SECRETARY TO GOVT., TAMIL NADU AND ORS.versusK. VINAYAGAMURTHY

        SECRETARY TO GOVT., TAMIL NADU AND ORS.                                   A
                                      v.
                        K. VINA Y AGAMURTHY

                           AUGUST 26, 2002

[G.B. PATTANAIK, RUMA PAL AND K.G. BALAKRISHNAN, JJ.)                             B

      Excise p~licy :

       Tamil Nadu Prohibition Act, 1927-Tamil Nadu (Retail Vending) Rules,
 1989-Rules 13,14 and 30-Excise Policy-Retail vending of Indian made              C
foreign liquor-Augmentation of excise revenue-Grant of privilege and
issuance of licence. therefor-Renewal of licence of existing licencees-Stare
Government revising policy-Abolishing renewal of licence and directing fresh
draw of lots-Revised policy challenged-High Court holding it to be
arbitrary-On appeal held, High Court was right since the revised policy wqs       D
only to replace the existing licences by afresh set ofpersons by a fresh drawal
of lot and not for augmentation of excise revenue.
       Appellant-State Government adopted a policy for licensing of Indian
 made foreign liquor retail vending shops. There was grant of privilege and
issuance of licence therefor and existing licensees could apply for renewal       E
of license. State Government changed the existing policy doing away with
the renewal of licences of existing licensees and directed fresh draw of lot.
 Existing licencees challenged the same. High Court held that abolition of
·renewal of the existing licences and following the procedure of fresh draw
of lot was unreasonable and arbitrary. Hence the present special leave
petitions.                                                                        F
      Petitioners contended that High Court was in error in interfering
with revised policy since there is no inherent right of a citizen to deal with
the liquor; that the legislature of a state or the executive government is
fully competent to regulate business of vending intoxicating liquor to
mitigate its evils or to suppress it entirely; that the State Government          G
altered the existing policy for augmentation of excise revenue; that there
is no right of renewal of licences with the grantee of privilege and amended
provisions has been engrafted for new excise year and also that since the
existing licensees failed to lift the minimum off-take quantity of liquor new
set of policy was formulated for augmentation of the excise revenue.
                                     683                                          H
    684                   SUPREME COURT REPORTS [2002] SUPP. I S.C.R.

A         Respondent contended that High Court was justified in striking down
    only that part of government order which was held to have no nexus with
    the object of augmentation of excise revenue. It was further contended
    that licensees are agreeable to pay privilege fee as decided by Government
    and also would be bound by limit of off-take of liquor to be decided by
    excise authorities.
B
          Dismissing the petitions, the Court
                                                                 •
          HELD:l. No citizen can claim any inherent right to sell intoxicating
    liquor by retail. It cannot be claimed as a privilege of a citizen of a State.
    Any restriction which State brings forth, must be a reasonable restriction
C   within the meaning of Article 19(6) of the Constitution and reasonableness
    of restriction would differ from trade to trade and no hard and fast rule
    concerning all trades can be laid down. (690-F, G)

        2.1. In the instant case, State Government did not purport to abol.ish
  trade in intoxicating liquor but purports to change its policy intended for
D augmentation of excise revenue. Under the new set of Government orders,
  there have been large number of shops to deal with retail vending of Indian
  made foreign liquor, there has been re-categorisation of shops, re-
  adjustment and 1elocation of retail shops and increase in the amount of
  privilege fee. High Court upheld all these conditions on the ground that
E they related to the augmentatiOn of excise revenue. Right of renewal being
  unequivocally indic~ted in the excise policy of 2001-2002, as reflected in
  the G.O.Ms. No.115 for the block period of 2001-2004, State Government
  could not have annulled it and directed afresh the self same procedure to
  be adopted again by drawal of l6ts for settling of the privileges in respect
  of 7,000 shops since that has nothing to do with the augmentation of excise
F revenue. High Court rightly concluded that the same was arbitrary and
  whimsical only to replace the existing licensees by a fresh set of persons
  by a fresh drawal of lot. Even though licensees under earlier policy may
  not claim an absolute right of renewal but it cannot be denied that under
  G.O.Ms. No.115 read with the excise policy evolved for the block period
G 2001-2004 and relevant provisions of Act and Rules, contemplate a case
  of renewal and is also apparent from the recommendations of Excise
  Commissioner on the basis of which State Government came forward with
  the revised policy and a new set of rules by enacting G.O.Ms. Nos.128,
  129 and 130. (690-G, H; 691-A-D)

