L. Narasimha Reddy, J.
1. In this batch of writ petitions, some of the existing licensees of IL-24 wine shops in the State of Andhra Pradesh, challenge the validity of the amendment to Rule 26-A of the A.P. Indian Liquor and Foreign Liquor Rules, 1970 (for short 'the Rules') through G.O. Ms. No. 991, Revenue (Excise-II) Department, dated 4.12.2004, and the excise policy of the Government, enunciated in G.O. Ms. No. 184, dated 7.2.2005, in relation to IL-24 shops, for the excise year 2005-06. In some of the writ petitions, the validity of G.O. Ms. No. 206, dated 10.2.2005, which brought about further amendments to the Rules, is challenged.
The background:
2. The manufacture, sale, transport and storage of intoxicants in the State of A.P. is governed by the provisions of A.P. Excise Act (for short 'the Act') and the Rules made thereunder. Apart from various regulatory measures, the Act provides for grant of different kinds of licences, in such matters. The Rules prescribe the procedure for grant of licences, to enable the licensees to undertake trade in different kinds of intoxicants. To the extent it is relevant to the present context, it would be sufficient to refer to three categories of licences. IL-17 is a licence, which is granted for establishing a bar, and to supply liquor therein. Licence, IL-24, is for retail sale of liquor, in sealed bottles. Consumption of liquor in the premises of such shops is not permitted. In the recent past, a new category of licence viz., IL-24(B), was provided for, to enable an IL-24 licensee to maintain a place known as 'permit room', where the customers can consume liquor purchased in that shop. The licences are granted or renewed for a period of one year, commencing from 1st April, of a year, and ending with 31st March, of the succeeding year.
3. Till the Excise year 1997-98, prohibition of intoxicants was in force in the State. From the Excise year 1998-99 onwards, the prohibition was relaxed and licences of various categories were being issued from time to time. Initially, grant of licences, particularly IL-24, was on the basis of applications. The shops were notified with reference to Districts and Mandals, and applications were invited. If the number of applications exceeded the number of notified shops, the licences were granted to the applicants, selected on the basis of drawal of lots. This procedure continued till the current excise year. Rule 26-A of the Rules, as it stood before 4-12-2004, provided for renewal of the existing licences, almost as a matter of course. Sub-rule (2) thereof was to the effect that, in case the application for renewal is not considered before the expiry of the licence period, the licensee shall be entitled to carry on the business, till he is communicated the decision, either granting or refusing the renewal. Through G.O. Ms. No. 991 dated 4.12.2004, the Government amended the Rule 26-A, renewal of licences was made discretionary, and to depend upon the policy. The various provisos and Sub-section (2) of the Rule were omitted altogether.
4. The Government issued G.O. Ms. No. 184, dated 7.2.2005, declaring its policy for the excise year 2004-05 in relation to IL-24 licences. The policy is to the effect that, no existing licence shall be renewed, and 7,500 IL-24 shops (as against the existing 6,800 shops) will be licensed. The selection of licensees, out of the applicants, is to be in accordance with Rule 31 of the Rules, which provides for drawal of lots. G.O. Ms. No. 185 of the same date, was issued, enunciating the policy for grant of IL-17 licences. It provides for renewal of existing licences and continuation of the policy for the previous year, almost in all respects. Hitherto, bar licence used to be granted in places with population of 45,000 and above, and in the belt areas of two kilometers from the periphery of such places. Under the new policy, it is permissible to grant bar licence for places with population 25,000 and above.
5. Through G.O. Ms. No. 206, the Government effected further amendments to the Rules. The amendments range from altering the definition of 'off-licence' in Clause (3h), to addition of Rule 70, according finality to the opinion .of the Commissioner in the matter of interpretation of the Rules. The concept of 'permit rooms' by issuing IL-24(B) is retained, but the scope was expanded by providing for issuance of licences for places with population of 5,000/-, as against 10,000 under the earlier Rule. Rule 69 was substituted with a new provision. It entails the seizure of the quantity of liquor, that remains with the licensee, by the end of the Excise year, if he is not selected for the grant of licence for the succeeding year.
Pleadings:
6. Petitioners contend that the amendments to the Rules as well as the change in the policy, which results in automatic cancellation of existing licences, is illegal, arbitrary and without any basis. According to them, when the Government has chosen to renew the existing IL-17 licences and to increase the number of IL-24 shops, there is absolutely no justification in not renewing the IL-24 licences. They plead that blanket refusal of renewals in respect of a particular category of licences smacks of arbitrariness and the reasons stated in the policy do not provide any valid basis. In short, their plea is that there is no nexus between classification undertaken by the respondents and the object sought to be achieved, in the matter of refusal to renew the licences.
7. The respondents filed a common counter-affidavit. The relevant provisions of the Act and Rules are referred to and the working of the system for the past several years is depicted. Statistics, as regards the number of IL-24 shops, notified from the Excise Years 1998-99 to 2004-05 as well as the number of licensees, who did not seek renewal of licences are furnished. The contention of the respondents is that a substantial section of the existing IL-24 licensees have formed into a cartel and are not coming forward for renewal of substantial number of shops, thereby causing serious loss to the revenue of the State. It is alleged that the new policy is aimed at breaking the cartel and to ensure transparency in the matter of grant of licences. It is emphasized that IL-17 licences stand on a different footing and form a separate class and that there cannot be any comparison with IL-24 licences, in this regard.
The Contentions:
8. Sri S. Ramchander Rao, learned Senior Counsel appearing for some of the petitioners, submits that except to do away with as many as 6,800 IL-24 licensees, G.O. Ms. No. 184, does not enunciate any policy, worth its name. According to him, the term 'cartel' was utilized by the Government from time to time, only with a view to justify its actions, either to expand the number of shops or to bring about changes in the method of allotment. Learned Counsel points out that the licence fee is fixed, candidates are selected on the basis of lots, supply of the liquor is exclusively through A.P. State Beverages Corporation, the price at which the liquor is to be sold is regulated, and under these circumstances, the question of the licensees forming into a cartel or causing any loss to the revenue, does not arise. He also submits that there is no rational basis, in according differential treatment to licensees of IL-24. He also submits that the principle laid down by the Supreme Court in Secretary to Government, Tamil Nadu v. K. Vinayagamurthy, : [2002]SUPP1SCR683 , squarely applies to the facts of the case.
