Holding

Mandamus cannot be granted where the duty is discretionary; the Commissioner had no legal duty to grant the licence without prior State Government approval, and natural‑justice requirements do not apply to the grant of a licence privilege.

Summary

The Madras High Court, on a petition under Art. 226, quashed the Commissioner of Prohibition & Excise’s order rejecting two licence applications and, by mandamus, directed the Commissioner to grant a licence to Majestic Bottling Company despite the requirement of prior State Government approval under Rule 7 of the Tamil Nadu Arrack (Manufacture) Rules, 1981. Both the State Government and Chingleput Bottlers appealed. The Supreme Court held that a writ of mandamus cannot be issued where the duty is discretionary and that the Commissioner had no legal obligation to grant the licence without the State Government’s prior approval. It further ruled that the grant of a liquor licence is a privilege, not a right, and the rules of natural justice do not compel the Commissioner to disclose the Collector’s report or the representation of Majestic Bottling. Consequently, the Court set aside the High Court’s mandamus and remanded the matter for fresh consideration in accordance with the statutory procedure. The State Government’s appeal was allowed and Chingleput Bottlers’ appeal dismissed.

Issues considered

The High Court’s jurisdiction to issue a writ of mandamus directing the Commissioner to grant a licence without prior State Government approval under Rule 7.
Whether the Commissioner’s refusal to furnish the Collector’s report and other material to Chingleput Bottlers violated the rules of natural justice.
Whether the grant of a licence under the Arrack Rules is a matter of right or a mere privilege subject to discretionary authority.

Legislation cited

Constitution of Indias. Article 226
Tamil Nadu Arrack (Manufacture) Rules, 1981s. Rule 5, s. Rule 6, s. Rule 7
Tamil Nadu Prohibition Act, 1937s. Section 25A, s. Section 2A

Subjects

writ of mandamusdiscretionary dutynatural justicelicence privilegeArt. 226administrative lawTamil Nadu Arrack Rules

Judgment

'

190
A
CHINGLEPUT BOTTLERS
·~t
•
v.

MAJESTIC BOTTLING COMPANY
B
March 15, 1984
y •
[A,P. SEN ANn•A. VARADARMAN, JJ.]

Constitution oflndia-4rt. 226-High Court's Jurisdiction .to issue writ of
·c mandamus in cases where duty sought tq be enforced is-of discretz'onary nature.

Natufal Justice-Applicaiion of rules of natural justice to case$ which relate
not to rights but to mere privile'Ces of licences.

Tamil Nada Arrai:k (Manuff(lcture) Rules, 1981-R. 7-Commissioner has no
legal duty tO grant /icence-ApprovQl of State_ Government is a pre-requisite for
D grant of licence-High Court cannot com]lf!l gr~n/ of licence by Commissioner by •
issuing writ of mandamus.
. .
On the surrender oft.he licence for the manufacture and supply of bottled
arrack for the Chingleput District for the financial year 1982·83 by the then
existing licensee, the C.Ommissioner of ProJ:iibition and Excise called for fresh·
appliJ;atiOns from intending persons for the grant of licence 'under the Tamil
E Nadu Arrack (Manufacture) Rules, 1981 framed under the Tamil Nadu Pro-
hibition Act, 1937. Two firms, namely, Majestic. Bottling Company and
Chingleput·Bottlers, filed there applications and an enquiry with regard to them
was held by the . Assistant Commissioner. The Comniissioner considered the
report of enquiry, gave a separate oral hearing to the two applicants and passed
an order rejecting both the applications. As regard_s Majestic Bottling Company
F the Commissioner held that they did not satisfy the requirements of rr. 5(a) and
S(e). In the case of Chingleput Bottlers,. he held that they did not satisfy the
•
. requirements of rr. S(a), S(c) and S(e). While recording the finding in respcc(
of CbingJCpU.t Bottlers, the CommissiOner. rCiied on a: report of the Collector and
other material gathered by him during the. course of the enquiry, which included ·
a ·representation. froq-i Majestic Bottling ComPany against the application of
Chingleput Bottlers. Both the applicants filed petitipns under Article 226 of the
'
G Constitut~on questioning the orders passed. by the Commissioner.

. A Single judge Of the High O?urt .issued a writ of certiorari quashing the
order· of the Commissioner insofar as he rejected the application of Majestic
•
Botfling Company an4 also issued ;{w.rit of miindamµs ordaining the' Commis~
sioner tO grant the licen~ to Majestic Bottling Company. As regards ChingJeput
Bottiers, the Single Judge rejec~ed their· Contention that tpe Commissioner had -<
'
.H acted in breach of rules of natural justice by ·his failure -to furnish them the
report .of the Collector and Observed that nothing pre~luded them from seeking
ven1s~l of. the records or from ~~king a demand for a copy of th~ sam~.
CHINGLEPUT BOTTLERS v. MAJESTIC BOTTLiNG 191

r ~oth the' applicants preferred appeals to t11e D_ivision Bench. The State
Government which Was in pOssession of material adverse to the two partners· of ·
' Majestic Bott.ling Compriny did iiot initially file a ~eparate counter affidavit but
A

only di~ so at the conciusion of the hearing. The Division Bench ruled that the
order passed by the Commissioner must be adjud'ged by the reasons stated by
him and those reasons cannot be supp1emented by fresh reasons provided by the
State Government in its belated affidavit and upheld the judgment of the Single
Judge. B

. '
The State Government and piingleput. Traders filed appeals against the
jridgm~nt of the Division Bench.

It was contended on behalf· of the. State Government that the grant of
licence under r: 7 was.subject to the prior approval of the State Government,
that if the High Court- was satisfied that the impugned order of the Commis·
c
sioner. was liable to be quashed on the grouncf: that there was an error apparent
on the face of the record, the proper course for it to adopt was to issue a writ
of mandamus to the Commissioner t"ff re-determine the question of gra11t Or such
priviICge and .that. the High Court had nO power to fssue a writ of mandamus
directing the Commissioner .to grant the Jicence in favour of lvlajestic Bottling ·
Company: D

It was cpntended on behalf of Ching1eput Bottlers that the ·Commissioner
had acted in breach of rules of na:turaI jusliee in not furnishing them a copy of
the report submitted by the Collector and _other material gathered by hi~ during
the course of the enquiry.

Allowing the appeal of th'e State Government and disniissing the appeal Of
E
Chingleput Bottlers. .1 .

HELD : 1. No mandamus wil1 lie where the duty sought to be enforced is
of a discretionary nature nor wi_ll a rnandamus issue to compel th! performance
by a public body or authority of an act contrary to law. [!98H-!99A]

(a) In the instant case the Commissioner was under no legal duty to graht
a licence to Majestic Bottling Company ti11 he received the prior. approval of the
State Government under r. 7. Even assuming that the Commissioner recom-
mended the grant of a li~ence to them under f· 7, the State Government were
.under no compulsion to grant such prior approval. Th~ grant or refusal of such
licence was e~tirely in.the discretion of the State Government. The High Court
had no jurisdiction to issue a writ of mandamus to the_ Commissioner to grant a G
l~cence to Majestic Bottling Company contrary to the provisions of r. 7.
• (199A-C] •

de Smith : Judicial Review of Administrative Acti~n, 4th Ed. pp. 341 and
5~ ;•H.W.R. Wade: Administrative Law, 5th ed. p. 638; referred to.

