# ·G ff NASHIRW AR ETC. ETC v. THE STATE OF MADHYA PRADESH

- **Citation:** [1975] 2 S.C.R. 861
- **Court:** Supreme Court of India
- **Decided:** 1974-11-27
- **Case number:** Civil Appeal Nos. 1711 to 17'.Zl, 7123, 1699, 1706 & 1744 of 1974
- **Bench:** A. N. Ray, K. K. Mathew, N. L. Untwalia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/g-ff-nashirw-ar-etc-etc-v-the-state-of-madhya-pradesh-6363
- **Pages:** 12

## Headnote

Central Provinces Excise Act; 1915--S. IS-Whether the State has the power
to gram liquor licences by public auction-Whether. violates fundamental right
under Art. !9(1)(g) of the Constitution.
Constit111wn of India, 1950-Art. 19(1)(g)-Entry 8, List U.
Under the Central Provinces Excise Act, 1915 (which was the .Act applicable
to the State of Madhya Pradesh) the excise 1111thorities granted licences for
selling foreign liquor under a system of fee per bottle. From the year 1964-65
the State Government decided that licences for foreign liquor should be disposed
of by public auction.
The appellants unsuccessfully
challenged before
the
High Court the authority of the State to hold public auctions for grant of.
licences for foreign liquor.
In 1964 th'e Act woo amended, as a result of
which the State could grant leases in respect of both country and foreign
liquor.
By a notification the State Government declared that it would grant
·foreign liquor licences by public auction. Similarly the impugned Act of
Kerala State places restrictions on the manufacture, sale, import and export
of liquor. The appellants in the Madhya Pradesh case and the petitioners
in the Kerala case have questioned the constitutional validity of the restrictions
on the ground that they deprive them of the fundamental right to carry on
trade in· liquor. It was ,contended that the right to trade in liquor was not
declared by the legislature to be a monopoly of the. State to exclude trade in
liquor from the operation of Art.19(1 )(g) as a fundamental right to trade.
Dismissing the appeals and. writ petitions :
HELD : 1 (a) The State has exclusive right or privilege of manufacturing
and selling liquor. The State grants such right or privilege in the shape
of ·a licence or a lease. The State has power to hold public auction for
grant of such right or privilege and accept payment of. money in consideration
of grant of lease. [872-B]
(b) The State legislatme is authorised to
make a provision for public
au;tion by reason of the power contained in Entry 8, List II of the Constitution. That entry empowers the State Governm.ent to legislate with regard to
intoxicating liquor, that is to say, oroduction, manufacture, possession .. transport,
purchase and sale of intoxicating liquor. [865-F]
(2) (a) There are three principal reasons to bold that there is no fundamental right of citizens to carry on trade or to do business in liquor. First,
·there. is the police power of the State to enforce public morality, to orob.ibit
trades in noxious or dangerous got>ds.
Second, there is power of the State· to
enforce an absolute probibitio!l of manufacture or sale of intoxicating liquors.
Article 47 s~tes that. the State shall. endeavour to bri.ip ll·. about prohibition of
the consumption; ~tept for medical {lurposes, of into~l1lting drinks and df'\lis
which arc injurious to health. Third" the history of excis.i law in India shOws
that the State has . the exclll'Sive right 'Qr privilege of manufacture or sale of
liquor.
[8~J.il
· '
(b) Trild(lh'~.quor.has historically .. ~~ ori,a difte)'e~':f9oting.from .1·
··
trades; Itestr1oflo11S which are nol ip6rnuss1ble with btlttr
!les are lawful
reasonable 10 .far : . .as the trade' in· .liquor is .::oru:ei'iiell)) -hat Is why e'i>
prohibition Q~.~·tradp ln liquor•·is·~ .only permissib\e. ~~.is also.reasonable.
T.be reasons are" 'pubhc morality, public interest andr harniful and danger11111
character of the liquor. The State p<>ssesses. the · right' Of complete · corifrol
over all aspects of intoxicants viz., ,maqufacture, colle~tion, sale and consumption. The State• Ms exclusive· rlSh'f 1tol1ilanufact11re ad/114lel! liquor and. Ii> ~
the said right in ·order to raise revenue. [8710-EJ
·
(. -
862
SUPREME COURT REPORTS
[1975J 2.~.C.lt.
Cc) The nature of the trade is such that the State confers right to vend
liquor by farming ou.t either in auction or on private treaty. Rental is the
consideration for the privilege granted by tile Government for

## Text

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NASHIRW AR ETC. ETC.
v.
THE STATE OF MADHYA PRADESH
November 27, 1974
861
[A. N. RAY, C.J., K. K. MATHEW AND N. L. UNTWALIA JJ.]
Central Provinces Excise Act; 1915--S. IS-Whether the State has the power
to gram liquor licences by public auction-Whether. violates fundamental right
under Art. !9(1)(g) of the Constitution.
Constit111wn of India, 1950-Art. 19(1)(g)-Entry 8, List U.