H         2.2. It is affirmed that the portions of G.O.Ms. dealing with non-
            SECRETARY TO GOVT., TAMILNADU >'.K. VINAYAGAMURTHY             685

renewal of privileges granted to existing licensees subject to their fulfilling   A
the other conditions of provisions of Act and rules are arbitrary. The
conclusion of High Court, regarding dispensing with the right of renewal
of the existing licensees under the present set of G.0.Ms. which fell before
High Court for consideration is not interfered. Necessarily, therefore, the
appropriate excise authority will have to decide the case of applicants for       B
renewal of licences in accordance with Rules as well as other conditions
of licences. Further the manner in which High Court issued the directions,
are not in conformity with rules for issuance of a mandamus. Once court
comes to the conclusion that certain provisions of Act or Rules or
Government order is arbitrary, then Court would strike down the same,
leaving the matter for appropriate authority under statute to deal with           C
cases of applicants. In that view of the matter the directions given by High
Court are modulated. It is directed that competent authority/State
Government shall consider application for renewal of licence in accordance
with law and would be entitled to include all conditions in licence, including
condition of minimum off-take. The licensees of privileges would be bound
by the enhancement of the privilege amount as well as re-categorisation           D
of shops contained in three G.O.Ms. The facility of renewal would be
available to those existing licensees, who had remitted the requisite amount
on or before 31st of July, 2002. It is further directed that privilege fee
already paid by these licensees for the Excise Year 2002-2003 shall be duly
adjusted. [691-E-H; 692-A-C]                                                      E
     Madras City Wine Merchants' Association and Anr. v. State of Tamil
Nadu and Anr., (1994] 5 SCC 509, referred to.

    CIVIL APPELLATE JURISDICTIOn : Petition for special leave to
Appeal (C} No.14735/2002.                                                         F
     From the Judgment and Order dated 24.7.2002 of the Madras High
Court in Writ Appeal No. 2209 of 2002.
                                    WITH
      SLP (C) Nos. 15724, 15725, 15726, 15727 and 15728 of 2002.                  G
     K.K. Venugopal, C.S. Vaidyanathan, R. Muthukumarasamy, A.A.G.
for State, K. Mahendran, Sp!. Govt. Govt. Pleader, V. Balaji and P.N.
Ramalingam for the Petitioners .

    . P. Chidambaram, S. Ganesh, K.M. Vijayan, Ranjit Kumar, R. Anand H
    686                     SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A Padmanabhan, R. Vidhuthalai, K. Ramu, M. Bhaskar, J. Ravindran, Pramod
    Dayal, Ms. Amritha Sarayoo, G. Ramakrishna Prasad, J. Pothiraj, K.V. Mohan,
    V.B. Singh, Rakesh K. Sharma, Ms. Monika Tripathy, K.K. Mani and A.R.L.
    Sundaram, for the Respondent.

          The Judgment of the Court was delivered by
B
          PATTANAIK, J. This batch of Special Leave Petitions are by the
    State of Tamil Nadu, directed against the Judgment of the Division Bench of
    Madras High Court, dealing with the licensing system for retail vending of
    Indian made foreign liquor. The Excise Year is for the period of 1st of
C   August of the year in question till the 31st of July of the next year. In June,
    2001, the Government of Tamil Nadu came forward with a Policy'to be
    adopted for licensing of the Indian made foreign liquor retail vendi~g'shops
    for the block period 2001-2004. The said Policy was issued under G.0.Ms.
    No. 113. For the aforesaid block period, it was decided that the retail vending
    shops for the entire State should be fixed at 6000 and the privilege fee shall
D   be worked out on the notified area basis~ taking the average privilege fee of
    the last three years and providing for· some suitable increase. It was also
    stipulated that the licensee should lift the minimum off-take fixed for the
    shop by the licensing authority and in case of failure to lift the same, .tbe          I

