TaxTMI 
TaxTMI 
1986 (10) TMI 321
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....8 of 1985 was filed by one Nandial Jaiswal on 28the November 1985 while writ petition No.335 of 1986was filed by one Sagar Agarwal on 24th-January 1986. Both these writ petitions were directed against the policy decision of the State of Madhya Pradesh contained in the Cabinet decision dated 30th December, 1984. The third writ petition, viz., writ petition No. 785 of 1986 was also filed challenging the same policy decision of the State of Madhya Pradesh by a firm called M/s Doongaji & Co. but it was filed much later at a time when arguments were actually going on in court in the first two writ petitions. The respondents in the first two writ petitions were not aware at that time that it was a writ petition which was filed by M/s Doongaji & Co. They thought that it was merely an intervention application since no notice was served upon them and they had also no opportunity of filing an affidavit in reply to that writ petition. All these three writ petitions were disposed of by a common judgment delivered by a Division Bench of the High Court consisting of Acting Chief Justice J.S. Verma and Justice B.M. Lal. Both the learned Judges, by separate judgments, substantially set aside the p....
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....have a licence for manufacture of intoxicant and for bottling liquor for sale and no intoxicant can be manufactured and no liquor can be bottled for sale without such licence. Section 14 is a material section and it may, therefore, be reproduced in extenso: 14. Establishment or licensing of distilleries and warehouses (a) establish a distillery in which spirit may be manufactured under a licence granted under section 13 on such conditions as the State Government may impose; (b) discontinue any such distillery; (c) licence, on such conditions as the State Government may impose, the construction and working of a distillery or brewery; (d) establish or licence a warehouse, wherein any intoxicant may be deposited and kept without payment of duty, but subject to payment of such fees as the State Government may direct; and (e) discontinue any such warehouse We may then refer to section 17 which provides inter alia that no intoxicant shall be sold except under the authority and subject to the terms and conditions of a licence granted in that behalf. The State Government obviously has the monopoly in regard to manufacture, possession and sale of liquor as held in sever....
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....nt a licence in Form D-1 and Form D-1(s) for the wholesale supply of country spirit to retail vendors. IV. The Collector may issue, on payment of a fee of Rs. 1000 a licence in Form D-2 for the construction and working of a distillery to any person to whom a wholesale supply licence has been issued. V. Subject to sanction of the State Government the Excise Commissioner may issue a licence in Form D-2 for the construction and working of a distillery on payment of a fee of Rs. 1000." It is clear on a plain reading of Rule XXII that a licence for manufacture or sale of country liquor may be disposed of in any one of four different modes, viz., tender, auction, fixed licence fee or such other manner as the State Government may by general or special order direct. These four different modes are alternative to one another and any one of them may be resorted to for the purpose of disposing of a licence. It is not necessary that the mode of disposal by tender must first be resorted to and if that cannot be acted upon, then only the mode of disposal by auction and failing that and not otherwise, the third mode of disposal by fixed licence fee and only in the event of it not being po....
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....der of such licence must also have a licence in Form D-2. No one can have a licence in Form D-1 unless he has simultaneously a licence in Form D-2. He must have a distillery in which he distils country spirit in order that he should be able to make wholesale supply of country liquor to retail vendors. If for any reason he is unable to obtain licence in Form D-2 for working a distillery, no licence in Form D-1 can be given to him and if he has such licence, it would become ineffective. It is for this reason that when a person is granted a licence in Form D-1 by the Excise Commissioner under Rule III, he is also simultaneously granted a licence in Form D-2 under Rule IV and the period of both the licences is co-terminus. But, though a person cannot be granted a licence in Form D-1 unless he also obtains licence in Form D-2, the converse does not hold true. A licence in Form D-2 can be granted to a person under Rule V even though he does not hold a licence in Form D-1. Where a person is granted a licence in Form D-2 for working a distillery under Rule V, without having a licence in Form D-1 for wholesale supply of country liquor to retail vendors, he cannot make wholesale supply of co....
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....e distilleries was to invite tenders for the wholesale supply of country liquor from these distilleries and the tenderers were requested to quote their rates for the wholesale supply of country liquor to the State Government. Normally the lowest tenders were accepted but at times the State Government used to accept even higher tenders taking various relevant factors into account. The State of Madhya Pradesh was divided in several areas and a particular area was attached to each distillery for the wholesale supply of country liquor in that area. The person whose tender was accepted for any particular distillery was given a D-2 licence for working the distillery and also a D-1 licence for wholesale supply of country liquor manufactured in that distillery to retail vendors in the area attached to the distillery. These licences in Forms D-1 and D-2 were ordinarily issued for a period of five years. Respondent Nos.5 to 11 in the writ petition of Nandlal Jaiswal were the holders of D-1 and D-2 licences in respect of these distilleries for the period ending 31st March, 1986. There were two districts, however, which were not attached to any distillery, namely, Jabalpur and Betul and so far....