Under the Central Provinces Excise Act, 1915 (which was the .Act applicable
to the State of Madhya Pradesh) the excise 1111thorities granted licences for
selling foreign liquor under a system of fee per bottle. From the year 1964-65
the State Government decided that licences for foreign liquor should be disposed
of by public auction.
The appellants unsuccessfully
challenged before
the
High Court the authority of the State to hold public auctions for grant of.
licences for foreign liquor.
In 1964 th'e Act woo amended, as a result of
which the State could grant leases in respect of both country and foreign
liquor.
By a notification the State Government declared that it would grant
·foreign liquor licences by public auction. Similarly the impugned Act of
Kerala State places restrictions on the manufacture, sale, import and export
of liquor. The appellants in the Madhya Pradesh case and the petitioners
in the Kerala case have questioned the constitutional validity of the restrictions
on the ground that they deprive them of the fundamental right to carry on
trade in· liquor. It was ,contended that the right to trade in liquor was not
declared by the legislature to be a monopoly of the. State to exclude trade in
liquor from the operation of Art.19(1 )(g) as a fundamental right to trade.
Dismissing the appeals and. writ petitions :
HELD : 1 (a) The State has exclusive right or privilege of manufacturing
and selling liquor. The State grants such right or privilege in the shape
of ·a licence or a lease. The State has power to hold public auction for
grant of such right or privilege and accept payment of. money in consideration
of grant of lease. [872-B]
(b) The State legislatme is authorised to
make a provision for public
au;tion by reason of the power contained in Entry 8, List II of the Constitution. That entry empowers the State Governm.ent to legislate with regard to
intoxicating liquor, that is to say, oroduction, manufacture, possession .. transport,
purchase and sale of intoxicating liquor. [865-F]
(2) (a) There are three principal reasons to bold that there is no fundamental right of citizens to carry on trade or to do business in liquor. First,
·there. is the police power of the State to enforce public morality, to orob.ibit
trades in noxious or dangerous got>ds.
Second, there is power of the State· to
enforce an absolute probibitio!l of manufacture or sale of intoxicating liquors.
Article 47 s~tes that. the State shall. endeavour to bri.ip ll·. about prohibition of
the consumption; ~tept for medical {lurposes, of into~l1lting drinks and df'\lis
which arc injurious to health. Third" the history of excis.i law in India shOws
that the State has . the exclll'Sive right 'Qr privilege of manufacture or sale of
liquor.
[8~J.il
· '
(b) Trild(lh'~.quor.has historically .. ~~ ori,a difte)'e~':f9oting.from .1·
··
trades; Itestr1oflo11S which are nol ip6rnuss1ble with btlttr
!les are lawful
reasonable 10 .far : . .as the trade' in· .liquor is .::oru:ei'iiell)) -hat Is why e'i>
prohibition Q~.~·tradp ln liquor•·is·~ .only permissib\e. ~~.is also.reasonable.
T.be reasons are" 'pubhc morality, public interest andr harniful and danger11111
character of the liquor. The State p<>ssesses. the · right' Of complete · corifrol
over all aspects of intoxicants viz., ,maqufacture, colle~tion, sale and consumption. The State• Ms exclusive· rlSh'f 1tol1ilanufact11re ad/114lel! liquor and. Ii> ~
the said right in ·order to raise revenue. [8710-EJ
·
(. -
862
SUPREME COURT REPORTS
[1975J 2.~.C.lt.
Cc) The nature of the trade is such that the State confers right to vend
liquor by farming ou.t either in auction or on private treaty. Rental is the
consideration for the privilege granted by tile Government for manufacturing or
vending liquor. Rental is neither a tax nor an excise dllty.
Rental is the
consideration for the agreement for grant of privilege by the Government. [87 lF] .
(d) The grant of a lease either by public auction or for a sum is ,a
regulation pertainin~ to liquor. . One of the purposes of regulation is to raise
revenue. Revenue 1s collected by the grant of contract>s to carry on trade in
liquor. . These contracts are sold by auction. The grantee is given · licence
o~ payment· of auctio~ price. [872A]
'·
Kri.rlma Kumar Nar!'la etc. v. The State of Jammu .and Kqshmir .and Ors.
[1967].3. S.C.R.. 50; Coovarjee B. Bharucha v. The Excise CommisSio1w 'ind
the Chief Com'11pssiore·r, Ajmer, [19541 S.C.R. 873; Crowley v. Christensen 34
L.Ed. 620; Jta. te of At~an1. v. A. N. Kiilwai, Commi!.:rioner of Hills Division 'ind
~ppea/s, Shi/lpng [19~71' ;5.C.R. 295; fitate of Bombay cl Anr. v. F. N. Bal&2ra
[1951] S.C.R. 682;· Ml1,\0uru8)tlamy cl Co., etc. v. State of Mysore cl Ors.
[1967] I S.C.R. 548; State of· "ris.ra cl Ors. v. Harl Narayan )a/swat cl Ors.
[1972] 3 S.C.R. 748; Amar Chandra Chakraborty
v. Collector of 'Exdse
Government of Tripura and Ors. [1973] . 1 S.C.R. 533; State of Bombay v.
