Bihar Distillers Association v. State of Bihar — 1990 DIGILAW 229 (PAT)

JUDGMENT G. G. Sohani, C. J. This is a petition under Article 226 of the Constitution of India. 2. The material facts giving rise to this petition, briefly, are as follows ;- (i) In the State of Bihar the exclusive privilege of wholesale supply of country spirit from warehouses established under section 15 of the Bihar Excise Act, 1915, (hereinafter referred to as 'the Act') to licensed retail vendors within a specified area, is granted by the State department of Government by a licence issued under section 22 of the Act. The State Government has delegated its powers in this behalf to the Board of Revenue by notification no. 470-R dated 16.1.1919, Instructions issued by the Board of Revenue in this behalf are incorporated in paragraphs 217 A to 249 of the Bihar and Orissa Excise Manual, Vol. III. The Board has also framed rules in this behalf under section 90 of the Act. The grant of such licence is by inviting tenders and this is known as Contract System. (ii) Under the Contract Supply System the strength of the country spirit stored in the warehousing is reduced to prescribed strength of country liquor with the addition of water and the liquor of reduced strength so-obtained is issued to retail vendors on their depositing necessary duty and cost price of the same. Earlier, the retail vendor carried this liquor to their shop in drums where it was bottled for sale to the consumers. (iii) Prior to the year 1981 this contract was granted to the distillers alone because there used to be a clause in the tender notice that vendorers having distilleries of their own would be preferred. The adverse effect of this grant of monopoly to distillers was that the distiller-contractor failed to maintain adequate and regular supply of country spirit and bottling of the country liquor by the retail vendors at their shops resulted in supply of sub-standard and spurious liquor to consumers. The State Government, therefore, removed the preference clause from the tender notice and decided to grant licences for bottling country liquor. Under this licence a licensee has to purchase country spirit at the warehouses and after making it portable under the supervision of the excise officials, he is required to supply the same in bottles. The State Government, therefore, removed the preference clause from the tender notice and decided to grant licences for bottling country liquor. Under this licence a licensee has to purchase country spirit at the warehouses and after making it portable under the supervision of the excise officials, he is required to supply the same in bottles. This was done with a view to make standard liquor available to the consumers bottled under hygienic conditions under the supervision of the excise officer incharge of the warehouses. Aggrieved by this decision of the state Government, the distiller & filed a writ petition in this Court (CWJC No. 4148 of 1984). It was contended in that petition that the State Government had no authority to create a middleman between the distiller and the retail vendor. That writ petition, however, was dismissed by this Court by the judgment dated 18th October, 1984, holding that the grant of licence by the State Government did not interfere with the right of distillers and was lawful. (iv) Subsequently, the State Government decided to introduce a more improved system of supply of country liquor to the licensed retail vendors from the warehouses. It was decided that the supply of country liquor to retail Venders be made by the contractor in sachets or polythens bags of prescribed quality and specifications which were cheaper than bottles and disposable after use. To introduce this scheme tenders were invited for the grant of licence for the period from 1.7.1989 to 31.3.1993.22 persons submitted their tenders out of whom 17 persons were granted licence for the supply of country liquor in sachets through different warehouses to retail vendors for the period 15.7.1989 to 31.3.1993. Aggrieved by this grant of licences the petitioner claiming to be an association of the distillers, has filed this petition. 3. Aggrieved by this grant of licences the petitioner claiming to be an association of the distillers, has filed this petition. 3. Though in the petition a number of contentions were raised, the petition was amended during the course of arguments and the action of the State Government in granting licences in question was assailed, mainly on the ground that as the licencee was required to reduce the strength of the country spirit before bottling it, the licence was in effect a licence for manufacture of country liquor which the State Government had no authority to grant by virtue of the provisions of the Industries (Department and Regulation) Act, 1951, (hereinafter referred to as the I.D.H. Act) read with Entry 52 of List I, of the Seventh Schedule to the Constitution, Reliance was placed on the decision of the Supreme Court in Synthetics and Chemicals Ltd, and others v. State or U. P. and others (1990) 1, S. C. C. 109) It was also contended that the grant of licence was vitiated by virtue of Article 47 of the Constitution and that in any event no licence could be granted to respondents 5 to 11 who had not obtained, any licence under the I. D. R, Act. It was also contended that the grant of licence to non-distillers was contrary to the provisions of section 15 of the Act. It was also pointed out that subsequent to the grant or licence, some of the distillers had with drawn their consent to supply country spirit to the licensees, and that the action of the State Government in introducing this contract supply system was arbitrary resulting in huge loss of revenue, to the State Government. 