Sobhag Mal Jain, J.
1. In this group of writ petitions, filed under Article 226 of the Constitution, the petitioners, who are licensees for the exclusive privilege of selling by retail country liquor, have challenged the validity of - (1) Section 42(e)(iii) of the Rajasthan Excise Act, 1950, (here in after referred to as 'the Act'); (2) Notification dated 25th May, 1985, amending the Rajasthan Issue and Sale Prices of Country Liquor Rules, 1964 (here in after referred to as 'the Issue Price Rules'); and (3) Conditions Nos. (1)(ga) and 22 (kha) of the Licences issued in their favour.
2. In response to the Notification issued by the Excise Commissioner on December 26, 1983 inviting tenders for the grant of licences for the years 1984-85 and 1985-86 to sell, in retail, country liquor at the various shops in Rajasthan, the petitioners submitted their tenders and were granted lincences which are in form C.L (I) G. prescribed by the Excise Commissioner under Rule 93 of the Rajasthan Excise Rules, 1956 (to be referred to in short as 'the Rules'), made by the State Government, in exercise of the powers conferred by Section 31 of the Act. The Conditions of the licence were prescribed earlier by the Excise Commissioner by the Notification published in the Rajasthan Gazette dated 25th January, 1983. In the tender forms the licensees declared that they would abide by the said conditions published in the above Rajpatra The licences issued to the petitioner contained the conditions prescribed by the Excise Commissioner. In this set of writ petitions we are concerned with the licences for the year 1985-86. Some licences were issued for two years, namely 1984-85, and 1985-86, while others were issued for 1984-85, with the stipulation that the licensees will pay in 1985-86 the privilege amount 10% over the stipulated sum for the year 1984-85 and would also abide by all the terms and conditions of the licence. They were also required to deposit enhanced security amount, which they did. There is no dispute that the licensees have fully worked the licence granted to them for these years.
3. In order to decide these writ petitions it is not necessary to state of each individual matter. It would be sufficient to notice, in brief, the facts of two writ petitions, which in the course of arguments, have been referred to by the counsel for the petitioners as also the Additional Advocate General, namely, S.B. Civil Writ Petition No. 2680/85 Mohan Ram v. State of Rajasthan and S.B. Civil Writ Petition No. 2597/85 Lekh Ram v. State of Rajasthan. In Mohan Ram, the petitioner submitted his tender form on January 17, 1984 for the shop at Merta Road. It was for a period of two years, i.e. 1984-85 and 1985-86. In this form the petitioner declared that he would abide by the conditions of the licence as prescribed by the Excise Commissioner published in the Rajasthan Rajapatra dated 25th January, 1983 and as may be amended from time to time. The Excise Commissioner accepted the tender of the petitioner, the amount offered by him being highest, and issued the order of acceptance for two years. The petitioner was then granted a licence of exclusive privilege to sell country liquor, in retail, at the shop at Merta Road for the periods from April 1, 1984 to March 31, 1985. The privilege amount was stipulated as Rs. 4, 51,000/-. Since his tender was for a period of two years i.e. 1984-85 and 1985-86, the petitioner was allowed to work in licence for the year 1985-86, on an enhanced privilege amount 10% above the stipulated sum for the year 1984-85. The order of confirmation for working the licence for the year 1985-86 was issued to him. The petitioner thus worked and utilised the liecnce for the years 1984-85 and 1985-86.
4. In Lekh Raj's case, the petitioner was a co-licensee with Beerbal Khan, Hem Raj and others. They submitted their tender for the group of shops of Jaipur city in the name of Beerbal Khan Hemraj and party. Their tender was accepted and they were granted licence for the years 1984-85 and 1985 86, i.e. for the period from April, 1984 to March 31, 1986. The privilege amount for the period of April 1, 1984 to March 31, 1985 was Rs. 4,41,57,000/- and for the period April 1985 to March 31, 1986, it was Rs. 4,85,72, 100/-.
5. As per the conditions of the licence, the licensees were required to deposit a sum of Rs. 1,000/- or 1% of the stipulated privilege money, whichever be less, at the time of taking the licence and the balance of the privilege amount was to be deposited by them in equal monthly instalments by the 10th of the next month. The licensees were allowed a rebate of 80% of the total value of the quantity of liquor taken by them against the monthly instalments from the Government warehouse. The value of the liquor for the purposes of rebate was, however, to be calculated at rate of the issue price of the liquor current on January 1 of the year preceding the term of the licence.
6. Conditions Nos. 1 K, Kha, Ga and 22 Kha of the licence, which are involved in the present writ petitions are set out below:
1d ykbZlsUl/kkjh dks jktLFkku vkcdkjh vf/kfu;e] 1950 dh /kkjk 24 ,oa 30 rFkk jktLFkku vkckdkjh fu;e 1956 ds fu;e la[;k 67 k ds v/khu ,dkdh fo'ks'kkf/kdkj ds fy, ykbZlsUl vof/k dh fu/kZkfjr Hkqxrku dh jkf'k ds :Ik;s vadks es o'kZ 1&4&1984 ls 31&3&1985 rd ds fy, 4]41]57000 pkj djksM+ bDrkfyl yk[k lRrkou gtkj :Ik;s ek= 1 o'kZ 1&4&1985 ls 31&3&1986 ds fy, mls 10 izfr'kr dh o`f) dh tkdj :Ik;s 4]85]72]700 pkj djksM+ ipklh yk[k cgRrj gtkj lkr lkS :Ik;s ek= tek djus gksxs A ;g jkf'k vkcdkjh 'kqYd ] vxj dksbZ gS ] ds vfrfjDr gksxh A
[kmijksDr fu/kkZfjr jkf'k es ls mldh ,d izfr'kr jde vFkok 1000@& :Ik;k izfr nqdku] tks Hkh de gks] ykbZlsUl izkIr djrs le; gh uxn tek djkuh gksxh A
x mijksDr jkf'k [k es of.kZr tek gks tkus ds ckn cdk;k jde cjkcj ekfld fd'rks es tek djkuh gksxh A vkSj izR;sd eghus dh fd'r vkxkeh eghus dh 10 rkjh[k rd jkT; dks'k es tek djkuh gksxh A bl egkokjh fd'r ds izfr mDr eghus ftl eghus dh fd'r ns; gks ykbZlsUl/kkjh }kjk ljdkjh xksnke ls fy, x, 'kjkc dh ek=k ij ykbZlsUl dh vof/k ds iwoZ ds fofRr; o'kZ dh 1 tuojh ds izpfyr o'kZ ls fuxZe ewY; ds 80 izfr'kr rd /kujkf'k dk fjcsV fn;k tkosxk A ysfdu ;g fjcsV ml eghus dh fd'r jkf'k rd gh lhfer gksxk A ijUrq vxj ekg viSzy] ebZ] o twu es ykbZlsUl/kkjh ekfld fd'r ls vf/kd fjcsV dh jkf'k mldh ekg tqykbZ ] vxLr o flrEcj es jgh ekfld deh] ;fn dksbZ gks] ds izfr lek;ksftr djok ldsxk A
22[ vkcdkjh vk;qDr 'kjkc dh fdLe] rsth vFkok fuxZe ewY; dh nj es tc pkgs rc fcuk dkj.k cryk;s ?kVk & ch dj ldsxk A vkSj ykbZlsUl/kkjh dh mldk ikyu djuk gksxk A bl ?kV&ch; ds QyLo:Ik ykbZlsUl/kkjh dksbZ {kfriwfrZ ikus ;s ,dkdh fo'ks'kkf/kdkj dh jkf'k es deh djkus dk gdnkj ugh gksxk A
The licensees also signed the counter part of the contract appended to the licence and stipulated that they would abide by the provisions of the Act, the rules and the conditions of the licence.
7. In exercise of the powers conferred by Section 42 of the Act, the Excise Commissioner, with the previous sanction of the State Govt., made the Issue Price Rules. By the notification dated 25th May, 1985, the Excise Commissioner, with the previous sanction of the State Government, amended Rule 2 of the Issue Price Rules and thereby enhanced the price of different varieties of country liquor to be supplied by the Government warehouse to the retail licensees.
8. On account of the amendment in Rule 2 of the Issue Price Rules by the notification dated 25th May, 1985 the issue price of the liquor was increased but the licensees were allowed rebate at rate current on January 1, of the preceding year, with the result that the licensees were required to lift more quantity of liquor from the warehouses to pay off the privilege amount. In the writ petitions, the petitioners have given a chart showing the existing rule and the new rate of the various varieties of liquor, which are supplied to them from the warehouses. The chart reads thus:
S.No. Variety of Strength Existing New rateliquor Rate(1) Keshar Kasturi 5 U.P. 30.00 34.00(2) Gulab (light caramelcolour) 35 U.P. 14.40 16. 92(3) Sada (Tinge of lightcaramel colour) 45 U.P. 10.40 12.53(4) Sathiya (Dark caramelcolour) 60 U.P. 6.00 7.56
According to the petitioners, there was an increase in the issue price of the liquor by 15% to 20%. In addition, they were to pay sales tax on the issue price and thus the burden of increase was 25 to 40%. As credit in the rebate was not given at the existing rate but at rate current on January 1 of the preceding year whereas they had to pay the price of the liquor at the enhanced rate, the licenses claimed that they should be allowed rebate at the enhanced rate. The licensees, therefore, represented to the Excise authorities to calculate the amount of rebate according to the enhance issue price. The Government, however, did not accede to their request. Aggrieved, the petitioners have filed the present writ petitions in this Court under Article 226 of the Constitution. The petitioners claimed the following reliefs:
(a) The notification dated 25-5-86 (Annx. 2) may kindly be struck down;
(b) Alternative, the respondents may kindly be directed to give rebate/ adjustment against the guaranteed amount as per enhanced rate of Issue Price;
(c) Condition No. 1 (Ga) and 22 (Kha) of the licence (Annx. 1) may kindly be struck down;
(d) Further Section 42 (e)(iii) of the Act may kindly be struck down.
