Rule 24(i-eeee) of the Haryana Liquor License Rules 1970 (as amended by the Haryana Liquor License (Amendment) Rules 2017), (hereinafter referred to as ‘the Rules’) as being ultra vires the Punjab Excise Act, 1914 = the exclusive licensee is under the condition required to keep sufficient stock of all brands as are demanded by the procuring licensees and all such brands as were registered with the department in 2016-17. Thus at least two restrictions exist as in built safeguards which operate against the exclusive licensee. The licensee is obliged to keep sufficient number of stock of all brands which are demanded by the procuring licensees. In this case, the members of the appellant would fall within the expression ‘procuring licensees’. Secondly, there is a regulation of the maximum price which the exclusive licensee can demand as the price is to be fixed by the State itself. where there is a conflict of interest and by suppressing the sale of certain brands and permitting the sale of other brands the exclusive licensee is placed in a more advantageous position, and therefore, he prefers it. I must remind myself that the complaint of the individual company would be that brand which it wishes to import and deal in is not made available.Quite clearly if there is any such concrete incident which is pointed out, it would be an infraction of the condition of the licence. Certainly it would give rise to power with the authorities to take suitable action as available in law including in appropriate cases, cancellation of the licence. If such provisions are not already there I would observe that the State may devise suitable provisions so that an individual who acts as the licensee of the state would not do what the State itself would be forbidden from doing under the Constitution. I must also remind myself that at the same time, the State has apparently gained by way of enhanced collection of revenue by the new regime put in place. The State’s power to experiment in economic matters shall not suffer invalidation at the hands of the Court. Such power must be premised solely on State action falling foul of the Constitution and the laws. State would however do well to provide for a suitable mechanism by which it can provide appropriate safeguards so that there is fair dealing by the exclusive licensee. Subject to the above observations I would dismiss the appeal with no order as to costs


Hon’ble Mr. Justice Navin Sinha

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9533 OF 2018
INTERNATIONAL SPIRITS AND WINES
ASSOCIATION OF INDIA ….APPELLANT(S)
VERSUS
STATE OF HARYANA AND OTHERS …RESPONDENT(S)
JUDGMENT
NAVIN SINHA, J.
The appellant having been unsuccessful in its challenge to
Rule 24(i-eeee) of the Haryana Liquor License Rules 1970 (as
amended by the Haryana Liquor License (Amendment) Rules
2017), (hereinafter referred to as ‘the Rules’) as being ultra vires the
Punjab Excise Act, 1914 (hereinafter referred to as ‘the Act’), is in
appeal before this Court. The amended Rule provides for a single
L-1BF license for the entire State to deal in imported foreign liquor,
bottled outside India and imported into the country in a bottled
form (i.e. bottled in original). Under challenge is also clause 9.5.1.2
of the State Excise Policy for the year 2017-2018 to that extent,
2
carried forward to the year 2018-2019 also. The procedure for
grant of the single license under the amended Rule is through
tender by e-bidding, with a reserve price of Rs. 50 crores.

  1. Sri Gopal Subramanium, learned senior counsel for the
    appellant, submitted that the creation of a monopoly by the State
    in favour of a private entity, to trade in liquor, is contrary to Article
    19(6) of the Constitution of India. The impugned order
    acknowledges that it would lead to serious distortions in the
    market, yet erroneously declines interference holding that once the
    matter moves from State control into the hands of private
    enterprise, the restrictions applicable to the State cease to apply.
    Reliance was placed on Akadasi Padhan vs. State of Orissa, AIR
    1963 SC 1047, to contend that if a monopoly is created by the State
    in its favour, the same cannot be constitutionally permitted if the
    private agents appointed pursuant thereto, act as independent
    entities. Sri Subramanium also relied on Khoday Distilleries Ltd.
    vs. State of Karnataka (I), (1995)1 SCC 574, to submit that once
    the State parts with its privilege to trade in liquor, in favour of
    private individuals, the rigours of Article 14 will continue to apply
    to provide equal opportunity to all desirous to do so. Alternatively,
    it was submitted that the absence of sufficient checks and balances
    3
    gives untrammeled and uncanalised powers to the sole licensee
    which again is constitutionally impermissible. Sri Subramanium
    further relied on Khoday Distilleries Ltd. vs. State of
    Karnataka (II) (1996) 10 SCC 304, to submit that the
    interpretation of Section 58 (2)(e) and 59(a) of the Act by the High
    Court was flawed. Rule 24 (i-eeee) was ultra vires the Act. The
    interpretation put by the High Court grants wider powers to the
    Financial Commissioner, than the State Government itself. The
    single monopolistic L-1BF license was also discriminatory and
    violative of Article 14 of the Constitution in so far as no such
    requirement was stipulated for wholesale trade in Indian made
    foreign liquor or country liquor in the State. There was no rational
    or reasonable classification for this distinction between licensees,
    having any rationale or nexus with any object to be achieved.
  2. Ms. Pinky Anand, learned Additional Solicitor General,
    submitted that the appellant never participated in the bidding
    process for the L-1BF license. A mere apprehension that a single
    L-1BF license for the entire State may affect market dynamics,
    when the reality was otherwise, resulting in rise of revenue, negates
    the challenge laid out by the appellant. The issue of monopoly in
    the hands of a private entity is devoid of merit as the process is
    4
    through public auction, open to participation by all, and not
    tailored to suit any particular person or activated by malafides,
    relying on Association of Registration Plates vs. Union of India,
    (2005) 1 SCC 679. Trade in original bottled foreign liquor was only
    a fraction of the entire liquor trade in the State, ranging between
    0.64 percent to 1.98 per cent. The aim and object of the
    amendment was to increase revenue, curb pilferage, control illicit
    trade in the State of Indian made foreign liquor and bottled in
    original bottled foreign liquor. The Financial Commissioner was
    competent under Section 59(a) read with Section 13 to amend Rule
    24 by incorporation of Rule 24 (i-eeee) providing for a single L-1BF
    license for the entire State, as the competence of the State for
    issuance of license under Section 58(2)(e) was limited to a local
    area only.
  3. Sri M.K. Dutta, learned counsel for the sole L-1BF licensee for
    2017-2018, submitted that the appellant was not even a bidder.
    The question of any apprehension on its part simply does not arise.
    There are sufficient checks and balances in the excise license
    providing for cancellation also if the conditions of the license were
    not followed. The grant of a monopolistic license as the agent of
    the State Government was permissible in the law for trade in liquor.
    5
  4. We have considered the submissions on behalf of parties. The
    appellant assails the amended Rule 24(i-eeee) as ultra vires the
    provisions of the Act. Integral to the issue is whether the state
    government is competent to issue licences for a local area alone
    under Section 58(2)(e) of the Act, while the Excise Commissioner,
    a sub-delegate of the Financial Commissioner is competent under
    Section 13(b) read with Section 59(a) to issue L-1BF licence for the
    entire state under the amended rule, notwithstanding the
    prohibition in Section 13(a) to the delegation of powers under
    Section 58 by the State Government. The amended Rule 24(i-eeee)
    relevant to the controversy reads as follows:
    “ (xiv) for clause (i-eeee), the following clause
    shall be substituted, namely: –
    (i-eeee) For a license in form L-1BF –
    (a)Reserve price shall be Rs.50,00,00,000/-.