(b?Absence of a specific plea in the natµre of demurrer wo~ld not.invest H
the H1~h. Court with jurisd~ction_ to issue a writ of mandamlJ,J ordaining the
~omm1&S1oner to ~ant a hcen~e un~er ;. 7 without the prior •rproval of the
'
192 SUPREME COURT REPORTS (1984] 3 S.C.R. I
A State Government w~ic~ is a condition pre-.reqUisite for the grant of such p~ivi·,
Iege. The Hjgh Court was u·nduly technical in applying the rul6s of pleading
and short·circuited the whole procedure upon a wrongful assumption of itS own
1
power~. The view taken ?Y it is manifestly erronCous; ·otherwise, the statutory
requirements of such prior approval of the S.tate Government under r. 7 would
be rendered wholly otiose. [20!CE]

B. K.N. Guruswamy v. State of Mysore, [1955] 1 S C.R. 305; and P: ·Bhooma
Reddy v. Staie of Mysore, [1969] 3 S.C:R. 14; distinguished .
.
(c) It is not possible to accept the contention that no useful pur~ose would ! •
have been serVed by the High Court remitting the matter for the reconsideration
of the Commissioner sinte it hacJ already found that all the reasons that could
c .be given for upholding the validity of the ·commissioner's order were bad and
unsustainable. This· was not a case where it could be said tb~t there was
nothing for the. State Government to consider while examining the question
whether it should accord or." refuse prior approval to the. grant of licence to
Majestic.Brittling Com.pany under r. 7. One .of the .relevant factors that the
•
State Government had to t;:ike into consideration was whethe; the partners of
that Company were persons who would abide by the provisions· of the Act and
D the rules. 'I:he facts d,isclosed 'in the counter affidavit of the State Government
lay a-serious charge against the partners of that Company and it \vas permissible
for "the .State Government to take those facts as justification for refusal to. grant
prior 'approval under r. 7. [202C,'203A-B, E-F]

(d) The proper course for- the High Court to adopt was to issue a writ of
mandamu1 directing the Commissioner to redeterffiine the Question after
E following the procedure of r. 7 and in case ·he ca&te to a decision .to grant· the
ti~nce in favour of Majestic Bottling Company, to refer the matter to the State
Oovemment for its prior approval. [206A-B]

Mis Hochtief Gammon v. Stateof-Orissa, [1976] l S.C.R. 667; Pad/ieldv.
Minister of Agriculture, Fisheries and Fodd, L.R. [1968] A.C. 997: referred to.
p
•
Gujarat State Financial Corpn. v. M/s. Lotus Hotels Pvt. Ltd., [1983] 3
·s.c.c. 379; distingl\ished.
State of Tamil Nadu v. C. Vadiappan, [1982] 2 Mad. L.J. 30; and K.
Ramaswamy v. Government of Tamif. Nadu (Writ App.eat No. 368of1981);
G overruled.

' 2. It iS a fundamental rule of law that no decision •ust be taken . which
Will affect the rights of any perSon- without first giving him an.opportuD.ity of
putting forward. his case. Strict adherence to the rules of naturai justice is
requi~ed- where a public authority or body has to deal with rights. The audi
alteram· .partem rule may - not apply to cases which relate not to rights or legal
B expectation· but to mere privilege or licence. An authority or body need not
•
observe the ruleS of natural justice where its·, decision, although fin<il~ relates I·
not to a 'right' but to a 'privilege' or· 'licence'. All that is emphasised in s:uctj
. ' ' .
'

..
CWINGLEPUT BOTTLERS v. MAJESTic BOTTLiNG 193

Cases is that the applicatibns for grant of privilege or licence must be considered A
fairly. There are no inflexible rules of natural justice of universal application.
Each case depends on its own Circumstances. Rules of natU.ral justice vary with
the varying constitutions of statutory bodies and the rules prescribed by the
legislature under whi~h they have to act. [209C-D-G, 213D-E-G]

'The right to know the case to be met docis not necessarily involve any right
to know the source of adverse information or to confront the informants, for, in B
some cases it. wou Id be quite proper for the authority to emJ?IoY confidential
sources. [210B-C]
• >

Ridge v. Baldwin:
. .
L.R: [1964] A.C. 40 ; R. v. GaminK Board for Great
Britain, [1970] 2 All E.R. 528; R. Surinder Singh Kanda v. Govanment of the
Federation of Malaya, L-R. [1962] A.C. 322; Breen v. Amalgamated, Engineerinr C
Union, [1971] 2 Q.B. 175; Mac lnne. v. Onslow Fane & Anr., [1978] 3 All E.R.
211; l{ishanChand Arora v.. Commissioner of Police, [1961] 3 S.C.R. 135; and
Nakkuda ,\/Iv. M.F. De S. Jayaratne, L.R. [1951] A.C. 66. referred to.

3. In tbe i~t~nt case there is nothing in the language of r. 7 to sUggest
that in rCfusi~g to grant the privilege, the Corpmissioner is obliged to act
~judiciallY'· · The order refusing a licence undet r. 7 is purely. an administrative D
or executive order f!.nd is not Open ·to appeal or revision. There is no /is between
, the Commissioner and the person who is refused such Privilege. ThC power of ·
refusal of licence unlike the power to grant is not subject to any pte-condition.
The grant-Of a liquor licence under r. ·7 'does ~bt involve any right or expectation ,
, but it is 3. matter of privilege. The Commissioner was· under _no obligation
either fo disclose the sources of information or the gist of the informatio·n that
he had. All that was required was that he should act fairly and deal \Vith the E
applications. without any bias, _and not in an arbitrary or capricious manner.
The Commissioner was entitled to ~ct on the report of the Collector and also on
other material gathe~ed by him during the course of the enquify. It~Cannot be ,
said that" the Commissioner in dealing with the app1icil.tions did not act fairly in
-not furnishing a copy of the report of the Collector or in taking a rePresentation
from Majesti~ Bottling Company. There is also no suggestion of any ma/ajides
on the part of the Commissioner or. the State Government. F
[213G-H,'214A-B, C-E, G-H]

_J. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1 1970-,
·; 11972of1983

Appeals by Special leave from the judgment and Order dated G
the 27th July, 1983 of the Madras High Court in W. A. Nt>s. 523,
531 & 528 of 1983.

K. K. Venugopa/ and C. S. Vaidyanathan for the Appellants in
> CA-Nos. 1 1970-7118\.
I
H
Sahnti Bhushan, A. T. M. Sampath and Mr. K. Subramaniam
for the Respondents· in CA. Nos. 11970-71/83.
194 SUPREME COURT REPORTS • , ll 9841 3 S.C.R.
•
-
-A A. K. Sen an-d A. V. Rangam for the Appellant in CA. No.
11972of1983.

· Soli J. Sorabjee A. T. M. Sampath and K. Subramantam
• for the Respondent in CA. 11972/83.

B ihe Judgment of the Court was delivered by

SEN, J. These appeals by special leave directed against a judg- !' •
ment of a Division. Bench of the Madras High Court dated July 7,
i983 upholding the judgment and order ()f a learned Single Judge
· dated.June 13, 1983 relate to the grant of a licence for the manufac-
c turing and supplying of bottled arrack to the wohlesale and. retail
for
licensees the Chingleput district under r. 7 of the Tamil Nadu ·
Arrack(Manufacture) Rules, 1981 ('Rules', for short) framed under
the Tamil Nadn Prohibition Act, 1937 ('Act' for short). These
appeals raise separate' anq distinct questions and must therefore
receive separate consideration.

·Put very shortly, the essential facts are these. On May 28, 1982
one 0. H. Kumar carrying oniJusiness 11nder the name and style
of .Messrs Three Star Bottling Company surrendered his Iicene for
the mamifacture arid supply of bottled arrack for. the Chingleput
E district for the financial year 1982-83. The Commissioner of Prohi-
bition & Excise, Madras called for applications from intending
persons for the grant of the licence. fn response to the notice 'issued
by the Commissioner under r.3(2) of the Rules, 'there were two
applications filed under r.5 in Form 1, namely, by J. Balaji. manag-
ing partner of Messrs Majestic Bottling Company on June 9, 1982
F anct"by V. Ramabadran, maiiaging partner of . Messrs Chingleput
Bottlers on June 14, 1982.~The Commissioner issued a questionnaire
and directed the Collector, Chingleput to have an . inquiry held as
regards the suitability of the applicants for the grant of a licence. L
Pnrsuant thereto, the Collector had an inquiry held by the Assistant
G Commissioner (Excise) which lasted for four days i.e. from June
·21 to June 24, 1982. Atter.the preliminary inquiry and field inspec-
tion m!de by the Assistant Commissioner (Excise), the Collector
forwarded his 'report dated July 2, 1982 to the Commissioner who
fixed July 5, 1982 for oral hearing of the parties.

