# INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF INDIA v. STATE OF HARYANA AND OTHERS

- **Citation:** [2019] 3 S.C.R. 234
- **Court:** Supreme Court of India
- **Decided:** 2019-02-12
- **Case number:** Civil Appeal No. 9533 of 2018
- **Bench:** Ranjan Gogoi, Navin Sinha, K. M. Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/international-spirits-and-wines-association-of-india-v-state-of-haryana-and-33578
- **Pages:** 39

## Headnote

Haryana Liquor License Rules, 1970:
r. 24(i-eeee)(as amended) - L-1BF license to trade in foreign
liquor - r. 24(i-eeee) providing for a single L-1BF license for the
entire State to deal in imported foreign liquor, bottled outside India
and imported into the country in a bottled form (i.e. bottled in
original), if ultra vires the provisions of the 1914 Act - Held: r.24(ieeee) is ultra vires the powers of the Financial Commissioner under
the Act and is struck down - Financial Commissioner was not
competent to amend the Rules with regard to grant of number of
licenses for the entire State, and which power was exclusive to the
State Government u/s. 6 read with ss.13(a) and 58(2)(e) - To hold
that the power of Financial Commissioner u/s. 59(a) to regulate
sale of liquor, and that sale could be regulated through grant of
license, the Financial Commissioner was vested with the power to
determine the number of licenses, is unreasonable as also
unsustainable - Amendment notified by the Excise Commissioner
as a delegate of the Financial Commissioner was per se ultra vires
the powers of the latter u/ss. 6 and 13(a) r/w s. 58(2)(e) - While the
State Government would have the power to determine the number
of licenses and to issue licence for a local area only, the Excise
Commissioner would have a superior power to determine the number
of licenses and issue licenses for the entire State - Punjab Excise
Act, 1914 - ss. 8, 6, 13(a) and 58(2)(e) - Haryana Liquor License
(Amendment) Rules, 2017 - Liquor.
Allowing the appeal, the Court
HELD: Per Navin Sinha, J. (for himself and Ranjan Gogoi,
CJI):
1.1 Under Section 8 of the Punjab Excise Act, 1914 the
State Government exercises general superintendence and control
[2019] 3 S.C.R. 234
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of Excise Administration and Excise Officers. Section 9 provides
for vesting powers of the Financial Commissioner in the Excise
Commissioner by the State Government. The Financial
Commissioner is therefore, competent to delegate only such
powers to the Excise Commissioner which the State Government
can delegate to the former under the Act, in view of the prohibition
contained in Section 13(a). Under Section 58(2)(e) of the Act, the
State Government alone has the power to regulate the number of
licenses which may be granted in any local area for wholesale or
retail sale. In the scheme of the Act, the Haryana Liquor License
Rules, 1970 and the Punjab Intoxicants License and Sales Orders,
1956 read together it is apparent that a liquor license is to be
granted for a local area only. The power to determine the number
of licences that may be granted in any category in a local area is
exclusively vested in the State Government under Section 58(2)(e)
of the Act. The delegation of this power by the State Government
to the Financial Commissioner is prohibited by Section 13(a).
This is only in consonance with the general power of
superintendence vested in the State Government under Section
8. The Act maintains a clear distinction between a local area as
the unit for grant of licence, and the entire State for other purposes.
The State government is the sole repository of these other powers
with regard to the entire State evident from Sections 5 and 6.
The power to declare by notification that a licence granted shall
be applicable to the entire State is exclusively vested in the State
Government under Section 6(a) of the Act. [Paras 6, 10, 12][245B, E; 248-A, E]
1.2 The High Court held that in contradistinction to Section
58(2)(e) of the Act, which limits the powers of the State
Government to grant of licence for a local area, the Excise
Commissioner, as the delegatee of the Financial Commissioner,
was competent under Section 59(a) to grant a single L-1BF licence
for the entire State. [Para 13][248-F]
1.3 The nature of powers conferred under Section 59 of
the Act, make it manifest that it is but a regulatory power available
only after a license is granted to the licensee for a local area, to
ensure supp

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INTERNATIONAL SPIRITS AND WINES ASSOCIATION OF
INDIA
v.
