TaxTMI 
TaxTMI 
1994 (7) TMI 366
X X X X Extracts X X X X
X X X X Extracts X X X X
....e privilege of selling by retail of I.M.F.S. and Beer through auction/tender system, Accordingly, the Government framed Tamil Nadu Liquor (Retail Vending) Rules 1989 by G.O. Ms. N, 506 Home (Prohibition) dated 15.4.1989. In the auction, the successful bidder was granted the licence to carry on the business of vending I.M.F.S. in retail in their respective shops. The licence was valid for a period of one year. Under the said Rules, it was provided for a renewal of the licence for two successive years on the licensee offering to pay 15% and 10% respectively more than the privilege amount at which the sale was confirmed in his favour during the previous years. Rule 13 contained all these clauses. Under Rule 14(3), a provision was made that it was open to the Licensing Authority to refuse the renewal by an order recording the reasons for refusal. However, before such refusal, the Licensing Authority was obligated to give a reasonable opportunity to the licensee of being heard. The successful bidders obtained licences for the year 1989-90 and carried on the business. Most of them obtained renewal for the subsequent excise year 1991-92. The Government issued orders in G.O. Ms. N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nding or liquor in the Bar. Every liecensee of retail I.M.F.S. shop was entitled to apply for and obtain a Bar licence on payment of a licence fee and the privilege amount ranging from Rs. 18,750 to Rs. 75,000 depend-ing upon the area in which the shop was located. The case of the appellant is, in order to obtain the privilege of vending I.M.F.S. in retail for the excise year 1992-93, the members of the first appellant Association increased their offer. This huge offer was to enable them to have a bar attached and thereby increased the volume of sale of liquor. On obtaining licences under retail vending rules, the members of the Appellant association spent considerable sums of money for acquiring the adjoining premises to locate the Bar in accordance with the Bar Rules, They were carrying on business in accordance with the rules with the fond hope of making good the investment and also earn a profit during the period to come. It appears that the Government received various complaints. The drinking in the Bars led to law and order problem. Therefore, by impugned G.O. Ms. No. 44, Prohibition and Excise dated 3.3,1993, the Tamil Nadu Liquor (Retail Vending in Bar) Rules 1992 wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case, the plea of legitimate expectation certainly will came to the rescue of the appellants. No doubt, the State can change its policy but it cannot be done arbitrarily as held in the above cases. Raising a hope in the retail vendors that they would be allowed to carry on vending in .Bars, renewal being a matter of course, suddenly to deny that privilege is arbitrary. A privilege once accrued cannot be taken away. This is a clear implication of Section 8(3) of the Tamil Nadu General Clauses Act, More so, in a case like this where the Rules are prospective in nature such a legitimate expectation cannot be denied. Section 4 of the Tamil Nadu General clauses Act does not, in any way, militate against the operation of Section 8. If retail vending of liquor is permitted there cannot be anything wrong in selling the same liquor in the Bar. Lastly, the learned counsel cites R. Vijaykumar v. The Commissioner of Excise, JT (1993) 6 S.C.325 and submits that even in policy matters Article 14 of the Constitution will apply. Mr. R.K. Garg, learned counsel, appearing for the appellants in C.A. No. 4982 of 1994 arising out of SLP(C) No. 9957 of 1993 submits as follows: The Prohibiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was received before the impugned Notification was issued the State has proceeded on unfounded apprehensions relating to law and order. It is violative of Article 14 of the Constitution because - (i) It is destructive of the principles of natural justice ; (ii) it is not based on relevant considerations and fair determination of changed circumstances justifying prejudice and injury to the lawful interest of the retail vendors; (iii) No damage to public policy is established requiring all Bars had to be closed. In support of the above submissions Mr. R.K. Garg, learned counsel, cites State of M.P. v. Nandlal Jaiswal, [1986] 4 SCC 566. On the strength of this ruling it is submitted that an integrated policy cannot be broken. On the question of legitimate expectation reliance is placed on Council of Civil Service Unions v. Minister for the Civil Service, (1984) 3 All ER 935, Mr, G.L ;Sanghi, learned counsel, appearing for the State of Tamil Nadu traces the history relating