9. Sri M.R.K. Chowdary, learned Senior Counsel submits that the decision as to renewal of existing licences has to be guided by the statutory rules and not by the administrative instructions. According to him, the Rules have been reversed in the instant case and even while the Rule 26-A, that too, in its amended form provides for renewal, the policy contained in G.O. Ms. No. 184 totally shuts the door for renewal of IL-24 licences. He states that the policy must be subservient to the Rules and not vice versa.
10. Sri D. Prakash Reddy, learned Senior Counsel, has referred to various provisions of the Rules as well as the forms of licences. He submits that nothing is discernible from G.O. Ms. No. 184, as to the object sought to be achieved by the Government. Learned Counsel submits that the three aspects contained in the preamble to G.O., viz., (a) streamlining the sale and consumption of liquors, (b) elimination of cartel in liquor trade; and, (c) making the quality of liquor available to consumer at affordable prices, do not warrant the cancellation of existing licences, by refusing renewal. He urges that none of the three aspects have any bearing on the object, if any, sought to be achieved. He further submits that the necessity to refuse to renew the existing licence would have arisen, if the policy provided for reduction of the shops, or alteration of privilege fee, or method of selection. He urges that, when the number of shops is increased by 700, and the licence fee and selection procedure are not altered, there was no justification in denying refusal. Learned Senior Counsel submits that the justification (augmentation of financial resources) pleaded by the Government of Tamil Nadu, in Secretary to Government, Tamil Nadu v. K. Vinayagamurthy (supra), is not present in this case, and contends that when such a justification was not found acceptable by the Supreme Court as a basis for refusal to renew the existing licences, the instant policy stands on a weaker footing. He also contends that except for cosmetic differences, IL-17 and, 24(B) licences are functionally similar and that the action of the Government is discriminatory and arbitrary. He has pointed out the various paragraphs of the judgment of Supreme Court as well as that of the Division Bench of the Madras High Court, which gave rise to the appeal before the Supreme Court.
11. Sri P.Sri Raghu Ram, learned Counsel submits that what is contained in G.O. Ms. No. 184 cannot be termed as 'policy' and that there does not exist any basis for the same. By referring to the judgment of the Supreme Court in Comptroller and Auditor General v. Kamlesh Vadilal Mehta, : [2003]1SCR471 , he contends that any policy is required to be based on a principle, and no such principle is discernible from the policy. He also places reliance upon a judgment of the Supreme Court in Union of India v. International Trading Co., : AIR2003SC3983 .
12. Sri Vedula Venkata Ramana, learned Counsel appearing for some of the petitioners, submits that the policy of the State is not clear as regards the continuance of the existing licences. He submits that petitioners had invested huge amounts in the trade, with a legitimate expectation that the same procedure would be continued for the next Excise year. He also submits that though the petitioners do not have any fundamental right to carry on the trade in excise, their existing rights cannot be taken away, through arbitrary means. He contends that a policy decision is required to be in the larger public interest and there would have been justification for non-renewal of licences, if only the IL-24 shops are proposed to be reduced. He places reliance upon a judgment of the Supreme Court in Bannari Amman Sugars v. C.T.O., 2004 (9) Scale 604.
13. Sri Balamukunda Rao, learned Counsel submits that a right is conferred on a licensee to seek renewal on the basis of the existing rules, as long as he complies with the conditions of licence. He has traced the genesis of the various Rules and submits that refusal to renewal, as a matter of policy, was never resorted to.
14. Sri Sai Ram Goud, learned Counsel appearing in some of the writ petitions, submits that when a Government has chosen to increase the number of shops, there was no justification in not renewing existing licences. He states that if the object of the Government is to earn more revenue, the same could not have been achieved by marginally enhancing the privilege fee. Sri Gopala Rao, learned Counsel submits that the policy, if any, contained in G.O. Ms. No. 104 cannot overwrite the statutory rules, particularly the Rule 26-A. He contends that even the amended Rule 26-A provides for renewal, subject to discretion of the Government, and the discretion can never be taken away through a policy. To the same effect is the argument of learned Counsel Sri Amaranadh Goud. He urges that in view of addition of 700 more IL-24 shops, it was not at all necessary to cancel the existing licences.
15. Sri E. Phani Kumar, learned Counsel for the some of the petitioners, has drawn the attention of this Court to the various amendments carried to the Rule through G.O. Ms. No. 206 dated 10.2.2005. He states that by amending the definition of 'off licence' under Rule 3(h) and Rule 23(a)(xiii), to such an extent as to enable supply of liquor in sealed or capsuled bottles or 'in any other manner', the distinction between an IL-24 and IL-17 licence is virtually taken away and in that view of the matter, there was no basis for maintaining a distinction between those two categories of licences, in the matter of renewal. He also refers to the relevant provision relating to licence in IL-24(B) and states that it virtually blurs the distinction between a bar and a permit room. Learned Counsel submits that the amended Rule 69(1) provides for seizure of the unsold liquor at the expiry of the licence period and such a measure would be confiscatory in nature, without there being any fault of the licensee. He contends that the sole supplier being the agency of the State, it ought to have taken return of the unsold quantity, than to seize as a confiscatory measure without paying any price to it. Learned Counsel further submits that the newly added Rule 70, which adds finality to the opinion of the Commissioner, cannot be sustained in law.
16. Learned Advocate-General had advanced extensive arguments. He has referred to the provisions of the Act and the Rules, as well as to the various stages, which they passed through, and evolved to the present form. He submits that no individual can claim any right in trade in intoxicants and other related substances, and that it is always in the discretion of the Government to evolve suitable policy, in such matters, from time to time. He contends that the experience over the past few years indicated that on account of formation of cartels by some of the existing IL-24 licensees, the State was subjected to loss, and the liquor was being sold at higher prices, in some places. He submits that the policy decision, not to renew the existing licences, is aimed at breaking the cartels, and to ensure transparency in the matter of selection of licensees and supply of liquor to the consumers. According to him, the whole trade is sought to be streamlined, by taking recourse to number of measures, and the policy decision of the Government does not suffer from the legal infirmity.