    (b)The license in form L-1BF shall be allotted
    through e-bidding to the highest bidder.
    (c) There shall be only one L-1BF license in the
    State.”
  5. Under Section 8 of the Act, the State government exercises
    general superintendence and control of Excise Administration and
    Excise Officers. Section 9 provides for vesting powers of the
    6
    Financial Commissioner in the Excise Commissioner by the State
    Government. Section 13 dealing with delegation of powers
    provides:
    “Delegation:
    (a) The State Government may by notification
    delegate to the Financial Commissioner or
    Commissioners all or any of its powers under
    this Act, except the powers conferred by sections
    14, 21,22, 31, 56 and 58 of this Act.
    (b) The State Government may by notification
    permit the delegation by the Financial
    Commissioner, Commissioner or Collector to
    any person or class of persons specified in such
    notification of any powers conferred by this Act
    or exercised in respect of excise revenue under
    any Act for the time being in force.”
    The Financial Commissioner is therefore competent to delegate
    only such powers to the Excise Commissioner which the State
    Government can delegate to the former under the Act, in view of
    the prohibition contained in Section 13(a) of the Act.
  6. Section 58 of the Act, in its relevant extract reads as follows:
    “Power of State Government to make Rules:
    (1) The State Government may by notification
    make rules for the purpose of carrying out the
    provisions of this Act or any other law for the
    time being in force relating to excise revenue.
    (2) In particular and without prejudice to the
    generality of the foregoing provisions, the State
    Government may make rules:
    ……
    7
    (e) Regulating the period and localities for which,
    and, the persons or classes of persons, to whom
    licenses, permits and passes for the vend by
    wholesale or by retail of any intoxicant may be
    granted and regulating the number of such
    licenses which may be granted in any local area;
    (3) Previous publication of rules: – The power
    conferred by this section of making rules is
    subject to the condition that the rules be made
    after previous publication;
    Provided that any such rules may be made
    without previous publication if State
    Government consider that they should be
    brought into force at once.”
    Under Section 58(2)(e) of the Act, the State Government alone has
    the power to regulate the number of licenses which may be granted
    in any local area for wholesale or retail sale.
  7. Relevant to the discussion are also Rules 3 and 4 which
    provide as follows :
    “3. The authority given by these rules to grant
    and renew licenses is, in each case, subject to
    the restrictions contained in the Punjab
    Intoxicants License and Sale Order as to the
    localities in which licenses may be granted and
    the number of licenses which may be granted in
    any local area, and to such reservations from the
    general superintendence of the Financial
    Commissioner as the State Government may
    notify under Section 8 of the Punjab Excise Act,
    1914.
    8
  8. Every license shall be granted to a particular
    licensee in respect of particular premises/area.”
  9. Chapter D of the Punjab Intoxicants License and Sales
    Orders, 1956 (hereinafter referred to as ‘the Order’) provides for the
    number of licences and reads as under :
    “6. The number of liquor vends except vends
    licenced in form L-2 for the wholesale and retail
    sale of foreign liquor to the public only and drug
    shops, which may be licenced in any local area,
    shall be the number which the Financial
    Commissioner, subject to the control of the
    State government considers necessary. The
    number of L-2 vends, which may be licenced in
    any local area, shall be the number of such
    licences granted by the Collector under the
    rules.”
  10. In the scheme of the Act, the Rules and the Order read
    together it is apparent that a liquor license is to be granted for a
    local area only. The power to determine the number of licences
    that may be granted in any category in a local area is exclusively
    vested in the State Government under Section 58(2)(e) of the Act.
    The delegation of this power by the State Government to the
    Financial Commissioner is prohibited by Section 13(a). This is only
    in consonance with the general power of superintendence vested in
    the State Government under Section 8.
    9
  11. In Khoday Distilleries vs. State of Karnataka (II) (supra),
    a similar provision under the Karnataka Excise Act 1965 fell for
    consideration therein:
    “71(1): The State Government may, by
    notification and after previous publication,
    make Rules to carry out the purposes of this Act.
    (2) In particular and without prejudice to the
    generality of the foregoing provision, the State
    Government may make Rules –
    …..
    (e) regulating the periods and localities in
    which and the persons or classes of persons to
    whom, licenses for the wholesale or retail sale of
    any intoxicant may be granted and regulating
    the number of such licenses which may be
    granted in any local area:
    (f) ……
    (g) ……
    (h) prescribing the authority by which, the
    form in which and the terms and conditions on
    and subject to which any license or permit shall
    be granted, and may, by such Rules, among
    other matters.”
    This Court held as follows :-
    “11. ….The Act itself provides that the number
    of licenses can be regulated by the State. If the
    State chooses to regulate licenses by providing
    that the license shall be granted only to a
    company owned by the State, it cannot be said
    that such a license is something which is outside
    the purview of the Act or the rule-making
    authority of the State under the Act.”
    10
  12. The Act maintains a clear distinction between a local area as
    the unit for grant of licence, and the entire State for other purposes.
    The State government is the sole repository of these other powers
    with regard to the entire State evident from Sections 5 and 6 which
    read:
    “5. Power of State Government to declare
    limit of sale by retail and by wholesale- The
    State Government may by notification declare
    with respect either to the whole of Punjab or to
    any local area comprised therein, and as regards
    purchasers generally or any specified class of
    purchasers, and generally or for any specified
    occasion, the maximum or minimum quantity or
    both of any intoxicant which for the purposes of
    this Act may be sold by retail and by wholesale.
  13. Power to limit application of
    notifications, permits, etc., made under this
    Act.- Where under this Act any notification is
    made, any power conferred, any appointment
    made or any license, pass or permit granted, it
    shall be lawful to direct –
    (a)That it shall apply to the whole of Punjab or
    to any specified local area or areas;
    xxxxx”
    The power to declare by notification that a licence granted shall be
    applicable to the entire State is exclusively vested in the State
    Government under Section 6(a) of the Act.
    11
  14. The High Court has held that in contradistinction to Section
    58(2)(e) of the Act, which limits the powers of the State Government
    to grant of licence for a local area, the Excise Commissioner, as the
    delegatee of the Financial Commissioner, was competent under
    Section 59(a) to grant a single L-1BF licence for the entire State.
    “59. Powers of Financial Commissioner to
    make rules:-
    The Financial Commissioner may, by notification,
    make rules,-
    (a) regulating the manufacture, supply, storage or
    sale of any intoxicant, including-
    (i) the character, erection, alteration, repair,
    inspection, supervision, management and
    control of any place for the manufacture,
    supply, storage or sale of such article and
    the fittings, implements, apparatus and
    registers to be maintained therein;
    (ii) the cultivation of the hemp plant and the
    collection of spontaneous growth of such
    plant and the preparation of any
    intoxicating drug;
    (iii) the tapping or drawing of tari from any tari
    producting tree;
    (b) regulating the bottling of liquor for purposes of
    sale;
    (c) regulating the deposit of any intoxicant in a
    warehouse and the removal of any intoxicant
    from any warehouse or from any distillery or
    brewery;
    (d) prescribing the scale of fees or the manner of
    fixing the fees payable in respect of any license,
    permit or pass or in respect of the storing of any
    intoxicant;
    12
    (e) regulating the time, place and manner of
    payment of any duty or fee;
    (f) prescribing the authority by, the restrictions
    under, and the conditions on, which any license,
    permit or pass may be granted, including
    provisions for the following matters-
    (i) the prohibition of the admixture with any
    intoxicant of any substance deemed to be
    noxious or objectionable;
    (ii) the regulation or prohibition of the
    reduction of liquor by a licensed
    manufacturer or licensed vendor from a
    higher to a lower strength;
    (iii) the strength at which intoxicant shall be
    sold, supplied or possessed;
    (iii-a) the fixing of the price below and above which
    any intoxicant shall not be sold or supplied
    by the licenced vendor.