Prior to the present writ petition, being S.B. Civil Writ Petition No. 259?, the petitioner Lekh Raj had earlier filed S.B. Civil Writ Petition No. 1677 of 1985, but it was withdrawn with liberty to move the Excise authorities claiming adjustment/rebate against the guarantee amount in view of the increase of issue price and by the order dated the 9th October, 1985, this Court had directed the respondents to decide the matter of adjustment/rebate within 15 days from the filing of the application by the petitioner before the competent authority. The petitioner filed the representation on October 11, 1985 but the respondents did not decide the same. Therefore, after filing the present writ petition, the petitioners made an application on February 3, 1986 that before the hearing of the case, the respondents may be directed to dispose of their representation for giving rebate against the guarantee amount according to the enhanced issue price. By the order dated 4th February, 1986, this Court directed the respondents to dispose of the representation dated October 11, 1985 made by Lekh Ram by February 11, 1986. The respondents then rejected the representation of the petitioners referred to above, by order dated the 7th February, 1986. The Excise Commissioner in the order of rejection has said:
The Excise Department is under no contractual obligation to grant your request as the conditions of the licence made clear at the time of tender and well within your knowledge ad in which you are a voluntarily contracting party clearly provides that 80% of the issue price prevalent on 1st of January preceding the financial year for which the settlement is made alone is counted towards guarantee fulfillment and further provides that the Excise Commissioner is fully empowered to vary the variety, strength and issue price of country liquor without assigning any reason and you are contractually bound to accept these.
According to the information available to the office you have passed the incidence of the increase in issue price on to the consumers by increasing the retail sale price of different varieties of country liquor soon after the issue prices were increased;
In view of the above you are not entitled to any relief and your representation referred to above is hereby rejected. You can rest assured that the State Government and the Excise Department are fully prepared to meet their contractual obligations and are entitled to expect you to do likewise.
On the request of the petitioners, the respondents were also directed by this Court to tile an appropriate affidavit giving the reasons/basis for enhancing the issue price. In response to this, the respondents filed an affidavit of Shri Prem Prakash Bidiasar, District Excise Officer, explaining the circumstances necessitating increase in the issue price. In short, the stand was that the increase was on account of the fact that cost of production had considerably increased at the Ganganagar Sugar Mills where liquor is manufactured. The petitioner then filed a reply to the aforesaid affidavit controverting the averments and also submitted an application for amendment of the writ petition. This application came up for hearing on February 20, 1986 and Dr. Singhvi appearing for the petitioner confined the amendment application to the insertion of the writ petition:
(e) Communication dated 7-2-86 (Ex. 4) may kindly be quashed.
Accordingly, the application for amendment was allowed to the extent it sought to insert the above prayer.
9. Arguments on the writ petitions were then heard on February 20, 1986, February 21, 1986 and March !7, 1986. During the course of arguments on March 17, 1986, Dr. Singhvi made a proposal that if the enhancement of the issue price is made on the basis of actual cost of liquor i.e. Rs. 3.81 per L.P.L. instead of Rs. 6/- L.P.L. with effect from May 25, 1985 and the accounts are taken and adjusted accordingly, he would advise his clients to withdraw the writ petitions. The Additional Advocate General prayed for one month's time to seek instructions from the Government and on this the hearing was adjourned. On May 12, 1986, the Additional Advocate General informed the court that there seemed to be no chance of the matter being decided by the Government in accordance with the suggestion made by Dr. Singhvi. This court, therefore, directed the matter to be put up for hearing arguments. The matters were then heard on July 1, 1986. When the arguments were in progress, Shri N.M. Lodha, counsel for the petitioner in Lekh Ran's case (S.B. Civil Writ petition No. 2597/85) filed an application for amendment in the prayer para of the writ petition A copy of the application was given to the counsel for the respondents who opposed the amendments. The petitioner sought the following amendments in the prayer para of the writ petition:
(f) That alternatively respondents may kindly be directed to enhance the issue price only to extent the actual cost of production of liquor i.e. Rs. 3.81 per L.P.L. instead of Rs. 6/- per L.P.L.;
(g) It is further alternatively prayed that the issue price may kindly be reduced by the amount shown in para No. 16(c);
(h) Alternatively, it is further prayed that the respondents may kindly be directed to apply the criterion given by the Excise Commissioner in Ex.R. 4.
Arguments of counsel on both the sides were then heard. Some writ petitions were already admitted while in others only show cause notice had been issued. Learned Counsel for the petitioners and the Additional Advocate General, however agreed that the questions involved being common, all the petitions could be heard and decided together.
10. Dr. L.M. Singhvi, who opened the arguments for the petitioners, contended that Section 42(e, (iii) of the Act is unconstitutional as it confers arbitrary and unbriddled powers in the Excise Commissioner without any guideline for the same; that the Notification dated 25th May, 1985 (Ex. 2) is invalid, in as much as, the rise in the issue price effected by the said Notification Was excessive, arbitrary and quite unjustified. The notification was discriminatory in as much as, the increase in the price made by this notification was not applicable to the shops in tribal sub-plan areas and the Tehsils of Shahabad and Kishanganj. The counsel urges that the classification had no nexus with the object of the Act and was arbitrary and violative of Article 14 of the Constitution; that the licences issued to the petitioners were in a standard form prescribed under Section 402(e) of the Act. The contract was an adhesive contract and its condition No. 1(Ga) contained terms that were onerous and unreasonable to render the contract as null and void. Learned Counsel submitted that the expression 'licence ki avedhl se purva ke vitiya vaksha ki ek january ki prachalit dar se' used in condition 1(ga), stipulating that the value of the liquor for the purposes of rebate shall be calculated at rate current on the 1st January of the year preceding the contract and not as per the actual price was unreasonable and need to be ignored or deleted.
11. Shri H.M. Parekh, counsel for the petitioners adopting the arguments of Dr. Singhvi, concentrated his attack on the notification Ex. 2 and condition No. 22(Kha) of the licence. He urged that Clause (e) of Section 42 of the Act, under which the notification was issued, authorised the Excise Commissioner to prescribe restrictions or conditions at the time or before the grant of licence and not after the licence had come into being. According to Mr. Parekh, the Notification Ex. 2 was ex-facie without jurisdiction. Learned Counsel also contended that Sub-clause (iii) of Clause (e) of Section 42 empowers the Excise Commissioner to fix a price in excess of or below which any excisable article could not be sold. This expression was meant to authorise the Excise Commissioner by way of prescribing as a condition of the licence, to fix a maximum or minimum price for the sale of excisable articles but he could not prescribe a fixed price for the same. He also urged that the price envisaged in Clause (e) of Section 42 refers to the price at which the licensees could sell the excisable article and not the issue price at which country liquor was issued to the retail dealers from the ware-houses. He further submitted that as the notification was issued under Section 42(e) of the Act, it was not open to the respondents now to rely on Condition 22(kh) of the licence. Supporting the argument of Dr. Singhvi that Section 42(e) is unconstitutional, Shri Parekh submitted that Section 42(e) did not lay down any guideline and the power conferred upon the Excise Commissioner to vary the issue price during the currency of the licence was arbitrary, unguided and ultra vires Article 14 of the Constitution. He also submitted that the notification (Ex 2) was discriminatory and liable to be struck down under Article 14 of the Constitution, in as much as, the issue price fixed under the Notification was made applicable to the shops of the petitioners but were not made applicable to the tribal sub-plan areas and the shops in Tehsils Shahabad and Kishanganj.
12. Dealing with condition No. 22(Kha) of the licence, learned Counsel has urged that the terms incorporated in this condition suffer from the vice of conferment of arbitrary powers on the Excise Commissioner. He has submitted that a term in a contract where in it has been laid down that the issue price can be varied by one party unilaterally without reference the other contracting party, will be void under Section 29 of the Contract Act.
13. Mr. N.M. Lodha, while adopting the arguments of Dr. Singhvi as regards the validity of Section 42(e) and that of Shri Parekh, as to its applicability further submitted that even according to the statement given by the respondents the cost value comes to Rs. 3 8l per L.P.L. whereas the respondents were demanding Rs. 6/- per L.P. L just to recoup past losses. According to him the representation submitted by the licensees was dismissed by the respondents without any application of mind. The explanation given by the respondents for the increase in the issue price is not satisfactory and borne out by the facts and circumstances of the case. The respondents have foiled to justify the increase.
14. Shri B.R. Arora has adopted the arguments of the learned Counsel aforesaid.
15. As a preliminary objection Shri J.P. Joshi, Additional Advocate General, has urged that the petitioners voluntarily entered into the contract and having worked the said contract cannot now be allowed to wriggle out of their contractual obligations. The petitioners are not entitled to challenge the validity of the rules which they voluntarily accepted. They purchased liquor at the price fixed under the Issue Price Rules and it is not now open to them to challenge the same. The writ petition filed by the petitioners under Article 226 of the Constitution is clearly not maintainable.
16. In reply to the various submissions made by the counsel for the petitioners, on merits, the Additional Advocate General has contended that:
(i) It is not correct to say that the powers conferred by Section 42(e) of the Act are unguided or uncontrolled The preamble of the Act provides sufficient guideline for the exercise of the power and there is a further check on his powers, in as much as before making the rules, he is required to obtain previous sanction of the State Government. Section 42(e) of the Act cannot, therefore, he declared, as unconstitutional;
(ii) The issue price rules and the notification Ex. 2 enchancing the issue prices has been issued in exercise of the powers conferred by Sub-clause (iii) of Clause (e) of Section 42 of the Act. The contention of the petitioners that the Excise Commissioner is competent to fix only minimum & maximum price for an excisable article is entirely misconceived and does not bear out from the language of the said sub-clause. Section 42(e)(iii) authorises the Excise Commissioner to fix one price and that price is meant to be observed by the dealers and they cannot sell country liquor at a price in excess or below the price so fixed by the Excise Commissioner;
(iii) Under Section 42(e) the Excise Commissioner is competent to prescribe conditions on which any licence may be granted. The licence is in a statutory form prescribed under Rule 98 read with Section 31 of the Act. The licence contains the condition that the Excise Commissioner is entitled to revise/increase the issue price of the liquor. The Excise Commissioner is thus fully empowered to fix the issue price of the liquor;
(iv) In the alternative the Excise Commissioner has the power under Section 42(e) to regulate the manufacture, supply storage and sale of any excisable article. The word 'regulating sale' comprehends regulating the price for the sale of an excisable article. The Excise Commissioner is, therefore, fully empowered to frame the rules regulating the issue price of any excisable article under Section 42(e) of the Act. If the powers to regulate the issue price exist, the mere mention of wrong provision in the notification would not vitiate the notification;
(v) The petitioners while urging that Ex. 2 notification dated 25th May, 1985 in without jurisdiction have completely ignored Clause 22 (kha) of the licence which empowers the Excise Commissioner to increase the issue price during the currency of the licence. The conditions of the licence have been prescribed under Section 42(e) of the Act and when a condition of the licence comprehends the power to increase the issue price during the currency of the licence, it cannot he said that the Excise Commissioner has no jurisdiction to increase or revise the same;
(vi) The contention of the petitioners that the notification Ex. 2 was issued without any application of mind is not correct. The letter of M/s. Ganganagar Sugar Mills produced in the court on the request of the petitioners and the affidavit filed in pursuance of the order of this court explains the circumstances necessitating the increase of the issue price of the country liquor;
(vii) The trial sub-plan areas and the two Tehsils of Shahabad and Kishanganj in Kota District are not similarly situate with the areas served by the petitioners. Two different systems operate for the sale of liquor in Rajasthan. In tribal sub-plan areas liquor is not sold on exclusive privilege system. The price of selling country liquor in these areas is controlled, whereas in areas where the exclusive privilege system is in vague, there is no control of price for the sale of country liquor. Further, the shops in the tribal sub-plan areas and these two Tehsils are run by the Ganganagar Sugar Mills, a State Government enterprise, itself for socio-economic reasons. It is thus evident that the petitioners are not similarly situate with the shops situate in tribal sub-plan areas and the Tehsils of Shahbad and Kishanganj. In any event the foot-note No. 2 appended to Rule 2 of the notification has now been deleted and there is no discrimination in the matter of issue price;
(viii) The plea that condition 22 (kha) is void as it renders the contract uncertain, was not raised in the writ petition and such a plea cannot be raised at the stage of arguments. Further, rection 29 of the Contract Act cannot be invoked to invalidate a statutory contract entered into between the Government and the liquor licensees. The provisions of Section 29 are obviously not attracted to statutory contracts. The increase in the issue price is fully justified, in as much as the cost of production by the Ganganagar Sugar Mills has substantially increased and the Excise Department was now required to pay Rs. 6/- per L.P.L. to the Mills as against Rs. 2.62 as was paid previously.