R. M. D. Clwmarbaugwalla [1957] S.C.R. 874 and ·A. B. Abdulkadlr v.
•State of &ra/11 [1962] 2 Supp. S.C.R. 741 referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1711 to 17'.Zl,
7123, 1699, 1706 & 1744 of 1974.
From the Judgment and Order dated the 24th April, 1.974 of 1tlte
Madhya Pradesh High· Court in Misc. Petitions Nos. 391, 392, 395,
394, 412, 401, 405, 430, 400, 399, 403, 390, 409, 417 and 407 of
1970 respectively.
Civil Appeal No. 1267 of 1910.
From the judgment and Order dated the 8th April, 1970 of 1thr.
Kerala High Court in O.P. No. 995 of 1970.
·
Writ Petitions Nos. 436 of 1911 and 26 and 133 oi 1912.
Petitions under Art. 32 of the Constitution of India.
A
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B. Sen, S. Balakrish11a11 and N. M. Ghatate, for the appellants (In
F ·
CAs. Nos. 1711-1721, 1_723/74), for the appellants.
.
.
S. S. Khanduia and S. K. Jain (In CAs. Nos. 1699, 1706, 1744
and 1715/74), for the appellants. ·
S. N. Al'Ulley (In CA. 1723/70) R: P. Kapur and I. N. Shroff, for
the respondents in all the appeals.
· C
.D. V. Pat,el (In CA 1267/70)
1 Y. S. Chitalt, (WP. 436/71), N. K.
Shreedharan (In WPNo. 133/72), V.
B~askarat:i Nambuar . (CA.
1267170 and WP. 436/71) P. K. Sr1~edharan (lq WP. 133/72). P.
Sankaran Kutty (In WP. 436171 and 133172) 'and A.. S. Nambiar,
for the appellants (In CA No. 1267/70) and petitioners ,(In Wl's.
Nos. 436171 :and 133172).
B
D. V. Pa;~/ and S. Gopalakrishrian, for the petitioner (In WP
26172).
A
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NASHIRWAR v. M. P •. S1',ATE. (Ray, C.J.)
863
K. T; Harindernath (In CA No. 1267170 and WP. 436171) and
K. M. K. Nair, for the respondents (In CA. No. 1267 /70) and WPs.
Nos. 436171 and 26172.
·
·
Lily Thomas, for the Intervener (K. J. Joseph).
The Judgment of the Coiirt was d~livered by__:
R.Av, C.J. The principal question in these civil appeals and writ
petitions is whether it is permissible for .the Sta'e Government to auction licences for carrying on the business of sellint foreign liquor whi<!h
is neither mimufactured nor imported by the State Government. Some ·
of these appeals re\ate to State of Madhya Pradesh and .others relate
to State of Kerala.
,
·
The M:at!hya Pradesh appeals are governed by' the Ceritial Provinces and Berar Excise Act 1915 which became applicable to Madhya
Pradesh as the Central Provinces Excise Act, 1915. This will be referred t(J as the Madhya Pradesh Act.
.
.
.
, I
The Kerala Appeals are governed by the Abkan Act ·(Act No. I
1700). This will be referred to as the Abkari Act.
Prior to 1 April, 1964 licences for sale of foreign liquor in M9:c1hya
Pradesh were &ranted by the excise authorities under the fee per. bottle
system. In 1964-65 the State decided that licences for foreign liquor
would be . disposed of by public auction to the highest biddor. The
appellants then challanged in the Madhya Pradesh High Court the
authority of the State Government to hold public auction for grant
of licences for foreign liquor. The appellants did not succeed because
the Act was amended in 1964. The result of the amendment was that
whereas formerly the State Government could grant lease only in respect of country liquor, the Amending Act empowered the Government
to grant leas<: ip. respect of any liquor which meant bOth foreign and.
country liquor., fifter the amendment, public auctions were held under
section~l8 .. of 1tl\e~
... adhya Pradesh Act in respect of foreign liquor as
well. In 1956-6tl ublic auctions were held in respect of foreign liquor,
The leases ~· newed up to 1969-70. In 1967-68 prohibition was
~ithdrawn in dettaiqi a~eas of Madhya Pr~desh and new for~ign lictuor
vends were opep.cd : These vends were dis~ed of by public auction.
In 1968 the Sta~ Government by a notification date<l 29 March, 1968
ordered that.With ~lfeclj from 1 April, 1965 foreign liquor licen~ shall
be disposed C!>f om l13pncnt of extra fee of Rs. 1000 in additjon to
the paynient of a fee per bottle at specified rates. The notification
o· further directed tqat' wher~ new shops were required to be opened
licences wolild be disposea of by public auction in addition tQ a fee
per bottle. Iii 1970 there was a notification dated 14 August, 1970
where the State Government wpuld dispose of foreign liquor licences
bv public auction. 'fbit.notification is the subject matter of the Madhva
Pradesh appeals.
.
