaiswal, Mr. Sagar Aggarwal and M/s Doongaji & Co. and the policy decision was set aside by the Hon’ble Judges. Thereafter, the State filed an appeal in the Supreme Court against the decision.

ISSUES INVOLVED-

1. Whether it was obligatory on the part of the competent authority to adopt tender method, failing which the auction method, and then again the fixed license method and so on as prescribed under Rule XXII?
2. Whether the licenses granted created a monopoly in favor of the licencees?
3. Whether the High Court has the power to bifurcate the policy decision and strike down one part of it as bad?
4. Whether Article 14 applies to grant of liquor licenses?
5. Whether a writ can be granted in favor of the petitioners after a long delay in filing the petition to the prejudice of the licensees?

CONTENTIONS OF PARTIES-

1. APPELLANTS (State of MP and Respondents no. 5 to 11)
2. The appellants submitted that there is no commitment to grant the license beyond a period of 5 years; the license renewal shall operate within those 5 years only and not beyond that.
3. They further submitted that trade or business in liquor manufacturing is not so common and the ambit of Article 14 cannot be extended to it by anyone.
4. It was also urged that if anyone, including M/s Doongji and Co. had applied for the license; their application would also have been heard by the Excise Department before the grant of license to the existing manufacturers according to Clause 2 of the policy decision.
5. RESPONDENTS (Nandlal Jaiswal, Sagar Aggarwal and M/s Doongaji and co.)
6. It was averred that the petitioners were not aware of the policy decision of the government regarding the manufacture and supply of wholesale liquor and that it was given to the existing manufacturers. As soon they became aware of it, they filed the writ petitions.
7. It was submitted by them that by virture of the policy decision a monopoly was being created in favor of the Respondents no.5 to 11 as the license granted to them was valid for 5 years and then renewable after a period of one year after payment of certain fees which was clearly arbitrary and violative of Article 14.
8. The Counsel of M/s Doongaji and Co. submitted that the State Government had no right to give effect to the policy decision before publication of the Rules made for that purpose u/s 62(2)(h) of the Act.
9. He also argued that under Section 11 of the Industries (Development and Regulation) Act, 1951 the Respondents No.5 to 11 were not entitled to set up new distilleries without license from the Central Government. (But this issue had not been brought up in the writ petition earlier)
10. It was further contended that the policy decision granted license only to the existing contractors without any opportunity to other contractors which was arbitrary and violative of Article 14.

JUDGMENT-

The Supreme Court Bench comprising Chief Justice P.N. Bhagwati and Justice V. Khalid held:

1. The four modes of disposal of license provided under Rule XXII are alternative to one another and any one of them may be resorted to, instead of using them in a particular order. Further, the Court said that it is impossible to say that only when an earlier mode of disposal is available only then the other method can be used.
2. On issue no.2, the Hon’ble Court clarified that policy decision did not create a monopoly in favor of Respondents No. 5 to 11 as it granted them license only for a period of 5 years, and not an indefinite period of time.
3. The Court further held that the policy decision was a single integrated decision considering all aspects of the matter and the High Court was wrong in scrapping a portion of it as invalid. Stating that such an action would be creating a new policy which is not inherent in the Courts to do so, they also said that such a policy would also cause hardship to the Respondents as they had invested a lot of resources and hard work in setting up the distilleries in such a short span of time.
4. On issue no.4, the Court observed that no person has a fundamental right to carry on trade in liquor, but when the State decides to grant this privilege to others, it cannot escape the rigour of Article 14. On a plain reading of Clause 2 of the policy decision, the Court held that it clearly provides for an opportunity to other persons to make applications for license which shall be disposed off by the Excise Department, therefore, it cannot be said that it violates Article 14 at all.
5. Lastly, the Court explicitly said that the petitioners had committed enormous delay in filing the petitions. Although there is not a straitjacket formula to reject delayed petitions, but in this case the Respondents no.5 to 11 had already incurred huge expenditure by acting on the policy decision; and to allow the petitions would cause immense hardship on them which was not warranted in the matter.

The Hon’ble Court also condemned the observations and remarks of the High Court Judges as being harsh and unjustified.

RULE OF LAW-

The main question of law to be determined in the case was that whether the Courts can bifurcate a policy decision of the State Government and scrap down one part of it as invalid as such an action would result into a new policy which is not an area where the Courts function. Also, it was a moot point as to whether there is a right to equality in granting liquor licenses or not.

CONCLUSION-

The Hon’ble Court was right in reversing the decision of the High Court as the policy decision was an economic decision of the State Government not pertaining to the Courts. Further, the Petitioners had committed immense delay in filing the writ petitions.

Had the Court considered their arguments, it would have resulted in extreme loss to the Respondents who had incurred a lot of expenditure based on the policy decision.