    (iv) the prohibition of sale of any intoxicant
    except for cash;
    (v) the fixing of the days and hours during
    which any licensed premises may or may not
    be kept open, and the closure of such
    premises on special occasions;
    (vi) the specification of the nature of the
    premises in which any intoxicant may be
    sold, and the notice to be exposed at such
    premises;
    (vii) the form of the accounts to be maintained
    and the returns to be submitted by licenseholders; and
    (viii) the prohibition or regulation of the transfer
    of licenses;
    (g) (i) declaring the process by which spirit shall
    be denatured;
    (ii) for causing spirit to be denatured through
    the agency or under the supervision of its
    own officers;
    13
    (iii) for ascertaining whether such spirit has
    been denatured;
    (h) providing for the destruction or other disposal of
    any intoxicant deemed to be unfit for use;
    (i) regulating the disposal of confiscated articles;
    (j) prescribing the amount of security to be
    deposited by holders of leases, licenses, permits
    or passes for the performance of the conditions of
    the same.”
  15. The nature of powers conferred under Section 59 of the Act,
    make it manifest that it is but a regulatory power available only
    after a license is granted to the licensee for a local area, to ensure
    supply, storage, sale or otherwise that the conditions of the license
    are adhered to and necessary directions can also be given for the
    purpose.
  16. The Excise Commissioner, a sub-delegate of the Financial
    Commissioner, in exercise of the powers conferred under section
    59 of the Act by virtue of the Haryana Government Excise and
    Taxation notification dated 01.04.2016, made the impugned
    amendment to the Haryana Liquor License Rules, 1970. The same
    were notified on 29.03.2017. These rules were called the Haryana
    Liquor License (Amendment) Rules, 2017. Rule 1(2) stated that
    they shall come into force with effect from 01.04.2017. Rule 3 of
    14
    the amendment substituted Rule 24 (i-eeee) which provided that
    there shall be only one L-1BF license in the State. The amendment
    with regard to the number of licenses that could be issued for the
    entire State is in teeth of Sections 6 and 58(2)(e), delegation of
    which by the State Government is expressly prohibited by Section
    13(a).
  17. The distinction sought to be drawn by the High Court with
    regard to the term ‘local area’ under Section 58(2)(e) of the Act as
    being confined to small compact area only and that the Financial
    Commissioner by virtue of the power to regulate supply, storage
    or sale of any intoxicant had the power to determine the number
    of licenses to be granted for the entire State in a particular
    category, in our view, is not only unreasonable but also in teeth of
    the statutory Scheme and its provisions. To hold that the power of
    Financial Commissioner under Section 59(a) of the Act to regulate
    sale of liquor, and that sale could be regulated through grant of
    licence, the Financial Commissioner was vested with the power to
    determine the number of licences, to our mind is not only
    unreasonable but also unsustainable. Such an interpretation
    amounts to reading words into the statute which the legislature
    itself never intended. The amendment notified by the Excise
    15
    Commissioner as a delegate of the Financial Commissioner was
    per se ultra vires the powers of the latter under Section 6 and 13(a)
    read with Section 58(2)(e) of the Act. The unreasonableness and
    incongruity in the reasoning by the High Court would vest wider
    powers in the Excise Commissioner than the State Government
    itself. While the State Government would have the power to
    determine the number of licences and to issue licence for a local
    area only, the Excise Commissioner would have a superior power
    to determine the number of licences and issue licences for the
    entire State.
  18. The meaning and scope of a regulatory power fell for
    consideration in Deepak Theatre vs. State of Punjab, 1992 Supp
    (1) SCC 684,
    “4. The power to regulate includes the power
    to restrain, which embraces limitations and
    restrictions on all incidental matters
    connected with the right to trade or business
    under the existing licence. Rule 12(3)
    regulated entry to different classes to the
    cinema hall and it was within the rule making
    power of the State Government to frame such
    rule. The court further held that fixing limit of
    rate of admission was an absolute necessity
    in the interest of the general public and the
    restriction so placed was reasonable and in
    public interest….”
    16
  19. The Financial Commissioner was therefore not competent to
    amend the Rules with regard to grant of number of licences for the
    entire state, and which power was exclusive to the State
    Government under Section 6 read with Section 13(a) and 58(2)(e)
    of the Act. In conclusion, we hold that Rule 24(i-eeee) as amended
    by the Financial Commissioner in exercise of powers under Section
    59(a) of the Act is ultra vires the powers of the Financial
    Commissioner under the Act and is therefore struck down. In view
    of Rule 24(i-eeee) itself having been struck down, it is not
    considered necessary to discuss or consider the other grounds of
    challenge raised.
  20. The appeal is allowed.
    ……………………………….CJI.
    [RANJAN GOGOI]
    ………………………………….J.
    [NAVIN SINHA]
    NEW DELHI
    FEBRUARY 12, 2019.
    1
    Reportable
    IN THE SUPREME COURT OF INDIA
    CIVIL APPELLATE JURISDICTION
    CIVIL APPEAL NO.9533 OF 2018
    INTERNATIONAL SPIRITS AND WINES
    ASSOCIATION OF INDIA ..APPELLANT(S)
    VERSUS
    STATE OF HARYANA AND ORS. ..RESPONDENT(S)
    JUDGMENT
    K.M. JOSEPH,J.
  21. Having perused the judgment authored by
    brother Justice Navin Sinha notwithstanding the
    highest respect that I maintain for him, I express my
    inability to accept the reasoning given in support of
    the conclusion on the point which has been dealt with
    by him and the consequent verdict.
  22. The appellant is the writ petitioner before
    the High Court in writ petition No.6870 of 2017 which
    came to be decided along with another writ petition.
    Appellant is a company registered under Section 25 of
    the Companies Act. It claims to be a representative
    body of International spirits and wines companies
    2
    doing business in India. On 06.03.2017, the excise
    policy for the State of Haryana came to be announced
    for the period 01.04.2017 to 31.03.2018. Under clause
    9.5.1.1, a wholesale licence in the form of L-1BF for
    imported foreign liquor (BIO) was prescribed. The
    licensee was authorized to import IFL (BIO) including
    beer from other countries and supply it to L-1s, L-4
    and L-5s, L-12Cs and L-12Gs of the State. Clause
    9.5.12, however, provided that there will be only one
    wholesale licence in the form of L-1BF in the State.
    It was contemplated that licence was to be settled by
    e-tenders through the Departmental Portal in a
    completely secure and transparent manner. The reserve
    price was fixed at Rs.50 crores. Under the general
    conditions provisions for L-1BF it was provided as
    follows:
    “(vi) The licensee will have to submit pricing
    of each brands at the time of approval of the
    brand and department will approve his maximum
    sale price factoring in the landing price,
    expenses, profit margin, prevalent rates of
    same or equivalent brands in the neighboring
    States and the Government levies. The licensee
    shall do this preferably in the first quarter
    of the financial year.”