·
H
The Mlldhya Pradesh Act by sections 8 and 9 confers power on
the State to prOhibit import, export Qr transport of any intoxicant.
ulntoxicant
1
~ Wider ·the. Act ·means any liquor or intoxicating dru~. The
State. Government has power to. imp(>se .restrictions on import, export
'.
864
SUPREME COURT REPORTS
[l975j 2 s.C.R~
or transport of intoxicant in the shape of payment of duty and compliance with other conditions. Chapter IV of the Madhya Pradesh Act
consisting ot sections 13 to 24 deal with manufacture, possession and
sale 6f intoxicants. Section 13 requires licence for manufacture, collection, possession of 'intoxicants and materials for manufacturing intoxican•s.
se,c;tions 17 and 18 of the Madhya Pradesh Act are important for
the purposes of \ttese appeals. Section 17 deals with licences for sale
of intoxicants.
Se·~tion 18 states that the State Government may lease
to any person on such conditions and for such period as it may think
fit the right (a) of manufacturing or of supplying by wholesale, or of
both, or (b) of selling by wholesale or by re•ail, or (c) of manufacturing or of supplying by wholesale, or of both, and sdling by retail any
liqw:ir intoxicating drug withi.n any specified area.
The Abkari Act which governs the Kerala Appe,«s in sections. 6 to
11 deal with import, export and .transp?rt of liq~or or intoxicating ~rugs.
Permission of .the Government 1s reqmred for import, export of liquor.
Section 9 of the Abkari Act confers power on the Governinent to
prohibit, .transport of liquor from any local area to any other lcx:al
area. Sections 12 to 15C of the Abkari Act deal with manufacture,
possession and sale of liquor or intoxicating drug. Manufacture is
prohibited except under the provisions of the Act, viz., licence granted
by the Commissioner.
The establishl]lent and control of distilleril:s,
breweries, warehouse etc. is by grant of a licence. Sections 17 to '.23
of the Abkari Act deal with duties taxes and rentals. Section 17 of
the. Abkari Ac:t speaks of duty on liquor or intoxicating drugs. Section
18A of the Abkari Act confers p0wer on the Government to grant,
on such conditions and for such period! as the Government may dee:m
fit the exclusive or other privilege '(i) of manufacturing or supplying by
whole-sale; or (ii) of selling by retail; or (iii) of manufacturing or
supplying by wholesale and selling by retail any liquor or intoxicati1ng
drugs within any local area on. his oi: their payment to the Government
of an amount as rental jn:consideration of the grant of such privilege.
The. Act furth.er. states -that the amount of rental .may be' settled by
auction, negotiation or by any other method as may be determim:d
by the Government, from time to time, and may be collected to the
exclusion of, or in addition to, the duty or tax leviable under sectio:ns
17 and 18. No grantee of any privilege under section 18A of the Act
shall exercise the same until he has reeeived a licence in that behalf
from the Commissioner. Rule 13(1) under the Abkari Act states that
the privil~~e under the licence .will .be sold io puQ.Iic auction subject to
~he cond~tions of the sale notificatio~ published by Government from
time to time.
·
·
The .contention o!1. behalf of the appellants is that it is the fund:ament~l nght of the. c1ti.zens t? carry on trade in liquor. It s said th:at
the right to trade m liquor 1s not declared by . the legislature to be a
mono~oly of the State to. exclude trade in liquor from the operatio1n
of Article 19(.ll(~) as a fundamental right to trade. The. appellants
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NASHIRWAK v. M. P. STATE (Ray, C.J.)
S {i 5
challenge tnat the State has any right or privilege in the matter of ~~nu
facture or sale of liquor which can be granted as a right or pr1v1lege
to the citizens.
On beha!f of the State it is said that the State is not claiming mono-
;ioly. in foreign liquor. The State does not contend that the a~ction
of liceoces is either a fee or a tax. The State contends that the highest
bid represents the consideration for the lease under section 18 . of the
Madhya Pradesh Act or section .18A of the Abkari Act.
It is ·said
·on behalf of the State that.the State has the exclusive.right or privilege
to manufacture, possess and sell intoxicant liquor and these p_rovisions
in the Act confer a right or privilege on ·the highest bidder at the
auction to vend foreign liquor in specified .areas.
The Madhya Pradesh Act as well as the A:bk~ri ... Act stat.es, that ·
citizens c;annot have the right to carry on trade m liquor except to t~e
extent and subject to such conditions as may be imp~sed by the. le~1s
lature under its regulatory powers. The Acts deal with four ptmc1pal
forms of activities pertaining .to liquor. First, the import, export al).d
transportation of liquor is regulated by providing for passes on, terms
and conditions mentioned. in the Act.
A fe€? is also prescribed for
such passes. Second, the manufacture of liquor is dealt with by providing for licences from the State Government and fees are prescribed
for such licences. · Third, the possession of liquor requires a permit
from the Government and a fee therefor. Fourth, the sale of liquor
is dealt with by sections 17 and 18 of the Madhya Pradesh Act i;ind
section 18A of the Abkari Act. The Acts speak of the grant of privilege or right to sell liquor by lease. The Government can hold a public
auction to grant lease. The State Government accepts payment. of a .
sum in consideration of the grant of any lease. The amount of bid at
a public auction represents the consideration for the grant of such right
or privilege.