17. He contends that there is a clear distinction between the licences of IL-17, on the one hand, and IL-24, on the other hand, and the policy of the Government is based on a definite and discernable classification. He submits that the petitioners would also be entitled to submit their applications, and that it is not as if they are totally deprived of such an opportunity. He submits that the classification is not only based on rational criteria, but is also reasonable, and constitutes sufficient basis for the policy decision. According to the Learned Advocate-General, the supply of liquor to all the licensees, in the State, is chanalised through A.P. Beverages Corporation, a Government of Andhra Pradesh undertaking, and the purchases, which hitherto were restricted from the manufacturers within the State, are being undertaken from the manufacturers from all over the country. He urges that the interference with the policy decision of the Government is very rare and exceptional circumstances, and that the same do not exist in the present case. He relies upon the judgments of the Supreme Court in Amar Chandra v. Excise Collector, Tripura, : [1973]1SCR533 , State of A.P. v. McDowell & Co., : [1996]3SCR721 , Krishnan Kakkanth v. Government of Kerala, : AIR1997SC128 and M/s Ugar Sugar Works Ltd. v. Delhi Administration, : [2001]2SCR630 .
18. According to the learned Advocate-General, the important factor that constituted the basis for the judgment of the Supreme Court in Secretary to Government, Tamil Nadu v. K. Vijayagamurthy (supra), was that even while the policy for the block period 2001-2004 was in operation, the Tamil Nadu Government altered it, in between, and that such circumstance does not exist in the present case.
The Discussion:
19. Trade in liquor has several unique features. It is not comparable to ordinary categories of trade, in respect of which, the citizens are conferred with a fundamental right, under Article 19(1)(g) of the Constitution. The same was never considered to be in the public interest, and in view of the directive principles of state policy, contained in Article 47 of the Constitution, the State is conceded the maximum latitude, in regulation of the trade in intoxicants. It ranged from total prohibition to liberal regulation. While testing the validity of the various legislations, or administrative actions, the High Courts and the Supreme Court, maintained a uniform view that no citizen has a fundamental right, to undertake trade in intoxicants. However, the measures adopted by the State from time to time, in relation to this activity are not taken away from the purview of judicial review by the Constitutional Courts. The State is granted the maximum liberty in formulating its policies. But the basis for such policies, declared by the State itself, is subject to judicial scrutiny. The measures, for implementation of such policies are also tested from the touchstone of reasonableness and fairness. The area of scrutiny in such matters, is limited to the one of discrimination and rationality.
20. In the State of Andhra Pradesh, prohibition existed till the Excise year 1997-98. It was relaxed thereafter. As observed in the preceding paragraphs, different categories of licences are provided for, under the A.P. Excise Act and the Rules made thereunder. In the year 1998-99, 3211 IL-24 licences were granted. Few years thereafter, permissions were also accorded for opening the Bars. Whenever there existed more applications, than one, in respect of IL-24 shops, the licensees are selected by drawal of lots, as provided for under Rule 31. There was phenomenal increase in number of IL-24 shops, year after year. By the year 2003-2004, it reached 7,609. There was marginal decline in the current excise year, and their number is about 6,800. The IL-24 licences, once granted, were being renewed, from time to time, in exercise of power under Rule 26-A. During the current excise year, namely 2004-2005, renewals were granted for few months, in view of certain developments, such as general elections, change of Government etc. Such renewals were accorded in three phases, viz., March, July and September, 2004.
21. In continuity of the convention, to issue and pronounce the excise policy for the concerned year, the Government issued two orders namely, G.O. Ms. Nos. 184 and 185, dated 7-2-2005. The first G.O., discloses the policy, in relation to IL-24, shops, and the other G.O., relates to IL-17, Bars. The important clauses in these policy statements read as under:
'G.O. Ms. No. 184: 1. The sale and consumption of liquor be made more streamlined. The necessary steps in this direction will be to effectively eliminate the cartels in liquor trade, throw open the trade to more competition and thus ensure availability of good quality liquor to the consumer at affordable prices.
2. The licenses of IL-24 (Retail Off Licenses) which are functioning during the year 2004-05 in the State, which will expire on 31-3-2005, shall not be renewed for the year 2005-06.
3. For the year 2005-06, 7,500 (Seven thousand and Five hundred) IL-24 Retail shops will be licenced in the State. The shops may be located in areas where there is requirement'.
'G.O. Ms. No. 185: 1. The Licenses of IL-17 (Bar Licenses) which are functioning during 2004-05 in the State, which will expire on 31-3-2005 will be renewed for 2005-06 at the option of the Licensees.
2. The Policy with regard to grant of Bar Licenses (IL-17) in force during 2004-05, will continue for the year 2005-06. In addition, Bar Licenses will be granted in all places where the population is more than 25,000 and in the Belt areas of 2Kms of the periphery of such places'.
22. Rule 26-A of the Rules, which provides for the procedure for renewal of licences, was amended through G.O. Ms. No. 991, dated 4-12-2004. Thereafter substantial amendments were carried through G.O. Ms. No. 206, dated 10-2-2005. In this batch of writ petitions, the main challenge is to the policy, in relation, to IL-24 shops as well as to the relevant amendments to the Rules. Reference to the policy, in relation to IL-17, is mostly by way of comparison.
23. Under the new policy, the State proposes to grant licences to 7,500 retail wine shops, as against the existing 6,800 shops. It may appear that the number of shops is increased. However, if the number of shops for the excise year 2003-04, namely, 7,609, is taken into account, the picture may not be so alarming. The basis, as spelt out in G.O. Ms. No. 184, itself, for not renewing the existing IL-24 shops, is that the Government
(a) proposes to make the sale and consumption of liquor more streamlined;
(b) intends to eliminate cartels, and
(c) wants to throw open, the trade, to more competition.
24. These three steps are said to be to, 'ensure availability of good quality liquor to the consumer at affordable prices'. Whether this object accords with the provisions of the Constitution, would be considered at a later part of the judgment.