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....lery and Ratlam Alcohol Plant was only 203 lacs proof litres but even this capacity of production was not realised and the actual production fell for short of this capacity. The total production of country liquor from all the 9 distilleries in the year 81-82 came to only 129 lacs proof litres and though in the year 1982-83 there was some improvement, the total production did not go beyond 171 lacs proof litres. The result was short supply on many occasions leading to loss of licence fee as well as excise duty by the State Government. The State Government, in order to meet the requirement of the consuming public, had actually to purchase liquor from other States at a higher price. Moreover, the consumption of liquor was growing from year to year and it was estimated that by the year 1991, the total consumption to country liquor would be likely to be in the neighbourhood of 482.36 lacs proof litres and by the turn of the century it was expected to be in the neighbourhood of 1696.80 lacs proof litres. Obviously, the existing 9 distilleries were totally inadequate to meet this growing demand for country liquor. Furthermore, the buildings in which these distilleries were housed had beco....
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....ey will be liable for solving the problem of pollution." The Revenue Department, after obtaining the Report from the Excise Commissioner examined the matter carefully from various aspect. But since several points required consideration such as whether the distilleries should be transferred to private ownership during the period of the subsisting contracts, and if so, what would be the legal consequences and whether the distilleries should be allowed to continue at the same place or should be transferred to new sites in view of the problem of pollution and the question of transfer of distilleries to private ownership was itself an important policy issue, the Separate Revenue Department referred the matter to the Chief Minister with a suggestion that a high level committee should be appointed for the purpose of examining the various issues. The State Government accordingly under the orders of the Chief Minister constituted a Cabinet Sub-Committee consisting of Ministers of Separate Revenue Department, Major and Minor Irrigation Department, Commerce and Industry Department and Rehabilitation and Environment Department and four highly placed officers, namely, Chief Secretary, Secret....
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....ix lagoon plant for removing pollution. The Vijayvargi Committee also stated in its Report that it was necessary to make arrangement in regard to polluted water thrown out from Nowgaon and Ratlam Distilleries. The Cabinet Sub-Committee at its meeting held on 21st July 1984 considered the Report of the Vijayvargi Committee and decided to accept it wholly. The Cabinet Sub-Committee directed that an estimate of the cost involved in setting up the Bhopal, Ujjain, Badwaha, Seoni and Bhilai distilleries at the new sites should be worked out by the Excise Commissioner as also by the M.P. Consultancy Organisation and the valuation of the lands and buildings of Gwalior and Dhar distilleries, which according to the Vijayvargi Report, were not necessary to be shifted to new sites, should also be got done by the Collectors concerned on the basis of prevailing market rates. It was also directed by the Cabinet Sub-Committee that an estimate of sales of country liquor projected in the next 20 years should be got made and it should also be examined whether such future demand could be met by the present distilleries and on this basis how many' distilleries in the public cooperative and private sect....
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....gestion that even Gwalior and Dhar distilleries should be transferred to new sites since the problem of pollution, though not pressing at the present moment, was bound to arise after 5 or 7 years, but if the existing lands and buildings of these two distilleries were to be transferred, such transfer should be made on the basis of their book value and not at the market price. It was also pleaded by these representatives that if the distilleries were going to be transferred to private ownership, such transfers should be effected in favour of the existing contractors and not outsiders. Some suggestion was also made on behalf of these representatives that compensation should be paid by the State Government, to the existing contractors for the expenditure incurred by them in construction of roads, molasses collection pits, wharehouses etc. These suggestions were considered and examined by the Cabinet Sub--Committee. Before the next meeting of the Cabinet Sub-Committee was held on 20th September 1984, a letter dated 10th Sept. 1984 was submitted by the Finance Department in which two points were raised by the Finance Department. One was that "transfer of distilleries should be made by....