Fhe State Legislature is authorised to make a provision for public
1uction by reason of power contained in Entry 8 of List II of the Constitution. That Entry empowers the State Government to legislate with
regard to intoxicating liquor, that is to say production, manufacture,
possession, transport, purchase and sale of intoxicating liquor.
Counsel on behalf of the appellants relied on '<the decision of this
Court in Krishna Kumar Narula etc:
v.
The State •of lammu and
Kashmir and OrS. [1967] 3 S.C.R .. 50 as an authority fo~ the proposition that a citizen has a fundamental right to do basines~ to deal .
;n liquor.
· ··
·
.
·
· ·
This Court in Cooverjee B. Bharucha v. The Excise Commissioner
and of Chief Commissioner, Ajmer [1954] S.C.R. 873 held that the
grant . of a
lease . either J>.y public auction or for a sum is a
r~!l'llati?n pert~iniilf to liquor. . It .was .contended on behalf of the
citizen m Bharucha s case (supra) that every person has an inherent
right to carry ori frade in intoxicating J'iquors and ·that the State has
no right to create a monopoly in them. In Bhar:ucha's case ·(supra)
the auc,tion sale .of country liquor shop un~er Excise Regulation 1 of
1915. was. challenged on. the.ground .that the provisions 9f the Exoise
S-66
SUPREME COURT REPORTS
[1975) 2 s.c.a.
Regulation and the auction rules were ultra vires because the srune
purported to grant monopoly to trade to a f~w persons. The E_xcise
Regulation 1915 in that case protjded that the Chief Commiss10~.er
miglit lease to any person the right .of manufacturing or of supplying
or of selling by wholesale or retail any country liquor or intoxicating
drug within any special area.
This Court said that laws prohibiting
trades in noxious. or dangerous goods cannot be held to be illegal as
enacting a pn)hibition and not a mere regulation.
In Bharucha's case (supra) this Court concurred with the obs€:rvations in Crowely
v.
Christensen 34 L.Ed. 620. Those observations indicate that the sale of liquor has been at all times considered
as the proper subject of legislative regulation. A licence may be ex-
.acted apd restrictions may b~ imposed as to sale of liq11or.
There
may be absolute prohibition -of sale of liquor. fl.t the i:oot lies public
expediency and public morality. The sanction is the police power of
the State to regulate business and to mitigate evils.
·
The observations in Crowely's case (supra)
which. were
Ia.id
down as a ruling of this Court in Bharuchas case (supra) are these.
"There is no inherent right in a citii.en to sell intoxicating liquors by
retail; it is not a privilege 'of a citizen .of the State or of a citizen of
the United States. As it is a business attended with danger to the
community, it may, as already said, b1~ entirelty prohibited, or be p1:rmitted under such conditions as will limit to the utmost its evil. The
maimer and extent of regulation rest in the discretion of the governing
authority". Bharucha's case (supra) negatived the contention of
inherent right of citizens to carry on trade in intoxicating liquors.
Bharucha'.~ case . (supra)
lays down three propositions. First,
that there is no inherent right of citizens to carry on trade in intoxicating liquors. Second, the auction sale of liquor shop is a method by
whicb carrying on particular trade in liquor is regulated and one of
the purposes of reaUJ.ating is to raise revenue. · Third, there can be a
monopoly only when a trade which could .be carried on by all perso·ns
is entrusted to one or more persons to the exclusion of the geneiral
public. That is not the case with. the business of li9uor.
This Court in Narulas case (supra) referred to the decision in
Bharucha's Cl)Se (supra) and the concurrence of this Court in
Bharucha's c;ise (supra) with Crowley's case
(~upra) that the:re
is no
inlier~t right in a citizen to. sell intoxicating liquor. In
Narula's case (supra) this Court read the obsetvatioos of this Court
in Bharuchas case (supra)
to have conceded
the1 inherent a:nd
fundamental rieht of a citizen to carry on business. in sale of intoxicating liquor. Bharucha's case. (supra) in no uncertain ·terins reoelled
the ·citizens contention of inherent ri11ht to sell intoxicating liq11JJr.
Bharucluls
case
(supra)
is
a Constitution Bench
decisicln.
Narultls case is also a Cons.titution Bench decision .. · · Naru£ts
case (supra) ·.cannot be saii:t to have overruled · Bharuchas caise
(supra).
.
/
'
· There is an earlier decision of tllis Court in State •Of Assam v.
A. N. Kidwaf, Commisiioner· of Hills Division and Appeals, 'Shillong
'
'
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NASHIRWAR v. M. P. STATE (Ray, C.J.)
867
A
f1957] S.C.R. 295 where it is said that no person has any absolute:
1:ight to sell liquor.