17. The foremost contention that requires consideration at the out set is the one advanced by the Additional Advocate General as a preliminary objection that the petitioners having voluntarily entered into a contract and having worked the licence for the entire term cannot now be allowed to challenge the validity of the same. Relying on State of Rajasthan v. Bal Mukund ILR 1974 (24) Raj. 510, Panna Lal and Ors. etc. v. State of Rajasthan and Ors. AIR 1975 SC 2806, Har Shanker and Ors. etc. etc. v. The Deputy Excise and Taxation Commissioner and Ors. etc. AIR 1975 SC 1121, State of Haryana and Ors. v. Jage Ram and Ors. AIR 1980 SC 2018, Sham Lal and Ors. v. State of Punjab and Ors. AIR 1975 SC 2045, State of Punjab and Ors. v. Ajudhia Nath and Anr. AIR 1981 SC 1374, State of Haryana and Ors. v. Lal Chand and Ors. AIR 1980 SC 1327 and State of Punjab v. Dial Chand Gian Chand & Co AIR 1983 SC 743, the Additional Advocate General has contended that the petitioners are not entitled to invoke the jurisdiction of this Court to impeach or wriggle of their contractual obligations under the licence.
18. In State of Rajasthan v. Bal Mukund's case this court held:
We may also add that having worked under that licence for the full term thereof it is not open to the writ petitioners to challenge it when fits non-compliance results inconvenient consequences. If the terms were onerous the liquor contractor could decline to accept the licence and it could have been given to his competitor. After excluding his competitor and taking the licence and enjoying its monopoly could he challenge its validity Reference in this connection may be made to observations in Basheshar Nath v. Commissioner of Income Tax, Delhi & Rajasthan:
xxx xxx xxx xxx xxxSuppose a man obtains a permit or a licence for running a motor vehicle or an excise shop. Having enjoyed the benefit of the permit for several years, is it open to him to say when action is proposed to be taken against him to terminate the licence, that the law under which permit was granted to him was not constitutionally valid Having derived all the benefits from the permit granted to him, is it open to him to say that the very Act under which a permit was granted to him is not valid in law ?
19. In Panna Lal and Ors. v. State of Rajasthan and Ors. AIR 1975 SC 2806, Chief Justice A.N. Ray said:
The licences in the present case are contracts between the parties. The licensees voluntarily accepted the contracts. They fully exploited to their advance the contracts to the exclusion of others. The High Court rightly said that it was not open to the appellants to resile from the contracts on the ground that the terms of payment were onerous. The reasons given by the High Court were that the licensees accepted the licence by excluding their competitors and it would not be open to the licensees to challenge the terms either on the ground of inconvenient consequence of terms or of harshness of terms.
20. In Har Shanker and Ors. etc. v. The Deputy Excise and Taxation Commissioner and Ors. etc. AIR 1975 SC 1121, Chandrachud, J., as he then was, delivering the judgment of the Constitution Bench of the Supreme Court held:
'Those who contract with open eyes must accept the burden of the contract along with its benefits. The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds its prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force.'
xxx xxx xxx xxx xxxThe licences, in a large measure, owe their existence and validity to the rule-making power of the Financial Commissioner. One of the relief which the appellants ask for is that Rules 27-A, 30 and 31 be declared ultra vires and unconstitutional and consequently the respondents be directed to refund the assessed fees already recovered. By attempting to exploit the licences without the burden of assessed fees originally attaching to them under the rules framed by the Financial Commissioner the appellants are seeking to work the licences on such terms as they find convenient. The writ jurisdiction of High Courts under Article 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred. That however, will not estop the appellants from contending that the amended Rules are not applicable as their licences were renewed before the amendments were made.
It is not necessary to multiply cases on this point. Suffice it to say that the law is well settled that the licensees having voluntarily entered into the contract and having enjoyed the licence to their benefit, could not be permitted to avoid their contractual obligations and the preliminary objection raised by the Additional Advocate General so the maintainability of the writ petition in so far as it seeks to challenge the conditions of the licence, deserves to be accepted. The writ jurisdiction of the High Court under Article 226 of the Constitution is not intended to facilitate avoidance of contractual obligations. The petitioners, in the present group of writ petit ons, voluntarily entered into the contract, used and enjoyed the privilege granted by the licence and worked the contract to their benefit. It is not now open to them to resile from the same and urge that the conditions incorporated in the said licence are void and not binding on them. The Additional Advocate General has further urged that the petitioner are also not entitled to challenge the validity of the Rules which they voluntarily accepted. The petitioners have been purchasing liquor at the prices filed under the Issue Price Rules and, therefore, they cannot be permitted to challenge the same. True, the petitioners have been purchasing liquor at the price fixed under the Issue Price Rules and they had also agreed to a bide by the provisions of the Act, the Rules and the terms of the licence but for that reason they are not precluded from challenging the amendment in the Issue Price Rules, brought about by the Notification dated 25th May 1985, issued by the Excise Commissioner in the exercise of his powers conferred by Section 42(e)(iii) of the Act. Whether the petitioners succeed in their challenge on merits or not is different but the writ petition challenging the constitutional validity of the amendment made in the Issue Price Rules, by the notification dated May 25, 1985 cannot be thrown, at the thresh-hold on the preliminary objection raised by the Additional Advocate General, I, therefore, propose to examine the validity of the notification dated 25th May, 1905 on merits.
21. As noted above the petitioners have challenged the validity of (1) Section 42(e) of the Act; (2) Notification Ex. 2 issued by the Excise Commissioner on May 25,1985, and; (3) Conditions 1 (Ga) and 22(Kha) of the licence. Section 42(e) is challenged because the provision under which the notification Ex. 2 was issued was mentioned as Clause (e) of Section 42. I have, therefore, to examine whether the source lies in Section 42(e) of the Act or else where. First of all, therefore, I propose to deal with the challenge to the validity of the notification Ex 2. Before I do so, it would be necessary to glance through the relevant provisions of the Act and the Rules.
22. The object of the Act as given in the preamble and its long title is to enact for Rajasthan a uniform law relating to the import, export, transport, manufacture, sale and possession of intoxicating liquor and of intoxicating drugs. Prior to the integration of the princely States in Rajasthan, the covenanting States had separate Statutes and, therefore the present Act was enacted to consolidate and amend the law relating to intoxicating liquor and drugs for the entire State The purposes of the Act have to be understood in the light of Article 47 of the Constitution which mandates the State to endeavour to bring about prohibition of the consumption of intoxicating drinks and of drugs which are injurious to health. Seen in this light, the objective is clear that the State has to proceed towards complete prohibition of the consumption of intoxicating drinks and drugs. In the present case, we are concerned with the sale of excisable article. The term 'excisable article' has been defined in Section 3(4) of the Act to mean and include:
(i) spirit, fermented liquor or any alcoholic liquor for human consumption or denatured spirit or denatured spirituous preparation; or
(ii) any intoxicating drug; or
(iii) stills or other appliances for distillation; or (iv) fermented wash or other material for distillation; or
(v) any other article which the State Government may, from time to time declare to be an excisable article for the purposes of this Act.
Section 5 empowers the State Government to declare what quantity of excisable article shall be the limit of sale by retail and the State Government by (notification issued in that behalf has declared the limits of such sale.
23. By Section 8, the control of the administration of the Excise Department vests in the Excise Commissioner, Chapter-Ill consisting of Sections 11 to 15 deal with import, export and transport of excisable article, with which, we are not concerned. Chapter IV deals with the manufacture, possession and sale of excisable article and it is relevant. Section 16 provides that no excisable article shall be manufactured and that no liquor shall be bottled for sale except under the authority and subject to the terms and conditions of a licence granted in that behalf by the Excise Commissioner. Section 17 authorises the Excise Commissioner to establish or licence the construction and working of a distillery and also to establish or licence a warehouse wherein any excisable article may be deposited and kept. Section 19 provides that no person not being a licensee shall have in his possession any quantity of excisable article in excess of the quality declared by the State Government to the limit of sale by retail except under a permit granted by the Excise Commissioner. Section 20 prohibits the sale of excisable article except under a licence granted by the Excise Commissioner. Section 21 lays down that no excisable article shall be sold otherwise than in accordance with the terms and conditions of a licence. Section 24 empowers the Excise Commissioner to grant a licence for the exclusive privilege of manufacturing or of supplying by wholesale, or by retail country liquor or intoxicating drug. Section 28 invests the State Government with the power to impose excise duty or a counter-vailing duty. Under Section 30, the Excise Commissioner may instead of or in addition to any duty leviable under Chapter-IV may accept payment of a sum in consideration of the grant of the licence for exclusive privilege. Section 31 empowers the State Government to prescribe by rules forms of licence to be granted under this Act. It also authorises the State Government to prescribe by rules, the authority which may grant such licence and also to prescribe payment of fees, restrictions and conditions subject to which such liecnce may be granted. Section 33 provides that the authority granting a licence may require the grantee to execute a counter part agreement in conformity with the tenor of his licence and to give such security for the performance of such agreement. Sections 34 and 35 lay down the powers and procedure for cancelling or suspending the licence. Section 41 empowers the Government to make rules for the purpose of carrying out the provisions of this Act and Section 42 empowers the Excise Commissioner to make rules subject to the previous sanction of the State Government. Clause (e) of Section 42 is the subject matter of challenge in these writ petitions and it would be relevant to quote the entire section here in under:
42. Power of Chief Excise Authority to make rules-The Excise Commissioner may, subject to the previous sanction of the State Government make rules:
(a) regulating the manufacture, supply, storage or sale of any excisable article including-
(i) the erection, alteration, repair, inspection supervision, management and control of any place for the manufacture, supply, storage or sale of such article or drug, and the fittings, implements and apparatus to be maintained therein;
(ii) the cultivation of the hemp plant (Cannabis Sativa);
(iii) the collection of portions of the hemp plant (Cannabis Sativa) from which many intoxicating drugs can be manufactured and the manufacture of any intoxicating drugs there form;
(iv) the bottling of liquor for the purpose of sale;
(b) regulating the deposit of any excisable article in a warehouse and the removal thereof from any such warehouse or from any distillery pot-still or brewery;
(c) prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass or of the storing of any excisable article;
Explanation-Fees may be prescribed under this sub-clause at different rates for different clauses of licence, permits passes or storage and for different areas.
