1986 (4) TMI 339 - SC - Central Excise

Supreme Court rules against State Gov't in bottling contracts case, citing unlawful actions.

CHAITANYA KUMAR Versus STATE OF KARNATAKA

The Supreme Court upheld the High Court's decision that the State Government's awarding of bottling contracts was unlawful and arbitrary. The Court found ... License ob bottling of liquor - Held that:- The necessity for obtaining licences under the Bottling of Liquor Rules by the persons to whom the bottling contracts had been awarded was also realised by the Government and it was for that reason that Rule 3 came to be amended. We are unable to understand how despite the prohibition contained in s.13(1)(e) anyone can engage himself in the business of bottling liquor without obtaining a licence under the Rules. It is true that s.13(1)(e) uses the expression 'bottling liquor for sale' and the expression 'to bottle' is itself defined to mean 'the transfer of liquor from a cask or other vessle to a bottle for the purpose of sale'. But there is no justification for the implication sought to be read into section 13(1)(e) read with the definition of 'to bottle' that only a bottler who himself sells the liquor bottled by him is subject to and governed by s.13(1)(e) and the Rules and not a bottler who merely bottles liquor for others. Bottling liquor for sale may be for selling the liquor by the bottler himself or by someone else for whom the bottling has been done by the bottler. In either case it is bottling liquor for sale. ALL that is necessary is that the liquor must be meant for sale. It may be that occasionally liquor may be bottled not for sale but for private consumption. Manufacture of liquor for private or domestic consumption may be permitted under the Excise Laws and where so permitted, the liquor may be bottled without obtaining a separate bottling licence but where the liquor which is bottled is intended to be sold whether by the bottler or by someone else at whose instance the bottling is done, the bottler must necessarily have a bottling licence without which he cannot engage himself in the business of bottling liquor meant for sale. Bottling of liquor meant for sale by whosoever is without doubt regulated by the Bottling of Liquor Rules. Though considerable argument appears to have been advanced before the High Court on the question of locus standi, the question was rightly not raised before us. Appeal dismissed. Issues Involved:1. Legality of the State Government's action in awarding bottling contracts.2. Applicability of the Karnataka Excise (Bottling of Liquor) Rules.3. Consideration of public interest and locus standi in Public Interest Litigation.4. Allegation of personal bias and malafides against the Chief Minister.5. Request for continuation of contracts by the appellants.Detailed Analysis:1. Legality of the State Government's action in awarding bottling contracts:The Supreme Court examined the legality of the Karnataka State Government's action in awarding contracts for bottling arrack. The High Court had struck down the State Government's order on the grounds that it was 'unlawful,' 'arbitrary,' 'capricious,' 'in flagrant violation of the rule of law,' and 'shocking the judicial conscience.' The appellants, who had been awarded the contracts, challenged this decision under Article 136 of the Constitution. The Court noted that the Excise Commissioner had excluded eligible applicants (distillers and those connected with the liquor trade) and recommended those who were not eligible under the existing rules, which was deemed an 'unusual, wilful and perverse way of exercising the power of distributing State largesse.'2. Applicability of the Karnataka Excise (Bottling of Liquor) Rules:The Court analyzed the Karnataka Excise Act, 1965, and the Karnataka Excise (Bottling of Liquor) Rules, 1967, particularly Rule 3. Initially, Rule 3 restricted the grant of bottling licenses to those already connected with the liquor trade. However, the Government's notification inviting applications for bottling arrack did not confine its invitation to such persons, which was inconsistent with the rules. The Court found that the Government's subsequent amendment of Rule 3 (after awarding the contracts) to include 'persons entrusted with the bottling of arrack by the Government' was an afterthought tailored to favor the chosen applicants.3. Consideration of public interest and locus standi in Public Interest Litigation:The Court addressed the issue of public interest and locus standi, emphasizing that while Public Interest Litigation (PIL) is beneficial, it should not be misused by individuals making false allegations. Despite the false allegations of personal bias against the Chief Minister, the Court upheld the High Court's decision, stating that courts must act to prevent public mischief and uphold the rule of law.4. Allegation of personal bias and malafides against the Chief Minister:The Court found the allegation of personal bias against the Chief Minister to be unfounded and false. The High Court had also dismissed this allegation. The Court emphasized that while false allegations should not be encouraged, the judiciary must intervene when executive actions are arbitrary and perverse.5. Request for continuation of contracts by the appellants:At the conclusion of the argument, the appellants requested to continue working the contracts for a reasonable time to avoid wastage of their investments. The Court dismissed this request, stating that it could not permit the continuation of contracts that were awarded unlawfully.Conclusion:The Supreme Court dismissed all appeals, upholding the High Court's decision that the Government's action in awarding the bottling contracts was arbitrary and unlawful. The Court emphasized the need for adherence to the rule of law and the importance of preventing public mischief. The appeals were dismissed with costs.