    3
  23. Originally Clause 9.5.1.2 was challenged.
    The third respondent had been appointed as exclusive
    licensee and declaration was sought that the
    appointment was invalid. While the Writ Petition was
    pending, the Haryana Liquor License (Amendment) Rules,
    2017 was introduced. The rules came into effect on
    01.4.2017. Thereupon the appellant challenged Rule
    24 (i-eeee) of the 1970 Rules introduced by the
    amending Rules. The said Rule reads as follows:
    “3. In the said rules, in rule 24, –
    …….
    (xiv) for clause (i-eeee), the following
    clause shall be substituted, namely:-
    “(i-eeee) For a license in form L-1BF –
    (a) Reserve price shall be Rs. 50,00,00,000/-
    (b) The license in form L-1BF shall be
    allotted through e-bidding to the highest
    bidder
    (b) There shall be only one L-1BF license in
    the State.
    (d) In case no eligible bid equal to or above
    the reserve price is received for the lone L1BF license, the same shall be allotted
    exclusively to a Government owned entity on
    the terms and conditions as decided by the
    Government. The permit and brand label fee
    shall be levied as under to procure Stock of
    liquor by the L-1BF licensee.”
  24. The ground which failed to persuade the
    Division Bench of the High Court but which has found
    acceptance at the hands of my learned Brother Sinha J.
    4
    is that the impugned rule is ultra vires, the power
    of the Finance Commissioner under Section 59 of the
    Punjab Excise Act, 1914 (hereinafter referred to as
    “the Act”). The argument of the appellant is that the
    power to make a rule regarding number of licenses is
    with the State Government and it is said power which
    has been usurped by the Financial Commissioner in
    purported exercise of the power under Section 59 of
    the Act. To put it differently, the question would be
    whether the power is vested with the State Government
    under Section 58 or with the Financial Commissioner
    under Section 59 of the Act. It is but natural that
    I set out the provisions of Section 58 and 59 of the
    Act.
    “58. Power of State Government to make Rules
    – (1) The State Government may by notification
    make rules for the purpose of carrying out the
    provisions of this Act or any other law for the
    time being in force relating to excise revenue.
    (2)In particular and without prejudice to the
    generally of the foregoing provisions, the
    State Government may make rules: –
    (a) prescribing the duties of excise officers;
    (b) regulating the delegation of any power by
    the Financial Commissioner, Commissioner or
    Collector, under Section 13, Clause (b);
    (c) prescribing the time and manner of
    presenting and the procedure for dealing
    5
    with appeals from orders of excise
    officers;
    (d) regulating the import, export, transport or
    possession of any intoxicant or Excise bottle
    and the transfer, price or use of any type of
    description of such bottle.
    (e) regulating the period and localities for
    which, and, the persons or classes of persons,
    to whom licenses, permits and passes for the
    vend by wholesale or by retail of any
    intoxicants may be granted and regulating the
    number of such licenses which may be granted in
    any local area;
    (f) prescribing the procedure to be followed
    and the matters to be ascertained before any
    license is granted for the retail vend of liquor
    for consumption on the premises;
    (g) for the prohibition of the sale of any
    intoxicant to any person or class of persons;
    (h) regulating the power of excise officers to
    summon witnesses form a distance;
    (I) regulating the grant of expenses to
    witnesses and compensation to persons charged
    with offences under this Act and subsequently
    released, discharged or acquitted.
    (j) for the prohibition of the employment by a
    license holder of any person or class of persons
    to assist in his business in any capacity what
    so ever;
    (k) for the prevention of drunkness, gambling
    and disorderly conduct in or near any licensed
    premises and the meeting or remaining of
    persons of bad character in such premises;
    (l) prohibiting the printing, publishing or
    otherwise displaying or distributing any
    advertisement or other matter commending or
    soliciting the use of, or offering any
    intoxicant calculated to encourage or incite
    any individual or class of individuals or the
    public generally to commit an offence under
    this Act, or to commit a breach or evade the
    provisions of any rule or order made there under,
    6
    or the conditions of any license, permit or pass
    obtained there under:-
    (m) prohibiting within the State the
    circulation, distribution or sale of any
    newspaper, book, leaflet, booklet, or other
    publication printed and published outside the
    State which contains any advertisement or
    matter of the nature described in clause (1);
    (n) declaring any newspaper, book, leaflet,
    booklet or other publication, wherever printed
    or published, containing any advertisement or
    matter [of the nature described in clause (1)]
    to be forefeited to the State Government; and
    (o) implementing generally the policy of
    prohibition.
    (3) Previous publication of rules – The power
    conferred by this section of making rules is
    subject to the condition that the rules be made
    after previous publication.
    Provided that any such rules may be made
    without previous publication if State
    Government consider that they should be brought
    into force at once.
  25. Powers of Financial Commissioner to make
    rules – The Financial Commission may, by
    notification, make rules.
    (a) regulating the manufacture, supply, storage
    or sale of any intoxicant, including:-
    (i) the character, erection, alteration,
    repair, inspection, supervision, management
    and control of any place for the manufacture,
    supply storage or sale of such article and
    the fittings, implements apparatus and
    registers to be maintained therein;
    (ii) the cultivation of the hemp plant and
    the collection of spontaneous growth of such
    plant and the preparation of any intoxicating
    drug.
    (iii) the tapping of drawing of tari from any
    tari producting tree.
    7
    (b) regulating the bottling of liquor for
    purposes of sale.
    (d) regulating the deposit of any intoxicant in
    a warehouse and the removal of any
    intoxicant from any warehouse or from any
    distillery or brewery.
    (e) prescribing the scale of fees or the manner
    of fixing the fees payable in respect of any
    license, permit or pass or in respect of the
    storing of any intoxicant;
    (f) regulating the time, place and manner of
    payment of any duty or fee;
    (g) prescribing the authority by, the
    restrictions under, and the conditions on
    which any license, permit or pass may be
    granted including provision for the
    following matters: –
    (i)The prohibition of the admixture with any
    intoxicant of any substance deemed to be
    noxious or objectionable;
    (ii) The regulation or prohibition of the
    reduction of liquor by a licensed manufacture
    or licensed vendor from a higher to a lower
    strength;
    (iii) [the strength at which intoxicant shall
    be sold], supplied or possessed;
    (iii-a) the fixing of the price below and
    above which any intoxicant shall not be sold
    or supplied by the licensed vendors;
    (iv) The prohibition of sale of any
    intoxicant except for cash;
    (v) The fixing of the days and hours during
    which any licensed premises may or may not be
    kept open, and the closure of such premises
    on special occasions;
    (vi) The specification of the nature of the
    premises in which any intoxicant may be sole,
    and the notice to be exposed at such premises;
    8
    (vii)The form of the accounts to be
    maintained and the return to be submitted by
    license holders; and
    (viii) The prohibition or regulation of the
    transfer of licenses;
    (g-i) declaring the process by which spirit
    shall be denatured;
    (ii) for causing spirits to be denatured
    through the agency or under the supervision of
    its own officers;
    (iii) for causing spirits to be denatured
    through the agency or under the supervision of
    its own officers;
    (h) providing for the destruction or other
    disposal of any intoxicant deemed to be
    unfit for use;
    (i) regulating the disposal of confiscated
    articles;
    (j) prescribing the amount of security to be
    deposited by holders of leases, licenses,
    permits or passes for the performance of the
    conditions of the same.”