    licensee will be liable to pay a penalty in proportion to the loss of revenue          ~

    due to non-lifting of stocks and if there is still further default, then the licence
E   would be liable to be cancelled. In accordance with the aforesaid policy
    decision, amendments to the Tamil Nadu Liquor (Retail Vending) Rules,
    1989 were made, which were issued under G.O.Ms. No. 115 dated 22nd of
    June, 200 I. The Prohibition Commissioner also recommended a new licensing
    system for grant of licences to the Indian made foreign liquor retail vending
F   shops for the block year 2001-2004, which was accepted. by the State
    Government and the necessary amendments to the Retail Vending Rules
    were made. Under Rule 13 of the amended rules, when the number of eligible
    applications does not exceed the number of shops notified for an area, then
    all applicants shall be selected for the grant of privilege. But when the number
    of applications in respect of the shops in a notified area is more then the
G   number of shops in that area, the selection of applicant for grant of privilege
    shall be decided by drawal of. lot by the licensing authority in the presence
    of the Collector and the applicants who prefer to be present. Rule 14 of the
    amended rules provided that privilege amount be fixed by the Commissioner,
    on the basis of the guidelines approved by the Government. Rule 30(2)
H   provides for the lifting of the minimum off-take of the liquor fixed for the
      SECRETARY TO GOVT., TAMIL NADU •·. K. VINAYAGAMURTHY (G.B. PATTANAIK, l.J 687

     shops by the licensing authority based on the guidelines issued by the             A
     Government and the consequences to follow, in case the licensee fails to lift
     the minimum off-take. Sub-rule (7) of Rule 30 provides that the applicant on
     being granted licence, shall abide by the provisions of the Tamil Nadu
     Prohibition Act, 1937, as well as the Tamil Nadu Liquor (Retail Vending)
     Rules, 1989, as amended from time to time and the terms and conditions of          B
     the licence granted thereunder..

            In accordance with the aforesaid Excise Policy and the provisions of
     the Act and the Rules, the exclusive privilege in respect of different retail
     vending shops of Indian made foreign liquor were settled with the applicants
     and licences were also issued by the licensing authority in fuvour of them for C
     carrying on the business. Even though the policy was for the block period of
     2001-2004 and an existing licensee could apply for renewal of his licence,
     for the excise year 2002-2003, the Government of Tamil Nadu changed the
     policy by issuance of three G.O.Ms. of the same date being G.O.Ms. Nos.
     128, 129 and 130. The aforesaid three G.O.Ms. indicate that the Government
     felt that there is a need for increasing the number of shops in unserved areas D
     that are not notified and also in the existing notified areas where there is
     further potential and demand identified by the Collectors. It was also indicated
     that the privilege amount in respect of the shops located in areas adjoining ·
     the Corporations and Municipalities could be enhanced and as such there is
     a need to re-categorise the shops and to re-fix the privilege amount. The E
     Commissioner of Prohibition and Excise also suggested that along with the
-·   increase in the number of notified shops and re-fixation of the privilege
     amount for the shops located in peripheral areas of Corporations/Municipalities,
     as well as the revision of privilege amount for augmenting the excise revenue,
     the Government should consider whether instead of renewing the licences of
     the existing licensees, all the shops may be allotted afresh in accordance with F
     earlier G.O.Ms. No. 115 dated 22nd of June, 200 I. In other words, it suggested
     to have a fresh draw of lot. In accordance with t.he aforesaid recommendations
     contained in G.O.Ms. No. 128, the State Government passed the necessary
     orders, directing that the provision for renewal of licences prescribed in Rule
      14 of the Tamil Nadu Liquor (Retail Vending) Rules, 1989 be repealed and
     all the 7000 shops including the re-categorised shops shall be disposed of, as G
     per the procedures laid down in G.O.Ms. No. 115 dated 22nd June, 2001.
     Consequential amendments of certain rules were also made.