(d) regulating the time place and manner of payment of any duty or fee;
(e) prescribing the restrictions under and the conditions on which any licence, permit or pass may be granted including, provisions for the following matters:
(i) the prohibition of the admixture with any excisable article of any substance deemed to be noxious or objectionable:
(ii) the regulation or prohibition of the reduction of liquor by a licensed manufacturer or licensed vendor from a higher to a lower strength;
(iii) the fixing of the strength, price or quantity in excess of or below which any excisable article shall not be sold or supplied or possessed and of the quantity in excess of which denatured spirit shall not be possessed, and of the prescription of a standard of of quality for any excisable article;
(iv) the prohibition of sale except for cash;
(v) the fixing of the days and hours during which any licensed premises may or not be kept open, and the clauses of such premises on special occasions;
(vi) the specification of the nature of the premises in which any excisable article may be sold and the notices to be exposed at such premises;
(vii) the form of accounts, to be maintained and the returns to be submitted by licence holders; and
(vii) the regulation of the transfer of licences;
(f)(i) declaring substance and the process by which spirit manufactured in India shall be denatured;
(ii) for causing such spirit to be denatured through the agency or under the supervision of Excise Officer;
(iii) for ascertaining whether such spirit has been denatured.
(g) providing for the destruction or other disposal of any excisable article deemed to be unfit for use;
(h) regulating the disposal of confiscated articles.
The rest of the provisions in the Act deal with powers and duties of Officers; offences and penalties and other miscellaneous matters which are not relevant or our purposes in this case.
24. By exercising the powers conferred by Section 41, the State Government made the Rajasthan Excise Rules, 1956 (hereinafter referred to ('the Rules'). Chapters VI, VII and VII-A deal with the licences e.g. Retail licences (general), procedure for auction, licence under the guarantee system. Chapter VII-B contains provisions concerning licences. Rule 67-I provides hat the licence for the exclusive privilege may be granted by the Excise Commissioner on condition of payment of a lump sum. It also authorises the excise Commissioner to lay down terms and conditions subject to which the cense is granted. Rule 67-I reads as under:
67-I. Licence on payment for exclusive privilege: (I) licence for exclusive privilege of selling country liquor by retail within any local area under Section 24 may be granted on condition of payment of such lump sum instead of or in addition to excise duty, as may be determined by the Excise Commissioner and subject to such other terms and conditions as may be laid down by him.
(2) Licence for exclusive privilege of selling by retail country liquor at a shop may be granted either-
(a) by negotiations with the existing licences;
offer under Sub-rule (1), or where no offer is made under Sub-rule (1) on account of any general or special direction of the Excise Commissioner, make an offer to any other person for the grant of a licence on the same terms and conditions as those, contained in the other offer under Sub-rule (1);
(b) by auction;
(c) by inviting sealed tenders;
(d) by negotiation with the third parties (persons other than existing licensees).
(3) Nothing in these rules shall prevent adoption of any of the above methods in any order in respect of any shops or categories of shops or adoption of different methods for different categories of shops,
Rule 93 authorises the Excise Commissioner to prescribe forms for any licence to be issued under the Rules.
25. In exercise of the powers conferred by Section 42 of the Act and Rule 93 of the Rules, the Excise Commissioner has prescribed the various forms of licences and has also prescribed terms and conditions of such licences. Form C.I. (1) G is a form of retail sale licence and Form C.L. (1) E is a form of whole-sale licence. By notification dated 25th January, 1983 the Excise Commissioner also prescribed the conditions of the licences to be granted from April 1, 1983.
26. Thus in short is the scheme of the Act and Rules.
27. Another aspect which has to be taken note of is that by exercising the powers conferred by Section 42 of the Act, the Excise Commissioner made the Rajasthan Issue & Sale Prices of Country Liquor Rules, 1964 (here in after referred to as 'the Issue Price Rules'. The amendment made in these rules by the notification dated 25th May, 1985 is the subject matter of challenge in these writ petitions. It would, therefore, be appropriate to quote in full the Issue Price Rules:
'Short title: (1) These rules may be called the Rajasthan Issue and Sale Prices of Country Liquor Rules, 1964;
(2) They shall come into the force on and from 1st April, 1964;
2. Issue Price: The issue price of different varieties of country liquor, that is, the price at which the country liquor will be issued from Government Warehouse to the retail licensees shall be as under:
S. Variety of Liquor Strength Issue Price/No. bulk litres(1) KesarKasturi 5 U.P. Rs. 30.00(2) Gulab (Light caramel colour) 35 U.P. Rs. 14.40(3) Soda (Tinge of light caramel colour) 45 U.P. Rs. 10.40(4) Sathiya (Dark caramel colour) 60 U.P. Rs. 6.00Note: The rate of issue prices are exclusive of the price of containers.
3. Sale Price: There shall be no restriction on the retail sale price chargeable by a retail sale licensee.
Provided that the sale price chargeable by a retail sale licensee in Tribal Sub-plan areas and Tehsils of Shahabad and Kishanganj of Kota District shall be as under:
Maximumretail saleS.No. Variety of liquor Strength price perbottle of750 ml.(1) Keshar Kasturi 5 U.P. Rs. 42.00(2) Gulab (light caramel colour) 35 U.P. Rs. 22.00(3) Soda (Tinge of light caramel colour) 45 U.P. Rs. 17.00(4) Sathiya (Dark caramel colour) 60 U.P. Rs. 11.00Note: The above rates of retail sale prices are inclusive of the price of container.
Now I take up the challenge to the Notification (Ex, 2) dated 25th May, 1985.
Notification dated 25th May, 1985 (Ex. 2): Validity of
28. By the notification dated 25th May, 1985 the Excise Commissioner, with the previous sanction of the State Government, has made the following amendment in the Issue Price Rules:
In the Rajasthan Issue and Sale Price of Country Liquor Rules, 1964-for Rule 2, the following shall be substituted, namely:
(2) Issue Price: The issue price of different varieties of country liquor that at the price at which the country liquor will be issued from Government Warhouse to the retail licensees shall be as under:
S. Variety of Liquor Strength Issue price perbulk literes(1) Kesar Kasturi 5 U.P. Rs. 34.62(2) Gulab (light caramel colour) 35 U.P. Rs. 16.92(3) Soda (Tinge of light caramel colour) 45 U.P. Rs. 12.53(4) Sathiya (Dark caramel colour) 60 U.P. Rs. 7.56Note: (1) The rules of issue prices are exclusive of the prices of containers.
(2) There will be no change in the issue price of the country liquor shops situated in tribal sub-plan areas, and in two Tehsils of Shahabad and Kishanganj of Kota District.
The effect of the newly substituted rule is that the issue price of different varieties of country liquor was enhanced with effect from the date of the notification i.e. May 25, 1985. The counsel for the petitioners have challenged the validity of this Notification on the grounds:
(1) that the notification was wholly ultra vires the powers of the Excise Commissioner under Section 42(e) of the Act;
(2) that the Excise Commissioner had no jurisdiction to issue the Notification during the currency of the licence period;
(3) that the notification was not made applicable in the tribal sub-plan areas in two Tehsils of Shahabad and Kishanganj of Kota District and as such it was discriminatory and violative of Article 14 of the Constitution; and
(4) that the notification does not give any indication as to how and on what basis the issue price was raised during the currency of the licence and the present increase was quite unjustified.
29. It may be pointed out that in the notification the source of power to amend the said rule is mentioned as clause(e) of Section 42 of the Act. The learned Counsel for the petitioners have contended that Clause (e) of Section 42. authorises the Commissioner to prescribe restrictions and the conditions on which a licence may be granted and it could be done at the time of granting the licence or prior to it but not. after the licence has already been granted. Referring specifically to the expression 'fixing of the strength, price or quantity in excess of or below which any excisable article shall not be sold occurring in Sub-clause (iii) of Clause (e) the learned Counsel has further urged that this expression authorises the Excise Commissioner to fix the maximum and the minimum price of the excisable article and he did not possess the power to prescribe a fixed price for the same. The counsel has in this connection referred to-(1) Principles of Statutory Interpretation b G.P. Singh Page 66, Jugal Kishore Saraf v. M/s. Raw Cotton Co. Ltd. AIR 1955 SC 879 S. Narayanswami v. G Paneerseham and Ors. AIR 1972 SC 2204, State of Uttar Pradesh v. Singhara Singh and Ors. AIR 1954 SC 358 and S.B. Civil Writ petition No. 587 of 1974 decided on August 25 1980 and by reference to these cases he has submitted that ordinarily the rule of 'Plain meaning or 'literal construction should be applied for construing the aforesaid expression and that its ambit should not be extended to meet a case for which a provision has not been made in the statute. He has further urged that the things must be done in the mode provided by the statute or not at all According to the learned Counsel the aforesaid expression does not vest in the Excise Commissioner a power to prescribe a fixed issue price.