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....tting out the history of the discussions that preceded the preparation of the Report, it proceeded in paragraph 17 to make the following recommendations: A. Transfer of ownership of distilleries (1) All the Government distilleries should be transferred to the contractors concerned whose contracts are current for the periods from 1.7.1981 to 31.3.1986. (2) The present buildings, lands of Gwalior and Dhar Distilleries should be transferred as per the price of the present market rates reported by the Committees formed under the Chairmanship of the Regional Commissioners after receiving the same from the distilleries and no concession should be given therein. (3) There should be an agreement with the Distillers who are allotted lands for establishing distilleries at the new sites to the effect that the Government will be bound to 'issue them D-2 licence after the construction of buildings and fitting of plant, on fulfilling all terms and conditions. B. Allotment of lands for construction of distilleries at the new places (4) Generally a principle should be accepted in connection with the price of land to be allotted to the distillers at those five places whose distill....
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....nly. Without such arrangement D-2 licence should not be given to the distillers. E. Construction of Laboratories for Liquor test (13) The distillers shall be compulsorily required to constructa laboratory for examination of liquor in the distillery. It will also be compulsorily required to construct a laboratory for examination of liquor in the distillery. It will be compulsory to construct laboratory for liquor test in the distilleries which are to be transferred to the distillers at the existing spot only. F. Arrangement for manufacturing liquor from Mahuwa (14) The plants for manufacturing liquor from Mahuwa also should be established by the distillers for manufacturing liquor from Mahuwa in all the distilleries in the State so that, if it is necessary, liquor should be manufactured from Mahuwa and the Mahuwa produced in the State should be properly used within the state only and they should get reasonable ,price for the Mahuwa purchased by them at the support price of MARPED or Vano Upaj Vyaper Sangh. For each distillery 71/2% liquor should be manufactured from Mahuwa of its total productive capacity and it should be mentioned in D-2 licence. G. Period of D-2 lic....
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.... submission to the Cabinet. These points together with the answers given by the General Administration Department may be reproduced as follows: "Point No.1 The distilleries which are to be transferred to the private distilleries on account of the problem of pollution, it is not proper to transfer to them the land and buildings. Answer In this connection it is pertinent to note that the Cabinet Sub-Committee has only reommended transfer of Gwalior and Dhar distilleries to the existing distillers. Looking to the problem of pollution, other five distilleries have been recommended to be transferred at the new sites and their construction and establishment in the private ownership. Hence, the question of transfer of land and buildings of these distilleries does not arise. It is clear that the lands and buildings of the present five distilleries will be of the State Government and they can be used for Government purposes. So far as the transfer of Gwalior and Dhar distilleries and their lands and buildings are concerned, the said distillers have made applications to the State Government that they also intend to establish distilleries at the new sites. If the State Government ....
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....dvantage of their proprietory rights may not close the distilleries? Ordinarily, no such imagination can be made because after investing such a huge amount the intention of the distillers is to gain profits. For that purpose, their effort would be to constantly run the distilleries and for meeting such an eventuality some arrangement should be made in the agreement that could be entered with the distillers so that the distilleries can be taken over the State Government. Point No. 4 The Sub-Committee has recommended that for the supply of liquor the rates of the same may be fixed by a Committee consisting of a Chartered Accountant, a cost accountant and a senior Officer of the Excise Department. The Finance Department has suggested that in this Committee, representatives of the Finance Department and the Separate Revenue Department and the representative of the Separate Department should be its Chairman which would fix the rates on the basis of principles. Answer This suggestion is capable of being accepted. It may be pertinent to mention here that the Sub-Committee was apprised of the different systems adopted by different States with regard to supply rates. The Sub-Com....
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....such respondent held D-2 and D1 licences for the period ending 3 1st March 1986. The Letter of Intent set out various conditions subject to which D-2 licence was to be granted in favour of each of respondent Nos. 5 to 11. Clause (1) of the Letter of Intent prescribed the following condition: 1. (a) The licence shall be granted for a period of five years commencing from 1-41986, subject to the payment of licence fees of Rupees Twenty Five thousand in advance and such security as may be prescribed by the Excise Commissioner for due observance of rules, and conditions of licence. (b) It will be the responsibility of the licensee to obtain a licence/permission, if any required by the State Government or Government of India. (c) The licence shall be further subject to renewal every year' on payment of a licence fees of Rs. Five thousand in advance and subject to due observance of the provisions of the Excise Act and rules made thereunder and conditions of the licence. The licensee to whom the Letter of Intent was issued was required under Clause 2 of the Letter of Intent to construct the distillery on the land approved by the ....
