licence could not be granted unless the distiller has participated in the tender process.= no one can claim as against the State the right to carry on trade or business in liquor and the State cannot be compelled to part with its exclusive right or privilege of manufacturing and selling liquor. But when the State decides to grant such right or privilege to others the State cannot escape the rigour of Article 14. It cannot act arbitrarily or at its sweet will. It must comply with the equality clause while granting the exclusive right or privilege of manufacturing or selling liquor. The Appellant’s request for grant of a CS-1 license requires to be considered strictly in accordance with law.The Respondents are directed to consider the application of the Appellant for issuance of CS-1 licence in accordance with the Act and the Rules made thereunder. It is needless to mention that the Respondents should not insist on the condition that the Appellant should have participated in a tender and should have been allotted an area of operation.


Hon’ble Mr. Justice L. Nageswara Rao 

Non -Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 1701 of 2019
[ Arising out of S.L.P. (Civil) No. 30428 of 2018 ]
GWALIOR DISTILLERIES PVT. LTD.
…. Appellant

Versus
THE STATE OF MADHYA PRADESH & ORS.
….Respondents
J U D G M E N T
L. NAGESWARA RAO, J.
Leave granted.

  1. The Appellant is a manufacturer of spirits and holds a
    licence in the form of D-1 granted in the year 2017. A
    tender notice was issued for supply of country spirit in
    sealed bottles, in the State of Madhya Pradesh for the year
    2018-2019. The condition imposed for participating in the
    tender was that the tenderer must have a licence for
    manufacturing, bottling and wholesale supply of country
    spirit in the State of Madhya Pradesh, issued in the form of
    1
    CS-1 licence. Clause 2(i) of the tender notice dated
    03.02.2018 was challenged by the Appellant on the ground
    that the stipulation pertaining to possession of
    CS-1 licence was contrary to Rule 3 of the Madhya Pradesh
    Country Spirit Rules, 1995 (hereinafter referred to as ‘the
    Rules’) since such licence could not be granted unless the
    distiller has participated in the tender process. That
    according to Rule 3, a successful tenderer is granted an
    area for supply of country spirit which would enable him to
    claim a CS-1 licence and CS-1-1B licence. The Writ Petition
    filed by the Appellant was dismissed. However, the High
    Court observed that the contention of the Appellant that
    he could not be granted a licence under the Rules unless
    an area was allotted to him was not borne out from Section
    18 of the Excise Act, 1915 (hereinafter referred to as ‘the
    Act’) or the Rules.
  2. Thereafter, the Appellant submitted an application for
    grant of CS-1 licence on 09.04.2018. By an order dated
    26.07.2018, the application filed by the Appellant for grant
    of CS-1 licence was rejected. Aggrieved by the said
    rejection, the Appellant filed a Writ Petition which was
    dismissed by the High Court. Hence, this appeal.
    2
  3. The order by which the request for issuance of CS-1
    licence was rejected by the Respondent No.2 was
    challenged by the Appellant as being in violation of Articles
    14 and 19 (1) (g) of the Constitution of India. The
    Appellant alleged discrimination since eight other distillers
    in the State of Madhya Pradesh who were similarly situated
    to the Appellant, not possessing CS-1 and CS-1-1B licence
    were allowed to participate in the tender process. The
    Appellant relied upon the observations of the High Court in
    its judgment dated 21.03.2018, in Writ Petition No.6525 of
    2018 filed by the Appellant, that neither the Act nor the
    Rules made thereunder required allotment of an area for
    grant of CS-1 licence.
  4. The High Court dismissed the Writ Petition by
    observing that allotment of an area was an imperative precondition for grant of CS-1 licence. The High Court further
    held that there was no fundamental right to trade in liquor
    and opined that the Appellant was not entitled to any
    relief. Clause 2 (i) of the tender notice dated 03.02.2018
    issued by the Respondents provides that a distiller having
    a proper licence for manufacturing, bottling and wholesale
    supply of country spirit shall be eligible to participate in
    3
    the tender process. The validity of the said condition was
    challenged by the Appellant in Writ Petition No.6525 of
    2018 in the High Court of Madhya Pradesh. The Appellant
    contended in said Writ Petition that according to the
    scheme of the Rules, a CS-1 licence will not be granted
    unless the area is allotted. A Division Bench of the High
    Court dismissed the Writ Petition finding no substance in
    the challenge to Clause 2 (i) of the tender notice. While
    dismissing the Writ Petition, the High Court observed that
    the allotment of an area was not a pre-requisite for grant
    of CS-1 licence. Subsequently, the Appellant submitted an
    application to the Excise Commissioner, Gwalior on
    09.04.2018, requesting issuance of a CS-1 licence. The
    application for granting CS-1 licence was rejected on
    26.07.2018 on the ground that the Appellant did not
    participate in the tender process, published on 20.02.2018
    for the year 2018-19. There is no doubt that the Appellant
    has a D-1 licence. A perusal of Rule 3 would show that
    manufacturing, bottling and wholesale supply of country
    spirit can be only undertaken by persons who possess a
    CS-1 licence. CS-1 licence is granted by the Excise
    Commissioner after the approval of the State Government.
    4
    A CS-1 licensee shall operate in such area or areas as may
    be determined by the Excise Commissioner from time to
    time. The apprehension of the Appellant that a CS-1
    licence would not be granted unless an area was allotted
    pursuant to a tender process was addressed by the High
    Court in the earlier round of litigation. The High Court held
    that the Act and the Rules do not provide for allotment of
    an area as a condition for issuance of CS-1 licence. The
    application filed by the Appellant for issuance of CS-1
    licence was rejected by the Respondents on the ground
    that the Appellant did not participate in the tender
    process.
  5. Section 18 of the Act which confers power on the
    State Government to grant lease of right to manufacture,
    etc. and Rule 3 of the Rules read as follows:
    “18. Power to grant lease of right to
    manufacture, etc. — (1) The State Government may
    lease to any person, on such conditions and for such
    period as it may think fit, the right—
    (a) of manufacturing, or of supplying by wholesale or of
    both; or
    (b) of selling by wholesale or by retail; or
    (c) of manufacturing or of supplying by wholesale, or of
    both, and selling by retail; and liquor or intoxicating
    within any specified area.”