           The existing holders of the privilege in question who had obtained
     licences for carrying on the business for the excise year 2001-2002, appr<iached   H
                                                                                        ...

    688                    SUPREME COURT REPORTS [2002) SUPP. l S.C.R.

A the High Court of Madras by filing writ petitions, challenging the validity of
    the Government Order Nos. 128, 129 and 130.; The Learned Single Judge, on
    entertaining the writ petitions, granted interim orders on 16th of July, 2002,
    directing ad hoc renewal of licences for a period of three months in respect
    of the petitioners who had approached the Court. The State preferred the
B   appeal to the Pi vision Bench against the aforesaid interim order of the learned
    Single Judge and the Division Bench while being in seisin of appeal against
    the interim order, passed by the Single Judge, brought before it the writ
    petitions which were pending before the Single Judge and disposed them of
    together by the impugned judgment dated 24th of July, 2002. On considering
    the submissions made at the Bar as well as the new excise policy and
C   introduction of G.O.Ms. Nos. 128, 129 and 130, the Division Bench of the
    High Court came to the conclusion that though the excise policy is a subject
    of the policy-maker and it relates to a trade, which cannot be claimed as a
    matter of right by any citizen, but the Court would be entitled to probe into
    the reasonableness or otherwise of the Governmental orders and examine
    whether they can be sustained on the touchstone of the arbitrariness. The
D   Division Bench sustained the Government orders, so far as they relate to the
    fiscal policy of the government and the provisions made therein for
    augme_ntation of the excise revenue. It rejected the contention of the privilege
    holders and held that doctrine of promissory estoppel and legitimate
    expectation will have no application. But so far as the provisions dealing
E   with the abolition of the renewal of the existing licence holders and to follow
    the procedure in respect of the shops by a fresh lot, the Court came to the
    conclusion that the aforesaid provision has absolutely no nexus with the
                                                                                          1-
    object of augmentation of excise revenue and it was only meant to disable the
    existing licensees from opting for the renewal notwithstanding that the excise
    policy as enunciated in June, 2001 was for the block period 2001-2004. The
F   Court held the aforesaid revised excise policy to be wholly unreasonable and·
    arbitrary, having no nexus at all with the object of augmentation of excise
    revenue for which purpose the new policy was introduced. The Court finally
    disposed of the matter with the following directio~s:

            "(i) The Government is at liberty to go ahead with the grant of privilege
G           of retail vending of Indian Made Foreign Liquor to the extent of
            7,000 shops as decided.

            (ii) But the Government shall adhere to the places of retail vending
            which have been licenced for the excise year 2001-2002 and held by
            the petitioners and renew the licence of the petitioners for the excise
H
--'    SECRETARY TO GOVT., TAMIL NADU >. K. VINAYAGAMURTHY [G.D. PATTANAIK,'1.I 689

              year.2002-2003 on the petitioners' remittance of the privilege amount       A
              on the basis of the amount fixed in G.O.Ms. No. 129 dated 8.7.2002
              end also taking into account the re-categorisation of the shops for the
              purpose of levy of the privilege amount.

              (iii) The above facility of renewal to the petitioners shall be made
              available if the petitioriers remit the requisite amounts on or before      B
              31st of July, 2002.

              (iv) For any reason, ifthere is a delay in renewal, the petitioners shall
              be entitled to vend the Indian Made Foreign Liquor in retail on
              payment of the proportionate privilege amount till the grant oflicence.

              (v) The Government, the Commissioner end all the District Collectors
                                                                                          c
              shall be entitled to re-locate the shops out of 7,000 at the places they
              feel expedient, but only after safeguarding the shops which are being
              run by the petitioners."

      It is this order of the Division Bench of the Madras High Court, which is the       D
      subject matter of challenge in all the special leave petitions.