25. There cannot be any plausible objection for the steps taken towards or aimed at streamlining the sale and consumption of liquor. If, however, one keeps in view, the directive contained in Article 47, of the Constitution of India, such streamlining is required to be, in a direction, to discourage consumption of intoxicants. Neither in the counter-affidavit, nor during the course of arguments, the State has come forward to spell out the nature of streamlining. Further, it is not indicated as to how, the non-renewal of the existing licences, can result in streamlining the sale and consumption of liquor. Much has been said about the cartels, in the counter-affidavit. The respondents have formed an opinion that there is concerted effort on the part of the existing licensees, to cause loss to the revenue, and to act, detrimental to the interests of the Government and public. In the counter-affidavit, the respondents explained as to how the cartels came into existence and how they operate; thus:
------------------------------------------------------------------------------------Year No. of shops No. of shops No. of shops No. existed No. of shopsat the end of established which did during the closed forthe previous additionally not renew year other reasonsyear due to cartel------------------------------------------------------------------------------------1998-1999 3211 3709 68 68521999-2000 6852 742 6017 932000-2001 6017 731 241 65072001-2002 6507 615 59 7056 72002-2003 7056 802 231 7609 182003-2004 7609 481 7118 102004-2005 7118 209 6859 50(Break up)End ofMarch, 04 7118 26 7092 22July, 04 7070 125 6945 28Sept. 04 6917 58 6859------------------------------------------------------------------------------------'Whenever, the Government wished to establish additional shops with an intention to check the cartels by inducting fresh licenses, the traders re-grouped themselves and strived hard to nullity Government's actions by forming into cartels and reducing the number of shops which is clear from the table. It is relevant to submit that for the period 2004-05, the validity of the existing licenses was extended in three spells, subject to payment of Licence fee. At the time of every extension, there was reduction in the number of shops due to formation of cartels resulting in loss to the public ex-chequer and detrimental to the interest of consumers. It is respectfully submitted that, in spite of a lapse of seven years, the number of shops could not be stabilized according to requirement, year after year. In fact the number of shops that are existing as of now is almost equal to the shops that existed during 1998-99 in spite of growth in population and growth due to other natural factors. It is also respectfully submitted that in spite of Government taking necessary steps to substitute closed shops, the cartels succeeded in stalling the same to serve their own interest'.
26. Two more factors are attributed to the formation of cartels, viz., the action of some of the existing licensees in filing W.P. No. 9367 of 2001 and Batch, when the Government permitted creation of new shops through G.O. Ms. No. 177, dated 8-3-2001, and their filing W.P. No. 21498 of 2003, questioning the booking of cases for violations of recommended maximum retail price, in selling the liquor. In both the instances, the cases ended in favour of the Government. The result, which the respondents expect, on account of refusal to renew the licences, is spelt out as under:
'...When a new set of Licensees are in place after 1.4.2005, who have been granted licenses through a transparent method of selection, it is hoped that the existing equations in the trade would be erased and the trade will be thrown open to healthy competition. It is submitted that there is a direct nexus between the object sought to be achieved and the decision not to renew the existing licenses automatically...'.
27. It is true that the intervention by the Courts, in policy matters, that too, in the business, in intoxicants, is very restricted. However, when the Government spells the reasons, in support of its decision, the Courts are entitled to examine the same, in arriving at a conclusion, as to whether the reasons so spelt out, would sustain the policy. The fact that a second opinion is possible on such policy matters, is no ground for the Court, to substitute its own opinion, for that of the Government. The evaluation of reasons, furnished by the Government, in support of policy, becomes necessary to verify, whether there exists any nexus between the action taken and object sought to be achieved. The action taken in the instant case is not to renew the licences, and the object sought to be achieved, is to throw open the trade, in liquor, to healthy competition.
28. It is not as if the respondents have brought about any new method of selection of licensees. Rule 31 of the Rules, prescribes that whenever their exists more number of applications, for any particular shop, the licensee shall be selected by drawal of lots. The same procedure continues, for the current excise year also. Three factors, which weighted with the respondents for forming an opinion as to existence of cartels. They are:
(a) some of the licensees did not opt for renewal of licences;
(b) order of the Government, to increase the number of shops, was challenged, and
(c) booking of cases, for violating the RMRP, were assailed before this Court.
29. As for the first reason, it needs to be noticed that the Rules clearly prohibit opening of more licences, than one, by an individual. Further, the licensee was selected on the basis of drawal, except where they were the only applicants. The supplies are from a Government agency, at a specified price. Each and every item so purchased is liable to be accounted for. The licence fee is fixed under the Rules. The reasons as to why an existing licensee did not seek renewal in the next year, cannot be uniform. In some cases, it may be on account of financial difficulties; in certain cases, it can be on account of losses, that may have been sustained by the licensee, and in yet other cases, it may be due to unhealthy competition. For instance, the number of shops at the beginning of the excise year 1998-99 was 3211. The Government established additional 3709 shops. This, naturally shakes the business equations, of the existing shops. 742 licences did not seek renewal for the next excise year. All such instances were attributed to cartels. It only discloses the effort of the excise officials, to keep their sole object of achieving the targets of sale of intoxicants, at any cost. At any rate, the refusal by an existing licence to seek renewal is not going to result in closure of that shop forever. The respondents can grant licence to another person, in accordance with Rule 31.
30. Coming to the other reasons spelt out in the counter-affidavit, it is evident that the respondents have taken exception to the very act of some of the licensees in approaching this Court. They seemed to be reeling under the impression that, availing the remedy in a High Court is an objectionable act. It is difficult to countenance such autocratic approaches. To certain extent, this approach of the respondents is reflected in Rule 70, added through an amendment. It reads as under:
'Rule 70: Interpretation:--If there is any doubt or dispute regarding the application or interpretation of any of these rules, the decision of the Commissioner thereon shall be final.'
31. It is permissible for the Legislature to enact laws, for subordinate Legislature, to frame Rules, and for the implementing agency, to take decisions. However, the interpretation of the Rules, under any Constitution, is a function assigned to Courts. An executive authority can never have a final word in the matter of interpretation. If such a course is permitted, it may prove detrimental to the Rule of Law and the very functioning of democracy.