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....as follows:-- "The rate of country spirit made from Mahuwa, Khandsari molasses or mill Molasses shall be determined every year by the State Govt. on the basis of the recommendation of the committee constituted by the State Govt. in this behalf. The cost price so determined shall be final and binding on the Licensee." The other clauses of the Deed of Agreement are not material and we need not refer to them in detail beyond merely stating that they were introduced in the Deed of Agreement in conformity with the policy decision dated 30th December 1984. Pursuant to the Letter of Intent and the Deed of Agreement each Of respondent Nos.5 to 11 selected with the approval of the State Government the new site at which the distillery should be located, purchased land at such new site, started constructing buildings for housing the distillery and placed orders for purchase the plant and machinery to be installed in the distillery. Some of the plant and machinery started arriving and it began to be installed in the distillery. There was some dispute between the parties as to how much amount each of respondent Nos. 5 to 11 had expended by the time ....
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..... Verma in view of the categorical statement made on behalf of the State Government by the learned AdvocateGeneral as also by the learned Advocates appearing on behalf of respondent Nos.5 to 11 that under the policy decision dated 30th December, 1984, D-2 licence was to be granted only for a maximum period of 5 years "subject to its renewal within the period of 5 years on the terms and conditions" mentioned in the Letter of Intent and "there was no undertaking on the part of the State Government" to grant, by way of renewal or otherwise D-2 licence after the expiry of the period of 5 years commencing from 1st April 1986. The learned Attorney General, appearing on behalf of the State Government, as also the learned advocates appearing on behalf of respondent Nos.5-11, reiterated the same stand before us namely, that there was no commitment on the part of the State Government to grant D-2 licence beyond the maximum period of 5 years and that the provision in regard to renewal from year to year was to operate within this period of 5 years. The learned counsel appearing on behalf of the petitioners, however, urged that this concession made on behalf of the State Government and responde....
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....ears itself and every year, the licence would be renewable on payment of licence fee of Rs.5,000 and due fulfilment of the conditions of the licence and the provisions of the Act and the Rules. It is not possible to spell out from this clause that the licence was to be granted for an initial period of 5 years and thereafter it was liable to be renewed from year to year. This so called concession made on behalf of the State Government and respondent Nos.5-11 was, therefore, really not a concession at all but it was a stand taken in recognition of the correct position in regard to the grant of D-2 licence. The High Court was, in the circumstances, right in holding that the grant of D-2 licence to respondent Nos.5-11 was for a maximum period of 5 years and it did not operate to create monopoly in their favour for an indefinite period of time. The High Court and particularly the Judgment of the Acting Chief Justice J. S. Varma with Justice B.M. Lal divided the policy decision dated 30th December 1984 into two parts. The first part according to the High Court related "to the grant for construction Of the new distilleries by the existing contractors" and the other part related "to the....
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....ng contractors cannot be said to constitute a distinct class by themselves so that grant of D-1, D-2 licences to them for manufacture and wholesale supply of country liquor to the exclusion of other persons could be justified under the equality clause of the Constitution. Though the High Court did not say so in express terms the view taken by it seem to be that the grant of D-1, D-2 licences given thrown open for all intending applicants and no one should have been excluded from consideration for the grant which means that the proposed grant of D-1, D-2 licences should have been advertised so that one and all could compete for the grant by filing their tenders or by bidding at an auction. The High Court in this view set aside the grant of D-1, D-2 licences to respondent Nos.5 to 11 but since there are no other distilleries apart from those constructed by respondent Nos.5 to 11 and country liquor under D-1, D-2 licences could be manufactured and supplied only from those distilleries, the High Court evolved a new formula namely, that the persons to whom D-1, D-2 licences may be granted on the basis of tender or auction should be entitled to take over the distilleries constructed by r....
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....ons of rule XXII (Supra) which gives abnoxious smell of malafide involving public revenue in crores, then, in my opinion, even for a moment it cannot be allowed to stand in the eye of law. It appears that by reducing the period of 30 years to a mere five years period, the State still wants to extend benefit to respondents 5 to 11, so that the amount so far spent by them in working out the contract in approaching the concerning authorities of the State may be compensated. Why this undue favour is being tried to be extended to the respodents Nos.5 to 11, speaks in itself in volume and is really a matter of the domain of the State Government. The facts relating to under hand dealing brought to our notice during the course of arguments by pointing out from the record are so startling." These are undoubtedly strong and highly disparaging remarks attributing mala fides, corruption and underhand dealing to the State Government. Are they justified by the record, is a question which we have to consider. We may first consider the question of laches or delay in filling the writ petitions because that is the question which has been decided by the High Court against the petitioners ....
