Liquor trade is not protected ordinary commerce; Karnataka's exclusive distributorship scheme and amended excise rules were upheld.

Liquor traffic was treated as res extra commercium, so no enforceable fundamental right under Articles 19(1)(g), 301 or 304 attached to dealing in intoxicants, and the State's exclusive distributorship scheme was upheld on that basis. The amended excise rules were also held to fall within the Karnataka Excise Act's wide rule-making power, which authorised channelisation of the State's liquor privilege; the scheme was not arbitrary under Article 14. Existing licencees had only a statutory privilege, not a vested property right under Article 300-A, and no Article 47 or postponement right was recognised. The laying requirement was procedural, not a condition precedent, and the President's Rule objection failed.

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Issues: (i) Whether dealing in liquor is a trade, business or commerce protected by Articles 19(1)(g), 301 and 304 of the Constitution of India, and whether the impugned exclusive distributorship scheme is unconstitutional on that basis; (ii) Whether the amended excise rules creating a sole State-controlled distributor were ultra vires the Karnataka Excise Act, 1965 or otherwise arbitrary under Article 14; (iii) Whether the existing licencees acquired any protected right or compensable interest which prevented enforcement of the amended rules during the currency of their licences, or made the scheme contrary to Articles 300-A and 47 of the Constitution of India; (iv) Whether the rules were invalid for want of prior legislative laying or because the State had acted without constitutional competence during President's Rule.

Issue (i): Whether dealing in liquor is a trade, business or commerce protected by Articles 19(1)(g), 301 and 304 of the Constitution of India, and whether the impugned exclusive distributorship scheme is unconstitutional on that basis.

Analysis: The judgment held that liquor traffic is inherently pernicious and falls within the category of activity treated as res extra commercium. On the authorities discussed, no fundamental right exists to carry on trade in intoxicants, and the constitutional guarantees relating to trade, commerce and intercourse do not extend to such activity. The State's retention of an exclusive privilege in liquor, including channelisation through its own distributor, was therefore not tested as a protected commercial freedom but as an exercise of State privilege in a regulated and dangerous commodity.

Conclusion: The challenge based on Articles 19(1)(g), 301 and 304 failed and the exclusive distributorship scheme was not unconstitutional on that ground.

Issue (ii): Whether the amended excise rules creating a sole State-controlled distributor were ultra vires the Karnataka Excise Act, 1965 or otherwise arbitrary under Article 14.

Analysis: The Act was read as a comprehensive excise enactment authorising regulation of manufacture, possession, import, export, transport, purchase and sale of liquor, and the rule-making power under Section 71 was held wide enough to channelise the State's own privilege in the liquor trade. The Court treated the subordinate legislation, when validly made under the Act, as having statutory force and capable of creating a single distributor for the State. The policy choice was not found to be manifestly arbitrary or colourable, especially because the State explained the object as curbing tax evasion and preventing spurious liquor, and because the State-owned corporation was presumed to act fairly in carrying out the function entrusted to it.

Conclusion: The amended rules were within the scope of the Act and did not violate Article 14.

Issue (iii): Whether the existing licencees acquired any protected right or compensable interest which prevented enforcement of the amended rules during the currency of their licences, or made the scheme contrary to Articles 300-A and 47 of the Constitution of India.

Analysis: The Court held that the licences conferred only a statutory privilege, not a vested property right protected by Article 300-A. Existing distributor licences were expressly saved for the current excise year, and the shift to State distributorship did not extinguish any constitutional right of the petitioners. Article 47 was held not to prohibit the State from itself engaging in liquor distribution until prohibition is achieved, and no legally enforceable entitlement to postpone the rules until expiry of the current licences was recognised.

Conclusion: No protected right, compensable interest or Article 47 violation was established against the amended scheme.

Issue (iv): Whether the rules were invalid for want of prior legislative laying or because the State had acted without constitutional competence during President's Rule.

Analysis: The requirement under Section 71 that rules be laid before the Legislature was held to be mandatory in the sense of procedure, but not a condition precedent to their coming into force. A valid rule under the Act was treated as having the force of law enacted by the Legislature for purposes of Article 304(b). The Court also rejected the objection founded on President's Rule, holding that the timing and enforcement of the rules did not render them unconstitutional.

Conclusion: The laying objection and the President's Rule objection were rejected.

Final Conclusion: The impugned excise amendments were sustained as a valid exercise of the State's regulatory and proprietary powers in liquor, and the petitions were dismissed.

Ratio Decidendi: Liquor is not protected as ordinary trade or commerce under the Constitution; the State may validly reserve, regulate or channelise its exclusive privilege in intoxicants through subordinate legislation authorised by the parent Act, subject to Article 14 and the limits of the enabling statute.

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