STATE OF HARYANA AND OTHERS
(Civil Appeal No. 9533 of 2018)
FEBRUARY 12, 2019
[RANJAN GOGOI, CJI, NAVIN SINHA AND
K. M. JOSEPH, JJ.]
Haryana Liquor License Rules, 1970:
r. 24(i-eeee)(as amended) - L-1BF license to trade in foreign
liquor - r. 24(i-eeee) providing for a single L-1BF license for the
entire State to deal in imported foreign liquor, bottled outside India
and imported into the country in a bottled form (i.e. bottled in
original), if ultra vires the provisions of the 1914 Act - Held: r.24(ieeee) is ultra vires the powers of the Financial Commissioner under
the Act and is struck down - Financial Commissioner was not
competent to amend the Rules with regard to grant of number of
licenses for the entire State, and which power was exclusive to the
State Government u/s. 6 read with ss.13(a) and 58(2)(e) - To hold
that the power of Financial Commissioner u/s. 59(a) to regulate
sale of liquor, and that sale could be regulated through grant of
license, the Financial Commissioner was vested with the power to
determine the number of licenses, is unreasonable as also
unsustainable - Amendment notified by the Excise Commissioner
as a delegate of the Financial Commissioner was per se ultra vires
the powers of the latter u/ss. 6 and 13(a) r/w s. 58(2)(e) - While the
State Government would have the power to determine the number
of licenses and to issue licence for a local area only, the Excise
Commissioner would have a superior power to determine the number
of licenses and issue licenses for the entire State - Punjab Excise
Act, 1914 - ss. 8, 6, 13(a) and 58(2)(e) - Haryana Liquor License
(Amendment) Rules, 2017 - Liquor.
Allowing the appeal, the Court
HELD: Per Navin Sinha, J. (for himself and Ranjan Gogoi,
CJI):
1.1 Under Section 8 of the Punjab Excise Act, 1914 the
State Government exercises general superintendence and control
[2019] 3 S.C.R. 234
234
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of Excise Administration and Excise Officers. Section 9 provides
for vesting powers of the Financial Commissioner in the Excise
Commissioner by the State Government. The Financial
Commissioner is therefore, competent to delegate only such
powers to the Excise Commissioner which the State Government
can delegate to the former under the Act, in view of the prohibition
contained in Section 13(a). Under Section 58(2)(e) of the Act, the
State Government alone has the power to regulate the number of
licenses which may be granted in any local area for wholesale or
retail sale. In the scheme of the Act, the Haryana Liquor License
Rules, 1970 and the Punjab Intoxicants License and Sales Orders,
1956 read together it is apparent that a liquor license is to be
granted for a local area only. The power to determine the number
of licences that may be granted in any category in a local area is
exclusively vested in the State Government under Section 58(2)(e)
of the Act. The delegation of this power by the State Government
to the Financial Commissioner is prohibited by Section 13(a).
This is only in consonance with the general power of
superintendence vested in the State Government under Section
8. The Act maintains a clear distinction between a local area as
the unit for grant of licence, and the entire State for other purposes.
The State government is the sole repository of these other powers
with regard to the entire State evident from Sections 5 and 6.
The power to declare by notification that a licence granted shall
be applicable to the entire State is exclusively vested in the State
Government under Section 6(a) of the Act. [Paras 6, 10, 12][245B, E; 248-A, E]
1.2 The High Court held that in contradistinction to Section
58(2)(e) of the Act, which limits the powers of the State
Government to grant of licence for a local area, the Excise
Commissioner, as the delegatee of the Financial Commissioner,
was competent under Section 59(a) to grant a single L-1BF licence
for the entire State. [Para 13][248-F]
1.3 The nature of powers conferred under Section 59 of
the Act, make it manifest that it is but a regulatory power available
only after a license is granted to the licensee for a local area, to
ensure supply, storage, sale or otherwise that the conditions of
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the license are adhered to and necessary directions can also be
given for the purpose. [Para 14][250-E]
1.4 The Excise Commissioner, a sub-delegate of the
Financial Commissioner, in exercise of the powers conferred
under section 59 of the Act by virtue of the Haryana Government
Excise and Taxation notification dated 01.04.2016, made the
impugned amendment to the Haryana Liquor License Rules, 1970.
The same were notified on 29.03.2017. These rules were called
the Haryana Liquor License (Amendment) Rules, 2017. Rule 1(2)
stated that they shall come into force with effect from 01.04.2017.