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....ing huge expenditure towards setting up the distilleries. Now, it is well settled that the power of the High Court to issue an appropriate writ under article 226 of the Constitution is discretionary and the High Court in the exercise of its discretion does not ordinarily assist the tardy and the indolent of the acquiescent and the lethargic. If there is inordinate delay on the part of the petitioner in filing a writ petition and such delay is not satisfactorily explained, the High Court may decline to intervene and grant relief in the exercise of its writ jurisdiction. The evolution of this rule of laches or delay is premised upon a number of factors. The High Court does not ordinarily permit a belated resort to the extraordinary remedy under the writ jurisdiction because it is likely to cause confusion and public inconvenience and bring in its train new injustices. The rights of third parties may intervene and if the writ jurisdiction is excercised on a writ petition filed after unreasonable delay, it may have the effect of inflicting not only hardship and inconvenience but also injustice on third parties. When the writ jurisdiction of the High Court is invoked, unexplained del....
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....ircumstances would, in our opinion, be sufficient to disentitle the petitioners to relief under Article 226 of the Constitution. The petitioners however contended that they were not aware of the policy decision dated 30th December 1984 nor had they any knowledge of the fact that the right to construct distilleries and to manufacture and supply wholesale country liquor from such distilleries was granted to the existing contractors and it was only when they came to know about this that they immediately proceeded to file the writ petitions. Now, it is difficult to believe that the petitioners were not aware of the policy decision dated 30th December 1984. The consideration of this matter started as far back as July 1983 and there were prolonged and wide ranging deliberations lasting several months, coupled with spot inspections by the Vijayvargi Committee and the Excise Department and it was after considerable discussion and deliberation that the policy decision was' arrived at on 30th December 1984. The petitioners were, on their own showing, liquor contractors by profession and they were "associated with the trade of country liquor in the State since the last several years" and it w....
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....hat, apart from the letter dated 1st April 1985, there was also another letter dated 25th September 1985 addressed by Sagar Agarwal to the Commissioner of Excise where he made a specific reference to the policy decision dated 30th December 1984 which shows that in any event, Sagar Agarwal knew specifically about the policy decision as far back as 25th September, 1985 and yet no action was taken by him until 24th January 1986. M/s Doongaji & Company also knew by April 1985 that the distilleries were being given 'permanently' to the existing contractors, vide their letter dated 12th April 1985 addressed to the Chief Secretary, Government of U.P. The next letter in point of time, namely, that dated 17th May 1985 addressed by M/s Doongaji & Company to the Prime Minister, also shows that M/s Doongaji & Company were aware by this time that the distilleries were being given 'permanently' to the existing contractors. M/s Doongaji & Company addressed another letter to the Prime Minister on 7th November 1985 in which they once again complained that the distilleries were being made 'permanent' to the existing contractors. Now if Sagar Agarwal and M/s Doongaji & Company knew as far back as Apr....
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.... relating to the grant of licences for manufacture and wholesale supply of liquor to the existing contractors on construction of new distilleries by them and in holding that delay on the part of the petitioners in filing the writ petitions disentitled them to relief in respect of only the first part 'and not in respect of the second. The High Court took the view that by reason of the delay in filing of the writ petitions, the petitioners could not be permitted to assail the grant made to the existing contractors for construction of new distilleries but so far as the grant of licences for manufacture and wholesale supply of liquor from the new distilleries was concerned the challenge to the same was not precluded by the doctrine of laches or delay and taking this view, the High Court proceeded to hold that the grant of licences for manufacture and wholesale supply of liquor made to the existing contractors was violative of the equality clause of the Constitution. This view taken by the High Court is in our opinion plainly erroneous. The policy decision dated 30th December 1984 was a single integrated decision arrived at by the State Government taking a holistic view of all the aspec....
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....ld be granted D1 and D-2 licences at least for a period of 5 years. Otherwise, we do not see why they should agree to construct new distilleries spending so much time and energy and incurring such huge expenditure. Moreover, according to the policy decision dated 30th December 1984, the rate chargeable for supply of liquor manufactured in the new distilleries was to be determined from year to year by an Expert Committee appointed by the State Government, but if such rate were to depend on the bid which may be made at the auction or tender and obviously the auction or tender could take place only at the end of 3 or 5 years and not from year to year--the entire policy of rate fixation laid down by the State Government would be set at naught. What would happen in effect is that the old policy which was being followed up to 31st March 1986 and which was sought to be changed by the State Government would be revived but now the distilleries forming the subject matter of that policy would not be the old distilleries of which the land and building belonged to the State Government and the plant and machinery was subject to transfer at a valuation but the new distilleries constructed by the ....
