Holding

The government may validly alter its policy for liquor‑shop licence settlement, and such alteration is not subject to Sections 42 and 43 of the Bihar Excise Act nor to promissory estoppel, nor does it violate Article 14.

Summary

The State of Bihar, under the Bihar Excise Act, 1915, initially adopted a policy in January 1990 granting five‑year settlements of liquor‑shop licences subject to annual renewal and certain conditions. The appellants paid the first year’s fee and claimed a contractual right to continue their licences for the full five‑year term. In August 1990 the government altered its policy, deciding that settlements for 1991‑92 would be made by an auction‑cum‑tender method, and the High Court dismissed the appellants’ writ petitions challenging this change. The appellants contended that the licence period could not be curtailed without compliance with Sections 42 and 43 of the Excise Act, that the government was estopped by a promise (promissory estoppel), and that the change violated Article 14 of the Constitution. The Supreme Court held that the licence was granted on an annual basis and expressly subject to policy changes, that Sections 42 and 43 do not apply to a change of policy, and that no enforceable promise existed, so the change was not arbitrary or violative of Article 14. The Court directed the return of security deposits (National Saving Certificates) to licencees and dismissed the appeal.

Issues considered

The licence period can be curtailed without complying with Sections 42 and 43 of the Bihar Excise Act, 1915
Whether the government is bound by promissory estoppel in changing its policy
Whether the change of policy violates Article 14 of the Constitution
Whether the order constitutes a change of policy or merely an executive order

Legislation cited

Bihar Excise Act, 1915s. 42, s. 43
Constitution of Indias. Article 14

Subjects

liquor licencepolicy changeexcise lawpromissory estoppelArticle 14Bihar Excise Actauction-cum-tendermonopolyrevenuelicence renewal

Judgment

A MOHD. FIDA KARIM Ai'lD ANR.
v.
STATE OF BIHAR AND ORS.

MARCH 31, 1992

B [N.M. KASLIWAL, K. JAYACHA.i"lORA REDDY Ai1'ID
G.N. RAY, JJ.]

Bihai Excise Act, 1915: Sections 42 and 4J.

c policy-Grant
Liquor shops~Right of vend-}.fode of settlement-Government
of licence for five years-Licence subject to cha11ge in policy of
.... --
Government-Change of policy to auction-cum-tender me1hod-Cl1011ge in
policy held valid and not violative of Article 14--Sections 42 and 43 held
inapplicable to change of policy by Govemment-.Principle of promissory
-( - ~

estoppel heid inapplicable. ~
D
The State of Bihar took a policy decision to make settlement cf liquor
shops for five years subject to yearly renewal on fulfilling certain condi-
lions in terms of change in policy. The said policy was approved by Cabinet
on 25th January, 1990. Rules were amended accordingly and published in
the official gazette. In pursuance to the said policy the appellants
E
deposited six months licence fee for the first year of settlement on 7th
March, 1990. The said policy was challenged and the Hlgh Court granted ~
interim stay of the policy directing the Government to grant licence on

-
yearly basis through public auction. In the meanwhile the State Govern-
ment changed the policy under which the settlement of liquor shops was
F to be made by auction-cum-tender method for the next year and the new
policy was approved by the Cabinet on 16th August~ 1990. The appellants
field writ petitions in the Patna High Court challenging the new policy of
auction-cum-tender for the year 1991~92 which were dismissed. I ""

In appeal to this Court, it was contended on behalf of the appellants
G that (i) the period of licence already granted cannot be curtailed without
compliance of sections 42 and 43 of the Bihar Exc!se Act; (ii) Government's
action was arbitrary and violative of Article 14 and the Govt. was estopped
from adopting the new policy on the principle of promissory estoppel; and
(iii) the impugned order was not a change of policy but was merely an
H executive order passed on the \\Tong assumption as if the High Court had
408
MOHD. FIDA KARIM v. STATE 409

directed the Government to review its policy. .. A
Dismissing the appeal, this Court,

HELD : 1. The Government was fully competent to change its policy
under the terms of the grant of licence itself. The Memorandum and the
sale Notification on the basis of which the appeHants claimed the right to B
continue the licence for a period of' five years, dearly mentioned that the
grant of licence was on annual basis and such renewal after every year was
subject to the conditions mentioned therein and also subject to any change
in policy. Sections 42 and 43 of the Bihar Excise Act have no application
in the case of change of policy by the Government. [412E-G, 413E] C

2. ,It is also well settled that the right of ~·end of excisable articles is
exclusively and absolutely owned by the State Government. [412G]

3. The r.ew policy of adopting the method of auction-cum-tender is
certainly a change of policy. The reason for change of policy is that the D
Government realised that making setUement for five years would give rise
to monopolistic tendency and the interest of revenue was not fully
protected in the fo1·mer policy. There is nothing wrong in taking such .a
view by the State Government and to change its poiicy in public ihterest.
The appellants as such have no right to challenge the new policy. [413A-D] E

4. There was neither any promise nor there is any justification to
hold that the appellants altered their position on the basis of promise. The
contention based on the ground of promissory estoppel or under Article
---- 14 cannot be accepted. (4130-E]
F
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1205 of
1992.

