Judgment:
1. Rule nisi.
2. The first petitioner is a public limited company and the second petitioner is the Managing Director of the company. The company was incorporated in the year 1986 for the purpose of manufacturing Ferro Alloy and it was registered as Sree Sarada Ferro Alloys Limited, but by an amendment to the Memorandum of Association dated 21-12-1992 the main objects of the company were changed. and the Company became entitled to carry on the business of Brewery. The second petitioner besides being Managing Director is the Share holder of the company holding 47,500 equity shares of Rs.10/- each. The petitioners obtained permissions from the respondents and also the Central Government and established a Brewery at Bantupally village of Ranasthalam mandal in Srikakulam district. The petitioners also entered into an agreement with another Company viz., M/s. Shaw Wallace and Company Limitedwhich is a manufacturer of well known brands of beer. Specific brands of M/s. Shaw Wallace and Company had been registered with the Excise Department. The petitioner further states that he has established a Brewery with a capital outlay of Rs.42.00 crpres and he has borrowed a sum of Rs.25.00 crores by way of loans from financial institutions. The average amount of interest to be paid by the petitioner is to the tune of Rs.500.00 lakhs per annum and approximately he has to pay Rs.1,40,000 per day by way of interest alone. He further states that, not only that he has to pay huge amount on the loans incurred by him but also he has to spend lot of money towards the maintenance of the unit and huge expenditure is incurred on account of salaries, watch and ward and other taxes. He further states that, in addition to Rs. 1,40,000 per day which is being paid by the petitioner by way of interest, he has to spend about Rs. 1,00,000 per day on the establishment. He states that if the Brewery does not become operational for a year he will have to incur loss of Rs.850 lakhs.
3. The petitioner was granted licence in Form-B2 on 1st August, 1994. This licence was valid up to 30th September, 1994. This licence was originally in the name of G. Mallikarjuna Rao but then it was transferred to the petitioner and according to the petitioner this licence enabled him to manufacture 12000 Kilo litres Beer per annum subject to the conditions laid down in the licence itself. The petitioner could not start the construction of brewery and manufacture of beer because the State Government imposed prohibition in September, 1994 and the prohibition remained effective till February, 1997. The petitioner's licence remained under cloud during this period as consumption and manufacture of alcohol was prohibited. Upon lifting of the Prohibition the petitioner again secured a licence in Form-B2 on 8th July, 1997. The petitioner further statesthat as soon as he got the licence he took steps to complete the project. The licence granted to the petitioner had been extended from time to time. One such extension was granted on 3rd April, 1998. The petitioner was permitted to complete the construction of brewery and commence the production on or before July, 1998. The licence was valid for the Excise year 1998-99. The licence was again renewed on 8-4-1999. While granting the extension the second respondent imposed a condition on the petitioner that the Project should be completed and production should commence by 30th June, 1999. The petitioner completed the project and production, according to the petitioner, commenced by 23rd June, 1999. Since the petitioner fulfilled the licencing condition the licence was renewed for the year 1999-2000 by letter dated 3rd July, 1999. Thereafter the petitioner submitted an application along with the requisite fee for registration of labels of M/s. Shaw Wallace & Company along with an affidavit of M/s. Shaw Wallace & Company permitting usage of their labels and brands.
4. The Government of Andhra Pradesh has framed a policy with regard to Indian Made Foreign Liquor (IMFL) and also Beer by an order being G.O. Ms. No.166, dated 18-3-1998. In accordance with this policy the entire distribution of IMFL and Beer to the licenced Vendors in the State is undertaken by third respondent. The third respondent has the exclusive right to purchase IMFL and beer from the manufacturers in the State of Andhra Pradesh and all the Manufacturers who are located in the State of Andhra Pradesh are bound to sell their entire produce to the third respondent. For the year 1998-99 the third respondent issued tenders and entered into agreement with various manufacturers for the purpose of supply of various categories of Beer to the third respondent. But, for the year 1999-2000 this policy was not valid and in terms of G.O. Ms. No.234, dated22nd March, 1999 the Government directed that third respondent would be permitted to extend the agreements in favour of those suppliers who had supplied IMFL and Beer in the year 1998-99. This G.O. further laid down that no further request for tie up arrangements between the units outside the State and those located in the State would be entertained. The petitioner stated that, since he had incurred heavy costs in establishing the unit and it was the condition itself by the Government that he should start production by 30th June, 1999 and in fact he complied it by 23rd June, 1999 the respondents were bound to register the labels so that he could sell his produce. Since the third respondent has monopoly over purchase of Beer has Brewery has come to stand still. Since labels were not approved he made certain representations to the first respondent, to the Chief Secretary to Government of Andhra Pradesh and also to the Hon'ble Chief Minister of Andhra Pradesh. Therefore, he sought a direction from this Court that clauses 4 and 5 of G.O. Ms. No.234, dated 22nd March, 1999 be quashed as according to him this was the barrier in his way of selling Beer to respondent No.3.