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....rule out the possibility of any agreement on the part of respondent Nos. 5 to 11 to transfer the new distilleries to any other person to whom D-1 and D-2 licences may be granted by the State Government and the only alternative left open to the State Government would therefore be to acquire the new distilleries. But that would again frustrate the policy of the State Government to transfer the distilleries to private ownership and the old policy would be revived, though in a different garb. Moreover, the State Government would have to produce over 40 crores of rupees by way of compensation for the acquisition of the new distilleries and that would be a heavy drain on the public revenues which might otherwise be used for developmental and welfare activities. Further more, the entire process of acquisition would take considerable time, may be years, and during this period, there would be no production of liquor and the State Government would have to purchase liquor from outside the State at higher prices in order to satisfy the demand of the consuming public, resulting in loss of licence fee as well as excise duty. Even if the person to whom D-1 and D-2 licences may be granted agrees t....
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....e briefly disposed of in a few words. The first contention raised by the learned counsel appearing on behalf of M/s. Doongaji & Co. was that it was not competent to the State Government to give effect to the policy decision dated 30th December 1984 until after the publication of Rules made for that purpose under section 62(2) (h) of the Act. The learned counsel pointed out that D-2 licence in its existing form does not contemplate any construction licence at all: it is only a licence to manufacture liquor and not a licence to construct a distillery and hence without publishing Rules relating to licence for construction of a distillery, the State Government could not implement the change of policy under the policy decision dated 30th December 1984. This argument was elaborated by the learned counsel by putting forward the following contention which we may reproduce in his own words: "Rule XXII contemplates the disposal of licences either by tender, auction or fixed licence fee or in such other manner as the State Government may by general or special order direct. It does not enable the State Government without publishing the rules to licence construction and working of a distillery ....
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....ruct new distilleries and D1 and D-2 licences should be given to them for a period of five years for manufacturing liquor in such new distilleries and making wholesale supply of it to retail vendors in the areas attached to those distilleries. This manner of disposal of licences was clearly covered by the fourth mode of disposal set out in Rule XXII. We fail to understand why any further Rules were necessary to be made by the State Government in order to give effect to this policy decision arrived at by the State Government on 30th December, 1984. The fourth mode of disposal set out in Rule XXII was, in our opinion, sufficient to permit disposal of licences in the manner set out in the policy decision dated 30th December 1984. The argument that there was no general or special order made by the State Government pursuant to the policy decision dated 30th December 1984 which would bring the case within the fourth mode set out in Rule XXII is equally futile. When the policy decision dated 30th December 1984 was arrived at by the State Government itself, there could be no need for separate general or special order to be made by the State Government in that behalf. This would seem to be ....
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....the language of the last clause of Rule XXII. It is true that what has been produced before the Court by way of policy decision dated 30th December 1984 is the decision of the Cabinet and if its production had been objected to on behalf of the State Government, a question would perhaps have arisen whether it is barred form the scrutiny of the Court under clause (3) of Article 163 of the Constitution. But, it has been produced by the petitioners without any objection on the part of the State Government and once it is produced, the Court is entitled to look at it and it clearly contains the decision of the State Government and must be held to fall within the last clause of Rule XXII. This view finds complete support from the decision of this Court in L.G. Chaudhari v. Secretary, L.S.G. Deptt., Govt. of Bihar & Ors., AIR 1980 SC 383. The learned counsel appearing on behalf of M/s Doongaji & Co. also raised another contention based on the provisions of the Industries (Development & Regulation) Act, 1951. The argument of the learned counsel was that respondent Nos. 511 were not entitled to set up new distilleries at the new sites without obtaining a licence from the Central Government u....
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....at extent is called for". The argument which found favour with the High Court was, and that is the argument which was reiterated before us on behalf of the petitioners, that the policy decision dated 30th December 1984 that licence to construct new distilleries should be given only to the existing contractors and D-1 and D-2 licences to manufacture and supply it in wholesale to retail dealers liquor in such new distilleries should be granted to them alone to the exclusion of other liquor contractors without holding auction or inviting often which would give an opportunity to all liquor contractors interested in setting up new distilleries and manufacturing and supplying liquor to complete for the grant of such licences, was arbitrary and irrational and there was no valid justification for selectively preferring the existing contractors to other liquor contractors for grant of such licences. This contention, plausible though it may seem at tint blush, is, in our opinion, wholly untenable. There are two very effective answers to it given by the learned Attorney General and the learned counsel for Respondent Nos. 5-11 and we shall immediately proceed to discuss them. But, before we do....