32. It is not indicated as to how the trade would be thrown open to more competition, if the existing licences are not renewed. It is not as if the person, who is going to be granted a licence, in the place of the petitioners, is to function under any different circumstances, be it, as to licence fee or number of shops or new business regime. A higher degree of competition, is anyway going to be ensured by adding 700 more shops to the existing ones. Therefore, this Court does not find any basis, in the reasons spelt out by the respondents, in support of their decision, not to renew the existing licences.
33. The issue needs to be examined from another angle. The Government declared its policy, in relation to three categories of licences namely, IL-17, IL-24 and IL 24-B. It has been decided by the respondents to renew the existing IL-17 licences. The refusal is in respect of IL-24 and IL 24-B licences. The functional difference between these categories of licences is this: In case of IL-17 (Bars), the customer is supplied the liquor, and is required to consume the same in the premises. The relevant rules stipulate the nature of facilities, that are required to be provided for, to the customers. In case of IL-24 licences, a customer is not permitted to consume the liquor in the premises of the shop. An IL 24-B shop, in a way, is a hybrid of IL-17; and IL-24, On payment of additional fee, an IL-24 licensee, is granted IL-24-B licence, and shall be entitled to maintain a permit room. In such cases, the customers are entitled to purchase liquor and consume it in the permit room. In excise terms, IL-17 and IL 24-B are 'on licences': whereas IL-24 are 'off licences'. The relevant definitions under Rule 3(h) and (i) read as under:
'Rule 3 (h): 'off licence' means a licence granted under these rules for sale of the liquor in sealed or capsuled bottles without permitting consumption on the licenced premises;
Rule 3(i): 'on licence' means a licence granted under these rules for sale of the liquor in open bottles, glasses, or pegs for consumption within the licenced premises;'
34. Rule 3(h) has been amended through G.O. Ms. No. 206, dated 10-2-2005, which read as under;
'Off Licence' means a licence granted under these rules for sale of the liquor in sealed or capsuled bottles or in any other manner without permitting consumption on the liccenced premises'.
35. Rule 23(b)(xiii) defines the parameters of IL-24 licences. It was correspondingly amended, from the point of view of sale of liquor and the consumption thereof. There does not exist any significant difference among the various categories of licences, referred to above, in the context of the object sought to be achieved through the new policy. It cannot be denied that, though a citizen does not have a fundamental right in doing business in intoxicants, the State action in regulating such business has to accord with the principles of reasonableness and fairness. Even in the trade in intoxicants, the State cannot claim that it has the prerogative to act, as it likes, and that its actions cannot be tested on the touchstone of reasonableness or fairness. Whenever it intends to accord differential treatment, to different categories of persons, or licensees, it has to satisfy the Courts, that there exists a reasonable classification, to justify such differential treatments.
36. Classification, in the context of examining the State action under Article 14 of the Constitution, has its own attributes. For the most part of it, the similarity or variation of any two sets of activities or objects, has to be determined, from the relevant perspective. No two similar situations can be identical, or similar, from all points of view. It is only the perspective with which, the comparison or contrast is undertaken, that results in treating the circumstances or things, either similar or different. What Article 14 frowns at, is, differential treatment, if accorded, to persons or situations, which are broadly on the same plane, from the context of the treatment sought to be accorded. The difference between the two categories, which are sought to be distinguished, has to clear and discernable, from the point of view of the concerned activity. Constitution does not permit of, an artificial differentiation. Viewed from this angle, the functional differences among the various licensees, or the lack of it, do not support the classification, from the limited context of grant or refusal of renewals to the existing licences.
37. A situation similar to the one, obtaining in this batch of writ petitions, arose before the Madras High Court. By the commencement of the Excise year 2002-03, in the State of Tamil Nadu, there existed 6,000 retail-vending shops of liquor. The licensees were granted under a policy, enunciated for the block period of 2001-2004. Through Government Orders dated 8-7-2002, the number of shops was proposed to be increased to 7,000, and it was proposed, not to renew the licences of the existing 6,000 shops. The existing licensees challenged the action of the State Government, on several grounds. It was urged on behalf of the State that the proposed action was resorted to, with an object of augmenting the State revenues. While upholding the policy, in all other respects, the High Court disapproved the action of the State Government, insofar as it provided for denial of renewal to the existing licences. The High Court found that there does not exist any nexus, between the proposed action, and the objects sought to be achieved. A finding was recorded to the effect that, the action was meant, only to disable the existing licensees, from getting their licences renewed. The matter was carried to the Supreme Court. After referring to the contentions of the parties and the findings recorded by the High Court, the Supreme Court held as under:
'[1] 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, 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 of renewal 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 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.O. Ms., dealing with the non-renewal of the privileges granted to the existing lecensees subject to their fulfilling the other conditions of file provisions of the Act and the rules to be arbitrary. We are, therefore, not persuaded to interfere with the conclusions 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 of G.O.Ms. which fell before the High Court for consideration. Necessarily, therefore, the appropriate excise authority will have to decide the case of the applicants for renewal of the licences in accordance with the Rules as well as the other conditions of the licences...'
38. Learned Advocate-General sought to distinguish the present case with the one, which is the subject-matter of the above judgment. According to him, the licences in question, in the State of Tamil Nadu, were issued under a policy, for the block period of 2001-2004, and the interference by the High Court and the Supreme Court was mostly on account of the fact that the arrangement was sought to be disturbed in the middle of the block period.
39. This argument would certainly have been acceptable, had it been a case, where, the licences were granted for the block period of three years and were attempted to be discontinued, in between. That is not so. Though the policy was enunciated for the block period 2001-2004, the licences were granted for a period of only one year, providing for renewal thereafter. But for the policies enunciated year-after-year, the licences in the State of Andhra Pradesh are also renewable under Rule 26-A. Even the amended Rule does not take away the right of renewal altogether. The amendment makes such renewals, subject to the policy of the Government. The amendment in fact, does nothing more, than making the renewal discretionary. Discretion, in respect of any exercise of any power, has to be guided by proper and legal considerations. Basically, the policy of the Government is reflected in statutory rules. Even assuming that it is permissible to frame policy, outside the realm of the statutory rules, there cannot be a policy to such an extent, as to render the very statutory rule, to a dead letter. Therefore, this Court is of the view that the principle laid down by the Supreme Court in Secretary to Government, Tamil Nadu v. K. Vinayagamurthy (supra), squarely applies to the facts of the case.