30. The Additional Advocate General has, on the other hand, tried to sustain the validity of the Notification by reference to the power under Section 42(e) of the Act. According to him, the power to prescribe restrictions and conditions on which any licence may be granted includes the power to frame a rule prescribing the fixed issue price of different varieties of country liquor and it also comprehends in the Excise Commissioner the power to revise the same from time to time. The Additional Advocate General has submitted that the expression 'fixing of the price in excess of or below which any excisable article shall not be sold' used in Clause (iii) of Clause (e) of Section 42 is meant to authorise the Excise Commissioner to make a provision fixing a price in excess of or below which any excisable article shall not be sold. According to him this vests in the Excise Commissioner the power to fix a price and the expression 'in excess of or below which an excisable article shall not be sold' is meant to be observed by the dealers. In other words, urges learned Counsel, what the Excise Commissioner has to do is to fix a price and when the price is so fixed under this clause, then it would not be open to the dealers to sell the excisable article at a price in excess of or below the price so prescribed by the Excise Commissioner.
31. There is considerable force in the submission of the learned Counsel for the petitioners that the power of making the 'Issue Price Rules' cannot be founded on Clause (e) of Section 42 of the Act. Clause (e) of Section 42 authorises the Excise Commissioner to make rules prescribing the 'restrictions under and the conditions on which a licence may be granted. The subject which is dealt with by this clause is the issuance of a licence, permit or pass and the restrictions and conditions which can be prescribed under this clause are meant to govern the licence, etc. On a plain reading, this clause does not include the power to make rule prescribing the issue and sale price of the country liquor. In this view of the matter it is not necessary at this stage to examine the contention of the learned Counsel for the petitioners that the aforesaid expression in Clause (iii) empowers the Excise Commissioner to make a provision regarding the maximum and minimum price of the excisable article and not a fixed price at which it will be sold at the various warehouses. To the extent that the power to make the 'Issue Price Rules' cannot be traced to Clause (e) of Section 42 of the Act, I agree with the arguments of the counsel for the petitioners but the controversy does not end here. The principle is well settled that if the power to make a rule can be sustained under some other provision in the Act, the mention of a wrong provision would not vitiate the rule. The mere mention of a wrong section or clause would not invalidate the action itself, if it could be justified under some other provision. In Hukam Chand Mills Ltd. v. State of M.P. and Anr. AIR 1964 SC 1329 Wanchoo, J. as he then was, said:
It is true that in the opening part of the notification it is said that the amendments were made under Rule 17 of the Tax Rules; but that in our opinion would not conclude the matter, for if the Government had the power to make amendments under Act 1 of 1948. the amendments in the Rules could be justified under that power in spite of the wrong words used in the opening part of the notification of December 28, 1949. It is well settled that merely a wrong reference to the power under which certain actions are taken by Government would not per se vitiate the actions done if they can be justified under some otter power under which the Government could lawfully do these acts. It is quite clear that the Government had the power under Section 5(1) and (3) of the Act I of 1948 to amend the tax Rules, for that was a law in force in one of the merged States. The only mistake that the Government made was that in the opening part of the notification Section 5 of the Act was not referred and the notification did not specify that the Government was making a regulation under Act I of 1948. But in our opinion it would make no difference to the validity of the amendments, if the amendments could be validity made under Section 5 of the Act of 1 of 1948. It is not disputed that the amendments could be validity made under Section 5 of the Act 1 of 1948.
32. In India Aluminium Co. v. K.S.E Board AIR 1975 SC 1967 P.N. Bhagwati, J. (as he then was) observed:
But if there is one principle more well settled than any other, it is that, when an authority takes action which is within its competence, it cannot be held to be invalid merely because it purports to be made under a wrong provision, if it can be shown to be within its power under any other provision. A mere wrong description of the source of power-a mere wrong lable-cannot invalidate the action of an authority, if it is otherwise within its power.
33. In Union of India v. Tulsi Ram Patel(l 4), the Supreme Court again held:
Similarly, if a source of power exists by reading together two provisions, whether statutory or constitutional, and the order refers to only one of them, the validity of the order should be upheld by construing it as an order passed under both those provisions. Further, even the mention of a wrong provision or the omission to mention the provision which contains the source of power will not invalidate an order where the source of such power exists.
34. I have, therefore, to see whether the Excise Commissioner has a power to frame the Issue Price Rules under any provision other than Clause (e) of Section 42 of the Act. I may in this connection refer to Clause (a) of Section 42 of the Act which vests in the Excise Commissioner, with the previous sanction of the State Government, the power to make rules regulating the manufacture, supply storage or sale of any excisable article. The expression 'regulating the supply and sold' is of vide import and comprehends the power to make rules governing the price at which country liquor should be supplied to the retail licensees from the Government warehouses. The word 'regulating' came to be construed by the Supreme Court in K. Ramanathan v. State of T.N. 1905 (2) SCC 116. The Supreme Court observed that the word 'regulating' was a word of broad import, having a broad meaning and was very comprehensive in scope. Dealing with the word 'regulating' in Clause (d) of Sub-section (2) of Section 3 of the Essential Commodities Act, 1955 the Supreme Court held-
We find no lawful justification for giving a restricted meaning to the word 'regulating' in Clause (d) of Sub-section (2) of Section 3 of the Act as not to take in 'prohibiting.
He was said that a word takes its colour from the context and may in a particular setting comprehend the power to exercise control, ex gratia, fixing a controlled price. In paras 19 and 23 of the report, A.P. Sen, J. said:
It has often been said that the power to regulate does not necessarily include the power to prohibit, and ordinarily the word 'regulate' is not synonymous with the word 'prohibit'. This is true in a general sense and in the sense that mere regulation is not the same as absolute prohibition. At the same time, the power to regulate carries with it full power over the thing subject to regulation and in absence of restrictive words, the power must be regarded as plenary over the entire subject. It implies the power to rule, direct and control and involves the adoption of a rule or guiding principle to be followed, or the making of a rule with respect to the subject to be regulated. The power to regulate implies the power to check and may imply the power to prohibit under certain circumstances, as where the best or only efficacious regulation consists of suppression. It would therefore appear that the word 'regulation' cannot have any inflexible meaning as to exclude 'prohibition. It has different shades of meaning and must take its colour from the context in which it is used having regard to the purpose and object of the legislation, and the court must necessarily keep in view the mischief which the Legislature seeks to remedy.xxx xxx xxx xxx xxxThe power to regulate or prohibit, supply and distribution of, and trade and commerce in, essential commodities may be exercised in innumerable ways. One of the ways in which such regulation or control over the production, supply and distribution of, and trade and commerce in, an essential commodity like food stuffs may be exercised is by placing a ban on inter-State or intera State movement of foodstuffs to ensure that the excess stock of foodstuffs held by a wholesale dealer, commission agent or retailer is not transported to places outside the State or from one district to another with a view to maximise the procurement of such food stuffs from the growers in the surplus areas for their equitable distribution at fair prices in the deficit areas. The placing of such ban on export of foodstuffs across the State or from one part of the State to another with a view to prevent out flow of food stuffs from a State which is a surplus State prevents the spiral rise in prices of such foodstuffs by artificial creation of shortage by unscrupulous traders. But such control can be exercised in a variety of ways wise than by placing compulsory levy on the producers, for example, by fixing a controlled price for foodstuffs, by placing a limit on the stock of foodstuffs to be held by a wholesale dealer, commission agent, or retailer, by prohibiting sales except in certain specified manner, etc. These are nothing but regulatory measures.
35. The Scheme of the Act reveals that the Act is both prohibitory as well as regulatory. The Act was passed in 1950. Prior to the formation of Rajasthan, the princely States had separate statutes. The object of the Act, as reflected in its preamble was t 6 consolidate and amend the law relating to import, export, transport, manufacture, sale and possession of intoxicating liquor and of intoxicating drugs. Read in the light of Article 47 of the Constitution which provides that the State shall endeavour to bring about prohibition of the consumption of intoxicating drinks and of drugs which are injurious to health the various provisions of the Act have to be understood and interpreted in a manner which help the chariot of reform to move forward. The Act is a social welfare legislation. As pointed out by Morataza Fazal Ali, J. in State of Kerala and Anr. v. N.M. Thomas and Ors. AIR 1972 SC 2204.
The directive principles form the fundamental feature and the social conscience of the Constitution and the Constitution enjoins upon the State to implement these directive principles.
It is unfortunate that a segment of our society is addict to alcoholism and despite the mandate of Article 4 the State has not been able to introduce total prohibition. However, the constitutional directive is clear. The statute obliges the Government to move and march towards complete prohibition. Indeed, as observed by Chandrachud, J. as he then was, in Harshanker's case (supra).
The liquor traffic is not something which is licensed for the purpose of promoting it. Indeed, licence fees may be exected in amounts intended to discourage participation in the business. The courts have suite generally refused to hold that the licence fee imposed, merely because it is large, is a tax, where the object is to control, regulate and restrict and not to encourage the liquor traffic, the revenue being the result of the system and not the motive for its adoption.... The higher the fee imposed for a licence, it is sometimes said, the better the regulation, as the effect of a high fee is to keep out of the business those who are undesirable, and to keep within reasonable limits the number of those who may engage in it.
The liquor business is not to be encouraged but confined and restrained. Fixation of price is certainly a measure to ensure proper control over the manufacture, sale and supply of country liquor. The word 'regulating' occurring in Clause (a) of Section 42 of the Act needs to be given a broad meaning to comprehend within its sweep the power to fix the price of the excisable article. It must, therefore, be held that the power to make the Rajasthan Issue and Sale Prices of Country Liquor Rules, 1964, flows from Clause (a) of Section 42 and as a corollary of this the source of power to issue the notification dated 25th May, 1985 would also be derived from this clause. The amendment in the Issue Price Rules sought to be made by the notification dated 25th May, 1985 cannot therefore, be held to be bad or invalid. The power is located in Clause (a) of Section 42 and the notification Ex. 2 cannot be struck down for want of statutory authority.
36. The view I have taken also dispose of the contention of the learned Counsel for the petitioners that the Excise Commissioner bad no jurisdiction to issue the notification during the currency of the licence. This contention was based On the premise that the source of power was derived from Clause (e) of Section 42 of the Act and that this clause could be invoked before or at the time of the grant of the licence and not afterwards. As I have held that the power to make the Issue Price Rules flows from Clause (a) and not Clause (e) of Section 42 of the Act, the contention urged by the counsel for the petitioners stands repelled.
37. Now coming to the question, whether the Notification violates Article 14 of the Constitution, being discriminatory in nature, I may at this stage quote Note No. 2 appended to the substituted Rule 2. Note No. 2 reads:
There will be no change in the issue price of the country liquor shops situated in tribal sub-plan areas and in two tehsils of Shahabad and Kishanganj of Kota District.
