Regulated liquor bottling requires licensing; arbitrary award of arrack contracts to outsiders could not bypass the statutory scheme.

Bottling liquor for sale under the Karnataka Excise Act, 1965 and the Karnataka Excise (Bottling of Liquor) Rules, 1967 was a regulated activity requiring a licence, and the rules as then framed confined bottling eligibility to persons already connected with the liquor trade. The State could not lawfully justify awarding arrack bottling contracts to outsiders as a mere policy choice without a valid amendment to the rules or a rational administrative basis. A selection process that invited all comers, excluded eligible trade-connected applicants, and lacked a governing principle was arbitrary. Bottling for sale could not be recast as mere agency or job work to avoid the licensing regime, and the contract awards were not sustainable.

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Issues: Whether the State could award bottling contracts for arrack to persons outside the liquor trade under the Karnataka Excise Act, 1965 and the Karnataka Excise (Bottling of Liquor) Rules, 1967, and whether the grant of such contracts was arbitrary or otherwise unlawful.

Analysis: The statutory scheme treated bottling liquor meant for sale as a regulated activity requiring a licence, and the rules, as they then stood, confined eligibility for bottling licences to persons already connected with the liquor trade. The State's later attempt to justify selection of outsiders as a policy choice was not supported by any prior lawful amendment of the rules or by a consistent administrative basis. The invitation to all intending persons, the exclusion of eligible trade-connected applicants, and the selection process disclosed no rational principle governing the award of contracts. A person bottling liquor for sale could not avoid the licensing regime by characterising himself as a mere agent or job worker of the Government, because the activity remained bottling for sale within the regulatory scheme.

Conclusion: The award of bottling contracts to the selected persons was not sustainable, and the challenge to the Government order failed.

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