In Kidwai's case (supra) this Court said that
the purpose of the Act and the Rules. is to control and restrict the
consumption of intoxicating liquor. Such control and restriction is said
by this Court to be necessary for the preservation of public health.
and morals and to raise revenue.
B
In Narula's case (supra) it was held that dealing in liquor is business and a citizen has a right to do tiu~iness and that a State can make
a law imposing restrictions
on the rights in public interest.
In
Narulrls case. (supra) it was also said that unless dealing in liquor
is not trade or busmess a citizen has a fundamental right to deal in:
t.hat commodity. It is not correct to read the decision in Narula's
case (stipra) that there is a fundamental right to do business in liquor.
C · 'The decisibn is tliat dealing in liquor is business and a citizen has a.
right to do business in that commodity and the State can impos~ reasonable restrictions on. the right in public interest. If the State can'
prohibit business in liquor as is held in State of Bombay and Anr. v.
F, N. Balsara [1951] S.C.R. 682 this establishes that the State has
exclusive right of privilege of manufacture, possession, sale of intoxicaD
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ting liquor and therefore the State grants such a right of privilege to
persons in the· shape of licence or lease.
The auction of the. privilege of selling liquor was upheld by this·
Court in M/s. 'Guruswamv' & Co. etc. v. State of Mvsore and Ors.
[1957] 1 S.C.R. · 548. This Court. said that the licensee pays for the
exclusive privilege of selling toddy from certain shops. The licensee
pays what he considers to be equivalent to the value of the right. It
has no relation to the production or manufacture of toddy. The only
relation it has to the production or manufacture of toddy, is that it
enables the licensee to sell it.
The privilege of selling is auctioned·
welt before the goods come into existence. The levy is in respect of
the business of carrying on the sale of toddy.
Naruk{s case (supra) was explained by this Court in a Bench
decision in State of Orissa & Ors. v. Hari Narayan Jaiswal and Ors.
[1972] 3 S.C.R.
7841 with considered whether the .sale by public
auction of the exclusive privilege of selling by retail country liquor
in 8 shops was valid. The respondent was the highest bidder there.
His bid was rejected, The Government was of the view that inade•
quate prices had been offered because of collusion between the bidders.
Fresh tenders were called for.
The State. accepted the tender in respect of one shop and rejected the others. The remaining seven shops
were sold by pr~vate negotiation for substantially higher prices.
The
respondent whose highest bid was rejected applied to the HiJ?h
Court for a direction to the Government to confirm his bid. Section 22
of the Orissa Excise Act which governed that case stated that "the State
Government may grant to any person, on such conditions and for such
period as it may thinkfit, the exclusive privilege (e) of manufacturing
and supplying wholesale and selling retail, any country liquor or intoxicating drug within any specified local area". Section 29(2) of the
· Orissa Excise Act dealt with the payment for grap.t of exehisive privilege. Section 29(2> of the Act stated that the sum payable shall be·
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SUPREME COURT REPORTS
(1975] 2 S C.R,
.determined by calling . ti~nders or by auction or otherwise.
I~ Htrri
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Naryana's case (supra) this Court held that the right to trade
in
intoxicating liquor is subject to regulations and restrictions and upheld
the pub)i~ au~tion of the right or privilege of selling liquor as an attri-
.bu'e <if co11ectioh of State revenue.
ln the recent decision in Amar Chandra Chakraborty v. Collector . 8
of Excise, Government of Tripura & Ors.
[1973] 1 S.C.R. 533
.under the Tripura Excise Rules fees for licence for the wholesale vend
of country spirit were required 'to b:. fixed- by
tender.c:wp;-auction.
Section 22 of the Bengal Excise Act l 909 conferred power on tbe
Chief Commissioner to grant exclusive privilege of manufacturing and
supplying country liquor. No grantee of any privilege_ could exercise
the same without a licence.
The Constitution Bench in Chakrn-
.borty' s case (supra) held that trad~ or business in country liquor
has from its inherent nature been treat1:d by the State and the socielty
as a special category requiring legislative control. This trade or busi·
ness is treated as a class by itself and cannot 'be treated on the saine
basis as other trades while considering Article 14. A contention was
rai>:ed in Chakraborty's case (supra) that the business of selling
liquor is protected under Article 19 as a fundamental right and Jeli.ance
·was placed on the decision in Narula's case (supra). This Court
'held that the State can make a law imposing reasonable restrictions in
public ir-:-erest on the right to deal in liquor by public auction of the
right of selling liquor.
•
There are three principal reasons to hold that there is no fundamen.-
tal right of citizens to caFry on trade or to do business in liquor. First,
there is tqe police power of the State to enforce public morality to
prohibit trade!; in noxious or dangerous goods.
Second,
there
is
power of the State to enforce an absolute prohibition of manufacture
or sale of intoxicating liquor. Article 4 7 states that the State sha111
endeavour to bring about prohibition of the consumption. except for
medicinal purpose of intoxicating drink:; and of drugs which are iniu:-
rious to health. Third, the history of excise laws shows thatt!)e State
has the. exclusive right or privilege of manufacture or sale of liquor.