True, the effect of this Notification is that the Issue Price rates changed by the substituted rule applies to the shops in the areas served by the petitioners while the shops situated in tribal sub-plan areas and in the tehsils of Shahabad and Kishanganj are exempt from its operation. According to the counsel for the petitioners this renders the notification discriminatory. In support of this submission the learned Counsel referred to the case of P.N.Kaushal v. Union of India AIR 1978 SC 1457 where in the Supreme Court held:
An important undertaking by the State. We must here record an undertaking by the Punjab Government and eliminate a possible confusion. The amended rule partially prohibits liquor sales in the sense that on Tuesdays and Fridays no hotel, restaurant or of r institution covered by it shall trade in liquor. But this prohibitions made non-applicable to like institutions run by the Government or its agencies. We, prima facie, felt that this was discriminatory on its face. Further, Article 47 charges the State with promotion of prohibition as a fundamental policy and it is indefensible for Government to impose prohibition restrainst on others and itself practice the opposite and betray the constitutional mandate. It suggests dubious dealing by State power. Such hollow homage to Article 47 and the Father of the nation gives diminishing credibility mileage in a democratic polity. The learned Additional Solicitor General, without going into the correctness of propriety of our initial view probably he wanted to controvert or clarify readily agreed that the Tuesday-Friday ban would be equally observed by the State organs also. The undertaking recorded, as part of the proceedings recorded, as part of the proceedings of the Court runs thus:
The Additional Solicitor General appearing for the State of Punjab states that the Punjab State undertakes to proceed on the footing that the 'Note' is not in force and that they do not propose to rely on the 'Note' and will, in regard to tourist bungalows and resorts run by the Tourism Department of the State Government, observe the same regulatory provision as is contained in the substantive part of Rule 37, Sub-rule (9). We accept this statement and treat it as an undertaking by the State Formal steps for deleting the 'Note' will be taken in due course.'
Although a Note can be law, here the State concedes that it may not be treated as such. Even otherwise, the note is plainly severable and the rule independently viable. Shri A.K. Sen who had raised this point at the beginning allowed it to fade out when the State's undertaking was brought to his notice. The vice of discrimination, blotted out of the law by this process may not be sufficient, if the traditional approach were to be made to striking down; but if restructuring is done and the formal process delayed, there is no reason to quash when the correction is done. Courts try to save, not to scuttle, when allegiance to the Constitution is shown.
The Additional Advocate General, has, however submitted that the note exempting the tribal sub-plan areas and the tehsils of Shahahad and Kishanganj was deleted by a subsequent notification dated 8th April, 1986, published in the Rajasthan Rajpatra dated 15th April, 1986. According to the Additional Advocate General, there is no discrimination as the objectionable part, if any, now stands withdrawn like the case of P.N. Kaushal AIR 1978 SC 1457. The notification dated 8th April, 1986 is set out below:
G.S.R. 3.-In exercise of the powers conferred by Clause (e) of Section 42 of the Rajasthan Excise Act, 1950 (Rajasthan Act 2 of 1950), the Excise Commissioner with the previous sanction of the State Government hereby makes with immediate effect, the following Amendments in the Rajasthan Issue and Sale Prices of Country Liquor Rules, 1964, namely:
AMENDMENTS
In the said rules:
(1) the existing Note (2) of Rule 2 shall be beleted.
(2) the Rule 3, the existing proviso shall be substituted as under: 'Provided that the sale price chargeable by retail sale licence in Tribal sub-plan areas and Tehsils of Shahabad and Kishanganj of Kota District shall be as under with effect from 25-5-85.
Maximumretail saleS. Variety of Liquor Strength price perNo. bottle of750 ml.(1) Kesar Kasturi 5 U.P. Rs. 50.00(2) Gulab (light caramel colour) 35 U.P. Rs. 27.00(3) Sada (Tinge of light caramel colour) 45 U.P. Rs. 21.00(4) Sathiya (Dark caramel colour) 60 U.P. Rs. 15.00Note: The above rates of retail sale price are inclusive of the price of container.
The Additional Advocate General further submitted that even otherwise the Tribal Sub-plan areas and the Tehsils of Shahabad and Kishanganj constitute a separate class. The system in these areas is quite different. The licences held by the petitioners are that of exclusive privilege, while the sale in these excluded areas is by commission. There is a control of price on the sale of country liquor in the excluded areas, whereas no restriction on the price to be charged by a retail sale licensee is placed in the areas served by the petitioners. Sub-rule (3) of the Issue Price Rules provides:
3. Sale Price. There shall be no restriction on the retail sale price chargeable by a retail sale licensee.
Provided that the sale price chargeable by a retail sale licensee in Tribal sub-plan areas and Tehsils of Shahabad and Kishanganj of Kota District shall be as under:
Maximumretail saleS. Variety of Liquor Strength price perNo. Bottle of750 ml.(1) Keshar Kasturi 5 U.P. Rs. 42.00(2) Gulab (Light caramel colour) 35 U.P. Rs. 22.00(3) Soda (Tinge of light caramel colour) 45 U.P. Rs. 17.00(4) Sathiya (Dark caramel colour) 60 U.P. Rs. 11.00Note: The above rates of retail sale price are inclusive of the price of container.
From the above it is evident that whereas no restriction on the retail sale price is placed on a retail sale licensee under the exclusive privilege system, a maximum retail sale price to be charged by a retail sale licensee in the tribal sub-plan areas and the tehsils of Shahabad and Kishanganj has been fixed by the Issue Price Rules. The liquor dealers of these tribal sub-plan areas and Tehsil of Shahabad and Kishanganj forma separate class and are not in similarly circumstances with those governed by the issue price fixed under Rule 2. Thus the case of discrimination is not mande out and Article 14 is obviously not attracted.
38. Taking up the contention of the petitioners that the rise in the issue price effected by the notification dated 25th May, 1985 is arbitrary and unjustified, it may, at the outset, be made clear that the fixation of issue price was done by the Excise Commissioner in the exercise of his rule making power conferred by Clause (a) of Section 42 of the Act. The increase in the issue price is also in the exercise of the same statutory power. The fixation of price depends on several factors. It is not solely dependent on the cost of production. True, the cost of production is one of the elements which has to be taken into account while fixing the issue price but there are other equally important circumstances which have to be kept in view. As already seen the sale of liquor is not one which needs to be encouraged. The old habits of a section of our society who are addict to alcohol obliges the Government to continue the manufacture, supply and sale of liquor because, if it is totally stopped, there is a danger that this segment may resort to consumption of illicit liquor, more hazardous to the health and life of our society. The mission of Article 47 is complete prohibition and therefore, in the matter of fixing issue price of excisable article under Clause (a) the Excise Commissioner must keep in mind the objective that the consumption of liquor and drugs is to be brought to a stop. Further, as held by the Supreme Court in Cooverjee B. Bharucha v. Excise Commissioner and Anr. AIR 1954 SG 220 an important purpose of selling the exclusive right to sell liquor in wholesale or retail is also to raise revenue. It would thus be seen that the fixation of price depends on several factors and the Excise Commissioner who is the highest authority on the subject is the best judge to decide that should be the price structure of the excisable article and to what extent any increase in the price would be justified. It is not for this Court to enter into a detailed enquiry as to whether the rise in the price is justified or not. The variation in the issue price has been made by amendment of the statutory rule with the previous sanction of the State Government and nothing special or exceptional has been shown by the petitioner to warrant an interference by this Court in the matter of fixation of the issue price.
39. However, in the present case the respondents have made an attempt to justify the increase made in the issue price by notification dated 25th May, 1985 by showing that the rise conforms to the increase in the cost of production incurred by the Ganganagar Sugar Mills. In the affidavit of Shri Prem Prakash Bidiyased District Excise Officer, it is stated that the increase in the price made by the notification dated 25th May, 1985 was the first after 1981. Country liquor is manufactured at the Ganganagar Sugar Mills, an undertaking of the Government of Rajasthan. The rectified spirit and molasses which are the essential raw material for-manufactring liquor are purchased in open market from outside Rajasthan The price of rectified spirit has increased from Re. 1.40 to Rs. 3.25 per litre and the export pass fee from Re. 1/- Rs. 2.15 per litre; The Ganganagar Sugar Mills has to pay Rs. 1550/-per metric tonne of molasses as against Rs. 980/- per metric tonne which was being paid previously. There was increase in the rates of electricity and water charges. The transport charges and the wages of the labour have also increased. All these factors necessitated an immediate increase in the issue price. The Excise Department is required to pay Rs. 6/- L.P. Litre to the Ganganagar Sugar Mills as against Rs. 2.62 per L.P. Litre. According to the respondents the issue price was raised to meet the increase in the cost of production. On the other hand the petitioners have submitted that the cost of liquor had not increased to the extent the issue price was enhanced. They denied the averments of the respondents that the price of the rectified spirit and molasses had increased to the extent stated in the affidavit of Shri Prem Prakash. According to them the rectified spirit was available for much lesser price, as also the molasses rectified spirit at rate of Rs. 21 to Rs. 250 per litre and molasses for Rs. 1100/-to Rs. 1200/- per metric tonne. The petitioner further submitted that the cost of production by the Ganganagar Sugar Mills comes to Rs. 3 81/-per L.P.L. whereas the respondents are claiming it as Rs. 6/- per L.P.L. just to recoup the past losses. According to the petitioners the rise in the price was quite arbitrary, unreasonable and unjustified.