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.... and strike down what the State Government has done, unless it appears to be plainly arbitrary, irrational or mala fide. We had occasion to consider the scope of interference by the Court under Article 14 while dealing with laws relating to economic activities in R.K. Garg etc. v. Union of India & Ors. etc. [1982] 1 SCR 947. We pointed out in that case that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. We observed that the legislature should be ,allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. We quoted with approval the following admonition give by Frankfurter, J. in Morey v. Dond, (354 US 457): "In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint ....
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.... and keeping them in mind that we must now proceed to deal with the contention of the petitioners based on Article 14 of the Constitution. The first answer to the contention of the petitioners is, and this in our opinion is a fatal answer, that no liquor contractors have in fact been excluded from consideration under the policy decision dated 30th December 1984. It is undoubtedly true that, on the application of the existing contractors, the State Government decided to grant to them licences to construct new distilleries in lieu of the old distilleries in Gwalior, Ujjain, Dhar, Badwaha, Chattisgarh, Bhopal Seoni as also to give them D-1 and D-2 licences to manufacture liquor in such new distilleries and to sell it in wholesale to retail vendors in the respective areas attached to such new distilleries and it might appear on a superficial reading of the policy decision dated 30th December 1984 that the entire cake was handed over to the existing contractors and all other liquor contractors were left out and they were denied an opportunity of asking for similar licences. But this view, in our opinion, is based on a misreading of the policy decision dated 30th December 1984. It ignore....
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.... cogent. Let us consider the circumstances under which the policy decision dated 30th December 1984 came to be taken. The proposal which ultimately culminated in the policy decision was first initiated in July 1983 by the M.P. Distillers Association, which was of course an association of existing distillers, making a representation to the State Government for privatisation of the distilleries. The situation which prevailed at that time in regard to the distilleries was quite disturbing. Whatever might have been the position at the date when the distilleries were constructed, considerable human habitation had grown around them over the years and, barring Gwalior and Dhar distilleries, all the other distilleries were in thickly populated localities and even so far as Gwalior and Dhar distilleries were concerned, it was apprehended that within 5 or 7 years they would also be in the same unhappy situation. The result was that the working of the distilleries at the old sites was causing serious air, water and environmental pollution. The note prepared by the separate Revenue Department for the consideration of the Cabinet Sub-Committee as also the Report of the Vijayvargi Committee clea....
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....nsidered this question in all its aspects and reached the conclusion that it would be better to entrust the construction of the new distilleries to the private sector rather than ask the State Government to do so. There are four very good reasons why the Cabinet Sub-Committee took this view. In the first place, the distilleries were in private ownership in almost all the States barring the State of M.P. and there was no reason why the State of M.P. should not fail in line with what was happening in the other States. Secondly, the State Government would have to invest about Rs.50 crores, in any event more than Rs.40 crores, if the State Government had to construct and cut up new distilleries. This large amount would become available for other developmental and welfare programme, if, instead of the State Government the private sector was entrusted with the task of construction of new distilleries. Thirdly, the State Government would not have to, incur any recurring expenditure on maintenance of the buildings and the plant and machinery, because in the event of construction of the new distilleries being entrusted to private entrepreneurs, maintenance of buildings as well as plant and ....
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....tate Government to set up new distilleries and considerable deliberations and detailed enquiries were going on at the highest level for deciding whether the new distilleries should be handed over to the private sector and negotiations were actually being carried on with the M.P. Distillers Association in that behalf the other liquor contractors were not aware of any such proceedings. Even after the policy decision dated 30th December, 1984 was reached by the State Government, neither Nandial Jalswal nor M/s Doongaji & Co. made any application for grant of licence to construct a new distillery on the same terms on which licences were decided to be granted to the existing contractors. It is true that Sagar Aggarwal did make an offer but it may be noted that in the first place he was at no time a D-2 licencee and he had no experience of working a distillery and secondly, his main interest was in having D-1(S) licences for Jabalpur and Betul districts. It is also significant that while taking a decision to grant licences to the existing contractors to put up new distilleries, the State Government did not wish to create a monopoly in favour of the existing contractors and the State Gove....