H On July 5, 1982, the Commissioner &eparately heard both J.
Balaji and . V. Ramabadran. At the hearing, the Commissioner
rec<;>rded the statements of both J. Balaji and v. Ramaba.dra11 .in

\
I t

CHINGLEPUT BOTTLERS v. MAJESTIC BOTTLING (Sen, J.) 195 •
support of their respective claims. On July 31,1982 the Commissio· A
ner passed an order rejceting both the applications. As regards
Messrs Majestic. Bottling Company, the Commissioner held. that
their application was in order but that they did not satisfy the
requirements of r. 5 (a) and (e) of the Rules. As to their suitability
under r. 5 (a), he found that though the partnership had been
formed prior to the date of the application i.e. on June 9, 1982 B
the firm actually got registered subsequent thereto on June 23, 1982
and therefore there was no valid partnership in. existence on June 14,
1982 i. e,. on the date of the filing of the application. As regards
r. S(e), be held that there was no water facility .in the lands owned
by the partnership firm. ·
c
As regafds Messrs Chingleput Bottlers, the Commissioner. held
that the application made by them was not in order because it was
not accompanied ·by a solvency certificate and that there was no
potable water available at the proposed site. ·He further held that
there was only one and a half feet water in the well at the site and D
it was of poor quality. He also came to the conclusion that the
appHcation had not been made bona fide on behalf of the partnership
firm but as benami for others. The. Commisioner accordingly held
that Messrs Chingleput Bottlers did not fulfil the requriements of
r.• S(a), (c) and'(e) of the Rules.
E
The finding of the Commissioner that Messrs Chingleput
Bottlers were mere benamidars of 0. H. Kumar, the previous
licensee, was based on the report of the Collector and the other
material gathered by him during the course ef the inquiry.

Both Messrs Majestic Bottling Company and Messrs Chingle· F
put Bottlers filed separate petitions under Art. 226 of the Constitu-
• tion before the High Court questioning the validity of the order
passed by the (;:ommissioner. By his judgment dated June 13, 1983
a learned Single Judge held that the Commissioner was not justified
in rejecting the application of Messrs Majestic Bottling Company on
G
a.wrongful assumption that they did not satisfy the requirement of
r. S(a) and (e) of the Rules. He held that the order was vitiated by
an error apparent on the face of the record inasmuch as J. · Balaji,
managing partner of Messrs Majestic Bottling Company had
produced record with regard to the availability ofwater.
•
H
The learned Single Judge however set aside the finding of
the Commissioner that th.~ appli~ation made by Messrs Chingleput
.
•
196 SUPREME COURT REPORTS [1984] 3 s.c.R.
Bottlers was not in order because it was not accompanied by a sol-
vency certificate holding that non-production of a solvency certifi-
cate wonld not entail a dismissal ol the application on that Jlround
·alone, as also the finding with regard to non-availabiiity of water
. at the proposed site since. the blending unit of ~essrs Three Star .
Bottling Company was already functioning there. The learned Single
B Judge rejected the contention of Messrs Chinglepnt Bottlers that
the Commissioner had acted in_breach of the rules of natural justice
by his failure to furnish the report of the Collectot obs<ll'Ving that
noth.ing precluded them .from seeking perusal' of' the records; nor
did they make a demand for it.
c By his judgment, the learned Single Judge by the issue Qf a
writ of certiorari quashed the impugned ord~r of the Commissioner
- insofar as he rejected the application· made by .Messrs Majestic
Bottling Company on the ground that there was an error apparent
on the face of the record but instead of remitting the matter back
D to the Commissioner to re-consider the question of grant of such
privilege, issued a writ of mandamus ordaining the Commissioner
to grant the licence to Messrs Majestic Bottling Company. He fur-
ther uplteld the order of the Commissioner rejecting the application
of Messrs Chinglpet Bottlers for the grant of privilege on the ground
that they were mere benamidars of the. previous licensee. AMrieved
by the judgment of the learned Single Judge, both the State Govern- '
ment and Messrs Chingleput Bottlers preferred appeals under cf. ·15
of the Letters Patent. Upholding the judgment of the learned Single
• Jndge the learned Judge of \he Division Bench held ihat learned
Single Judge was justifiep not only in quashing the same but in'
issuing a writ of mandamus directing the Commissioner to grant
F the licence in favour of Messrs Majestic Bottling Company without
the prior. approval the State Government under r. 7 of the Rules.
' .
Before proceeding further, we would like to mtntiOn that the
State Government did not file a separate counter. There was a
counter-affidavit filed by R. Lakshmanan, Joint Commissioner (IV),..
G
Department of Prohibition & Excise, ·Madras on behalf of both the_
State Government as well as the Commissioner of Prohibition &
Excise seeking to support the impugned order passed by the Commis·
sioner. In addition to the grounds mentioned by the Commissioner'"
' '

• for the refusal of the applications for grant of privilege, there was
ff an additional ground taken in paragraph 11 and it was alleged that
J. Balaji, managing partner of Messrs Majestic Bottling Company
. and his other partner Smt. Shanthi, who incidentally is also bis
bi1NGLBPUf BOTTLERS v. MAJESTIC BOfrLING (Sen,!.) 197

mother were the two erstwhile directors of Messrs Dhana\akshmi ·A
· Chemi~al Industries Private Limited, Ranipet up)o Novemb.er 26,
1980 and there was pr/ma facie evidence tltat the company had misu-
sed tbe large quantity of rectified spirit by diverting alcohol from
industries to arrack production and therefore they were persons not
likely to abide by the provisions of the Act and the Rules farmed ; .
,>'
thereunder within the meaning of r.S(b); and this would have been a B
relevant point to be taken into consideration by the State Government
in the matter of grant or refuMl of prior approval. under r. 7(1). It
was alleged that these two persons were directors during the afore
said period of misuse.

At the ccnclusion of the hearing of the appeals before the
c
High Court,. the State Government filed a supplementary affidavit
, of S. Ranganathan, Deputy Secretary to the State Government of
Tamil Nadu, Department of Prohibition & Excise furnishing further
and better particulars .of the alleged misuse of rectified spirit by
Messrs Dhanalakshmi Chemical Industries Private Limited which D
.had put the. State. Government to a loss of revenue to the tune of
Rs. 2 crores. It was averred that inviostig~tion into the case was
almost complete and a p~osecution was about to be launched' against
the Company and its directors, includiPg J. Balaji and Smt. Shanthi,
the two partners of Messrs M,ajestic Bottling Company. Inasmuch as
no such abjection was taken before the learned Single Judge, the E
learned Judges felt that it was not necessary for them to deal with
the facts brought out in t)le two counter-affidavits .. It appears that
the learned Advocate-General also did not press the ground at the
hearing of the appeals. The learned Judges held that the validity
of the impugned order passed by the Commissioner must be adjudg-
ed by the reasons stated by him and cannot be supplemented by F
fresh reasons by the State Government in the shape of affidavit or.
,,
otherwise.

Ther• are really two questions that fall for determination.
The first is as to the jurisdiction of the High Court to iss\le a writ
of mandamus. It is said that the grant of licence under r.7 is subject G
, to th~ prior approval of the ~late Government and is in thi discre-
tion of the State Government. .The High Court is not the granting
authority and therefore had no power to issue a writ of mandamus
directing the Commissioner to grant a licence to Messrs Majestic
Bottling Company. The second question is whether the Commis-
H
sioner acted in breach of the rules natural justice in not furnishing
I\
i9s SUPREME COURT REPORTS [1984] 3 s.c.R...
to Messrs Chingleput Bottlers a copy, of the report submitted by
the Collector and qther ma}erial gathered by him during the course
· of the inquiry tending to show th.at they were benamidars of one
. o.H. Kumar, the previous licensee. It is said that Messrs MaJestic
Bottling Company had at the separate hearing before the Commis-
• .... sioner submitted a brief styled as a representation containing several
documents in·oppsition to the.application made by'Messrs Chingle-
put Bottlers on the ground that their application was benanii with-
out furnishing a :copy of the ·same to them and this must have
influenced the mind of the Commissioner. Even if the Commissioner
was not acting in a judicial o'r quasi judicial capacity, he was
required
c . that Messrs to act fairly ... The rU!es of natural justice therefore required
Chiugleput Bottlers should not be deprived of this
business without knowing the case they had to meet. Both the ·ques-
tions that arise will have to be dealt with separately.