40. During the course of arguments the Additional Advocate General made an attempt to justify the increase in the issue price by showing that the issue price of the liquor is composed of three elements, namely, (a) cost of liquor; (b) wholesale margine money; and (c) amount in lieu of exclusive privilege to sell. The component of exclusive privilege amount was 80% of the issue price and that was the reason that 80% rebate was given to the licensees. On account of the increase in the price of rectified spirit, molasses, permit fee to be paid to other States and the incidental charges, the cost of liquor considerably increased and this necessitated increase in the issue price. Taking an example of 100 litre of 60 UP, the Additional Advocate General has explained the three components as per the cost of January 1, 1985 as under:
Issue Price of 100 litre of 60 UP. Rs. 600/-(a) Cost of liquor reimbursed to Ganganagar Rs. 85/-Sugar Mills(b) Margine of wholesale to be retained by Rs. 35/-the warehouses(c) Exclusive privilege amount Rs. 480/-Total Rs. 600/-
The Additional Advocate General argues that out of the total cost of Rs. 600/-the Excise department was getting Rs. 480/- which is 80% of the total issue price. The rebate allowed to the licensee was, therefore, fixed at 80% On account of the increase 100 litres of 60 U.P. would now cost Rs. 756/- at the revised rate of issue price of country liquor. Out of this amount of Rs. 756/-the State Government would have to reimburse a sum of Rs. 241/-as cost of liquor to the Ganga, nagar Sugar Mills. The three components of the amount of Rs. 456/- would be as under:
(a) Cost reimbursed to Ganganagar Sugar Mills Rs. 241/-(b) Wholesale margin money Rs. 35/-(c) Exclusive privilege amount Rs. 480/-Total Rs. 756/-
The argument of the Additional Advocate General thus proceeds that the above break up shows that the wholesale margin and the exclusive privilege amounts remains the same and it is only the cost factor that has increased. If 80% rebate is given to the licensees as per the revised issue price as on 25th May, 1985 it would mean that the licensees would be getting Rs. 600/- as rebate out of the total issue price paid by them. The cost of liquor which the department has to re-imburse to the Ganganagar Sugar Mills would be Rs. 241/- and, therefore, the State Government would suffer loss of Rs. 90/-in its exclusive privilege amounts and Rs. 35/- in the wholesale margin money, total loss Rs. 125/- on 100 litre of 60 UP. It was, therefore, urged that the claim of the petitioners for allowing them the rebate of 80% at the revised issue price as per the notification dated 25th May, 1985, cannot therefore, be allowed by the Government.
41. The question whether the increase in the issue price made by the Excise Commissioner conforms to the rise in the cost of production incurred by the Ganganagar Sugar Mills involves disputed questions of fact and a petition under Article 226 is not a proper forum to adjudicate such questions The Excise Commissioner and the State Government are the best judge to decide the rate of price of liquor to be sold from the warehouses and this is not a matter which can appropriately be gone into in this Court while exercising its extra ordinary jurisdiction under Article 226 of the Constitution. It is not possible to hold as urged by the petitioners that the increase in the issue price of country liquor effected by the notification dated May 25, 1985 was arbitrary, unreasonable or unjustified. The contention of the learned Counsel for the petitioners has no force.
42. On the view, I have taken above, that the source of power of the Issue Price Rules and the Notification Ex. 2 dated 25th May, 195 amending Rule 2 of the said Rules is located in Section 42(a) and not 42(e) of the Act, it is not necessary to examine the constitutional validity of Section 42(e) challenged by the petitioners in this group writ petitions.
43. However, I heard the learned, counsel for the parties on the question relating to the validity of Section 42(e) and it would be proper if I deal with the said question.
Section 42(e) of the Act-Validity of
44. Section 42(e) has been assailed on the ground that it confers arbitrary and ungriddled powers in the Excise Commissioner without any guidelines for the same.
45. Section 42 confers in the Excise Commissioner the rule making power in respect of matters mentioned in the various sub-clauses of this section. The matters covered by the various sub-clauses are such which need flexibility in view of the varying economic and social conditions. The Excise Commissioner and the State Government are the best judge to decide what regulatory measures in the matters of manufacture, supply, storage and sale of excisable article would advance the object and purposes of the Act and what kind of restrictions and conditions in the grant of licence would be needed to meet the prevalent situations and circumstances. The Excise Commissioner is the Chief Excise Authority under the Act. The control of the administration of the Excise Department vests in him. The rules to be made under this section by the Excise Commissioner are with the previous sanction of the State Government. Thus there is sufficient check on the exercise of powers by the Excise Commissioner in the matter of framing the rules. As regards guidelines, it is well settled that the object, the purposes and the scheme of the Act furnishes a sufficient guideline and in the matter of framing the rules, the Excise Commissioner is expected to be guided by the same. The requirement of previous sanction of the State Government in the matter of framing the rules is a sufficient safeguard provided by the Act and it cannot be said that unfettered, uncanalised or arbitrary power has been upon the Excise Commissioner under Section 42(e) of the Act. I find no substance in the contention of the learned Counsel for the petitioners that Section 42(e) of the Act is ultra vires the Constitution.
Conditions Nos. I (Ga) and (Kha) of the licence-Validity of
46. Dealing with the preliminary objection raised by the Additional Advocate General, I have held that the petitioners are precluded from challenging the validity of the conditions of the licence, which they have fully used and utilised to their advantage. On merits also I find no substance in the challenge to these conditions.
47. The period of the licence under challenge is 1985-86. i.e. from 1st April, 1985 to March 31, 1986. In case of some of the petitioners the licence has not been brought on the record of the case. There is, however, no dispute that the licences granted to the petitioners in all the writ petitions conform to the form No. CL(0G prescribed by the Excise Commissioner under Rule 67-1 read with Rule 93 of the Rules. The petitioners have challenged conditions Nos. 1(Ga) and 22 (Kha) of the licence granted in their favour. In the writ petitions the challenge was directed to the whole of condition No. 1(Ga), but during the course of arguments learned Counsel for the petitioners confined their attack to the expression 'Licence ki Avadhi ke Purya ke Vitiya Vanhki ek January ko Prachalit Dar se' occurring in condition 1 (Ga). Condition No. 1(Ka) obliges the licensee to pay a' stipulated sum for having the licence for the exclusive privilege of selling country liquor, by retail, within the area covered by the licence, during the period mentioned therein. Condition No. 1 (Kha) provides that the license will be inquired to deposit one percent of the stipulated amount Or Rupees one thousand per Shop, whichever is less, at the time of taking the licence. Condition 1(Ga) provides that after the amount required by 1 (Kha) is deposited the balance of the amount, stipulated in 1(Ka) shall be deposited in equal monthly instalments in the Government treasury by the 10th of next month. This condition further provides that the licence shall be entitled to a rebate'of 80% of the value of the quantity of liquor lifted by him during the month from the Government ware hose against the monthly instalment. However, for the purposes of this rule the value of the country liquor lifted by the licence from the Government warehouse shall be calculated at the rate of the issue price current on the first day of January preceding the financial year to which the licence relates. This term incorporated in condition 1(Ga) is the subject of attack in these writ petition.
48. Condition 22(Kha), which again is the bone of contention provides that the Excise Commissioned Shall be entitled to vary the kind, the strength and the issue price of the liquor at any time without showing'any reason for the same and the licensee shall be obliged to abide by the same. The licensee shall not be entitled to claim any compensation or any deduction from the exclusive privilege amount for any loss resulting on account of the variance so made by the Excise Commissioner.
49. Learned Counsel for the petitioners contend that the impugned term in condition 1 (Ga) of the licence is onerous, arbitrary and unreasonable and is liable to be struck down. Similarly, the power conferred by condition No. 22(Kha) in the Excise Commissioner to vary unilaterally the issue price is arbitrary and unreasonable. Learned Counsel further submits that condition 22(Kha) also contravenes Section 29 of the Contract Act and should be declared as null and void.
50. I propose to consider first the submissions of the learned Counsel relating to the contravention of Section 29 of the Contract Act. Section 29 reads thus:
29. Agreements, the meaning of which is not certain, or capable of being made certain, are void.
Relying on Bengal Agency and Stores Syndicate v. T.N. Khanna AIR 1949 Cal. 231 Shri H.M. Parekh, learned Counsel for the petitioners argued that a contract which contains a term that the issue price can be varied by one party unilaterally without any reference to other party would be null and void under Section 29 of the Contract Act as it renders the contract uncertain. In Bengal Agency and Stores Syndicate's it was said:
I will express a tentative opinion, and indicate, at any rate where the law on this point can be found. As at present advised, and although it is not essential for that decision of this case, I am of opinion that a contract in which after a price has been mentioned, the seller has it in his own power to vary that price at will with apparently the consequence that the buyer may either accept his price, or not is no contract at all. I have not looked up the authorities, but the relevant passage will be found in Leake on Contratcs at the beginning of Chap v. ( see Contract of service) Loftus v. Roberts, 1902 18 TLR 532. I am of opinion, that while it is possible to make a contract with an implied term that the price shall be reasonable, while it is possible to make a contract where the price has to be fixed by a third party, it is not possible to make a contract where the price is variable at the option of the seller, so much for the legal effect. On the facts, I am of opinion that the contract was at a fixed price and that was the agreement between the parties. I am further of opinion that Clause (3) of the pointed clauses since for among other reasons it is proper to adopt a construction consistent with legality that Clause 3 is one appropriate to a document of tender and not to a contract of sale.
In the aforesaid case it was observed that the price cannot be left to be varied at the option of the seller. Section 29 lays down that the agreements would be treated as void if the meaning of the same is not certain or which is not capable of being made certain. This section deals with uncertainty in contracts. In order to attract this section it is not enough that it contains terms which are not certain but it must further be shown that the 'contract is incapable of being made certain. This section incorporates the English doctrine that the parties to the contract should be consensus-ad-idem. A contract of sale would not be void just because it provides that the price to be paid shall be fixed by arbitration or by respectable persons. The purpose of Section 29 is to ensure that the parties to a contract are made aware of the precise nature of their mutual rights and obligations arising out of the contract they are entering into. The question for consideration is whether the condition No. 22 (Kha) contains terms which are uncertain and are incapable of being made certain. Both the Conditions 1 (Ga) and 22 (Kha) are part of the licence and were prescribed by the Excise Commissioner under Rules 67-1 and 93 of the Rules read with Section 42 of the Act. Section 42(e), in terms, authorises the Excise Commissioner, subject to the previous sadction of the State Government, to make rules prescribing restrictions and conditions on which any licence may be granted. There is no dispute that these conditions were prescribed by the Excise Commissioner with the previous sanction, of the State Government and the same were published in the Rajasthan Rajpatra Extraordinary, dated 25th January, 1983. The conditions prescribed are thus statutory. The rule contained in Section 29 applied to ordinary contracts where as the excise contracts are special and the norms which apply to ordinary contracts cannot be made applicable to excise contracts.
51. In Cooverjee's case AIR 1954 SG 220 the Supreme Court observed as under:
Elimination and exclusion from business is inherent in the nature of liquor business and it will hardly be proper to apply to such a business principle applicable to traders which all could carry.