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....s for securing the highest price, subject, of course, to any other relevant overriding considerations of public weal or interest, but in a case like this where the State is allocating resources such as water, power, raw materials etc. for the purpose of encouraging setting up of industries within the State, we do not think the State is bound to advertise and tell the people that it wants a particular industry to be set up within the State and invite those interested to come up with proposals for the purpose. The State may choose to do so, if it thinks fit and in a given situation, it may even turn to be advantageous for the State to do so, but if any private party comes before the State and offers to set up an industry, the State would not be committing breach of any constitutional or legal obligation if it negotiates with such party and agrees to provide resources and other facilities for the purpose of setting up the industry. The State is not obliged to tell such party; "Please it. I will first advertise, see whether any other offers are forthcoming and then after considering all offers, decide whether I should let you set up the industry". It would be most unrealistic to insist....
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....hout any foundation for the same being laid in the pleadings. It is true that in the writ petitions the petitioners used words such as 'mala fide', 'Corruption' and 'corrupt practice', but the use of such words is not enough. What is necessary is to give full particulars of such allegations and to set out the material facts specifying the particular person against whom such allegations are made so that he may have an opportunity of controverting such allegations. The requirement of law is not satisfied in so far as the pleadings in the present case are concerned and in the absence of necessary particulars and material facts, we fail to see how the learned Judge could come to a finding that the State Government was guilty of factual mala fides, corruption and under-hand dealings. The learned Judge observed that amount was spent by respondent Nos. 5 to 11 "in working out the contract in approaching the concerned authorities of the State". This observations carried a direct allegation that money passed from respondent Nos. 5 to 11 to "the concerned authorities" for getting the licences. But no such allegation was at any time made by the petitioners and when the petitioners did not mak....
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....arifications were given and the entire matter was fully considered. There was no attempt at any stage of suppress discussion and debate or to avoid or side-track or push under the carpet any doubts or questions raised by any of the parties involved in the deliberations. It is also significant that the policy decision was not arrived at by a single individual in the secrecy of his chamber but it was by the entire Cabinet and it was based on the recommendations made by the Cabinet Sub-Committee which was composed of four Ministers assisted by officers from different departments belonging to the highest scholars of the civil service. It may also be noted that the Cabinet Sub-Committee considered the matter from different angles, obtained relevant information, sent a Committee of officers for spot inspection, took stock of the valuation and the likely investment, reviewed the problem and worked out the solution and made its recommendations to the Cabinet. The entire proceedings of the Cabinet Sub-Committee were before the Cabinet including the reasons for which the recommendations were made and it was after considering these recommendations that the Cabinet reached the policy decision.....
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.... 1986, that these were not the most reasonable rates. The Cabinet Sub-Committee therefore felt that the system of rate fixation prevalent in West Bengal was the most beneficial to the State Government because it provided for rate fixation by an expert Committee which would take into account the escalation or de-escalation in the price of raw materials, varying labour cost and fluctuating market conditions every year and arrive at a reasonable rate, fair both to the licencee and to the State Government. The Cabinet-Committee also did not recommend taking over of the plant and machinery of the old distilleries from the existing contractors against payment of its value with the result that the old plant and machinery remained with the existing contractors and obviously it would have no value because they would not be able to sell it to any one and it would be dead junk in their hands and the price paid by them to the out-going licences would be totally lost. It is indeed difficult to see how it can at all be said that in making its recomendations, the Cabinet Sub-Committee was guilty of any mala fides or underhand dealing or was actuated by any corrupt motive. The Cabinet merely accep....
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....l plant which could not produce more than 60 lakh proof litres at the outside, possibly supply liquor for the whole of the territory of the State. If Ratlam Alcohol plant could be made to supply the requirement of the entire State there would be no need for any other distillery at all. But obviously the capacity of the Ratlam Alcohol plant was very limited and it was not able to achieve production on up to this capacity. Secondly, it was decided that the Ratlam Alcohol plant would manufacture only ractified spirit for making masala liquor which was more popular and which brought greater revenue to the State and obviously therefore Ratlam Alcohol plant could not be available for producing ordinary liquor for supply to the retail vendors. Thirdly, it is difficult to understand how the learned Judge could assume that Sagar Aggarwal would continue to get liquor from Ratlam Alcohol plant at the rate of Rs. 1.80 per proof litre. The rate for supply of liquor by the Ratlam Alcohol plant would naturally depend upon varying market conditions. And lastly we fail to understand how the learned Judge could proceed on the assumption that a rate of Rs.4 per proof litre would be fixed by the Expor....