The first issue, as 'already indicated, raises a question of
D prime importance and of some difficulty. It would therefore be
convenient, in the first instance, to deal with the appeal preferred by
the State Government.· It is urged that the High Court had no jurisdic-
tion to issue a •writ of mandamus ordaining the Commissioner to
grant a lrcence to Messrs Chinglepl\t Bottlers under r.7 of the Rules
without the prior. approval of the State Government. It ~s said. that
E although a writ of mandamus .may be a necessary adjunct to a writ
of certiorari, the proper course for the High Court to have adopted
was, if it was satisfied that the impugned ord~r of the Commissioner
was liable to be quashed insofar as he rejected the application made
by Messrs Majestic Bottling Company on the ground that there was
F an error apparent on the face of the record, to have issued a writ of
mandamus Commissioner to ·redetermine the question as to the
grant of such privilege. Reliance is placed on de Smith's Judicial
Review of Administrative Yi.ction, 4th edn. at pp.341 and 5.f4. The.·
• contention must,. in our opinion. prevail. e
G Iii order that a writ of mandamus may issue to compel the
Commtsioner to grant the licence, jt must be shown thai.under
the Act and the Rules framed thereunder there was a legal duty
imposed on the. Commissioner to issue a licence under r. 7 of the
Rules without the prior approvar·of the St.ate Government and that
Messrs Majestic Bottling Company had a corresponding legal right
.H for its enforcement. No . mandamus will lie where the duty sought
to be enforced is of a di~cretionary nature nor will a ·mandamus
'
CltINGLEPUT BOTTLElls v. MAJESTIC BOTTLING (Se71, J.) 199
•
issue to compel the performance by such public body or authority A
of an act contrary to law. The Commissioner of Prohibition &
Excise was ifnder no legal duty. to grant a. licence to Messrs Majestic
Bottling Company till he received the prior approval of the State
Government under r.7. Even assuming that the Commissioner
reommended the grant of a licence rt> them ;under r.7, the State
Government were under no compulsion to grant such prior approval. B
The grant or refusal of such licence was entirely in the discretion of •
the State Government. The High Court had no jurisdiction tll issue
a writ of Mandamus to the Commissioner t<l grant a licence to
Messrs Majestic Bottljng Company contrar' to the provisions of r.7
of the Rules. c
The learned Judges observed that in normal• ci~cumstances •
they would h(lve upheld the objection of the learned Advocate-
General as to the jurisdiction of the High Court to issue a writ of
mandamus, but in view· of the fact that the State Government had
chosen not to file a separate return. taking a specific plea that in D
the event of a writ of certiorari being granted, the Court shou"id not
issue a writ of mandamus for the grant of licence since the grant or
refusal of licence was subject to ·the prior approval of the State
Government under r.7 of the Rules. The learned Judges accordingly
held that the learned Single Judge was justified in issuing a writ in
the nature of mandamus directing the Commissioner to issue a E
• licence in favour pf Ms:ssrs Majestic Bottliug Company in view· of
the fact that there were . only two applicants in the field and the
• application of Messrs Chingleput Bottlers having b~n rejected, the
State Government had no other option but to make .the grant in
favour of Messrs Majestic Bottling Company. Further, the learned
F
Judges observed that to sustain· the objection would be tantamount
to allowing the State Government to sit in appeal over the j~dgment
of the High Court. In substance, the learned Tudges were of the
. view that f~ilure of the State Government to take a specific.
plea as to jurisdiction precluded them from raising a question' as 'to
the jurisdiction of the High Court to issue a writ of mandamus. G
We are afraid, we cannot accept this line of reasoning.

It is true that" sometimes it· is pfudent to couple a writ of
certiorari with a writ of mandamus to control the exercise of •
discretionary power. The following illuminating passages from de
Smith's Judicial Review of Administrative Action, 4th edn. at pp.341 H
; and 544 pithily sum up the function of a writ of mandamus •

•
200 . SUPREME COURT REPORTS
.[1984]
. . .- ·.

3 S.C.R.
~

•
A "It is now open to a court when granting certiorari to
·. remit the matter to the authority with a direction to recon'
' sider and to decide in a.ccordance with the findiugs of the
court. Apart from this, the role of the courts is limited to
ensuring that direction has been exercised f according to Jaw.
If, therefore, a party agg.rieved by the exercise of discretionary
·n power seeks an order of mandamus to compel the .authority
.. to determine the matter on the basis legally relevant considera-
tions,
4
the proper form of the mandamus will. be one to hear
and determine according. to Jaw ;· though by holding inad-
·missible the considerations on which the original decision was
based the court may 'indirectly indicate the. particular manner
c in which the discretion ought ti!! be exercised. In practice the
frontier be~ween . control of legality and control of the actual
exercise of discretion remains indeterminate, for the courts are
sometimes observed to cross the boundaries that they have
set .to. their own jurisdiction."
D ** *" •• •• ••
"The dnty to observe these basic principles of legality
in exercising a discretion is unlike the "duty" to apply the
law correctly to. findings of fact, prima facie enforceable by
mandamus. Hence where an authority has misconceived or
misapplied its discretionary powers by exercising them for an
E
improper purpose, or capriciously, or on the _basis of irrelevant
considerations or without regard to relevant c.onsideratipns,
i.t will be deemed to hav.e failed to exercise its di;cretion or
. jurisdiction .at all or to have failed to hear and determine
according to law, al!d mandamus may issue to compel it to act
F in accordance with the law."

Pr~fessor H.W.R .. Wade in his Administrative Law, 5th edn.
at p.638 also defines the purpose of a writ of mandamus in these
words:

"Mandamus is often used as· an adjunct to certiorari.
G If a tribunal or authority acts in a matter where it ha.s no
power to act at all, .certiorari will quash the decision aud
prohibition will prevent further unlawful proceedings. If there
is power to act, but the power )s abµsed (as by hreach of
• natural justice or error on the face of the record), certiorari
H will quasli and mandamus may '. issue simultaneously to ·
~
require a proper rehearing.. An example is Board of Educa·
' '

lion v. Rice ll911] AC 179 cited elsewhere ; the Board's
CliiNGLEPUT BOTTLERS v. MAJESTIC BOTTLING (Sen,
•i.) 20i
decision was ultra vtres since they had addressed their minds
to the wrong question ; consequently it was quashed by
certiorari and the Board were commanded by mandamus to
·determine the matter according to law, i.e. within the limits
indicated by the House of Lords."
B
In· our judgment, the High Coµrt exceeded its jurisdiction in
issuing a writ· of mandamus directing the Commission•:r to grant a
licence to Messrs Majestic Bottling Company without the prio"r
approval of the State Government as enjoined by r.7 of the Rules ..
The High Court was unduly technical in applying the rules of plead•
ings. Absence ·of a specific plea in nature of demurrer would not c
invest the High Court with jurisdiction to issue· a writ of mandamus
ordaining the Commissioner to grant a licen<e' to Messcrs Majestic .
. Bottl'tng Company under .r.7 of the Rules without the prior approval
·of the State Government which was a condition pre-requisite for the
grant of such privilege. It is regrettable that the High Court should
have short-circuited the whole procedure upon a wrongful assumption I)
of its own powers. The view taken by the High Court is manifestly
erroneous. Otherwise, the statutory . requirement of such prior
approval of the State Government under r.7 would be rendered
wholly otiose.
E
We should not be understood as laying down an inflexible
rule that the High Courts cannot, untler any circumstances, regulate
or control the manner of grant of a liquor licence by the issue of a
writ of mandamus. It would all depend upon the fktts and circum-
, stances as to whether the Hlgh Court should issue a wfit of manda-
mus .or not. The grant of a liquor licence is a matter of privilege. ·
II) the very nature of things, the grant of refusal of Jicen·ce is in the
discretion of the State Government. Normally, where the statute
• vests a discretionary power llj)On an administrative authority, the
Court would not interfere with the exercise of such .discretion unless
it is mane with oblique motives or extraneous purposes or'upon
extraneous considerations. The present case does notfall within the , G
rule laid down in K. N. Guruswamy v. The State of MyNre & Ors.1
and P. Bhooma Reddy v. State of Mysore & Ors' The decisions in
Guruswamy's and Bhooma Reddy's cases are•both in consonance with
the well-settled principle that. the High Court can always issue a

(l) [1955] 1 SCR 305
(2) [1969] 3 SCR 14
•
\
•

•
SUPREME COURT REPORTS [1984] 3 s.c.R.

writ of madam us under Art. 226 of the Constitution against a public
authority to compel the performance of a public duty where such
·authority
. .
acts in. violation of the law.