to prohibition in Tamil Nadu. On 16th of July, 1991, the present Government, as a first step towards implementation of total prohibition policy in the State, brought complete prohibit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on. The same is the position here. As regards the principle that the Government cannot claim any immunity from the doctrine of promisory estoppel and there is no obligation to act fairly and justly, reliance is placed on Vasantkumar Radhakishan Vohra v. Board of Trustees of the port of Bombay, [1991J 1 SCC 761. The next submission of the learned counsel is, legislative action whether plenary or subordinate is not subject to natural justice. It has been so laid down in Union of India v. Cyhnamide India Ltd., AIR (1987) SC 1802. To the same effect in Indian Express Newspapers (Bombay) Pvt. Ltd. v. Union of India, [1985] 2 SCR 287 at page 347. The principle that subordinate legislation cannot be questioned on the ground of violation of the principle of natural justice, has been reiterated. In the case of liquor vending licences one can expect to have renewal on payment of 15 per cent or 10 per cent, as the case may be. But in a Bar licence there is no possibility of renewal of the privilege because Rule 6(l){c) States ; "A privilege .amount as may be fixed by the Government in this behalf." If, therefore, it is a privilege no question of right to renewal arises. Lastly, it is su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rmal rate of excise duty or fee that would be payable on the quantity of the spirits lost in excess of the prescribed limits; NOTES : Clause (aa) inserted by Act 68 of 1986 (b) prescribing the powers to be exercised and the duties to be performed by paid and honorary Prohibition Officers in furtherance of the objects of the Act; (bb) prescribing the ways in which the duty under section 18-A may be levied; NOTES Clause (bb) inserted by Act 19 of 1948 (c) Determining the local jurisdiction of police and Prohibition Officers in regard to inquiries and the exercise of preventive and investigating powers; (d) authorizing any officer or person to exercise any power or perform any duty under this Act; (e) prescribing the powers and duties of prohibition committees and the members thereof and the intervals at which the members of such committees shall make their reports ; (f) regulating the delegation by the Commissioner or by collectors or other district officers of any powers conferred on them by or under this Act; (g) regulating the cultivation of the hemp plant, the collection of those portions of such plant from which intoxicating drugs can be manufact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y offence in regard to the contravention of such rule or the breach of any of the conditions subject to which the exemption is notified m such notification when such contravention or breach occurred before the date on which the rule or notification is published, as the case may be. NOTES: The proviso's inserted by Act 68 of 1986 (3) All rules made under this Act shall, as soon as possible after they are made, be placed on the table of both the Houses of the Legislature shall be subject to such modifications by way of amendments or repeal as the Legislative Assembly may make within fourteen days on which the House actually sits either in the same session or in more than one session. NOTES : Sub-section 3 added by Act 8 of 1958." "55, Publication of Rules and Notifications, All rules made and notifications issued under this Act shall be published in the Official Gazette and upon such publication, shall have effect as it enacted in this Act." (Emphasis supplied) The operation of the Prohibition Act was temporarily suspended in .August 1971. However, prohibition was re-introduced in August 1972 by abolition of toddy shops and in September 1974 by abolition of arrack shop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd five hundred only); and (iii) the privilege amount determined at fifteen percent centum more than the privilege amount at which the sale of the privilege was confirmed in the previous year. (2) If a licensee intends to renew the licence for the third year, he shall apply at least 30 days before the date of expiry of the licence for renewal in Form VII after remitting - (i) an application fee of Rs. 100 (Rupees one hundred only); (ii) the licence fee of Rs. 2,500 (Rupees two thousand and five hundred only) and (iii) the privilege amount determined at ten percent centum more then the privilege amount at which the sale of the privilege was confirmed in the previous year. Proviso omitted, (3) If the licensing authority decides not to renew the licence, he may refuse renewal by an order recording the reasons for refusal: (Emphasis supplied) Provided that the licensing authority shall give a reasonable opportunity of being heard to the licensee before such refusal. (4) If a licence is not renewed, the licence fee remitted by the licensee shall be refunded to him," What is important to be noted here is, under Rule 14(3) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fixed by the State Government in the behalf. 