  26. The case of the appellant is built around the
    provisions contained in Section 58(2)(e) of the Act.
  27. The Punjab Excise Act, 1914 as extended to
    the State of Haryana contains the following provisions
    inter alia:
    Section 5 of the said Act reads as follows:
    “5. Power of State Government to declare limit of
    sale by retail and by wholesale. –
    The [State] Government may by notification declare
    with respect either to the whole of [Haryana] or
    to any local area comprised therein, and as regards
    9
    purchasers generally or any specified class of
    purchasers, and generally or for any specified
    occasion, the maximum or minimum quantity or both
    of any [intoxicant] which for the purposes of this
    Act may be sold by retail and by wholesale.”
    (emphasis supplied)
    The expression “any local area” stands out in the said
    statutory provision as distinct from the whole of
    Haryana. It is to be noted that Section 5 does not
    deal with the rule making power of the State. In
    fact, it relates to the maximum and minimum quantity
    or both of any intoxicants which may be sold by retail
    and by wholesale. Similarly, Section 6(a) reads as
    follows:
    “6. Power to limit application of
    notifications, permits, etc., made under this Act.-
    Where under this Act any notification is made, any
    power conferred, any appointment made or any
    license, pass or permit granted, it shall be lawful
    to direct –
    (a) that it shall apply to the whole of [Haryana] or to any specified local area or
    areas;
    (b) …..
    (c) …..
    (d) …..”
    (emphasis supplied)
    Equally Section 6 also does not deal with the power
    to make rules.
  28. It is apparent that the legislature has
    maintained a distinction between the whole and a part
    10
    and the part is what is captured in the expression
    “local area”. Further Section 8 of the said Act reads
    as follows:
    “8. Superintendence and control of excise
    administration and excise officers. –
    (a) Subject to the control of the [State] Government and unless the [State] Government
    shall by notification otherwise direct,
    the general superintendence and administration of all matters relating to excise shall vest in the Financial Commissioner.”
    (b) ….
    (c) ….”
    (emphasis supplied)
  29. Section 9 of the said Act provides for
    appointment of an Excise commissioner and it reads as
    follows:
    “9. Excise Commissioner. – The State Government
    may by notification appoint an Excise Commissioner,
    and, subject to such conditions and restrictions
    as it may deem fit, may invest him with all or any
    of the powers conferred on the Financial
    Commissioner by this Act.”
  30. In terms of the notification vesting powers
    of the finance Commissioner apparently under Section
    59 it is that the Excise Commissioner has made the
    rules “Haryana Liquor Licence Rules 1970. It is
    undoubtedly true that Section 13 forbids delegation
    11
    of power under Section 58 inter alia on the Financial
    Commissioner or Commissioner. Section 34 comes under
    Chapter VI and is relevant. It reads as follows:
    “34.Fee for terms, conditions and form of, and
    duration of licenses, permits and passes. –
    (1) Every licence, permit or pass granted under
    this Act shall be granted, –
    (a) On payment of such fees, if any;
    (b) Subject to such restrictions and on such
    conditions;
    (c) In such form and containing such particulars;
    (d) For such period;
    as the Financial Commissioner may direct.
    (2) …..
    (3) …..”
  31. Section 35 speaks about grant of licences for
    sale. Sub-section (1) of the said provision reads as
    follows:
    “35. (1) Grant of lincenses for sale. – Subject to
    the rules made by the Financial Commissioner under
    the powers conferred by this Act, the Collector may
    grant licenses for the sale of any [intoxicant]
    within his district.”
    (emphasis supplied)
    12
  32. Coming to Section 58 undoubtedly what is
    pressed before us by the appellant is a specific
    provision contained in Section 58(2)(e). Breaking down
    the said sub-section, in my view produces the
    following inevitable result. The State Government has
    the power to frame rules.
    1)To regulate the periods of licences, permits and
    passes either wholesale or retail;
    2)To regulate the localities for which wholesale or
    retail licences, permits or passes may be granted.
    3)To regulate the persons or classes of persons to
    whom the licences, permits or passes may be
    granted either by way of a wholesale or retail
    licence;
  33. The latter part of Section 58(2)(e) on the
    other hand also permits the Government to regulate by
    rules, the number of such licences which may be
    granted in any local area. Therefore, it is clear
    that it is in respect of the licences which are
    referred, be it wholesale or retail mentioned earlier
    13
    in the provision which can be regulated but however
    limited to any local area. As against this and
    immediately following Section 58 in Section 59,
    legislature has also empowered the financial
    Commissioner to make rules inter alia to regulate the
    manufacture, supply, storage or sale or any
    intoxicant.
  34. It is relevant to notice that the High Court
    in the impugned judgment has specifically dealt with
    the expression “local area” by adverting to a judgment
    of this Court reported in 1995 (1) SCC 351. The
    expression “local area” has been designedly employed
    and it has to be given full play. It certainly cannot
    mean the whole of the State. Any other interpretation
    would render the word ‘local area’ in Section 58(2)(e)
    meaningless and, in fact, it would involve doing
    complete violence to the plain meaning of the words
    “local area”. It may be true that the whole may
    include the part (see in this regard the maxim in
    Brooms Legal Maxims Omne Majus Continet in Se Minus)
    but I do not think that the converse namely the part
    would include the whole could hold good. Thus, the
    14
    expression “local area” as used in Section 58(2)(e)
    would appear to convey the impression that the
    legislature intended to confer power on the State to
    place restrictions on the number of licences which are
    to be given qua any local area. In fact, in the written
    submission given by the State of Haryana, a definite
    case is set up that the State in its wisdom can
    conclude that a particular local area owing to the
    special conditions should be protected from the
    harmful effects of alcohol consumption. An example of
    tribal sub plan area is enlisted where the State may
    be carrying on a special programme. I would think that
    this view finds support also from another circumstance
    in the form of Rule 3 of Haryana Liquor Licence Rules,
  35. The said Rule reads as under:
    “3. The authority given by these rules to
    grant and renew licenses is, in each case,
    subject to the restrictions contained in the
    Punjab Intoxicants License and Sale Order as
    to the localities in which licenses may be
    granted and the number of licenses which may
    be granted in any local area, and to such
    reservations from the general superintendence
    of the financial commissioner as the State
    government may notify under Section 8 of the
    Punjab Excise Act, 1914.
    (emphasis supplied)
    15
  36. Thus, the said rule reinforces the view that
    the expression “number of licences” which may be
    granted in the local area is within the exclusive
    domain of the State Government and reliance placed by
    the appellant on the number of licences which may be
    granted in Section 58(2)(e) to strike at the impugned
    rule which is otherwise sourced under Section 59 is
    without any basis. In other words going through both
    the Act and the Rules, a distinction is made between
    the whole of the State and the local area. In regard
    to rule making power, undoubtedly, the legislature has
    specifically conferred rule making power qua the
    number of licences in any local area upon the State.
    Unless it can be reasoned that the powers to regulate
    sale of liquor within the meaning of Section 59 which
    is undoubtedly placed on the shoulders of the
    financial Commissioner would not include the power to
    make rules in regard to the number of licences for the
    State as a whole, the argument of the appellant must
    fail.