It is urged on behalf of Messrs Majestic Bottling Company
placing reliance on the decision of the House of Lords in Padfield
v. Minister of Agriculture, Fisheries & Food1 and that of this Court
in Messrs Hochtief Gammon v. State· of Orissa &ldrs. 2 following the
same that, no doubt where the reasons given are bad and the authori-
ty had not taken into consideration the relevant matters or real
grounds on which the order co.uld have been passed, the Court. can
direct the authority to reconsider the matter in the light of such
.Ci relevant m~ters. ~ufit was urged that ·no useful purpose would
b~ served in remitting lbe matter to the authority for reconsideration
where all the reasons that can be given for upholding the validity of
the order have been·found by the Court to be bad and unsustainable. ·
The .submission is that in such a case the Courts will not direct the
authority to refonsider the matter for, then there is nothing to .
reconsider but the Court will direct the authority to carry out what
it has by the impugned order refused to do. In Hochtief Gammon's
-case, this Court deduced the following principles from the decision
of House of Lords in Padfield';; case:

E "The l!xecutive have to reach their decisions by taking
into account relevant .considerations. They should not refuse
to consider felevant matter no.r should they take into account
·wholly irrelevant or extraneous consideration. They should
not misdirect themselves on a point of law. Only sµch a deci-
sion will be lawfuf. The Courts have power to see that the
F Executive acts lawfully. It is no answer to the exercise of that
power to say that. the Executive acted bona fide nor that they
have bestowed painstaking consideration. They cannot avoid
. scrutiny by courts by failing to give reasons. If they give
•
reasons and they are not good reasons, the court can direct
them to reconsider the matter in the light of relevant. matters
G • though the propriety, adequacy or satisfactory character of
these reasons may not be open to judicial scrutiny. Even if the
Executive .considers it inexpedient to exercise their powers
fhey should state their reasons and there must be;/ material to
show that they have considered all the relevant facts.
B
(I) LR [1968] AC 997
) · (1976] I SCR 667
•
CH!NGLEPUT BOTTLERS v. MAJESTIC BOTTLING ~Sen, J.) 2b3
.)J
This was not a case where it coul'tl be said that there was noth· A
ing for the State Government to consider as to whether should
accord or refuse prior approval to the gran~ of a licence to Messrs
Majestic Bottling Company under r. 7 of the Rules. The Commis-
sioner by the impugned order rejected the applications for grant .of a
licence made by both Messrs Chingleput Bottlersfnd Messrs Majes·
tic Bottling Company and therefore the. stage was not reached. The B
stage for the State Government to reconsider the matter of grant of
privilege under r. 7 would ,only ari~e when;. the commissioner makes
a recommendation for the grant of a licence. to Messrs Majestic Bott-
ling Company. At that stage, the State Government would have to
consider whether they should accord prior approval for the grant 'of
such privilege to Messrs Majestic Bottjjpg Company having regard to c
the matters specified in r. 5 of the Rules and the condilions set out in
r. 6(c), .in view of the further facts brought out in the supplementary
counter affidavit of Deputy Secretary to the State Government, Depart-
ment of Prohibition•& Excise in support of the objection raised in
para 11 of the counter-affidavit. One of the relevant factors that the
D
State Government must, as they should, take into consideration is
, the suitability of Messrs Majestic Bottling Company for the graqt of
licehce as required under r. S(a) and !he other is whether J. Balaji,
the managing partner and Smt. Shanthi the other partner, were per·
sons who would abide by tlie provisisjons of the Act and the Rules
made thereunder as enjoined by).. S(b). The facts lay a serious
charge that Balaji, managing ~partner of Messrs Majestic Bottling
Company and his other partner Smt. Shanthi were directors of Mes-
srs Dhanalakshmi Chemical Industries Private Limited, Ranipet
upto November 26, 1980 and that there was prima facie evidence
showing that the company had misused the rectified spirit issued to
it causing a loss of revenue to the State Government to the tune elf r
Rupees two crores or thereabout. It would be permissible for the
State Government to take these facts as justification for refusal to
grant prior approval under r. 7 of the Rules. .

In Foming to the conclusion they did~ the learned Judges have
drawn ·sustenance from the decision of this Court in Gujarat State G
Financial Corporation v. Messrs Lotus Hotels Private Limitedl and
of the High Court in the State of Tamil Nadu & Anr. v. C. Vadiap-
pan' in support of the view that the High Court had jurisdiction .to
issue a writ of mandamus directing the State of Tamil Nadu and

(!) (1983] 3 s.c.c.
379
(2) (1982] 2 Mad. L.J. 30
•
2o4 stJPRBMll COURT REPORTS t19s4J 3 s.c.ft:.
A · the Commissfoner of Prohibitit'm & Excise to grant the privilege for
the manufacture and supply of bottled arrack to Messrs Majestic .
Bottling Company for tbe Chingleput district under r. 7 of the
Rules .. The decision in Gu}wat Stat~ Financial Corporation's case .
(supra) is clearly distinguishable and is not an authority for any such .
proposition. No;;uch questiou arose in that case at al1. There, the
B Court was dealing with a contract entered into by the Guja~at State
. Financial Corporation with Messrs Lotus Hotels Private Limited for
the purpose of setting up a 4-star hotel. The Company ·approached
the Corporation for a loan.of rupees 30 !akhs and· the Corporation
sanctioned a loan of Rs. 29.93 lakhs on certain terms and conditions
wl'tich the Company accepted. The Corporation however finally
c resolved not to disburse the lo~n to the Company whereupon the
Company moved Gujarat High Court by a petition under Act. 226
for the issue of a writ of mandamus to ·direct the Corporation to
disburse the loan. A learned Single Judge of the High Court issued
the writ as prayed for and it was confirme<\ by• a Division Bench. ·.
D On appeal by the Corporation, this writ Court held that the High
Court was justified.in issuing the writ of .mandamus. The decision
in G,ujarµt State Financial·Corporation's case, (supra) turned on .the
doctrine of promissory estoppel and it does not justify the conclu-

. . .
sion reached by the learned ludges· in the present· case for the issue
of a writ of mandamus. It is needless to ·stress that if the require-
ment of law was that the advance of loan to be sanctioned by the
Gujarat State Financial Corporation was to be subject to the prfor.
approval of the Reserve Bank of India, the decision of the Court·
would have been otherwise.