2. If the licensee intends to renew the licence for the third term, he shall apply not later than thirty days before the date of expiry of the licence renewed, in Form III...... 3. The licensing authority may refuse the renewal of a licence by an order in writing for reasons to be recorded therein; Provided that the licensing authority shall give a reasonable opportunity of being heard to the licensee before such refusal." It has to be carefully noticed that under Rule 6(1)(c) the privilege amount may be fixed by the State Government in that behalf. Further there is power to refuse renewal; of course, for valid reasons subject to right of appeal and revision under Rules 16 and 17. On 4th February, 1993 the Governor of Tamil Nadu made the following address: "Prohibition as a key issue of State Policy is a Constitutional directive. Honourable Members of the House are aware that the Government, under the leadership of the Chief Minister Dr, J. Jayalalitha, implemented as its first decision the abolition of cheap liquor shops throughout the State, in keeping with its announced policy of prohibition, although this involv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. No. 44 dated 3rd March, 1993. In the light of the above discussion the correctness of the following contentions may be examined : 1. Whether the Tamil Nadu Liquor (Retail Vending) Rules, 1989 (For short Retail Vending Rules) and Tamil Nadu Liquor (Retail Vending in Bar Rules, 1992 (for short Bar Rules ) form an integral scheme? 2, Whether the appellants can claim the benefit of the doctrine of legitimate expection? 3, Whether under the impugned G.O. by rescinding of the Bar Rules- (a) The State has not acted fairly; (b) violation of Article 14, the action being arbitrary? 4. Whether the appellants could claim the benefit of Section 8 of the Tamil Nadu General Clauses Act? Point No. 1: In view of what is stated above, it is clear that privilege of retail vending could only be under licence. Such a licence is obtained after a successful bid. The mere success in the bid does not ensure the privilege. Still, as seen above, even after the confirmation of sale the auction pur- chaser will have to apply in form No. VI to the Licensing Authority for the grant of licence along with the requisite fee. It is only after the Licensing Authority is satisfie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the individual will be given a hearing before a decision is taken not to confer the benefit. The actual enjoyment of a benefit may create a legitimate expectation that the benefit will not be removed without the individual being given a hearing. On occasions, individuals seek to enforce the promise of expectation itself, by claiming that the substantive benefit be conferred. Decisions affecting such legitimate expectations are subject to judicial review." In Council of Civil Service Unions v. Minister for the Civil Service, [1984] 3 All ER 935 at pages 943-44 it is stated thus : "But even where a person claiming some benefit or privilege has no legal right to it, as a matter of private law, he may have a legitimate expectation of receiving the benefit or privilege, and, if so, the courts will protect his expectation by judicial review as a matter of public law. This subject has been fully explained by Lord Diplock in O'Reilly v. Mackman, [1982] 3 All ER 1124 = (1983) 2 AC 237 and I need not repeat what he has so recently said. Legitimate, or reasonable, expectation may arise either from an express promise given on behalf of a public authority or from the existence o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate expectation; see R. v. Secretary of State for the Home Department, ex p Khan, [1985] All ER 40 at 48, 52, [1984] 1 WLR 1337 at 1347, 1352, CA; and see para 23 ante. In relation to Inland Revenue extra - statutory concessions and assurances, see R v. A-G, ex p ICI pic, [1986] 60 TC I; Rv. HM Inspector of Taxes, Hull, ex p Bnmfteld, [1988] Times, 25 November; and R v. IRC, ex p MFK Underwriting Agencies Ltd., [1989] Times, 17 July; of Re Preston, [1985] AC 835, [1984] 2 All ER 327, HL.) including an implied representation, [R v. Secretary of State for the Home Department, ex p Khan, [1985] 1 All ER 40, [1984] 1 WLR 1337, CA (setting out criteria for exercise of discretion in guidance letter given to prospective adoptive parents of children requiring entry clearance led