    16
  37. The word `regulate’ in fact came to be
    considered by the decision of this Court in D.K.
    Trivedi and Sons v. State of Gujarat 1986 (Suppl.)
    SCC 20. The matter arose under Section 13 inter alia
    of the Mines and Minerals (Regulation & Development)
    Act, 1957. This Court went on to hold inter alia as
    follows :
    “30. Bearing this in mind, we now turn to
    examine the nature of the rule-making power
    conferred upon the State Governments by Section
    15(1). Although under Section 14, Section 13 is one
    of the sections which does not apply to minor
    minerals, the language of Section 13(1) is in
    pari materia with the language of Section 15(1).
    Each of these provisions confers the power
    to make rules for “regulating”. The Shorter
    Oxford English Dictionary, Third Edition,
    defines the word “regulate” as meaning “to
    control, govern, or direct by rule or
    regulations; to subject to guidance or
    restrictions; to adapt to circumstances or
    surroundings”. Thus, the power to regulate
    by rules given by Sections 13(1) and 15(1) is a
    power to control, govern and direct by rules
    the grant of prospecting licences and mining
    leases in respect of minerals other than
    minor minerals and for purposes connected
    therewith in the case of Section 13(1) and the
    grant of quarry leases, mining leases and
    other mineral concessions in respect of minor
    minerals and for purposes connected
    therewith in the case of Section 15(1) and to
    subject such grant to restrictions and to
    adapt them to the circumstances of the case
    and the surroundings with reference to which
    such power is exercised. It is pertinent to
    bear in mind that the power to regulate
    17
    conferred by Sections 13(1) and 15(1) is not only
    with respect to the grant of licences and
    leases mentioned in those sub-sections but
    is also with respect to “purposes connected
    therewith”, that is, purposes connected with
    such grant.”
  38. No doubt it is true that Section 13 of the
    Mines and Minerals (Regulation & Development) Act,
    1957 which was considered by the Court inter alia read
    as follows:
    “13. Power of Central Government to make
    rules in respect of minerals. –
    (1) The Central Government may, by
    notification in the Official Gazette, make
    rules for regulation the grant of prospecting
    licences and mining leases in respect of
    minerals and for purposes connected
    therewith.
    (2) In particular, and without prejudice to
    the generality of the foregoing power, such
    rules may provide for all or any of the
    following matters, namely :-

(i) the fixing and collection of dead rent
fines, fees or other charges and the
collection of royalties in respect of –
(i) prospecting licences,
(ii) mining leases,
(iii) minerals mined, quarried, excavated or
collected;


(r) any other matter which is to be, or may
be, prescribed under this Act.”
18

  1. However, having regard to the connotation of
    the word ‘regulate’ it would include power to control
    the sale of liquor under the Act. Control of sale is
    possible by providing for licences as it is through
    licencing that the authority can provide for
    conditions under which the sale could be best
    controlled. If the power to regulate include the
    power to stipulate licences it undoubtedly also would
    include power to provide for number of licences qua
    the State as a whole a matter which I have reasoned
    does not fall under Section 58(2)(e) of the Act.
  2. In the judgment of this court in Khoday
    Distilleries Ltd. and Others v. State of Karnataka and
    Others reported in 1996 (10) SCC 304, the issue arose
    under the Karnataka Excise Act, 1965. Undoubtedly,
    there is a provision therein which is pari materia
    with Section 58(2)(e) of the Punjab Excise Act in the
    Karnataka Excise Act, 1965 which has been extracted
    at para 8 of the said judgment. The case in fact
    related to a distributor licence and not wholesale or
    retail licence which is what the provision speaks of.
    19
  3. The Court was not dealing with the specific
    question which is posed before us as is clear from the
    judgement. I have in fact, gone through the Karnataka
    Excise Act and I find that while Section 71 confers
    power on the State Government to make rules there is
    no provision akin to Section 59 of the Punjab Excise
    Act which confers power on any other authority in
    which case it could not possibly be contended that
    sub-section (2) of Section 71 would in any manner cut
    down the width of the general power of Section 71(1)
    for the State Government to make rules for the purpose
    of the Act.
  4. In such circumstances, I would respectfully
    disagree with the majority view as expressed in the
    judgment of my learned Brother Justice Navin Sinha.
    I would confirm the finding by the learned Division
    Bench of the High Court that the Financial
    Commissioner has power to decide upon the number of
    licenses.
  5. Having expressed my disagreement with regard
    to the finding of the sole issue which has been dealt
    with in the majority judgment I must necessarily
    20
    proceed to consider the two other contentions which
    has been raised by the appellant. The appellant has
    contended that the rule leads to the creation of a
    monopoly and what is really objectionable, in favour
    of a private party and it is contrary to the guarantee
    embedded under Article 19(1)(g) of the Constitution.
    The High Court has repelled this argument also. It
    relied upon the judgment of this Court reported in
    Khoday Distilleries Ltd. and Others Vs. State of
    Karnataka and Others; 1995(1) SCC 574 wherein this
    Court in paragraph 22 held as follows :
    “22. In Cooverjee B. Bharucha v. Excise
    Commissioner and the Chief Commissioner AIR 1954
    SC 220, where the vires of Excise Regulation I
    of 1915 was under challenge on the ground of
    violation of Article 19(1)(g), the Constitution
    Bench of five learned Judges, among other things,
    held that:
    (a)In order to determine the reasonableness of
    restrictions, envisaged by Article 19(6), regard
    must be had to the nature of the business and
    the conditions prevailing in that trade. These
    factors would differ from trade to trade and no
    hard and fast rule concerning all trades can be
    laid down. It cannot also be denied that the
    State has the power to prohibit trades which are
    illegal or immoral or injurious to the health
    and welfare of the public. Laws prohibiting
    trades in noxious or dangerous goods or
    trafficking in women cannot be held to be illegal
    as enacting a prohibition and not a mere
    regulation. The nature of the business is,
    therefore, an important element in deciding the
    reasonableness of the restrictions. The right of
    every citizen to pursue any lawful trade or
    21
    business is obviously subject to such reasonable
    conditions as may be deemed by the governing
    authority of the country essential to the safety,
    health, peace, order and morals of the community.
    Some occupations by the noise made in their
    pursuit, some by the odours they engender, and
    some by the dangers accompanying them require
    regulation as to the locality in which they may
    be conducted. Some, by the dangerous character
    of the articles used, manufactured or sold,
    require also special qualification in the
    parties permitted to use them, manufacture or
    sell them. The Court in this connection referred
    to the observations of Field, J. in P. Crowley
    v. Henry Christensen; 34 L ED 620 : 137 US 86
    (1890) a part of which is as follows:
    “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. … 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 police power of the State
    is fully competent to regulate the business
    to mitigate its evils or to suppress it
    entirely. There is no inherent right in a
    citizen to thus sell intoxicating liquors by
    retail; it is not a privilege of a citizen
    of the State or of a citizen of the United
    States. As it is a business attended with
    danger to the community, it may, as already
    said, be entirely prohibited, or be
    permitted under such conditions as will
    limit to the utmost its evils. … It is a
    matter of legislative will only.”