From the Judgment and order dated 6.9.91 of the Patna High Court
in C.W.J.C. No. 2102 of 1991.
G
Kapil Sibal, Harish N. Salve, Ranjit Kumar, G.D. Bhandari and S.C.
Patel for the Appellants.

M.L. Varma, B.B. Singh, Vikash Singh and L.R. Singh for the
Respondents. H
410 SUPREME COURT REPORTS (1992) 2 S.C.R.

A . The Judgment of this Court was delivered by ~
KASLIWAL, J. Special leave granted.

This appeal is directed against the judgment of the Patna High Court
dated 6th September, 1991. Initially Mohd. Fida Karim and Dasrath Das
B had filed special leave petition challenging the dismissal of their writ
).._
petition, C.W.J.C. No. 2102 of 1991 by a Division Bench of the Patna High
Court by order dated 6th September, 1991. In view of the fact that by a
common decision, the Patna High Court had dismissed many other identi-
cal writ petitions, the petitioners in those other writ petitions also sub-
c mitted intervention applications before this Court and such intei:vention .-(
applications have been allowed. 35 applicants/interveners are also support-
ing the present appeal filed by Mohd. Fida Karim and Dasrath Das. '""'--
"1'
The controversy in this case relates to the mode of settl~ment of the
0 right of vend of country liquor, Indian made foreign liquor and spiced
country liquor under the provisions of the Bihar Excise Act, 1915
(hereinafter referred to as the 'Excise Act') and Rules framed thereunder.
The Government changed its policy from time to time. Prior to 1984,
settlement of country liquor shops was done by renewing the licence
E according to the sliding scale of system. In 1984, the. State Government
decided to make settlement of country liquor shops by public auction. This
was done on annual basis for a period commencing from 1st of April to ~
31st March of the next following year. This practice continued tipto 1989-
90. During the currency of the above licensing period 1989-90, the State
Government appointed a high power committee and according to its
F recommendations made a policy to make settlement of liquor shops for five
years by renewing the existing licences, subject to fulfilling certain condi-
tions like, satisfactory record of performance and enhancement of licence
fee at the rate of 10 per cent every year and also enhancement of the -f -
minimum guaranteed quota at the rate of 5 per cent every year. The above
G policy decision was taken by a Cabinet Memorandum dated 25th January,
1990. In pursuance to the above policy decision, the Excise Commissioner
by communication dated 8th February, 1990 informed the licensing
authorities to take steps for settlement of excise shops as per the amended
policy of the Government. On 17th February, 1990, necessary amendments ~
H were also made in the Rules framed under Section 89 of the Excise Act
MOHD. FIDA KARIM v. STATE [KASLIWAL, J.] 411

.~ inconsonance with the new policy of the Government. The amendments A
were duly published in the official Gazette on 7th March, 1990, to come
into force with effect from 1st April, 1990. The case of the appellants is
that in pursuance to the aforesaid policy, the appellants agreed to the new
terms and conditions and necessary agreements were also executed. The
appellants also deposited six months' licence fee for the first year of B
,.t settlement, on 7th March, 1990. According to the appellants a concluded
contract came into effect on 7th March, 1990 itself, which was to come into
force with effect from 1st April, 1990.

Some of the persons not satisfied with the aforesaid Government
~ policy, challenged the same by filing four \\Tit petitions in the High Court. C
The High Court passed interim orders on 9th March, 23rd March, and 13th
_.. .,.._ April, 1990 in these writ petitions. The High Court in the interim orders
granted stay on the new policy of the Government and in its place gave
directions to grant the licence on yearly basis through public auction.
Initially, it was directed that the period of such settlements shall not exceed D
four months, but subsequently it was made on monthly basis. It was also
directed that the aforesaid orders will not stand in the way of the State
Government in reviewing the policy decision. We have only mentioned the
substance of such interim orders passed on 9.3.1990, 23.3.1990 and
13.4.1990, as the same have been quoted in extenso by the High Court in
its impugned order dated 6th September, 1991. It appears that the E
)-- aforesaid interim orders were passed by the High Court under the vain
hope that the main Mit petitions would be disposed of soon. However,
before the writ petitions could be heard finally, the Government started
_..... the process of reviewing the policy decision dated 25th January, 1990/Sth
February, 1990. By Memor~ndum dated 7.7.1990 placed before the Council F
of Ministers, it was proposed that the settlement of the country liquor
shops, spiced country liquor shops and foreign liquor shops should be
...,.. \ made by auction-cum-tender method, according to which the persons
interested were required to submit their sealed tender and also to par-
ticipate in the public auction. The settlement was to be made finally in
favour of the person making the highest offer whether by way of tender or G
at auction. The Cabinet approved the aforesaid policy on 16th August,
1990. The Excise Commissioner also sent necessary instructions to all
~ licensing authorities by letter dated 25th February, 1991 in regard to the
proposed mode of settlement by auction-cum-tender for the year 1991-92.
H
412 SUPREME COURT REPORTS [1992] 2 S.C.R.