5
“3. Grant of Licence. – (1) (a) A licence in Form C.S.1
for manufacture, bottling and wholesale supply of
country spirit may be granted by the Excise
Commissioner after approval of the State Government.
It shall commence on such date as may be specified
therein and be in force for such period as the State
Government may decide and shall be for such area or
areas as may be determined by the Excise
Commissioner from time to time.
(b) [Licence in Form C.S. 1 shall be granted by the
Excise Commissioner as aforesaid on payment of fee in
advance at the rate of one lakh rupees for a period of
one year’s licence or such proportional amount of fees
for the period of licence to be granted.]
The licensee shall be required to deposit additional
amount of Rs.5 lacs as security in cash or in any other
form as may be directed by the Excise Commissioner for
the due observance of conditions of licence, provisions
of the Act and the rules made thereunder and orders
issued by State Government or Excise Commissioner.
The Excise Commissioner may ask for additional sum as
security amount not exceeding Rs.10 lacs as and when
he deems it necessary in circumstances of repeated
breaches of conditions of increase in area of supply and
the licencee shall comply with such order within 15 days
of its communication to him.”

  1. There is no condition either in Section 18 or Rule 3
    that CS-1 licence will be granted only to a person who
    participated in the tender process. The order passed by
    the Respondent No.2 is arbitrary and contrary to Section
    18 of the Act and Rule 3 of the Rules. By the impugned
    judgment the High Court held that allotment of an area is a
    6
    pre-condition for issuance of the CS-1 licence without
    examining the judgment in Writ Petition No.6525 of 2018.
    Reference made to Writ Petition No. 6525 of 2018 was
    restricted to recording a finding that the said Writ Petition
    was dismissed and the contentions raised by the Appellant
    in the said Writ Petition were negatived. To our
    understanding, Rule 3 (1) provides for allotment of an area
    to a person who is given a CS-1 licence. Participation in
    the process of tender as a condition for applying for a CS-1
    licence is not found in the Rules. The High Court dismissed
    the Writ Petition by holding that there is no fundamental
    right to trade of liquor. However, the other contention
    raised by the Appellant that there is hostile discrimination
    against the Appellant as other similarly situated distillers
    were permitted to participate in the tender, has not been
    dealt with by the High Court. This Court in State of M.P.
    & others v. Nandlal Jaiswal & others
    1
    has held that no
    one can claim as against the State the right to carry on
    trade or business in liquor and the State cannot be
    compelled to part with its exclusive right or privilege of
    manufacturing and selling liquor. But when the State
    decides to grant such right or privilege to others the State
    1 (1986) 4 SCC 566
    7
    cannot escape the rigour of Article 14. It cannot act
    arbitrarily or at its sweet will. It must comply with the
    equality clause while granting the exclusive right or
    privilege of manufacturing or selling liquor. The Appellant’s
    request for grant of a CS-1 license requires to be
    considered strictly in accordance with law.
  2. The Respondents are directed to consider the
    application of the Appellant for issuance of CS-1 licence in
    accordance with the Act and the Rules made thereunder.
    It is needless to mention that the Respondents should not
    insist on the condition that the Appellant should have
    participated in a tender and should have been allotted an
    area of operation.
  3. For the aforementioned reasons, the judgment of the
    High Court is set aside and the appeal is allowed. ……………………………J.
    [L.
    NAGESWARA RAO]
    …………………………..J.
    [M.R. SHAH]
    New Delhi,
    February 15, 2019.
    8