53. The same position was stated by the Supreme Court in A mar Chandra Chakraborty v. The Collector of Excise, Govt. of Tripura, Agartala and Ors. (20), where it was said:
Trade or business in country liquor has from its inherent nature been treated by the State and the society as a special category requiring legislative control which has been in force in the whole of India since several decades. In view of the injurious effect of excessive consumption of liquor on health this trade or business must be treated as a class by itself and it cannot be treated on the same basis as other trades while considering Article 14.'
xxx xxx xxx xxx xxxPrinciples applicable to trades which all persons carry on free from regulatory controls do not apply to trade or businessman country liquor; this is so because of the impact of this trade on society due to its inherent nature.
After referring to various cases decided by the Supreme Court, Chandra Chud, J., as he then was, said; in Harshanker's case AIR 1975 SC 1121:
These unanimous decisions of five Constitution Benches uniformly emphasized after a careful consideration of the problem involved that the State has the power to prohibit trades which are injurious to the health and welfare of the public, that elimination and exclusion from business in inherent in the nature of liquor business, that no person has an absolute right to deal in liquor and that all forms of dealings in liquor have, from their inherent nature, been treated as a class by themselves by all civilized communities. The contention that the citizen had either a natural or a fundamental right to carry on trade or business in liquor thus stood rejected.
Dealing with the nature of contract created by the licence and the question whether the privilege money can be equated with the issue price, A.N. Ray, C.J. in Pannalal's case (2) observed:
The appellants stipulated to pay lump sum amounts as the price for the exclusive privilege of vending country liquor. The appellants agreed to pay what they considered to be equivalent to the value of the right. Second, the stipulated payment has no relation to the production or manufacture of country liquor except that it enables the licensee to sell it.
xxx xxx xxx xxx xxxThe lump sum amount stipulated under the agreement is not to be equated with issue price. The issue price is payable only when the contractors take delivery of a particular quantity of specified value of country liquor. The issue price relates only to liquor drawn by the contractors and does not pertain to undrawn liquor. No excise duty is or can be collected on undrawn liquor. The issue price is the price at which country liquor is sold to the liquor contractors.
In Jage Ram's case AIR 1980 SC 2018 the Supreme Court again said:
We might add that the concession, if any, made by the Advocate General in the High Court cannot affect the true legal position that the amount which the respondents became liable to pay under the terms of the auction is not excise or still-head duty but is a price which the Government charged for parting with its privilege, during the currency of the period covered by the contract.
xxx xxx xxx xxx xxx...the true position, as stated earlier, is that the amount which the respondents are called upon to pay is not excise duty on undrawn liquor but the price of a privilege for which they offered their bid at the auction of the vend which they wanted to conduct.
The position that emerges from the observations quoted above is that the business of country liquor has been placed in a separate class or category. The norms which apply to normal business do not apply to the business in liquor. The trade in liquor is a separate class by itself. A contract of licence to deal in liquor cannot be equated with other kinds of contracts of ordinary nature. The liquor traffic is not something which is licensed for the purpose of promoting it. The amount stipulated under the terms of the licence is not the issue price of the liquor but a consideration or price for the exclusive privilege of vending country liquor. The amount payable for the exclusive privilege is not to be confused with the issue price.
53. In the present case the agreement entered into by the petitioners is not one for the purchase of liquor from the warehouse, but for holding a licence for the exclusive privilege to sell country liquor for the period and at the places stipulated in the licence? It would not be correct to say that the contract to hold a licence is a contract for the purchase of liquor from the Government warehouse or that the Excise Commissioner is the vendor of the excisable article. The Calcutta case AIR 1949 Cal. 231 has no application to the present case. The conditions of licence are statutory conditions prescribed by the Excise Commissioner in the exercise of his rule making power. No uncertainty iS created in the contract by incorporating in conditions No. 22(kha) the term that the rate of issue price shall be subject to variation to be madeby the Excise Commissioner. The terms of the Contract executed by the petitioners are certain and, in any case, they are capable of being made certain It can not be said that in the agreement there was no consensus-ad-idem The mere fact that there is a stipulation that the prices shall be variable by the Excise Commissioner would not render the agreement void for uncertainty.
54. I do not agree with the contention of the learned Counsel for the petitioners that either of the Conditions 1(Ga) or 22(kha) are unreasonable or arbitrary. As regard the objectional part of condition No. 1 (Ga) it is to be noted that the terms of the licence were prescribed much before the contracts to hold the licence came into being. The privilege of selling country liquor granted by auction or by offer and acceptance much before the goods came into existence. The contracts were settled in the previous year and the privilege amount also was stipulated during the year preceding the contract period The stipulated amount had relation to the circumstances which prevailed during the time the licences were granted. Therefore, the term incorporated in condition 1 (Ga) that the issue price of the country liquor lifted by the licensees shall be valued, for the purposes of rebate in the stipulated amount; according to the rate current during the year preceding the period of the licence cannot be said to be unreasonable. As already said the amount payable for the exclusive privilege is: not to be confused with the issue price. Adjustment by way of rebate in the contractual liability is purely a measure of concession or remission and, if for the purpose of calculating the amount of remission, the quantity of liquor lifted by the licensee is valued at the rate current during the year preceding the' period of licence the contract containing scuh a condition cannot be held to be arbitrary or unreasonable. Mostly the preceding year corresponds to the year when the auction took place or bid and oner was accepted.
55. Similarly, the power vested in the Excise Commissioner to vary the issue price cannot be said to be unreasonable or arbitrary. As already said the rate of issue price is to be fixed by taking into account several factors including the measures to bring about prohibiton, revenue to the Government and cost of production. The rate depends'on social and economical situation which often fluctuate and, therefore, the issue price rates cannot remain static They need variation and if the power to vary is conferred upon the Excise Commissioner, who is the highest authority on the subject in the State it cannot be held to be arbitrary or unreasonable. The prices to be fixed are to be uniformly applicable to all the licensees and thus a licensee individually cannot have a say in the matter of fixation of price. Both the conditions i e. condition No. 22(kha) and the impugned part of condition No. 1 (Ga) are just and reasonable. The power conferred on the Excise Commissioner cannot be held to be arbitrary or unguided.
56. Now, I turn to the contention of the learned Counsel for the petitioners that the contract is a contract of adhesion and the impugned expression in Condition No. 1(Ga) of the licence is unreasonable and liable to be struck down.
57. The counsel for the petitioners have urged that the stipulated term in condition No. 1(Ga) that the value of the liquor for the purposes of calculating the rebate to be allowed to them against the privilege amount shall be calculated at the rate current during the year preceding the contract is onerous and unreasonable. According to the learned Counsel the petitioners had no freedom to bargain in the grant of licence. They had no option but to agree to the various terms of the licence and sign the counter part of the contract appended to it. This, submits learned Counsel, makes the contract as adhesive and the petitioners are entitled to get the onerous part of the said condition in the licence ignored or deleted.
58. The argument is based on the assumption that a trade or, business in liquor is open and the petitioners are entitled to a free bargain while entering into the contract. The premise on which the argument proceeds is entirely misplaced. No person has an absolute right to trade in liquor. All forms of dealings in liquor are controlled and regulated by the Act and the Rules. The object of the Act seen in the light of Article 47 is to control and restrict the consumption of intoxicating liquors The ultimate objective is to bring about complete prohibition of the consumption of intoxicating, drinks, the measures of control and restriction of the trade in liquor are necessary, for the preservation of public health and morality. They are in public interest and the State Government and the Excise Commissioner are fully competent, and within their rights to lay down conditions restricting, controlling and regulating the various forms of dealings in liquor. The conditions of licence including the impugned term in condition 1 (Ga) are statutory conditions prescribed by the Excise Commissioner in the exercise of his rule making power and are reasonable. The licensees cannot be permitted to have a free hand in settling with the Excise Commissioner the terms and conditions of the licence. The conditions are required to be prescribed in terms of the provisions of the Act and the Rules and cannot be left to be settled bilaterally. The doctrine of review or adhesive contracts cannot obviously be involved in contracts for obtaining the licence of exclusive privilege to sell country liquor.
59. Further, every contract of adhesion is not unconscionable per se. Only those contracts which contain terms which are unfair and unreasonable that they shock the conscience of the court can be regarded as opposed to public policy and may justify adjudication by the courts.
60. The the fact and circumstances of the present case, the licence of exclusive privilege to sell country liquor was not drawn by over reaching or taking advantage of the position of the licensees. I have already held that conditions 1(Ga) and 22 (kha) of the licence are just and reasonable. These conditions have been enacted to advance the object of the Act. They are in public interest. The petitioners have failed to establish that any condition of the licence including 1(Ga), its impugned portion or 32 (kha) are unfair, arbitrary or unreasonable. I do not find any reason what so ever to declare the conditions as void.
61. Lastly, I come to the contention of Mr. Mootha that the representation dated 11th October, 1985 made by the petitioners was rejected by the respondents without application of mind by the order dated 7th February, 1986. The rise in the issue price according to the respondents was to meet the increase in the cost of production of liquor by the Ganga-nagar Sugar Mills. The case of the respondents is that the rise in the issue price conforms to the increase in the cost of production. The case of the petitioners, however, is that the actual cost of production of liquor comes to Rs. 3.81 per L.P.L. and not Rs. 6/- per L.P.L; as claimed by the respondents. I have gone through the ore'er dated 7th February, 1986. It does not show that the averment has at all examined this aspect. There being no material placed by any of the parties, it was not possible for this court to say, affirmatively or negatively, whether there is substance in the contention of the petitioner but the Government is expected to be fair just and if the petitioners are right in their submission that the cost of production bad not increased to the extent claimed by the Oanganagar Sugar Mills, their claim needs consideration by the Government. It would not be out of place to mention that the Excise Commissioner in his letter dated 4th September, 1985 also recommended soaie relief to be granted to the licensees. The Additional Advocate' General placed before the court the various components that form the issije price but did not show the particulars and breakup of the cost of production of liquor. Although f do not quash the order of the Government dated 7th February, 1986, it appears reasonable to me that if the petitioners make a representation, the Government should, in all fairness, consider the question afresh what really is the cost of production of liquor at the Mills and whether the petitioners need to be given any relief. Shri Parekh learned Counsel for the petitioners also prayed that the petitioners should be granted exemption of interest and relief to pay the balance by instalments. These are matters for the Excise Commissioner and the Government to consider. No direction in this respect can be given by this Court. The petitioners may approach the Government for these reliefs, if so advised.
62. For the reasons discussed above, I hold that Section 42(e) of the Act, Notification dated 25th May, 1985 issued by the Excise Commissioner; and Condition 1 (Ga) imparting the impugned portion objected to by the petitioners and Condition No. 22 (Kha) of the licence are all valid and Constitutional.
63. The result is that all the writ petitions fail and the same are dismissed without any order as to costs.