    (b)The elimination and exclusion from business
    is inherent in the nature of liquor business and
    it will hardly be proper to apply to such a
    business principles applicable to trade which
    all could carry on. The provisions of the law
    cannot be attacked merely on the ground that they
    create a monopoly. Properly speaking, there can
    be a monopoly only when a trade which could be
    carried on by all persons is entrusted by law to
    one or more persons to the exclusion of the
    general public. Such, however, is not the case
    with the business of liquor. The Court for this
    purpose relied upon the following observations
    of Lord Porter in Commonwealth of Australia v.
    22
    Bank of New South Wales; 1950 AC 235 : (1949) 2
    AII ER 755:
    “Yet about this, as about every other
    proposition in this field, a reservation
    must be made, for their Lordships do not
    intend to lay it down that in no
    circumstances could the exclusion of
    competition so as to create a monopoly either
    in a State or Commonwealth agency, or in some
    other body, be justified. Every case must be
    judged on its own facts and its own setting
    of time.”
    (c)When the contract is thrown open to public
    auction, it cannot be said that there is
    exclusion of competition and thereby monopoly is
    created.
    (Emphasis supplied)
  6. I may also refer to the judgment of this Court
    in Maninderjit Singh Bitta v. Union of India and
    others reported in 2005(1)SCC 679. In this case
    undoubtedly the rule provided that there will be only
    one license of the nature concerned. However, the
    right to the license was settled by way of e-tender.
    It was open to any person who is otherwise eligible
    to participate in the e-tender. Undoubtedly the
    guarantee of fairness of the State action and the
    taboo against arbitrariness must inform the State
    action once it decides to permit trade in liquor. It
    is to be noticed that the introduction of the rule was
    23
    primarily to earn maximum profits. The case of the
    state is that introduction of the rule has enabled
    collection of greater amounts by way of revenue. This
    cannot be said to be entirely an irrelevant
    consideration. Going too far in these matters may
    involve the court making a foray into the ordinarily
    forbidden territory of policy.
  7. No doubt, the appellant draws our attention
    to the recent decision of this Court in The Kerala
    Bar Hotels Association & Another v. State of Kerala
    & Others AIR 2016 SC 163. In fact, one the
    contentions of the appellants was that the state
    had 3 options. The first is prohibition, the second
    is State monopoly in manufacture or trade and the
    third was to allow private players into the business
    in which everyone has a right to partake in the
    business. The court went on to hold inter alia as
    follows:
    “24. We disagree with the submissions of the
    Respondents that there is no right to trade in
    liquor because it is res extra commercium. The
    interpretation of Khoday put forward by Mr.
    Sundaram is, in our opinion, more acceptable. A
    right under Article 19(1)(g) to trade in liquor
    24
    does exist provided the State permits any person
    to undertake this business. It is further
    qualified by Article 19(6) and Article 47. The
    question, then, is whether the restrictions
    imposed on the Appellants are reasonable.”
    The Court found support from the judgment of this
    Court in the Constitution Bench in Krishna Kumar
    Narula v. State of Jammu & Kashmir AIR 1957 SC 1368
    which took the view that dealing in liquor is a
    legitimate business although the State could impose
    reasonable restriction. The court however noted
    that in Khoday’s case (supra), the concept of res
    extra commercius came to be applied on the business
    of manufacture and trade of potable liquor.
    I may also notice paragraph 27 of The Kerala
    Bar Hotels Association case (supra) which reads as
    below:
    “27. We now move to the arguments predicated
    on Article 19 of the Constitution. We have already
    noted that the business in potable liquor is in the
    nature of res extra commercium and would therefore
    be subject to more stringent restrictions than any
    other trade or business. Thus while the ground
    of Article 19(1)(g) can be raised, in light of the
    arguments discussed with regard to Article 14, it
    cannot be said that the qualification on that right
    is unreasonable.”
    (Emphasis supplied)
    25
  8. I would not lose sight of in the facts of this
    case one dimension in this regard. The appellant is
    an association of companies. Article 19 provides for
    various fundamental freedoms. However, unlike Article
    14 and 21, these freedoms are not conferred on noncitizens. In other words, Article 19 is confined to
    citizens. It is well settled that a company though a
    juristic person but not being a natural person is not
    a citizen within the meaning of Article 19. The writ
    petition is filed without joining any shareholder who
    is a citizen. I would also take the view that
    therefore reliance placed on Article 19 may not hold
    good.
  9. Judicial review of policy is justified
    only if the policy is arbitrary or unfair or
    violative of fundamental rights. Courts must be
    loathe to venture into an evaluation of State
    policy. I have noticed the principles enunciated
    in paragraph 25 and also noted the view taken by
    this Court in paragraph 27 of the Kerala Bar Hotel
    Cases Supra. I may also notice that the question
    26
    which actually fell for consideration was in a
    different factual matrix. I do not think that the
    earlier view taken by this Court both in Cooverjee
    B. Bharucha Vs. Excise Commissioner and the Chief
    Commissioner, Ajmer and Others AIR 1954 SC 220 and
    Khodays’ case (supra) in relation to the effect of
    throwing open the right to obtain an exclusive
    privilege not flowering into a monopoly has not been
    overridden.
  10. The third complaint of the appellant is
    this. The assumption of the monopolistic position
    by the licensee would lead to arbitrary and unfair
    practices which would leave the members of the
    appellant without redress. The High Court, it is
    pointed out has rejected the contention by
    essentially reasoning that the licensee as long as
    it confirms to the conditions and law is a free
    agent and shut out the prospect of judicial review.
    This is what the High Court finds:-
    “32. There may be some safeguards within the
    policy which protect the rights of the upstream
    licenses such as manufacturers as well as the
    downstream licenses i.e. the purchasers, such as,
    retailers and holders of licences for bars, clubs
    and restaurants. There is no doubt, however,
    that a sole wholesaler can pick and choose the
    27
    parties that he wishes to deal with and, in
    effect, refuse to deal with those he does not
    wish to deal with including by devising various
    strategies. In doing so, the sole wholesaler can
    also effectively promote and encourage a
    particular brand or brands in preference to
    others. For instance, he may grant a particular
    dealer or a dealer in particular brands different
    payment facilities and not grant the same to
    others or others who deal in certain other
    brands. There is nothing that stops him from
    doing so. The question is whether that would
    render the appointment of a sole wholesaler
    illegal.
  11. The State, we will presume, even in the
    trade and business of liquor must act fairly and
    impartially and not arbitrarily. We will presume
    that in granting liquor licences and permits the
    State cannot adopt a pick and choose policy and
    must throw the field open to all those who are
    otherwise eligible. In the present excise
    policy, the State has permitted every eligible
    party to bid. It has not discriminated against
    or in favour of any party. The essential
    criteria for the appointment of the wholesaler
    is the value of the bid.
  12. The challenge to the policy and to the
    rule on the ground that the appointment of a sole
    wholesaler in respect of an L-1BF Licence would
    adversely affect the commercial interests of
    those who he deals with or those who must deal
    with him, such as, the petitioners is not well
    founded. As we noted earlier, theoretically it
    is possible that the commercial interests of
    certain dealers and manufacturers will be
    affected, in as much as, the sole wholesaler will
    have the choice of who it would deal with. The
    sole wholesaler would also be entitled to grant
    better facilities to some of the dealers. That,
    however, would not render the policy illegal. A
    private party is entitled to deal with any person
    or enterprise. The State, absent special
    circumstances, cannot do so. We will presume it
    cannot do so, even in so far as the trade and
    business of liquor is concerned. However, once
    a matter moves from the control of the State or
    the instrumentalities of the State into the
    hands of private enterprises, the restrictions
    applicable to the State and its
    instrumentalities cease to be applicable. This
    28
    is invariably the case in auctions and tenders.