to legitimate expectation that clearance would be granted where those criteria were satisfied. See also R v, Powys County Council, ex p Howner [1988] Times, 28 May; and R v. Brent London Borough Council, ex p Macdonagh, [1989] Times 22 March. In R v. Brent London Borough Council, ex p gunning, [1986] 84 LGR 168 the court appears to have relied in part on what were in effect express or implied representatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in existence will be fairly applied, and cannot be invoked to prevent a change of policy fairly carried out: Re Findlay [1985] AC 318 at 338, [1984] 3 AU ER 801 at 830, HL; R v. Secretary of State for the Environment, ex p Barratt (Guildford) Ltd, [1988] Times 3 April; and see R v. Secretary of State for the Home Department, ex p Ruddock supra. or it may mean that, if the authority proposes to defeat a person's legitimate expectation, it must affirm him an opportunity to make representations on the matter. A-G of Hong Kong v. Ng Yien Shiu, [1983] 2 AC 629 = [1983] 2 All ER 346, PC; Council of Civil Service Unions v. Minister for the Civil Service, [1985] AC 374, [1984] 3 All ER 935, HL; R v. Secretary of State for the Home Department, ex p Khan, [1985] 1 All ER 40, [1984] 1 WLR 1337, CA, Sometimes the expectation will itself be of consultation or the opportunity to be heard; R v. Liverpool Corpn., ex p Liverpool Taxi, Fleet Operators' Association, [1972] 2 QB 299, [1972] 2 All ER 589, CA; A-G of Hong Kong v. Ng Yien Shiu supra; Council of Civil Service Unions, v. Minister for the Civil Service supra; and see Ltyod v. McMahon, [1987] AC 625 at 715 1 All ER 1118 at 1170-117....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive effect. - The classic situation in which the principles of natural justice apply is where some legal right, liberty or interest is affected, for instance where a building is demolished or an office-holder is dismissed or a trader's licence is revoked. But good administration demands their observance in other situations also , where the citizen may legitimately expect to be treated fairly. As Lord Bridge has explained : Re Westminister CC, (1986) AC 668 at 692, Lord Diplock made a formal statement in the Council of Civil Service Unions case (below) at 408, saying that the decision must affect some other person either - (a) by altering rights or obligations of that person which are enforceable by or against him in private law; or (b) by depriving him of some benefit or advantage which either (i) he had in the past been permitted by the decision-maker to enjoy and which he can legitimately expect to be permitted to continue to do until there has been communicated to him more rational grounds for withdrawing it on which he has been given an opportunity to comment; or (ii) he has received assurance from the decision-maker will not be withdrawn without giving him first an oppo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stipulated is laid down for the grant of licences to fish against national quotas." Thus, it will be clear even legitimate expectation cannot preclude legislation,'' In Food Corporation of India v. M/S. Kamdhenu Cattle Feed In-dustries, JT (1992) 6, 259 at 264 this Court observed thus : "The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due con-sideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweight what would otherwise have been the legitimate expectation of the claimant. A b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....earing, though revocation of their permits within that time would have been contrary to legitimate expectation. Official statements of policy, therefore, may cancel legitimate expectation, just as they may create it, as seen above. In a different context where car-hire drivers had habitually offended against airport byelaws, with many convictions and unpaid fines, it was held that they had no legitimate expectation of being heard before being banned by the airport authority. There is some ambiguity in the dicta about legitimate expectation, which may mean either expectation of a fair hearing or expectation of the licence or other benefit which is being sought. But the result is the same in either case; absence of legitimate expectation will absolve the public authority from affording a hearing. (emphasis supplied)" Again, at pages 56-57 it is observed thus : "A case of legitimate expectation would arise when a body by representation or by past practice aroused expectation which it would be within its powers to fulfill. The protection is limited to that extent and a judicial review can be within those limits. But as discussed above a person who bases his c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... extremely confined and if the according of natural justice does