Prior approval in liquor licensing limits mandamus; courts cannot compel grant contrary to the prescribed statutory procedure.

A statutory liquor-licensing regime requiring prior State approval treated grant of the licence as a privilege and not an enforceable right. A court could not issue mandamus to compel immediate grant in disregard of Rule 7 or a condition precedent; if interference was warranted, the matter had to be remitted for reconsideration under the Rules. In considering a competing applicant, fairness required notice and hearing, but not disclosure of confidential adverse material such as internal reports or secret sources. The applicant's challenge failed where the rejection was supported by inquiry material and no mala fides, denial of fair hearing, or apparent error was shown.

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Issues: (i) whether the High Court could issue a writ of mandamus directing grant of the liquor licence without the prior approval of the State Government under Rule 7 of the Tamil Nadu Arrack (Manufacture) Rules, 1981; (ii) whether the Commissioner breached natural justice or acted arbitrarily in rejecting the other applicant's request for licence.

Issue (i): Whether the High Court could issue a writ of mandamus directing grant of the liquor licence without the prior approval of the State Government under Rule 7 of the Tamil Nadu Arrack (Manufacture) Rules, 1981.

Analysis: The statutory scheme made grant of the licence a matter of privilege and placed the final approval with the State Government. Mandamus lies only to compel performance of a legal duty, not to direct an authority to act contrary to the governing rules or to bypass a condition precedent. Since the Commissioner could not lawfully grant the licence without prior approval, the High Court could not substitute its own direction for the procedure prescribed by Rule 7. The proper course, if the Commissioner's rejection was to be interfered with, was to remit the matter for reconsideration and, if necessary, for consideration by the State Government in accordance with the Rules.

Conclusion: The writ of mandamus directing immediate grant of the licence was not legally sustainable and was against the State.

Issue (ii): Whether the Commissioner breached natural justice or acted arbitrarily in rejecting the other applicant's request for licence.

Analysis: The grant of a liquor licence was treated as an application for a privilege, not the adjudication of an existing right. In that setting, the Commissioner was required to act fairly, but was not bound to disclose confidential sources or furnish the Collector's report and other internal material. The applicant had notice of the adverse case and was heard on the relevant material. The finding that the application was not bona fide but was benami for others was based on the material collected in inquiry and could not be disturbed in writ jurisdiction merely because another view was possible. No mala fides, denial of fair hearing, or error apparent on the face of the record was established.

Conclusion: The rejection of the other applicant's request for licence was valid and was in favour of the Revenue.

Final Conclusion: The High Court's direction compelling grant of the licence was set aside, while the Commissioner's rejection of the competing applicant's claim was upheld; the administrative decision had to be dealt with only in accordance with the statutory procedure and the State's prior approval requirement.

Ratio Decidendi: Where a statutory licensing regime makes prior governmental approval a condition precedent and treats the grant as a privilege, courts may quash an illegal refusal but cannot compel grant of the licence by mandamus in disregard of the prescribed procedure; in such matters, fair hearing requires only fair consideration of the application and not disclosure of confidential adverse material.

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