40. The learned Advocate-General relied upon several judgments rendered by the Supreme Court to sustain the impugned action. Amar Chandra v. Excise Collector, Tripura (supra), is a case in which the Government of Tripura cancelled the wholesale licence granted in favour of the appellant therein. The cancellation was on account of a policy decision taken by the State Government to grant such licences on tender-cum-auction basis. The appellant was granted licence on application. The Supreme Court upheld the action of the State, which was based on the policy. In the instant case, there is no change or shift in the policy in the matter of granting IL-24 licences. Rule 31 of the Rules continues to hold the field.
41. In State of A.P. v. Mc.Dowell & Co. (supra), the Supreme Court was dealing with the validity of prohibition imposed by the State of A.P. on the manufacture of liquor. Through Act 17 of 1995, the State of A.P. imposed prohibition on manufacture, sale and consumption of liquor in the State. Their Lordships of the Supreme Court upheld its validity. Extensive reference was made to Article 19 of the Constitution and the decisions rendered thereon. It was in that context that the Supreme Court held that no individual can claim any right in the trade in liquor or intoxicants. The various steps taken by the Government, which are under consideration in this case, are exactly in the opposite direction.
42. Another decision relied upon by the learned Advocate-General is Krishnan Kakkanath v. Government of Kerala (supra), wherein the scope and ambit of Article 19 of the Constitution of India, particularly in the context of reasonable restrictions fell for consideration by the Supreme Court. The subject-matter related to the imposition of restrictions as to purchase of pumpsets from the dealers approved by the Government. Such an action was held as not constituting any unreasonable restriction. No comparable fact situation obtains in the instant case.
43. Lastly, reliance is placed on the judgment in Ugar Sugar Works Ltd., v. Delhi Administration (supra). Through a policy, the Delhi administration enhanced the 'Minimum Sales Figures' (MSF) from 60,000 cases existing in the previous Excise year to 75,000 cases for the relevant excise year. The object was to test the acceptability of particular brand of liquor, in other places before it is licenced to be sold in Delhi. Dealing with the contention, the Supreme Court held as under:
'The argument that since MSF laid down for the year 1994-95 were not changed till 1998-99, there was no need to increase MSF requirements in 1999-2000 or to further increase the same in the year 2000-2001 for the lowest price tag brand of liquor from 60,000 cases (7.2 lakh bottles) to 75,000 cases (9 lakh bottles) for the current year, suffers from the basic infirmity that it invites the Court to enter into an area of testing the executive policy, not on grounds whether it is 'just, fair and reasonable', but whether the object could not have been achieved by fixing a lower MSF requirement. In other words Court is being invited to prescribe MSF requirements in exercise of its power of judicial review. That is not permissible and we must decline the invitation to enter that area. It is not within the province of this Court to lay down that the executive policy must always remain static, even if its revision is 'just, fair and reasonable'. What is relevant is to find out whether the executive action is mala fide...'
44. In fact, the above observation of the Supreme Court contains the answer to the submission of the learned Advocate-General. It is impermissible for the Court to decide the parameters of a policy in exercise of its power of judicial review, but it can test the policy from the angles of fairness,' reasonableness and rationality. These tests, in turn, are the various facets of the broad principle underlying Article 14 of the Constitution of India. It is on application of those principles, and not as a result of considering the merits and demerits of the policy, that this Court finds that the refusal to renew the existing IL-24 licences cannot be sustained. Therefore, G.O. Ms. No. 184, dated 7-2-2005, insofar as it directs that the existing IL-24 licences shall not be renewed, cannot be sustained,
45. In some of the writ petitions, the validity of certain amendments to the Rules effected through G.O. Ms. No. 206, dated 10.2.2005 were challenged. Though submissions were made extensively in relation to various provisions, this Court is not inclined to examine the validity of all the provisions so challenged. For example, Rule 3(h) and Rule 23(B)(xiii) of the Rules re-define the scope of 'off-licence' as well as 'Form IL-24 licence'. The State has the absolute power and discretion to provide for various kinds of licences and to define their scope and ambit. Courts cannot interfere with the same or substitute their opinion, for that of the enacted provision, even where they are convinced. The effect of Rule 70, which was introduced through amendment, attaching finality to the opinion of the Commissioner in the matter of interpretation of Rules, has already been dealt within the preceding paragraphs and nothing further needs to be observed in relation thereto.
46. One important provision about which the petitioners have grievance is Rule 69(1) of the Rules.
Rule 69(1) of the Rules reads as under:
'The Licencee shall sell in retail the entire Indian Liquor and Foreign Liquor before the expiry of the Licence. Any balance of Indian Liquor, Foreign Liquor and Beer found unsold at the expiry of the period of licence, shall be seized by the Prohibition and Excise Superintendent, or the officer authorized by him or Commissioner of Prohibition and Excise. Such seized IL & FL shall be permitted by the licencing authority to hand over to the licensee, provided that the licensee obtains a licence for the succeeding lease year. In case, the licencee fails to obtain/ renew the licence the stocks seized may be sold to other licensees and the sale proceeds shall be remitted into Government treasury'.