It is difficult to subscribe to the doctrine evolved by the High
r Court in Vadiappan's case, (supra) that 'the Commissioner is the 'sole.
arbiter' under r. 7 of the Rules. It relied upon the earlier deci&ion
of the High Court in K. Ramaswamy v. Government of Tam ii Nadu
& Ors' laying down that .the proviso to r. 6 of the Tamil Nadu
Arrack (Supply by Wholesale) Rules, 1981 ·had to be understood
strictly ill a negative sen~. According to the High Court, at best it
G
confers.on the Government a power to .vefo. By itself, the High
Court observed, 'it does not make the Government a final arbiter
between the competing claims. The· High Court further observed in ·
Ramliswamy's case, supra, that 'the weighing of the pros and cons
and the consideration of the merits and demerits of the rival clai-

\
(I,) Writ >.ppeal No. 368of1981.
CHiNGLEPUT BOTTLERS v. MAJESTIC BOTTLING (Sen, J.) 205
ments remained, from first to last with the Commissioner as his
sole responsibility, and that the requirement of the Government's
proper approval under the proviso to r. 6 of the' Tamil Nadu
Arrack (Supply by Wholesale) Rules "1981 was no doubt a necessary
part of the validity of every licence, but 'the enabling power cannot
he employed as a machinery for a review in every case but only as
B
.-, '
f
a check upon a possible abuse of its power· by the Commissioner'.
That approach of the High Court seems to run counter to the scheme
of the Act and the Rules framed thereunder. The grant of a liquor
licence under r; 7 is a matter of privilege of the State Government.
The Commissioner merely exercises the delegated powers of the
State Government. The ultimate responsibility for the grant of such
privilege is with the State Government under r. 7 of the Rules .
c
. Nor can we subscribe to the contention that the Commissioner
bad to act under the directions and control of the State Govern-
ment under sub-s. (2) of s. 2SA of the act while exercising his powers
delegated under sub-s (I) of s. l 7C read with s. 25A (I) in the D
matter or grant of a liquor licence under r. 7 of the Rules. It would
not justify the High Court to issue a writ of mandamus to the
Commissioner to grant a licence to Messrs Majestic Bottling Com-
,
. pany under r. 7 of the Rules without .the prior approval of the State
Government. Obviously, the State Government and the Commissio-
ner canot act de hors the scheme of tl)e Act and the Rules framed E
thereunder. Furt~er, the contention that the State Government had
already made up their mind against the grant of such previlege to
Messrs Majestic Bottling Company . and that there was no occasion
for the High Court to send back the ca~e to -the Commissioner as
it would have amonnted to the State Governn1ent being asked to
sit in appeal over the judgment of the High Court, cannot be
accepted. We regret to say,· the High Court has tried to circumveni
the whole procedure by issuing a writ of mandamus directing the
Commissioner to grant a licence under r. 7 without the prior appro\lal
of the State Government. As already stated, the grant of a licence
un.der r. 7 of the Rules is a privilege. There are no charges of ma/a
G
fides on the part of the State Government. There is no suggestion
· that the State Government had already made up their mind. This is
also not a case where the rules of necessity require recourse "to a
-. writ of mandamus to command the issue of a licence without con·
J forming to the procedure prescribed under r. 7. · II>
ff;
In the premises, it was not a .proper exercise of jurisdiction for
the High Court to have 'iss\led a writ . of mandamus under Art, 226 ·
,,.
206 SUPREME COURT REPORTS [1984] 3 S.C.\l.
A of the Constitution ordaining the Commissioner to grant a licence to
Messr~ Majestic Bottling Company under r.7 of the )lules 'without
.the pr10r approval of the State Government. In our opinion, the
proper course for the High Court to adopt was to issue a writ of
mandamus directing the Commissioner to redetermine the question
after following the procedure of r. 7 and in case he came to a deci- '
B
sion to grant the licence in favour of Messrs Majestic Bottling
Company, to refer the matter to the State Government for its
prior approval. Otherwise r.7 of the Rules would be rendered.
completely otiose . .
c
Turningto the appeai preferred by M/s Chingleput Bottlers,
le'arned counsel for them has mainly advanced a three-fold sub·
mission: (1) The Commissioner had acted in flagrant violation of
the rules.<)[ natural justice in not furnishing to Messrs Chingleput
Bottlers a copy of the report of the Collector and other extraneous
D material comprising of a representation received from Messrs
Majestic Bottling Company along with various other documents.
Nor had. he disclosed to them the substance of the report of the ·
Collector or other information gathered by him irrespective of the
source. (2) The impugned order passed by the Commissioner
was vitiated by errors apparent on the face of the record. There
E. ·was no factual basis for. the assumptidn that the three persons from
whom Messrs Chingleput Bottlers had taken the lease of the land
on which the blending unit is located. viz, K.J. Geo"'5e, M/~. Visvam·
baran and E.K. Chandrasekaran, were real partners of Messrs Three.
Star Bottling Company. There was also no warrant for the suspicion
cast by the Collector in ~is report that Messrs Chingleput Bottlers
r were mere benamidars of otie . O.H. Kumar, proprietor of Messrs
Three Star Bottling Company, the existing licensee, on the ground
that they bad entered into an agreement to purchase the blending unit
from him. The function of the Commissioner in making the grant
of'privilege under r. 7 qf the Rules of being a quasi-judicial nature,
the Commissioner could not act on unwarranted conjecture,; and mere
surmises. (3) The 'commissioner had not acted fairly inasmuch as
G' 'he adopted a double standard. For a secret inquiry was conducted
against Messrs_Chingleput Bottlers for adjudging their,suitability for
the grant of privilege while no. such inquiry was mqde ·against Messrs
Majestic Bottling Company. The ·Commissioner had thus treated
Messrtchingleput Bottlers and Messrs Majestic Bottling Company on
an unequal footing and thus the procedure adopted was violative of
Art. 14. The observation made by the Commissioner that the
pepqsit of Rs. 10,01,00) made by Messr~ Chingleput Bottlers with.
CIUNGLEPUT BOTTLEM v; MAJESTIC BOTTLING (Sen, J.) 207
, J/
the Indian Overseas Bank ha.d not come from bona fide sources and
that obviously there was some secret understanding between O.H .
. Kumar and· Me;srs Chingleput B~ttlers was not based on any
material at all. The Commissioner knew that O.H. J(umar, the
previous licensee, was not in a position to advance rupees 10 lakhs
• and odd to Messrs Ching!eput Bottlers. Again, no such inquiry was
B ..,
made as to the financial capacity · of· Messrs Majestic Bottling
Company. Further, the Commissioner had wrongly assumed that
Me~rs Chingleput Bottlers and given their·address as 'Ramabadran,
c/o ~essrs Three Star lk>ttling Company, lyanchery' when no such '
..
'
address was ever furnished and therefore the impugned order is
vitiated by an error apparent on the face of the record.
c
In support of the contention that the Commissioner acted i11
violation of the' rules of natural justice, the learned counsel contends
that Messrs Chingleput Bottlirs had a right to be heard. It is urged
that there was clear ·breach of the principle of audi alteran partem
. inasmuch as neither a copy of the report of the Collector was
D
furnished to Messrs Chingleput Bottlers nor a copy of >the repre-
sentation submitted by Messrs Miijestic Bottling Company against
the grant of licence to them. The argument is that a hearing where
a party does not know the case he has to meet is no hearing at all,
while the learned counsel concedes that the right to know the case
to be met does not necessarily involve any right to know the sources E
of adverse inference or to confront informants,' for in many cases
it will be quite proper for the authority to employ confidential
sources, the rules of natural justice require that the information
itself should be · disclosed so that there is a fair opportunity of
meeting the case.
F
In the file relating to Messrs Majestic Bottling Company there
is a representation filed by J. Balaji, ·managing partner of Messrs
Majestic Bottling Company, consisting of 131 pages and was appa-
rently handed over by J .. Balaji at the time of heafing,before the
Commissioner on July 5, 1982. The r~resentation dated July 5, 198?
is in the forrn of a petition in continuation qf the application for
grant made on June 9, 198,2. Regarding Messrs Chingleput Bottlers,
certain objections are raised to the grant of licence. The objections
are formulated in a document marked Annexure 'A'. It is alleged
...
J
that the existing licensee 0.H. Kumar is running the show under the
name and style of Messrs Three Star Bottling Company which is
H
u~der the control of three person§. namely, K.J, George, M:S.
V1svaml,>aran and E.K. Chanctrasekara,n. It recites th11t now finq-
'

208 '·
WPREME COURT REPORTS _{1984} 3 s.c.R.