4. The petition was regulated by the respondent State, Inter alia, on the ground that the State was justified in parting for consideration its exclusive privilege to supply country spirit to retail vendors, that the action of the State Government was not contrary to any provision of law that it was neither arbitrary and that it had not resulted in any loss of revenue. It was contended that introduction of the system was with a view to make available to the consumers standard country liquor. The respondent licensees supported the State Government and also contended that as the petitioner was not a body registered under any Act, the petition was not maintainable. 5. It was contended that introduction of the system was with a view to make available to the consumers standard country liquor. The respondent licensees supported the State Government and also contended that as the petitioner was not a body registered under any Act, the petition was not maintainable. 5. As regards maintainability of the petition it is not in dispute that the petitioner is neither a Company incorporated under any Act nor a society registered under any Act. The petitioner is an unincorporated Association. In Sand Carrier's Owners Union and others Vs. Board of Trustees for the Port of Calcutta and others (A.I.R. 1990 Calcutta 176) it has been held that a writ petition filed by an unincorporated association is not maintainable, It is however, not necessary to deal with this aspect of the matter any further, because, in my opinion, even on merits, after having anxious consideration to the contentions advanced on behalf of the petitioner, I have come to the conclusion that the petition deserves to be dismissed. 6. The validity of the contract supply system introduced by the State Government has been upheld by this Court in its judgment dated 18.10.1984 in C.W.J.C. No. 4148 of 1984, In this petition, therefore, the learned counsel for the petitioner mainly confined his argument to the question as to whether, in view of the judgment of the Supreme Court in (1990) 1 S. C. C. 109 (supra) the State Government had any right to grant the licences in question. Gur attention was invited to the following observation or the Supreme Court in that judgment. After the 1956 amendment to the IDR Act bringing alcohol industries (under fermentation industries) as Item 26 of the First Schedule to IDR Act the control of this industry has vested exclusively in the Union, Thereafter, licences to manufacture both pot able and non-potable alcohol is vested in the Central Government." Relying upon the aforesaid observations it was contended that in view of the provisions of IDR Act the State Government has no power to grant any licence for manufacture of potable alcohol, 7. Before I proceed to appreciate the contention advanced on behalf of the petitioner, it would be necessary to bear in mind that the question before the Supreme Court in the aforesaid case was whether the State Government had any power to levy fees or duties in respect of industrial alcohol. Before I proceed to appreciate the contention advanced on behalf of the petitioner, it would be necessary to bear in mind that the question before the Supreme Court in the aforesaid case was whether the State Government had any power to levy fees or duties in respect of industrial alcohol. After appreciating the various decisions and the arguments advanced by the parties, the Supreme Court observed as follows - "On an analysis of the aforesaid decisions and practice, we are clearly of the opinion that in respect of industrial alcohol the States are not authorised to impose the impost they have purported to do, In that view of the matter, the contentions of the petitioners must succeed and such impositions and imposts must go as being invalid in law so far as industrial alcohol is concerned. We make it clear that this will not affect any impost so far as potable alcohol as commonly understood is concerned........" In view of this clear observation of the Supreme Court it is difficult to uphold the contention advanced on behalf of the petitioner that the Supreme Court has laid down in the aforesaid decision that the State Government has no authority to grant licence for supply of country liquor to the licensed retail vendors in polythene packs after reducing the strength of the country spirit in accordance with rules made in that behalf. Moreover, by the aforesaid decision the Supreme Court has not overruled its earlier decision in Har Shankar and others V. The Deputy Excise and Taxation Commissioner and others (A.I.R. 1975 S.C. 1121 where it was held that rights in regard to intoxicating liquor belong to the State and it is open to the Government to part with those rights for a consideration. The question as to whether reduction of strength of country spirit before packing it in sachets would around to 'manufacture' of country liquor for which licence would be needed under I.D.R. Act, was keenly debated before us but, in my opinion, it is not necessary to go into this question because even assuming that before making wholesale supply of country liquor to retail vendors in sachets, a licence under the I.D.R. Act would be required, that cannot affect the right of the State to receive consideration from the licensees for parting with its privilege to supply country liquor to retail vendors. The question as to whether the provisions of the I.D.R. Act would be attracted would depend upon the question as to whether any activity by a licensee is carried on in a factory as defined by section 3 (c) of the I. D. R. Act which reads as under :- “factory' means any premises, including the precincts thereof, in any part of which a manufacturing process is being carried on or is ordinarily so carried on- (i) with the aid of power, provided that fifty or more workers are working or were working thereon on any day of preceding twelve months; or (ii) without the aid of power, provided that one