A The present appellants as well as the interveners filed writ petitions chal- ~
lenging the aforesaid new policy of auction-cum-tender for the year 1991-
92.

Similar contentions have been raised before us on behalf of the
appellants, which were made before the High Court. The challenge to the
B new policy has been made on the following three grounds. Firstly, it bas
been submitted that there is no provision in the Excise Act or the Rules
>
to review or revoke the grant of licence or to curtail or reduce t~e period
of licence except as. provided under Sections 42 and 43 of the Excise Act.
The licence already granted for a period of five years from 1990 to 1995
c cannot be made ineffective by the so-called new policy of auction-cum- ~
tender. A further limb of this ground is that the period cannot be curtailed
without compliance of the mandatory provisions of Sections 42 and 43 of ..., ......
the Excise Act. The second ground of challenge is that the Government is
estopped from doing so on the principle of promissory estoppel. The third
D ground is that in any event, the exercise of power, in the facts of the case
is arbitrary, irrational and patently unreasonable and as such is violative of
Article 114 of the Constitution. The High Court has dealt with all these
contentions in detail and has rejected the same by giving cogent reasons.
We fully agree with the view taken by the High Court.
E
It is important to note that the Memorandum dated 25th January,
1990 and the letter dated 8th February, 1990 and the sale Notification on -<
the basis of which the appellants are claiming the right to continue the
licence fOi a period of five years, clearly mentioned that the grant of licence
was on annual basis and such renewal after every year was subject to the
F conditions mentioned therein and also subject tO any change in policy.
Thus, the Government was fully competent to change its policy under the
terms of the grant of licence itself. It is also well settled that the right of
vend of excisable articles is exclusively and absolutely owned by the State
J- ......
Government.
G
Mr. Ka.pil Sibal, Learned Senior Counsel appearing on behalf of th~
appellants did not dispute the aforesaid legal position, but his contention
was that the impugned order of the Government made iii August, 1990
~
cannot be termed a change of policy, but in fact was merely an executive
H order passed on a wrong assumption as if the High Court in its interim
MOHD. FIDA KARIM v. STATE [KASLIWAL, J.J 413

orders had given a direction to the Government to review its policy. We A
do not find any substance in this contention. The new policy of adopting
the method of auction-cum-tender is certainly a change of policy. The
reason for change of policy given by the Government is that it realised that
making settlement for five years would give rise to monopolistic tendency,
which will not be in public interest, at the same time the interest·of revenue B
was not fully protected in the former policy. This clearly goes to show that
.(
.
the Government wanted to adopt a new policy in public interest to be made
applicable from the year 1991-92. Learned Counsel appearing on behalf of
the State of,Bihar submitted in clear terms that the earlier policy was wrong
and the Government realised its mistake and thus adopted a new policy to
augment its revenue and to avoid monopolistic tendency. We do not find
c
anything wrong in taking such view by the State Government and to change
....... its policy considering the same to be in public interest. It is not disputed
that the appellants have continued the business of sale of liquor for the
whole year 1.4.1990 to 31.3.1991. The appellants as such have no right to
challenge the new policy which has to apply for the year 1991-92, even D
under the terms of their agreement. We do not find any force in the
contention raised on behalf of the appellants on the ground of promissory
estoppel or under Articie 14 of the Constitution. There is no basis at all
made out in the pleadings in support of the above grounds and the High
Court has rightly rejected the same. There was neither any promise nor E
there is any justification to hold that the appellants altered their pllSition
on the basis of promise. Sections 42 and 43 of the Excise Act have no
application in the case of change of policy by the Government.

Lastly, it was contended on behalf of the appellants that the licensees
who had taken the licence under the earlier policy of the Government of F
25th January, 1990/8th February, 1990 had submitted National Saving
Certificates by way of secruity and in case the Government had changed
its policy, it was bound to return the National Saving Certificates to the
respective licensees. We consider this submission to be just and proper.
Learned Counsel for the State appearing before us also conceded that such G
National Saving Certificates would be returned to the licensees. We ac-
cordingly direct the State Government to return all the National Saving
Certificates taken by way of secruity to all the licensees who had entered
in agreements under the old policy of five years license, within two months
H
414 SUPREME COURT REPORTS [1992] 2 S.C.R.

A from the date of the communication of this order. This direction will not
apply in case of such licensees who have filed civil suits for the recovery
of such amounts and their cases would be governed by the ultimate
decision in those civil proceedings.

In the results, we dismiss this appeal with no order as to costs.

T.N.A. Appeal dismissed.

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