ing that O.H. Kumar could not get the present· licence, they have
sef up Ramabadran who has himself shown his address as care of :
Messrs Three Star Bottling Company. This .itself clearly ·shows·
that the. applicant. Ramabadran is a benamidar of Messrs Three
Star Bottling Company. In support of the assertion that
B Ramabadran is a benamidar of 0.H. Kumar, there is a copy of the
judgment of the High Court of Madras in Writ Petition No. 1239
of 1961 filed along with other papers .. In the file relati,ng to ~ssrs
Chingleput
. .
Bottlers there is a two-page note which formulates
certain objections to the grant of privilege to Messrs Chirfllleput
Bot(lers. It was obviously handed over by J. Balaji, managing
c partner of Messrs Majestic Bottling Company to the Assistant Com-
missionef"(Excise) during his inspection of the blendipg unit or
before the C9llector before the submission of his report.
'
'
We do not think that the Com~issioner was under an obliga-·;
lion to furnish Messrs Chingleput Bottlers with a copy of.the report
0 submitted by the.Collector or of the representation made by Messrs
Majestic Bottling Company. Thf~ equally applies to the two-page note
appearing in.the file of Messrs Chingleput Bottlers. It was. quite pro-
. per.for the Commissioner to make secret and discreet inquiries from
confidential sources. There was no duty cast on him to disclose to
Messrs Chingleput Bottlers the sources of adverse information or to ·
E
give. them an oppt>rtuniiy to confront the informants. Rules of
fairplay only enjoin that Messrs Chinglepnt Bottlers should kiiow the
case against thFm. This apparently they did from the questionnaire
issued by the Commissioner and the questions put by the Commis-
sioner on July 5, 1982 on the basis of the information gathered by him.
The Commissioner has relied upon the report of the Collector and
the conclusions reached by the Collector are based on the statement
of Ramabadran recorded by the Assistant Commission~r (Excise).
Further, at the heating on July 5, I 982, the Commissioner recorded
the statementoof Ramabadran, managing partner of Messrs Chingle-
put Bottlers. There 'was no occasion for the Commissioner to have
G recorded the statement of Rartiabadran over again unless this was to
give him an opportunity to exp)ain \be substance of the report of
the Collector or other information gat\\ered by hi.m irrespective of
the source.

The learned Judg_es . repelled. the contention of Messrs Ching-
H
leput Bottlers, that the Co~missioner acted in breach of therules
9f natural justice by his failure to furnish theD! with a copy of th~
CllINGLEPUT BOTTLERS v. M~JESTIC BOTTLING (Sen, J.) 209

repoi;t of Collector on the ground that there is no fund<1mental right A
in a citizen to carry on any trade ln liquor. According to them, the
Commissioner under the Rules performs an admi11istrative function
and having regard to the re~uirements of r .5 of the Rules, and in
view of the fact that Messrs Chingleput Bottlers had neither a legal
right nor a legal expectation that they would be granted the privilage
B
all that was required was that the Commissioner should act fairly in
' .. dealwg with the application and not in a capricious or arbitrary
manner. _On the material on record, the learned Judges held that
they w•re satisfied that the Commissioner acted fairly and reasonably
and not arbitrarily or capriciously in coming to the conclusioo that
..
Messrs Chinglepnt Bottlers had not made the application on their c
own behalf, but betiami for others and in rejecting· their applica-
tion for the privilege for ·setting up a blending u~it for arrack.
Incidentally, they pointed out that Messrs Chingleput Bottlers did
not specifically make a grievance of the fact in the writ petition that
principles of natural justice had not been complied with. It is a.
fundamental rule of law that no decision mnst be taken whiCh. will D
affect the rights of any persQn without first giving h_im an opportunity
of putting forward his case.

There has ever since the - judgment of Lord Reid in Ridge v.
Ba(dwin, supra, been considerable fluctuation of judicial opinion in
E.
'England as tD the degree of strictness with which the rules ofnatural
justice should be extended, a~d there is growing awareness of the
problems created by the extended application of principles 9f natural
justice, or the duty to act fairly, which tends tQ sacrifice the admini-
strative efficiency and despatch, or frµstrates the object of the bw
in question. Since this Court had held that Lord Reid's judgmc:it
in Ridge v. Baldwin would be of assistance in ·deciding questi@ns
relating to natural justice, there is always "the duty to act judicially''.
whenever the rules of natural justice are applicable. There is there-
.
fore the insistence upon the requirement of a "fair. hearing".

In the light of the settled principles, we have to see whether the G
Commissioner. acted in breach of the rules of natural justice or
fairplay in passing the jmpugned order:

There is authority for the proposition that an authority or
body need' not observe the rules of natural justice where its decision, H
although final, relates not to a 'right' but to a 'privilege or ficeµce'.
Jn a: nunib~r of recent decisions, the Conrts have, while extending
•
210
.
SUPREME COURT REPORTS [!984) 3 S.C.R.
A the protection of natural justice in the former 'Category of claims,
denie\I such proiection to the latter ca!egory. All that is emphasize(!
in such cases is that the applications must be considered fairly. In
R. v. Gaming Board for Great Britain.e:Xparte Bneailn & Khaida1 the
Court of Appeal held that in refusing a certificate for reasons
· concerning the character and suitability of the applicants, the Board <
B
must act fairly and obey th~ broad principles .of natural justice, In
fact, it was held that they had done so _since they had given the
applicants full opportunity to know and contest the case again!t f • .• •
· them, ~ven though they had not revealed the sources of their infor-
• tfiatiim or given their reas,ons. It follows that the right to know
c the case to be met does not necessarily involve any right to know
the source of adverse information or to confront the informants,
for id. some cases it would be quite proper for the authority to
employ confidential sources.

The Master of' Rolls referred to the contention advanced by ·
D counsel appearing for the applicants. that they ougbt not to be
deprived of the chance to get licence for the gaming business without
knowing the case they had to meet. The counsel criticized especially
the ·way in which the Board proposed to kee,. that confidential
information and relied on.some words of his in R. Surinder Singh
Kanda v. Government .~! the ~Federation of Malaya• where he had
E said:

·'Thatthe Judge or whoever lras to adjudicate must not
hear evidence or receive representation from one side behind
·the pack of the.other." ·
F
Lord' Denning rejected the contention by observing that 'the
CO\Jnsel had put hjs case too high'. The· ]earned Master of Rolls then
observed.: ·

. . "It is an error to regard Crockfor!l's. as having any
~ right of which they are being deprive(!. They have not bad in
the past, and they have not now, any right to play these
games of chance-roulette, cheminde-fer, baccarai and the like
for their own profit. What they are really seeking is a
privilege:·almost, I might say, a· franchise'to carry on gaming
-r.
H
(!). [1970)" 2 All B.R. 528
(2). LR [1962) AC 3~.
CHINGLEPUT. BOTTLERS v. MAJESTIC BOTTLING (Sen, J.) 211

for profit, a thing never hitherto allowed in this country. It A
is for them to show that they are fit to be trusted with it."
Iu Breen v. Amalgamated Engineering Union.' Lord Denning
said :
)

"If a man seeks a privilege to.which he has no parti-

' . cular claim-such as an appointment to some post or other-
then lie can be turned away without a word." •
B

The Master of Rolls went on to say that nonetheless statutory
0

and in some cases ·domestic bodies must act fairly and this may
involve a. hearing. althoug_h it is not clear from the judgment
c
whether the duty applies where .an initial application is being con-
sidered·. or only where an existing privilege is being terminated.

In Mcinnes .v.·Ons/ow Fane & Anr., Megarry, V.Cc has drawn a
distinction between initial applications for grant of licence and the •
revocation, suspension or refusat to renew licences already granted. D
The learned Vice-Chancellor says:that there i~ a substantial distinc-
tion between 'application cases' and 'forfeiture cases'. He observes.
·that while an apJ,llicanf for _grant of licence has neither a right to
such a grant nor a reasonable expectation that su.ch grant would be
•. made· in his favour, but cancellation or forfeiture of an existing
licence or·refusa!' to renew a licences, involves. a right to a hearing E
as the applicant has what may be called 'reasonable expectation';
Megarry, V.C. dealt with the question · whether the grant or refusal
of licence by the Boara of Control is s~bject to any requirement of
natural justice or fairness which would be enforced by the Courts.
In dealing with the nature of the right to claim a licence, he said
F
that it was nothing but a privilege. The three distinct categories can
"- best be discerned in his ·own words :
;.
"First, there are what may be called the forfeiture cases.
In these, there is a· decision which takes away some existing
right or position, as where a member of an organization is G
expelled· or a licence is revoked. Second, at the other extreme
there are what may be called the application cases. There
are cases where the decision merely refuses to grant the appli-
I
""· cant the right or position that he seeks, such as membership
•
H
(!). [1971] 2 QB 175 ·
(2). (1978) 3 J\ll. B·R· 211
212 SUPREME COURT REPORTS [1984) 3 S.C.R.
A of the organization, or a licence to do certain acts. Third
"there is an interme<;liate category, which may be called th:
expectation, cases, which differ from the application cases
only in thar the applicant has spme legitimate expectation
from what has already happened that his application will
B be granted. This head includes cases where an existing licence
holder applies for a renewal of his licence, or a person already
j ,
eleceted or appointed to some position seeks confirmation
from some confirming autf10rity.