hundred or more workers are working or were working thereon on any day of the preceding twelve months and provided further that in no part of such premises any manufacturing process is being carried on with the aid of power." Respondents 5 to 11, to whom the State Government has granted licences, may or may not be required to obtain licence or permission under section 11 of the IDR Act depending upon the number of persons employed by them for reducing the strength of country spirit. Moreover, the fact that these licensees may also have to seek permission or licence under IDR Act or may have to comply with the provisions of other Acts cannot in any way deprive the power of the State to part with its privilege of wholesale supply of country liquor to retail venders for a consideration. It has not been averred by the petitioner that the persons, to whom the licences in question have been granted by the State Government, have employed more than 50 workers for the purpose of reducing strength of the country spirit. In this connection I may usefully refer to the following observation of the Supreme Court in State of N. P. and others Vs. Nandlal Jaiswal and others ( AIR 1987 SC 251 ) ;- "The learned counsel appearing on behalf of M/s Doongaji and Company also raised another contention based on the provisions of the Industries (Development and Regulation) Act, 1951. The argument of the learned counsel was that respondents nos. Nandlal Jaiswal and others ( AIR 1987 SC 251 ) ;- "The learned counsel appearing on behalf of M/s Doongaji and Company also raised another contention based on the provisions of the Industries (Development and Regulation) Act, 1951. The argument of the learned counsel was that respondents nos. 5-11 were not entitled to set up new distilleries at the new site 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 taking 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 respondents 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 petition 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' contained in sub-sections (c) and (d) of section 3 of this Act that licence from the Central Government for setting up new distilleries would be necessary only if 50 or more workers would be working in such distilleries and here in the present writ petition, there is nothing to show that 50 or more workers were going to be employed in the new distilleries." Even assuming that the provisions of the I.D.R. Act would be attracted in the case of the licensees, failure on their putt to obtain licence and comply with the provisions of the I.D.R. Act will render them liable for appropriate action under that Act. The possibility that such an action could be taken under the I.D.R. Act against the licensees, if they are found to be running a factory as defined by section 3 (c) of the I. D. R. Act, would not be relevant in deciding the question as to whether the State had the power to grant licence for wholesale supply of country liquor to retail vendors. In my opinion, therefore, thus the contention that the State Government had no authority to grant licences in question cannot be upheld. 8. It was then contended that the policy of the State Government to introduce middleman for supply of country liquor to retail vendors was arbitrary and would result in huge loss to the State exchequer. Apart from the fact that there is no material on record to substantiate this contention the Court would not normally be justified in interfering with the policy decision of the State Government. I may usefully refer in this connection to the following observations of the Supreme Court in A.I.R. 1987 S. C. 251 (supra) :- The Court cannot strike down a policy decision taken by the State Government merely because it feels that another policy decision would have been fairer or wiser or more scientific or logical. The Court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide. " There is no material on record for holding that the policy decision of the State Government is patently arbitrary, discriminatory or mala fide. 9. The contention that grant of licences to non-distillers would be contrary to the provisions of the Act has not been upheld by this Court in its judgment in C.W.J.C No 4148 of 1984, and I respectfully agree with that decision. The further contention advanced in this case that the grant of licence is vitiated by virtue of Article 47 of the Constitution because by the said grant it is possible for the licensees to divert country spirit, exclusively made for use in industrial alcohol, for portable purpose is devoid of any merit. In fact, by the grant of licences in question, the State Government has endeavored to curb supply to sub-standard and spurious country liquor to consumers. 10. It was also contended that subsequent to the grant of licence, some of the distillers have withdrawn their consent to supply country spirit to some licensees. In fact, by the grant of licences in question, the State Government has endeavored to curb supply to sub-standard and spurious country liquor to consumers. 10. It was also contended that subsequent to the grant of licence, some of the distillers have withdrawn their consent to supply country spirit to some licensees. I need not go into this aspect of the matter as it is not relevant for deciding the question as to whether the State has any authority to grant the licences in question. What action according to law can be taken against a licensee who is unable to comply with the term of the licence for want of supply of country spirit is a matter which will be decided as and when it arises. No case, in my opinion, has been made out for grant of any relief to the petitioner. 11. The petition, therefore fails and is, accordingly, dismissed. No order as to costs. S. C. Mookherji, J. I agree. application dismissed. (as approved by the Editor-in-Chief).