47. Sub-rule (2) provides for seizure in the event of cancellation or withdrawal of licences. There cannot be any objection for seizure of the stocks in the event of cancellation or withdrawal of licences as a punitive measure. However, seizure of stock from a licensee, whose licence has expired, cannot be sustained in law. The supply of liquor to a licensee is exclusively through the State Beverages Corporation. The sales of the liquor at a licensed shop may depend on several factors. If for any reason, the entire stock could not be sold, by the time the licence expired, the licensee must be given an opportunity either to surrender the stock to the supplier viz., the State Beverages Corporation, or to make over the same to another licensee, under the supervision of the concerned excise authorities. Seizure of stock, which invariably is a measure of penalty cannot be resorted to, against a person, who did not commit any illegality. It amounts to punishing and penalizing a person, who is not guilty of any wrong, and imposing such penalty without conducting any inquiry. Therefore, Sub-rule (1) of Rule 69 of the Rules cannot be sustained. Setting aside the same would result in a situation, where the licensee would continue to hold or deal with the stock, without proper licence. Therefore, the same shall be read down to the effect that the stock available with a licensee as on the date of expiry of his licence, shall be permitted to be surrendered to the A.P. Beverages Corporation and be entitled for refund of the cost thereof, after deduction of the amounts like sales tax etc. In case the Corporation does not take return of the stock, the licensee shall be entitled to make over or transfer such stock to another existing licensee under the supervision of an officer of a rank not below that of an Inspector of Excise. Accordingly Sub-rule (1) of Rule 69 shall stand read down.
The finding:
48. The result of the discussion undertaken in the preceding paragraphs is that G.O. Ms. No. 184, in so far as it directs that the existing IL-24 licences shall not be renewed, cannot be sustained in law and stands accordingly set aside. It is true that in W.A. No. 2209 of 2002 (the subject-matter of the judgment of the Supreme Court in Secretary to Government Tamil Nadu v. K. Vinayagamurthy (supra), the Division Bench of the Madras High Court directed that the facility of renewal, be extended to the existing retail liquor licensees, and they be permitted to remit the requisite amounts by a particular date; and the same was upheld by the Supreme Court. However, having regard to the fact that the excise year 2005-06 is to commence from 1-4-2005 and that there are several options before the Government, this Court feels it appropriate to leave it to the respondents to reformulate its policy in the light of the discussion undertaken above.
What next?
49. It is not known whether the State intends to evolve any other mechanism, once it realizes that it can not refuse renewal of IL-24 licences, as long as the existing number of shops is not reduced or the selection procedure under Rule 31 remains intact. Further, the Rules were amended through G.O. Ms. No. 206, dated 10.2.2005, subsequent to the formulation of the policy. Parameters and contents of various licences have been redefined. G.O. Ms. No. 184 does not contain any policy statement as to IL-24-B licences. In view of change of definition 'off licence' in Rule 3(h) of the Rules and definition of 'IL-24 licence' under Rule 23(a)(xiii), the entire issue needs to be given a fresh consideration.
50. Now that an occasion arises for the State, to formulate its policy, its attention needs to be drawn to certain aspects of the matter. The Constitution has enumerated Directive principles, which are required to be kept in view, by the State, while formulating its policies. Several enactments and amendments to Constitution, were brought about, as measures to implement the Directive principles. Such laws were upheld even where a conflict was found with the fundamental rights. It is not necessary to delve, deep into the same. It is true that the Directive principles are not enforceable, as is evident from Article 37 of the Constitution. However on that account, the State cannot absolve itself, of the liability to give effect to the Directive principles. The purport of Article 37 is that a corresponding right does not inhere in a citizen from the obligation of the State, to implement the Directive principles. In jurisprudential terms, the legal correlative of the duty of the State under Part IV of the Constitution, does not exist in any citizen. (See Hohfeld's Legal Correlatives. Salmond on Jurisprudence Twelfth Edition Page 224-233). On that account, its obligation does not either ease or cease.
51. Some of the directives, enshrined in Part IV of the Constitution are such that they cannot be accomplished within a time frame or up to an expected degree. There are many principles, which constitute more a guiding factor, than would result in concrete action. Though the compliance in such cases cannot be measured with mathematical precision, one must be able to perceive and discern, the intention and determination of the State to pursue the Directive principles, in the state policy. Three situations can be contemplated in this regard.
52. The first is where, the State takes steps to implement the Directive principles with necessary vigor. Instances of this are found in various legislations, enacted to implement agrarian reforms, abolition of child labour, protection of environment etc. Second situation is where the State fails to, or does not, take any steps for implementation of the directive, faced with variety of situations. Into this category, fall the inaction and inability in bringing about a uniform Civil Code, (Article 44) participation of members of management of industries (43-A) providing right to work, right to education and right to public assistance (Article 41) etc. The third is where the State action proceeds in a direction, totally opposed to what is enshrined in the Directive principles. If an example in this regard is needed, the steps taken by various states, to promote sale of liquor, of course, in the name of regulation, provide, the one. Article 47 of the Constitution commands that:
'The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and, in particular, the Sate shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health.'
53. In contrast, what the State of A.P. has been doing for the past few years is exemplified in the preamble to G.O. Ms. No. 184. It proposes to 'throw open the trade to more competition and thus ensure availability of good quality liquor to the consumer at affordable prices'.
54. This policy statement is nothing but the culmination of the similar steps taken in the preceding years. Ever since the year 1998, the effort has been to promote the sale of liquor to the maximum extent. The content of the policies centered around this object. From a total prohibition, the objective shifted to promotion of sale of liquor. Aggressive marketing techniques were adopted. The call of the day, or need of the hour was to make available more and more liquor, to the customers. The result is that liquor is available virtually at the doorsteps of the citizens. The statistics made available by the learned Advocate-General disclose that about 1,45,000 applications are received for grant of licences for 7,500 IL-24 shops. Non-refundable application fee is more than 70 crores. It indicates the extent and levels, to which the trade was promoted.
55. When the Constitution recognized the consumption of alcohol as an evil and exhorted that the State shall endeavour to bring about prohibition, one has to think over, as to how far the various steps taken by the Government of A.P. in the past few years accords with that.
56. Rich people living in urban areas may be having their own style of life or may have treated consumption of liquor as symbol of their status. However, encouraging a common man, particularly in rural areas, to resort this most dangerous and wicked of the vices, cannot be justified even with the best of the reasons. The inability to control mafia, during the prohibition, which is pleaded as an excuse to abandon prohibition, reflects the weakness or helplessness of the State. It also raises doubt about its conviction to the noble object of prohibition. No state can take credit in doing what the mafia used to do, in the name of driving way, or containing the mafia. If that is the guiding factor, most of the crimes defined under IPC deserve to be regularized, since they could not be banished even after one-and-half centuries of enforcing Penal Code. In the hunt for easy money in the form of licence fee, and commission on sale of liquor, the State did not hesitate to sacrifice the lives and health of millions of gullible people, the welfare of equal number of families and the corresponding dignity and decency in the society.