In Balsara's case (supra) this Court referred to Article 47. and
said that the idea of prohibition was connected with public health. The
challeng~ to a prohibition law under our Constitution was maqe under
Article 14 and 19 in Balsara's case. This Court held that absoMe
prohibition . of mam,1facture _or sale of liquor: i~ . permissible iind th1~
only excepti?n can be for ·in¢icinal ·preparations.
The con1;1:pt of
1nhennt ·tight of citizens. fo .do business in liquC>t is antithetica1 to th1e
power ot the State to enforce prohibition laws in respect of liquor.
Da,~. (:. l in State of' Bombay v. R. M. D.
Chamarbaugliiql/a
Tl 957] S.CR 874 said that gambling could not .be regarded adtacfo
or biJsines~ withie,the m¢anin~ of Article 19(1 )'(f) and (1?) ahd Atti-
-cle .3QL
Ttihereritly vicious 'activities c<illliot be treatCd .!IS entitlim~
·citizens to do business or ti:!!de in such ;icdvities. No one cart' <ldi .iii
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NASHIRWAR V, M. P. STATE (Ray, C.J.)
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counterfeit coins or currency notes.
Das, C. J. held that activities.
which are criminal, or dealing in articles or goods which are res extra.
commercium could· not have been intended to be permitted by Article
19 ( 1) ( f) and (g) relating to fundamental rights to trade or business ..
In our country the history of excise shows that the regulations issued
between 1790-1800 prohibited manufacture or sale of liquors without
a licence from a Collector. In 1808 a regulation was introduced in
the Madras Presidency which provided that the exclusive• privilege of
manufacturing and selling attack · should be farmed in each district.
In 1820 the law was amended to authorise the treatment of toddy and
other fermented liquors in the same way as spirits biy allowing Collectors to retain the manufacture and sale under direct maIJagement if
deemed preferable to farming. In 1884 a Committee was appointed
to investigate the excise system. The recommendations of the Committee were adopted. Under the new system the monopoly of manufacture was le( separately from that of sale. The former was granted
on condition of payment of a fixed duty per gallon. The right of sale
was given on payment o{ a fee per shop or a number of,.shops, or
on payment of a fee determined by auction. In the Bombay Presidency
tile monopoly of the retail sale of spirits and the right to purchase
spirits was farmed.
In 1857 the Government declared its future policy
to be the. letting by auction of each shop, with its still, separately.
In 1870-71 a change was made .. The rule at that time was that the
.Collector would fix the. number and locality of the different shops ,
and determine· their Jetting value according to the advantages possessed
by each. It was not intended that they should, as a rule, be put up_
tci public competition; but competition might be resorted tO by the ·
Collector and taken into account in determining the sum at which
each would be leased. This rule remained in force for many years.
The practice of putting the shops up to auction
was,
thereafter
followed. The history of excise administration in our country before
th~ Independence shows that there was originally the farming system
and thereafter the central distillery system
for manufacture, The
retail sale was by auction of the right and privilege of sale.
The
Government of India appointed an Excise Committee in 1905.-
The
measures recommended by lhe Committee
were the
advances· of
taxation, the concentration of distillation, the extended aqoption of
the contract distillery system. The Committee suggested among other
things the replacement of the then existing excise Jaw by fresh legislation on the lines of the Madras Abkari Act.
'5,ee Dr. Pramatha Nath
Banerjee: History of Indian Taxation p. 470 seq:).
Reference may, be made to the Taxation Enquiry Commissioner
Report 1953-54 Vol. 3. At page 130 following there is a discussion
of State excises. . Among the major sources of revenue which are
available to the State Government there is a duty on 'alcoholic liquors
fer. human consumption. At page 132 of the Report!t is stated that
in additi0n to the excise duties, licence fees are charged for manufacture or sal.e of liquor or for tapping toddy trees etc.
Similarly
8 70
SUPREM!:. COURT REPORTS
[1975] 2 s.c.R.
several fees like permit fees, vend fees, outstill duties are also levied.
Manufacture or sale of liquor is forbidden except under licences whfoh
.are generally granted b.y auction to the highest bidders. The manu·
facture of country spirit is done in Government distilleries or under
the direct supervision of the .'excise staff.
All supplies are drawn
from Govermnent warehouses which ensures that the liquor is" not
more than of the prescribed strength. The licensed sellers have to
.sell the country spirit between fixed hours and at fixed sell~ng rau:s.
As in the case of country spirit, the rir,ht of tapping and selling toddy
is also auctioned. In addition to the licence, in some States the
Jicensee has to pay a tree tax to Govc:rnment.
Traditionally tobacco, opium and intoxicating liquors have be1:n.
<the subject matter of State monopoly. (See section. IV of the Madras
.Regulation XXV of 1802 relating to permanent settlement of land
;revenue). Section IV states that the Government having rescrvc:d
to itself the entire exercise of its discretion in continuing or abolishing, .