The learned Vice-Chancellor went on to say that there was
c a substantial distinction betwi:en forfeiture cases and application
·cases: In forfeiture cases, there is a threat to take sometl)ing
away for some reason. In such cases, the right to an unbiased
tribunal, th.e right to notice of the charges arid the right to be heard
• in answer to the charges which were:the three features of natural
justice are plainly apt. In application cases, on the other hand,
nothing is being taken away, and i.n all normal circumstances there
are no charges', and so no requirement of an opportunity of being
heard in answer to the charges. Indeed, there is the.far wider and less
defined questions of the general suitability of the applicant for
membership or a licence. The distinction is well recognized, for in
general it is clear that tho Courts will require natilral justice to be
E
observed for expulsion from a social club, but not on an application
for admi!!llion· to' it. The intermediate category i.e. of tqe ·expectation
cases, may at least in sonze respects be regarded ~s being more akin
' -
to forfeiture cases than application cases ; for although in form
there is no forfeitnre bu' merely ·an attempt at acqnisition that
F fails, the legitimate expeCtation of a renewal of the licence or con-
formation of the' membership is one which raises tbe question of
what it is that has ·happened to make the applicant unsuitable for
{he membership or licence for which he was previously thought
suitable,

G
Iil such cases, Megarry, V.C. felt that. much help cannot be
had from discussirig whether 'natural justice' or 'fairness' was the
more appropriate term'. He.observes that if one expects that naturnl
• justice is a flexible term which imposes different requirements in
different cases; it is ·capable of.applying appropriately to the whole
H range of situations indicated by the terms such as 'judicial,' 'qnasi·
judicial' and 'administrative'. The content of the 'duty to act f\\irly'
1lid. not impose on :he Board to give either oral hearing to the .
•
CltlNGLEPUT BOTTLERS v. MAJESTIC BOTTLING (Sen, J.) 213
. '
applicant or to disclose the case against him nor was it under any A
obligation to give r_easons for a decision: The learned Judge then
went on to say that there was no obligation for the Board to give
the applicant even· the gist of the reasons while they refused his ·
applicatibu, or proposed to d_o so, and added:

B
The concepts of natural justice and the duty to be fair
must not be allowed to discredit themselves while making
unreasonable requirements and imposing undue bµrdens."
.' 1n such cases, the right to hearing has been denied on the ground .
that the claim or interest or legitimate' expectation is a more 'privilege c
or 'licence' .. This is in consonance with the decision of a Constitu-
. lion Bench of this Court in ·Kishan Chand Arora v. Commissioner of
. Police, Calcutta' following the judgme~t of the Privy Council in
v.
Nakkuda Ali M.F.De S. Jayaratne's' case.

It is beyond the scope of the" .present judgment to enter into a D
discussion on the apparent conftict between the decision of the Privy
Council in Nakkuda Ali's case and the observations of Lord Reid in
Baldwin's case. It would appear ·that the long line of cases begin-
ning. with 82/dwin's c~se and ending with D'arcy Ryan'J case are
cases dealing with interference with property rights, deprivation of
E
member>hip of professional or other non-statutory bodies, dismissal
from office, imposition of penalties and deprivation of advantages etc.
Both the Privy Council as well as this Court have required strict
apherenc~ to the rules of natural justice· wfiere a public authority or
body has_ to deal with rights. But the principle that there was a
duty to observe the audi alteram partem rule may not apply to cases F
whi_ch relate not to rights or legal expectations but to. mere p~ivilege
or· licence. •

It is now well-settled that, while considering the ·question of
breach of the principles of natural justice, the Court should not
proceed as if there are intlexible rules of natural justice of universal G
application. Each case depends on lits own circumstances. Rnles
of natural justice vary with· the varying constitutions nf statutory
bodies and the rules 'prescribed by the legislature under which they
have to act.

' H
I (I). [19611 3 SCR _135.
(2). LR [1951) AC 66.
214 SUPREME cotlRT REPORTS [1984} 3 ~.:;.i>: •
•
A There is nothin$ in the language of r. 7 of the Rules to suggest
that in refusing to grant the privilege, the Commissioner is obliged·
to act 'judicially'. The order refusing a licence under r. 7 is purely
an administrative or executive order and is not open to appeal or
revision. There is no /is between the Commissioner and the person
who is refused such privilege. The power of refusal of licence unlike
B
·the power to grant is riot subject t.o any pre-condition.

It mus; follo)l' that the grant Of a liquor. ~icence under r. 7 of f •
the Rules does no{ involve any right or expectation but it is a'inatter
c ot privilege. The Commissioner was therefore under no. obligation
either to disclose the sources of information or the gist of the infor-
mation that he had. All that was required was that he should act
fairly, and deal with the applications without any bias, and not in an
arbitrary or capricious manner. - .

D
.
There is no suggestion of any 1iiala fide!; on the part of the
Commissioner or the State Government. The Commissioner heard
both the parties after he had an inquiry made through the Collector
. to adjudge their suitability for the grant of the licence. The
Commissioner had issued a questionnaire and had the material
collected by the Collector. The Commissioner was entitled to act
E on the report of the Collector:and also on other material gathered
by him during the course of the:inquiry .. There is no requirement
under the Act for a confronted hearing like the hearing.contemplated . -\
between rival claimants for the grant of a stage carriage permit under .
the Motor Vehicles Act, 1939 into' their respective merits and
demerits. The Commissioner separately heard both the parties and
had their statements recorcied with respect to all the relevant aspects.
It· canntlt be said that the Commissioner in dealing with the applica-
tions did not act fairly in 'not furnishing a copy of the report of the
Collector or in taking a representation· from Messrs Majestic Bottling
Company.
G.
The Jiigh Court could not have in proceedings under Art. 126
of the Constitution interfered with the impugned order of the
. Commissioner merely because on a reappraisal of the evidence it
might have come to a contrary conclusion. There was. no errclr of
jurisdiction on the part of the Commissioner nor was the impugned
H order vitiaJed by any error apparent on the face of the record. The
finding reached by the Commissioner that the application made by'
Messrs Chingleput Bottl~irs was not, made bona fide on their own
•
C!!IN.GLEPUT norrLEks v. MAJEsnc lior:rtn~a (Sen, J.) 215
accQunt but as benami for others is a :finding based on appreciation A
of evidence .. The Con:imissioner was entitled to rely upon the facts
found by the Collector. It may be pointed out that the Collector's
report is entirely based on tl)e statement of V. Ramabadran, mana-
ging partner of Messrs Chingleput Bottlers. The High c;,ourt was
: •. therefore justified in dismissing the appeal preferred by Messrs
Chingleput Bottlers. · B
' •
• In the result, the appeal preferred by the State ·povemment
must succeed and is allowed .. The judgment. and brder passed by
the High Court fot the issue of a writ of mandamus directing the
Commissioner of Prohibition & Excise, .Madras is set aside and the
c
. case' is remanded to the Commissioner for a decision afresh according
to law. For th.e reasons stated, the appeal filed by Messrs Chingle-
put Bottlers must fail and is 'dismissed.

There shall be no order as to costs.

D
•

' .

• C.As .. 11970-71/83 dismissed
S.R. and C.A. / 1'172/83 allowed

•