            After hearing Mr. K.K. Venugopal, the learned senior counsel, appearing
      for the State of Tamil Nadu at great length and Mr. P. Chidambaram, the
      learned senior counsel, appearing for the respondents, though we did not find
      any infirmity with the impugned judgment of the Division Bench of Madras            E
      High Court and would have normally dismissed the special leave petitions,
      but since Mr. Venugopal had advanced a lengthy argument and certain
      directions given in the impugned judgment require modulation, we thought
      it appropriate to notice end answer the same, while dismissing the special
      leave petitions.
                                                                                          F
             Mr. K.K. Venugopal, the learned senior counsel, appearing for the
      State contended that there is no inherent right in a citizen to sell intoxicating
      liquor by retail and it is not a privilege of a citizen. As it is a business
      attended with danger to the community, it may be entirely prohibited or be
      permitted under such conditions as will limit to the utmost its evils. The          G
      legislature of a state or the executive government is fully competent to regulate
      the business of vending intoxicating liquor to mitigate its evils or to suppress
      it entirely. That being the right of a citizen to deal with the liquor and by the
      impugned orders the State Government having altered the existing policy for
      augmentation of excise revenue, the same could not have been interfered
      with by the High Court. Mr. Venugopal also further contended that there is          H
    690                     SUPREME COURT REPORTS (2002) SUPP. 1 S.C.R.

A   no right of renewal of the licences with the grantee of the privilege and the
    amended provisions having been engrafted for the new excise year, the High
    Court committed error in holding the same to be arbitrary. In support of this
    contention, reliance was placed on the decision of this Court in the case of
    Madras City Wine Merchants' Association and Anr. v. State of Tamil Nadu
B   and Anr., [1994] 5 SCC 509. According to Mr. Venugopal, in accordance
    with the Rules in force, the existing licensees having failed ~o lift the minimum
    off-take quantity of liquor; the State has suffered ·a loss in excise revenue
    and, therefore, for augmentation of the ·excise revenue, a new set of-.policy
    having been fonnulated in respect of a trade over which no citizen can claim
    a fundamental right, the Court was not justified in interfering with the same
C   on the ground that the decision to have a fresh lot for all the shops is arbitrary
    and unreasonable.

           Mr. Chidambaram, the learned senior counsel appearing for the existing
    licensees, on the other hand contended that the High Court was fully justified
    in striking down only that part of the government order which was held to
D   have no nexus with the object ofaugmentation of excise revenue. He further
    contended that the licensees are agreeable to pay the privilege fee as decided
    by the Government and also would be bound by the limit of off-take of liquor
    to be decided by the excise authorities. According to Mr. Chidambaram,
    there is no error in the impugned judgment, which requires any interference
E   by this Court in exercise of powers under Article 136 of the Constitution.