·temporarily 01· permanently, the articles of revenue included, according
<to the custom and practice of the country, under the several heads
.inter alia of the abkary, or tax on the sale of spirituous liquors and
:intoxicating .drugs, of the excise on articles of consumption, of all
taxes personal and professic>nal, as well as those derived from markets,
fairs, or 1Jaza1s, of lakhiraj lands (or lands exempt from the payme:nt
.of pub'.ic rev¢nue), and of all other land~ paying only favourable
•quit rents, th1: permanent assessment of the fand-tax shall be made
.exclu$iVely of the said articles now recited.
This was followed by section XXXII of Regulation II of 1803
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'in the Madras Presidency. That section provided that Collectors shi11l
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collect the re\·enue arising from sayer, salt, spirituous liquors or from ·
-other sources, in the manner prescribed by the regulations.
Regulatio!l I of 1813 in the Madras Presidency provided that the
llicensed retail dealer shall be supplied exclusively by the . Collector
of Madras with the quantity of liquor which they may require, at such
price as may be from time to time determined.
Regulation I of 1820 of the Madras Presidency inter alia pro,vidc:d
that the Board of Revenue was authorised to empower the Collecto;rs
either to retain the exclusive privil'ege of
manufacturing country
atrack, toddy, and other fermented ligu~rs, as well as the retail sale
·of foreign or country manufactured spudts, toddy and other fermente:d
liquors in th~ir respective districts,
under their own immediate
management, on account of Government; or to rent out those privileges, jointly or separately, for such periods as may be
deeme:d
eligible.
The Boa1d of Revenue as aforesaid was also authorised to alter,
amend and enlarge rules for regulating the exclusive manu·
facture and sa~e of country arrack, toddy and other fermented liquors,
and the exclusive sale of foreign spirits. The other provisions were
that licences for renting out the exclusive privilege of manufacturing
of country, arrack, toddy or other fermented liquor, and of retailfo1g
,;,pirituous liquors would be prepared by the Board of Revem1e.
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NASHIRWAR v. M. P. STATE (Ray, C.J.)
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Act :XXIII of 1841 of the Madras Presidency, Act :XXXII of 1845
of the Madras Presidenqy, Sections XLIII to XLVII of Regulation VII
Of 1932 of the Madras Presidency all indicate that it is the right and
privitege of the State Government to manufacture, sell
intoxicant
liquors and the State grants lease of such rights by public auction on
rental in consideration of the grant of such right.
The excise revenue arising out of manufacture and sale of intoxicating liquors is one of the sources of the State Exchequer. One of the
principal sources of State revenQe is customs and excise. In England
sale of intoxicating liquors although perfectly laWful at common Jaw
is subject to certain statutory restrictions. These restricti;ons are
primarily of t\\'.O kinds; those designed for the orderly conduct of the
retail trade and those desiined to obtain revenue from the trade
whether wholesale or. retail.
· Trade in liquor has historically stood on a different fooling from
other trades. Restrictions which are not permissible with other trades
are lawful and reasonable so far as the trade in liquor is concerned.
That is why even prohibition of the trade in liquor is not only permissible. but is. also reasonable.
The reasons are public morality, public
interest and harmful and dangerous character of the liquor.
T~e State
possesses the right of complete ~trol over all aspects of intoxicants,
viz., manufacture, colleption, sale and consumption. The State has
exclusive right to manufacture and sell liquor and to sell the said
right in order to raise revenue. That is the view of this Court in
Bharucha' s case
(supra)
and
J aiswa/' s case
(supra).
The
nature of the trade is such that the State confers the right to vend
liquor by farming out either in auction or on private treaty. Rental
is the consideration for the privilege granted by the Government for
manufacturing or vending liquor. Rental is neither a tax nor an
excise duty. Rental. is the consideration for the agreement for grant
of privilege by the Government.
This Court in A. B. Abdulkadir v.
State of Kera/a [1962] 2
~upp. S~C.R. 7 41 said that in British India there us~d to be public
auction of the right to possess .and sell exciseable goods like country
liquor, ganja and bhang and the amount realised was excise revenue.
The auction system which was in force ',\'.as said by this Court-~
A bdulkadir' s case (supra) to be only a method of realising duty
from the grant of licences to those who made the highest bid at The
auctions.
The grant of a lease· either by public auction or for a sum is a
regulation pertaining to liquor. · ·one of the purposes of regulation ·
SUPREME COURT REPORTS
[1975] 2 S.C.R.
' is to raise revenue.
Revenue is collected by the grant of contracts
to carry on trade in liquor.
These contracts . are sold by auction.
The . grantee :is given a licence on payment of auction price.
[S1ee
Blzarucha's case (supra)].
For these reasons we hold that the State has the exclusive right
or privilege of manufacturing and selling liquor.
The State grants
such right or privilege in the shape of a licence or a lease.
The State
has the power to hold a public auction for grant of such right or
privilege and accept payment of a sum in consideration of grant. of
lease.
The appeals and the writ petitions are, therefore, dismissed.
Parties will pay and bear their own cost.s.
P.B.R.
Appeals and petitions dismissed.
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