not condition the exercise of the power, the concept of legitimate expectation can have no role to play and the court must not usurp the discretion of the public authority which is empowered to take the decisions under law and the court is expected to apply an objective standard which leaves to the deciding authority the full range of choice watch the legislature is presumed to have intended. Even in a case where the decision is left entirely to the discretion of the deciding authority without any such legal bounds and if the decision is taken fairly and objectively, the court will not interfere on the ground of procedural fairness to a person whose interest based on legitimate expectation might be affected. For instance if an authority who has full discretion to grant a licence and if he prefers an existing licence holder to a new applicant, the decision cannot be interfered with on the ground of legitimate expectation entertained by the new applicant applying the principles of natural justice, It can therefore be seen that legitimate expectation can at the most be one of the grounds which may give rise to judicial r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....expectation. At best, it could be a hope. On this aspect we can usefully refer to Director of Public Works v. HO PO Sang, [1961] 2 All E.R. 721. at page 730 it was observed thus : "It was submitted on behalf of the lessee that, after the director had given notice (see s.3A(2) of his intention to give a re-building certificate, some kind of a right (even though one that might be defeated) to such a certificate was then acquired by the lessee. Their Lordships cannot accept this view. After the director gave notice of his intention to issue a certificate, there could have been no giving of it until certain conditions were satisfied. The lessee was under obligation to give notices as required by s.3B(l). Had there been no appeals by tenants and sub- tenants and had the time for appeals expired, the director would then have been in a position to give a certificate. Had those been the circumstances than inas-much as the director had indicated what his intention was, doubt- less he would in fact have given his certificate. But the ordinance did not impose an obligation on the director to give a certificate in accordance with his declared intention unless and until certain conditi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bove, it is clear that there was absolutely no promise of renewal at all. It was by a Rule (subordinate legislation) in exercise of the powers conferred by Sections 17-C, 17-D, 21 and 54 of the Tamil Nadu Prohibition Act, 1937 licences under Bar Rules came to be granted. Those Rules have been repealed by exercise of the same powers under Sections 17-C, 17-D, 21 and 54 of the Prohibition Act. Therefore, this is a case of legislation. The doctrine of legitimate expectation arises only in the field of administrative decisions. If the plea of legitimate expectation relates to procedural fairness there is no possibility whatever of invoking the doctrine as against the legislation. However, Mr. K. Parasaran, learned senior counsel relies on Supreme Court Advocates-on-Record Association v. Union of India, [1993] 4 SCC 441. At page 703 what is stated is this : "Due consideration of every legitimate expectation in the decision making process is a requirement of the rule of non-arbitrariness' and, therefore, this also is a norm to be observed by the Chief Justice of India in recommending appointments to the Supreme Court. Obviously, this factor applies only to those con-sidere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....into and the investment by statute to exercise particular discretionary powers. In the latter case the question may be considered on all grounds on which administrative action may be questioned, such as, non- application of mind, taking irrelevant matters into consideration, failure to take relevant matters into consideration, etc. etc. On the facts and circumstances of a case , a subordinate legislation may be struck down as arbitrary or contrary to statute if it fails to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the statute or, say, the Constitution. This can only be done on the ground that it does not conform to the statutory or constitutional requirements or that it offends Article 14 or Article 19(l)(a) of the Constitution, It cannot, no doubt, be done merely no the ground that it is not reasonable or that it has not taken into account relevant circumstances which the Court considers relevant." The same principle is reiterated in Union of India v. Cynamide India Ltd., AIR (1987) SC 1802 which is referred to with approval in H.S.S.K. Niyami v. Union of India, AIR (1990) SC 2128. Whe....