           We have carefully considered the rival submissions at the Bar as well,:·
    as the decision cited in support of the contention raised. So far as the trade
     in noxious or dangerous goods are concerned, no citizen can claim to have
    trade in the same and the intoxicating liquor being a noxious material, no
F   citizen can claim any inherent right to sell intoxicating liquor by retail. It
    cannot be claimed as a privilege of a citizen of a State. That being the
    position, any restriction which the State brings forth, must be a reasonable
    restriction within the meaning of Article 19(6) and reasonableness of the
    restriction would differ from trade to trade and no hard and fast rule concerning
    all trades can be laid down. The Government of Tamil Nadu does not purport
G   to abolish the trade in intoxicating liquor and what it purports to do is to
    change its policy intended for augmentation of excise revenue. With that end
    in view under the new set of Government orders, there have been large
    num~er of shops to deal with retail vending of Indian made foreign liquor,
    there has been re-categorisation of the shops, there has been re-adjustment
H   and relocation of the retail shops, there has been increase in the amount of
SECRETARY TO GOVT., TAMILNADU •.K. VINAYAGAMURTHY (G.8.PATTANAIK,I.)     69J
 privilege fee and the High Court has upheld all these conditions on the A
ground that they relate to the augmentation of excise revenue. But so far as
 the right of renewal is concerned, the same having been unequivocally
 indicated in the excise policy of2001-2002, as reflected in G.O.Ms. No. 115
for the block period of 2001-2004, the State Government could not have
annulled the same and directing afresh the self same procedure to be adopted
again by drawal of lots for settling of the privileges in respect of7,000 shops B
inasmuch as that has nothing to do with the augmentation of excise revenue.
To our query, as to how this should be helpful in achieving the augmentation
of excise revenue, Mr. Venugopal was not able to satisfy us and in our view,
the High Court rightly came to the conclusion that the aforesaid decision was
nothing but an arbitrary and whimsical one taken by the State Government, C
only to replace the existing licensees by a fresh set of persons by a fresh
drawal of lot. Even though the licensees under the earlier policy may not
claim an absolute right ofrenewal but it cannot be denied that under G.O.Ms.
No. 115 read with the excise policy evolved for the block period 2001-2004
and the relevant provisions of the Act and Rules, contemplate a case of
renewal and this is also apparent from the recommendations of the Excise D
Commissioner himself on the basis of which the State Government came
forward with the revised policy and a new set of rules by. enacting G.O.Ms.
Nos. 128, 129 and 130. We have, therefore, no hesitation in affirming the
conclusion of the Division Bench of the Madras High Court that the portions
of G.0.Ms. dealing with the non-renewal of the privileges granted to the E
existing licensees subject to their fulfilling the other conditions of the
provisions of the Act and the rules to be arbitrary. We are, therefore, not
persuaded to interfere with the conclusion of the High Court, so far as it deals
with the dispensing with the right of renewal of the existing licensees under
the present set ofG.O.Ms. which fell before the High Court for consideration.
Necessarily, therefore, the appropriate excise authority will have to decide F
the case of the applicants for renewal of the licences in accordance with the
Rules as well as the other conditions of the licences. Mr. Chidambaram very
fairly stated that none of the respondents have any grievances to be governed
by the rules and conditions of licence including the conditions providing for
a minimum off-take. But the manner in which the High Court has issued the G
directions, appears to us not to be in conformity with the rules for issuance
of a mandamus. Once the court comes to the conclusion that certain provisions
of the Act or the Rules or the Government order is arbitrary, then the Court
would strike down the same, leaving the matter for the appropriate authority
under the statute to deal with the cases of the applicants. In that view of the
matter, the directions contained in Clause (ii), Clause (iii) and Clause (iv) H
    692                    SUPREME COURT REPORTS (2002] SUPP. l $.C.R.

A require modulation. We, therefore, substitute the aforesaid clauses of the
    impugned judgment by the following directions:

         The competent authority/the State Government shall consider the
  application for renewal of the licence in accordance with law and would be
  entitled to include all conditions in the licence, including the condition of
B minimum off-take. Needless to mention that the licensees of the privileges
  would be bound by the enhancement of the privilege amount as well as the
  re-categorisation of the shops contained in the three G.O.Ms., referred to
  earlier. It is also made clear that the facility of the renewal would be available
  to those of the existing licensees, who had remitted the requisite amount on
C or before 31st of July, 2002, as ordered by the High Court itself. We also
  further direct that the privilege fee already paid by these licensees for the
  Excise Year 2002-2003 shall be duly adjusted. Clauses (i) and (v) of the
  directions contained in the impugned judgment shall remain as it is.

           Mr. Venugopal had referred to an affidavit which had been filed in this
D   Court by the Secretary to the Government of Tamil Nadu, Prohibition and
    Excise Department, wherein it had been stated that the State Government will
    be willing to consider the grant of renewal in favour of the existing licensees,
  · subject to their giving an undertaking to this court that they would abide by
    the rules and conditions relating to the minimum off-take during the current
E year as well as previous excise year 2001-2002 and would withdraw the writ           >
    petitions filed by them, which are pending in the High Court of Madras. So
    far as the minimum off-take for the excise year 2002-2003 is concerned, Mr.
    Chidambaram, appearing for the respondents, fairly stated that the respondents
    would abide by the same. But so far as the minimum off~take for the previous
    excise year is concerned, the same not having been there at the time of grant
F of the privilege and issuance of licence, but having been introduced at a later
    poinl of time, the legality of the same is the subject matter of consideration
    before the High Court of Madras and we express no opinion on the same.

        These special leave petitions are accordingly dismissed with the
    modulated directions, as stated earlier.
G
    N.J.                                                       Petitions dismissed.