    Take for instance, a case where the State decides
    to construct a building or a group of buildings.
    It can do so itself to the exclusion of all
    others. It is also entitled to engage private
    parties to do so. The State cannot pick and
    choose who to deal with. Absent any special
    circumstances, the State would be bound to
    consider the claim of every party that is
    otherwise eligible to undertake the work.
    However, once the State parts with its rights to
    construct a building and hands it over to a
    private enterprise, the matter ends there so far
    as it concerns the work that it has contracted
    to the private party. The contractor is not
    bound to call for tenders in respect of every
    item involved in the construction. The
    contractor is not bound to consider the
    application of every party for the supply of
    material required for the construction of the
    buildings. The contractor is entitled to obtain
    the material from such parties as it desires and
    on such terms and conditions that the contractor
    desires. The suppliers of the material would
    not be entitled to compel the contractor to
    afford them an opportunity of supplying the
    material. The rules of the game that apply to
    a State or an instrumentality of the State do
    not apply to such contractors.”
  13. In this case, in fact, Mr. Gopal Subramanium,
    learned senior counsel for the appellant drew our
    attention to the fact that the figures would show that
    the licensee has indeed being acting unfairly. It is
    the case of the appellant that the sole licensee can
    misuse his position in at least three ways. It is
    contended that it is possible that the licensee
    prefers certain brands to others inasmuch as it
    concerns negotiation, longer credit period and other
    29
    terms and conditions. BIO suppliers would be at the
    mercy of the licensee and they would have no option
    but to reconcile with the terms and conditions which
    would be laid down by the licensee. Secondly, it is
    contended that failure to adhere with the terms and
    conditions set out may result in a situation where a
    particular brand would not be made available in the
    State of Haryana. It is further contended that in
    view of the monopolistic position enjoyed by the
    licensee it may choose to promote certain brands over
    others on account of unfair negotiating position made
    available to it by the license. There are no checks
    and balances to ensure that interest of other stake
    holders is taken care of. Though the conditions
    provide that the licensee will have to supply goods
    demanded there are no means by which the actual demand
    can be ascertained. It is further pointed out that
    it is open to the licensee to offer discounts to the
    retailers it seeks to favour. This results in
    neutralizing the condition relating to the maximum
    sale price being fixed by the excise authority.
    Onerous conditions can be placed upon purchasers as
    30
    well as suppliers by the sole licensee and the lack
    of checks and balances renders the same violative of
    Article 14.
  14. The guarantee of Article 14 against the State
    undoubtedly embraces all spheres of its activities.
    If the action falls foul of the mandate of Article 14
    it is vulnerable, though different yardsticks may
    operate. Undoubtedly the expression ‘state’ would
    also include within its sweep an instrumentality of
    the State as it would fall under the expression “other
    authorities” in Article 12 of the Constitution. The
    matter relating to which authorities fall under
    Article 12 has been the subject matter of a catena of
    decisions of this Court. The principles have been
    culled out with sufficient clarity and I do not see
    any occasion or any reason to dwell more upon the same
    as the appellant even does not have a case that the
    licensee would be an instrumentality of the state
    within the meaning of Article 12 of the Constitution.
    It is a trite law that an effort at bringing a body
    within Article 12 must originate specifically in the
    pleadings.
    31
  15. Pleadings in this case on this point is
    conspicuous by its absence.
  16. The appellant would point out that in fact,
    after the new regime has been put in place, 5 star
    hotels were not being provided sufficient stocks of
    BIO products being supplied by the members of the
    appellant. Further it is pointed out that immediately
    upon grant of the licence in 2017, there has been a
    sudden decline in the sales of BIO prod8ucts supplied
    by the members of the appellant. The reason for this
    decline is sought to be placed at the door step of
    the sole licensee. The appellant has pointed out that
    there has been sudden decline of 25% in the supply of
    BIO brands of United Spirits Ltd.. There is a
    reference of 30% decline of BIO products of Pernod
    Ricard as well. There has been significant rise of
    the product of Pernod Ricard in the neighboring states
    of Rajasthan and Delhi, it is pointed out.
  17. I would notice that many of the contentions
    of the appellant are in the form of apprehensions
    about what may happen in future. In fact, there is
    a case for the respondents that no complaint as such
    32
    was moved against the licensee during the period.
    The licensee is duty bound under the terms and
    conditions of licence to submit pricing of each
    brand at the time of approval of the brand. The
    department is bound to approve the maximum sales
    price factoring in various elements. The licensee
    must indicate among other things, the landing price,
    expenses, profit margin. The price is also
    determined based on the prevalent rates of the same
    and equivalent rate at the neighboring states and
    the Government levies.
  18. Furthermore, the exclusive licensee is
    under the condition required to keep sufficient
    stock of all brands as are demanded by the procuring
    licensees and all such brands as were registered
    with the department in 2016-17. Thus at least two
    restrictions exist as in built safeguards which
    operate against the exclusive licensee. The licensee
    is obliged to keep sufficient number of stock of
    all brands which are demanded by the procuring
    licensees. In this case, the members of the
    appellant would fall within the expression
    33
    ‘procuring licensees’. Secondly, there is a
    regulation of the maximum price which the exclusive
    licensee can demand as the price is to be fixed by
    the State itself. A question however, no doubt,
    arises as to what would happen if the exclusive
    licensee himself also operates retail outlets and
    he promotes certain brands and/ or dampens the trade
    in others. In the first place I would think that
    ordinarily on the principle that a person would act
    in his own self interest there would be no reason
    for the licensee to deny himself the proceeds of
    the higher turnover based on more sales as by
    seeking to dampen the sale of certain brands it is
    the licensee who would suffer a loss. Let me assume
    however that he is placed in a situation where there
    is a conflict of interest and by suppressing the
    sale of certain brands and permitting the sale of
    other brands the exclusive licensee is placed in a
    more advantageous position, and therefore, he
    prefers it. I must remind myself that the complaint
    of the individual company would be that brand which
    it wishes to import and deal in is not made
    34
    available. Quite clearly if there is any such
    concrete incident which is pointed out, it would be
    an infraction of the condition of the licence.
    Certainly it would give rise to power with the
    authorities to take suitable action as available in
    law including in appropriate cases, cancellation of
    the licence. If such provisions are not already
    there I would observe that the State may devise
    suitable provisions so that an individual who acts
    as the licensee of the state would not do what the
    State itself would be forbidden from doing under
    the Constitution. I must also remind myself that
    at the same time, the State has apparently gained
    by way of enhanced collection of revenue by the new
    regime put in place. The State’s power to
    experiment in economic matters shall not suffer
    invalidation at the hands of the Court. Such power
    must be premised solely on State action falling foul
    of the Constitution and the laws. State would
    however do well to provide for a suitable mechanism
    by which it can provide appropriate safeguards so
    that there is fair dealing by the exclusive
    35
    licensee. Subject to the above observations I would
    dismiss the appeal with no order as to costs.
    ………………………………….J.
    (K.M. Joseph)
    New Delhi;
    February 12, 2019