5. When this matter came up before this Court on 4th August, 1999 the learned Government Pleader for Prohibition and Excise submitted that, since the petitioner has made a representation and the matter was under consideration of the Government therefore some lime should be granted to the Government to decide the representation. A direction was given by this Court that representation of the petitioner be disposed of within a period of two weeks. It was further directed that if representation was not decided within the time the respondent should file counter so that the matter can be decided on merits. Later on the learned Counsel appearing for respondents informed the Court that the representation of the petitioner has in fact been considered and has been rejected. The Additional Secretaryto Government, Revenue Department has filed counter. It is admitted that, petitioner has a valid licence of manufacturing Beer and it was renewed up to 30th June, 1999 subject to the condition that the unit should complete the construction of Brewery and commence production before 30th June, 1999.
6. There is no dispute as such with regard to the facts, it is only the G.O.Ms.No.234 dated 22nd March, 1999 which is the bone of contention. It is submitted by respondents that G.O. Ms. No.166, dated 18th March, 1998 was applicable for the Excise year 1998-99. By this G.O. the Andhra Pradesh Beverage Corporation Limited was advised to procure different categories of liquor from the distilleries located within the state as sufficient production capacity for these categories existed within the State. However, they were permitted to continue the import premium brands i.e., D category. Under this G.O. period of three months was given to those who would like to establish production facility within any existing distillery or a tie up with any local distillery regarding A, B and C categories not manufactured or produced within the State. According to the respondents, the petitioner started production of Beer on 23rd June, 1999. During the Excise year 1998-99 the unit was not in production, therefore the petitioner could not enter into any tie up arrangement with any distillery within the State or outside the State. Since he was not in production, therefore he could not also enter into any agreement with the Andhra Pradesh Beverages Corporation Limited., for supply of beer. Since production started on 234rd June, 1999 the petitioner is bound by the policy adopted by the State Government for the year 1999-2000 which is stipulated in G.O. Ms. No.234, Revenue Department, dated 22-3-1999. clauses (4) and (5) of the said G.O. reads as follows:
(4) The APBCL is permitted to extend the agreements entered into with the distilleries of the supply of various categories of IML and Beer, on the same conditions as in the previous year.
(5) No further request for tie-up arrangements by outside distilleries/ breweries with those located in the State shall be entertained.
7. Clause (4) is not an impediment in granting permission to the petitioner to enter into an agreement with respondent No.3 because it merely states that, the APBCL is directed to extend the agreements entered into with the distilleries for the supply of various categories of IML and Beer on the same condition for the year 1999-2000 as was applicable to them for the previous year. It does not create a bar for APBCL to enter into fresh agreement with those with whom it had no agreement in the year 1998-99. But, Clause (5) creates a bar for the petitioner because it lays down that no further request for tie-up arrangements by outside distilleries with those located in the State shall be entertained. The petitioner is admittedly a brewery within the State of Andhra Pradesh which has entered into a tie up with M/s. Shaw Wallace & Company which is a unit outside the State, therefore, they are not able to sell their stocks to the APBCL.
8. Now, the question before this Court would be, whether the condition imposed by clause (5) of G.O. Ms. No.234, dated 22-3-1999 is arbitrary, or not. It is settled law that no citizen has a fundamental right to do any business of liquor and it is only the privilege of the State to deal with the business of liquor, but this privilege can be extended to individuals by the State in accordance with the policy framed by the State. No citizen can demand as a matter of right to establish a distillery or to manufacture liquor or to sell liquor, this is the exclusive right of the State, but, oncethis privilege is extended to the citizens Article 14 of the Constitution comes into play, After the State decides to extend the privilege they are supposed to deal with citizens equally.