57. In the name of providing liquor to the 'common man' at affordable prices, the State has forgotten or neglected the plight of the 'common woman' and 'innocent children'. Many vices spoil the individual who is addicted to it. Intoxication is a vice, which spoils not only the person, but also his family. It does not stop there. The behaviour of an ebriated person would have its impact on every person, whom he comes across. The effort he makes to secure the money to purchase the liquor, and his mental condition, after the consumption, hardly need any emphasis. His beastly behaviour shuns decency and promotes crime. The most vulnerable to this vice are the women and children. It is not a coincidence that the State secured a prominent place in the spread of AIDS. There is a significant contribution of the excise policies of the recent years, to that position, or achievement, one may call it. In both the cases, the effort is only to tackle the manifestations of the evil, than to address the root cause. The result is that in the former case the policy drive is ending up sales promotion of condoms, while in the latter, it has boosted the sale of liquor.
58. It is true that it is difficult to achieve the object enshrined in Article 47 of the Constitution of India, in its entirety within a particular time. However, there does not exist any justification or basis for the State to undertake the acts, which defeat the said object, or to promote what was required to be prohibited.
59. Civilization and culture are not the things, which are built overnight or in few years. It is the cumulative effect of the works of right thinking people and the result of noble conduct of many, for centuries together, which bring about them. A pattern of life comes into existence through efforts of great men. In a democratic form of Government, the State is conferred with the right and endowed with the duty, to preserve cherishable values and to supplement the same from time to time. If the State's policy is designed to destroy the same, directly or indirectly, the results are not too difficult to be imagined.
60. It is not as if there is any section in the society, particularly those who are endowed with the responsibility of formulating policies, are not aware of these fundamental aspects. The fact that every political party, in every election manifesto swears to bring about prohibition, either in a phased and gradual manner or at once, indicates their determination to achieve the same. Many a time, notwithstanding such noble assurances, decisions are taken which operate exactly, the opposite direction, irrespective of the party in power, obviously faced with a grim situation of finances. Howsoever the financial needs of the State may be, it cannot depend on funds, derived out of an unfortunate vice. If that is the yardstick, the sovereign function of the State gets reduced to the one, of collection of percentages by permitting objectionable activities.
61. Even under the existing law, crimes of lesser magnitude, and consequences, compared to the vice of intoxication are punished and fined. The effect of those inconsequential crimes on the society, is relatively small. The endeavour of this Court is only to impress upon the policy makers or those who can influence the formulation of the policy, to give a thought to the matter, keeping in view, the objective underlying the Constitution as well as the welfare of the society. What is needed is a small amount of paradigm shift, and determination to fight the evil. It is not an issue which can be tackled by the Government alone. All sections, including the Government, the opposition, the executive, social organizations, and the local authorities, need to pay a little more attention to this, cutting across their party affiliations or functional limits.
62. Under the existing Panchayat Raj system, the permission of the Gram Panchayat, by a resolution, is needed even for the purpose of establishing any industry or to establish a market etc., to see that the activities undertaken in such places do not have any deleterious affect on the residents of the village. There is no reason why the view of the Panchayat be it in the Gramsabha or the Gram Panchayat be not required before a licence is granted for establishing bars or wine shops in that village. The residents of the village, particularly the women folk, would be in a position to know as to who exactly are the persons, responsible for bringing about such shops, and take remedial steps. Entrusting the Gram Panchayat or local bodies with the control and regulation of such shops in coordination with the excise officials go a very long way, in containing the menace. Committees at village levels can be constituted on par with the existing Education Committees, Irrigation Committees etc.
63. In these days of acute drought and phenomenal unemployment, indiscriminate opening of wine shops and bars may bring with them, the corresponding amount of damage to the society in terms of values of life, rural economy and vulnerability of human health. At a time when hundreds of farmers are committing suicide, villages together are migrating for livelihood and women, even in coastal areas, are required to walk kilometers, to fetch drinking water, it has to be thought over as to how far it is proper to promote sale of liquor, by opening new shops and bars. In fact, the situation demands the reduction of existing ones. Revision of policy or reduction of shops may not solve their problems. But they would atleast feel that their misery and plight is not being celebrated. The legislators of all the political parties, leaving aside their ideological differences, need to address the issue dispassionately, lest, the ordinary person in the street gathers an impression that the whole political system has made his or her life vulnerable and miserable. This Court does not have any doubt that having regard to the maturity of the legislators, conviction in the executive and concern of the voluntary organizations, for the welfare of the society, it is not at all a difficult task to bring about a policy in this regard, in such way as would maintain a perfect balance between the need of the State on the one hand, and necessity to preserve the values in the society on the other. Only this much can be said that any failure on this front would be very costly, and the results of failure would be felt, only in the later years to come. It would be too late to think, when the results manifest themselves.
The Result:
64. For the foregoing reasons, the writ petitions are allowed, directing that,
(a) G.O. Ms. No. 184, dated 7.2.2005, insofar as it prohibits renewal of existing IL-24 licences for the forth coming Excise year 2005-06, is declared as arbitrary and unreasonable and violative of Article 14 of the Constitution of India and, set aside to that extent.
(b) It shall be open to the Government to formulate its own policy, in accordance with law, by taking into account the observations made by this Court in the preceding paragraphs.
(c) Rule 69(1) of the Rules amended through G.O. Ms. No. 206, dated 10.2.2005, is read down to the effect that it shall be open to the licensee to surrender the left over stock, on the expiry of his licence, the A.P. State Beverages Corporation, which, in turn, shall refund the cost of the same by making permissible deductions. In the alternative, such licensee shall be permitted to transfer or make over the stock to an existing licensee, under the supervision of an officer of the Excise Department, not below the rank of Inspector.
(d) Rule 70 of the Rules, to the extent it attaches finality to, the interpretation placed by the Commissioner of Excise, is set aside.
(e) There shall be no order as to costs.