2003 (2) TMI 548 - SC - Indian Laws

Supreme Court Upholds Monopoly Ruling (6)

The Supreme Court upheld the High Court's decision regarding the validity of notifications creating a monopoly in favor of Mysore Sales International Ltd. ... - Issues Involved:1. Validity of the notifications creating a monopoly in favor of Mysore Sales International Ltd. (MSIL).2. Impact of the amended Excise Rules on existing licenses.3. Legality of the commission charged by MSIL.4. Enforcement of interim orders and compensation payable to MSIL.5. Adjustment of equities and restitution.Detailed Analysis:1. Validity of Notifications Creating Monopoly:The appellants challenged the High Court of Karnataka's judgment upholding two notifications dated 13.9.1989, which created a monopoly in favor of MSIL for wholesale liquor distribution. The High Court held that the licenses granted under the amended rules created a privilege under the Karnataka Excise Act and did not get the protection of Article 19(1)(g) of the Constitution. The Supreme Court noted that the amended rules aimed to prevent excise revenue leakage and were reasonable restrictions under Article 19(6). The Court found no manifest arbitrariness or disproportionality in the amended rules and upheld the High Court's decision.2. Impact of Amended Excise Rules on Existing Licenses:The amended Excise Rules required manufacturers to sell their products exclusively to MSIL, which would then sell to wholesalers. The rules were to come into force from 1.7.1990, and existing licenses were protected until the end of their current period. The Supreme Court observed that the appellants took advantage of the interim order in Khoday Distilleries' case, which stayed the implementation of the notifications, allowing them to bypass MSIL and sell directly to wholesalers.3. Legality of Commission Charged by MSIL:The appellants contended that MSIL was not competent to discharge its obligations and lacked the necessary infrastructure. However, the Court noted that MSIL had become a fully functional authority with multiple depots and substantial business operations. The Court also addressed the issue of commission, stating that MSIL was entitled to charge reasonable margins not exceeding 0.5% on exports and 5% on all sales within the State. The appellants were found to have charged and collected the commission from wholesalers, either directly or indirectly, without showing it in the bills.4. Enforcement of Interim Orders and Compensation Payable to MSIL:The Supreme Court addressed the enforcement of interim orders and compensation payable to MSIL. The Court held that the appellants, having benefited from the interim order, could not retain the undue advantages derived from it. The doctrine of unjust enrichment and restitution was applied, and the Court directed the appellants to pay the commission amount due to MSIL. The Court also clarified that the appellants had no liability to pay any commission to MSIL prior to 1.7.1990 and after 13.2.1997.5. Adjustment of Equities and Restitution:The Court issued several directions to ensure complete justice and proper adjustment of equities between the parties:- The appellants were required to produce all books of accounts for the period 1.7.1990 to 13.2.1997 to determine the amount due to MSIL.- Determination of the amount was confined to transactions where the appellants charged or indirectly realized the commission.- In case of disputes regarding the quantum of commission, the State of Karnataka would appoint an authorized officer to determine the amount, whose decision would be final.- MSIL was entitled to enforce its claims and recover dues in accordance with the law, with interest at 18% per annum until 12.2.1997 and 9% per annum thereafter.Conclusion:The Supreme Court disposed of the appeals, directing the appellants to pay the commission amount due to MSIL with interest and ensuring proper adjustment of equities. The Court also discharged the contempt petitions, concluding that no further orders were required.