9. Reliance has been placed on the judgements of the Supreme Court in Synthetics and Chemicals Limited v. State of Uttar Pradesh, , and also State of Andhra Pradesh v. Mc. Dowell & Company, : [1996]3SCR721 . In both the judgements the Supreme Court held that although the State has exclusive right to deal with the liquor yet once this privilege is extended Article 14 comes into play.
10. The net result of clauses (4) and (5) read together is that, although a monopoly is created with APBCL which is an instrumentality of the State, yet, as a matter of fact monopoly on sale of liquor in the State is confined to those agreement holders who entered into agreement with APBCL in the year 1998-99. When it was thrown open for manufacturers to offer their tenders for sale of liquor to APBCL in 1998-99 some of the bidders must have been rejected for various good reasons, but that does not mean that those bidders can be ousted for alt times to come. In 1998-99 admittedly bids were invited for one year only and it would have been legitimately expected by other manufacturers that they can compete in future. But, after granting contracts and drawing agreements with some manufacturers the Government has stopped the process resulting in creation of a monopoly in favour of those agreement holders who entered into agreement for one year i.e., 1998-99. For these reasons, I find that the petitioner's application could not have been rejected and Clause (5) of the G.O. Ms. No.234 cannot sustain.
11. There is another reason for this Court to allow this writ petition and that reason is the sufferance of the petitioner.The Government with their eyes wide open granted him licence and imposed a condition that he should start production by 30th June, 1999. After spending huge amounts, according to the petitioner he has to spend about Rs.2.4 lakhs per day for maintaining the unit and discharging the interest liabilities on the loans he has incurred when his licence was extended for the year 1999-2000 and a condition was imposed upon him that he shall start the production by 30th June, 1999 by the State Government itself, he would have legitimately expected that he will be able to sell his product also. In this matter, judgement of Supreme Court being National Buildings Construction Corporation v. S. Raghunathan, : AIR1998SC2779 , has been cited at the Bar. In this case, the Supreme Court while discussing the concept of legitimate expectation, noted the observations made in Union of India v. Hindustan Development Corporation, : AIR1994SC988 . These observations are as under:
'If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well known grounds attracting Article 14 but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles. It can be one of the grounds to consider but the Court must lift the veil and see whether the decision is violative of these principles warranting interference. It depends very much on the facts and the recognised general principles of administrative law applicable to such facts and the concept of legitimate expectation which is the latest recruit to a long list of concepts fashioned by the Courts for the review of administrative action, must be restricted to the general legal limitations applicable and binding the manner of the futureexercise of administrative power in a particular case. It follows that the concept of legitimate expectation is 'not the key which unlocks the treasury of , natural justice and it ought not to unlock the gates which shuts the Court out of review on the merits', particularly when the element of speculation and' uncertainty is inherent in that very concept.'
12. In the light of the facts of this case and the observations of the Supreme Court, I find that the petitioner was justified in expecting that he would be granted permission for selling liquor to respondent No.3. The petitioner has also stated in his affidavit that respondent No.3 at present is incurring heavy costs in purchasing the beer manufactured outside the State. For 1998-99 he submits that total demand of Beer by APBCL was 96.60 lakh cases and out of it supply from Beer manufacturers within the State of Andhra Pradesh was only to the tune of 48.12 lakh cases. So, the supply of more than 50% was made good by importing from outside the State. This assertion in Para 9 of the affidavit has been replied by the Government with 'No remarks'. In Para 10 of the affidavit the petitioner has stated that third respondent during the Excise year 1999-2000 would be importing 75,00,000 cases of Beer from manufacturers located outside the State of Andhra Pradesh. This has also been replied by the Government as 'No comments'. If the State Government is going to import 75 lakh cases of Beer, what is the hurdle in purchasing the beer from a local manufacturer, on the face of it, it appears to be unreasonable. The third respondent has not chosen to file any affidavit. The Corporation wants to import beer at the cost of a unit which is likely to close down if beer is not purchased from it.
13. For all these reasons, this writ petition is allowed. The respondent No.3 is directed to enter into an agreement with thepetitioner either on prices fixed with other suppliers for supply of Beer or on fresh rates as negotiated between 3rd respondent and petitioner. Clause (5) of G.O. Ms. No.234, dated 22-3-1999 is struck down as arbitrary and unconstitutional. No order as to costs.