Rule 3 of the amendment substituted Rule 24 (i-eeee) which
provided that there shall be only one L-1BF license in the State.
The amendment with regard to the number of licenses that could
be issued for the entire State is in teeth of Sections 6 and 58(2)(e),
delegation of which by the State Government is expressly
prohibited by Section 13(a). [Para 15][250-F-H]
1.5 The distinction sought to be drawn by the High Court
with regard to the term 'local area' under Section 58(2)(e) of the
Act as being confined to small compact area only and that the
Financial Commissioner by virtue of the power to regulate supply,
storage or sale of any intoxicant had the power to determine the
number of licenses to be granted for the entire State in a particular
category, is not only unreasonable but also in teeth of the statutory
Scheme and its provisions. To hold that the power of Financial
Commissioner under Section 59(a) of the Act to regulate sale of
liquor, and that sale could be regulated through grant of license,
the Financial Commissioner was vested with the power to
determine the number of licenses, is not only unreasonable but
also unsustainable. Such an interpretation amounts to reading
words into the statute which the legislature itself never intended.
The amendment notified by the Excise Commissioner as a
delegate of the Financial Commissioner was per se ultra vires
the powers of the latter under Section 6 and 13(a) read with Section
58(2)(e) of the Act. The unreasonableness and incongruity in the
reasoning by the High Court would vest wider powers in the
Excise Commissioner than the State Government itself. While
the State Government would have the power to determine the
number of licenses and to issue licence for a local area only, the
Excise Commissioner would have a superior power to determine
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the number of licenses and issue licenses for the entire State.
[Para 16][251-A-E]
1.6 The Financial Commissioner was not competent to
amend the Rules with regard to grant of number of licenses for
the entire state, and which power was exclusive to the State
Government under Section 6 read with Section 13(a) and 58(2)(e)
of the Act. Rule 24(i-eeee) as amended by the Financial
Commissioner in exercise of powers under Section 59(a) of the
Act is ultra vires the powers of the Financial Commissioner under
the Act and is therefore, struck down. [Para 18][251-H; 252-AB]
Akadasi Padhan v. State of Orissa AIR 1963 SC 1047
: [1963] Suppl. SCR 691; Khoday Distilleries Ltd. v.
State of Karnataka (I) (1995) 1 SCC 574 : [1994] 4
Suppl. SCR 477; Khoday Distilleries Ltd. v. State of
Karnataka (II) (1996) 10 SCC 304 : [1995] 6 Suppl.
SCR 759; Association of Registration Plates v. Union
of India (2005) 1 SCC 679 : [2004] 6 Suppl. SCR 496;
Deepak Theatre v. State of Punjab, (1992) Supp 1 SCC
684 : [1991] 3 Suppl. SCR 242 - referred to.
Per K.M. Joseph, J. (Dissenting):
1.1 In terms of the notification vesting powers of the finance
Commissioner apparently under Section 59 it is that the Excise
Commissioner has made the rules "Haryana Liquor Licence
Rules 1970. Section 13 forbids delegation of power under Section
58 inter alia on the Financial Commissioner or Commissioner.
[Para 9][258-H; 259-A]
1.2 Section 58(2)(e) states that the State Government has
the power to frame rules to regulate the periods of licences,
permits and passes either wholesale or retail; to regulate the
localities for which wholesale or retail licences, permits or passes
may be granted, and to regulate the persons or classes of persons
to whom the licences, permits or passes may be granted either
by way of a wholesale or retail licence. The latter part of Section
58(2)(e) on the other hand also permits the Government to
regulate by rules, the number of such licences which may be
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granted in any local area. Therefore, it is clear that it is in respect
of the licences which are referred, be it wholesale or retail
mentioned earlier in the provision which can be regulated but
however limited to any local area. As against this and immediately
following Section 58 in Section 59, legislature has also empowered
the financial Commissioner to make rules inter alia to regulate
the manufacture, supply, storage or sale or any intoxicant. [Paras
11, 12][259-F-H; 260-A-B]
1.3 The expression "local area" has been designedly
employed and it has to be given full play. It certainly cannot mean
the whole of the State. Any other interpretation would render the
word 'local area' in Section 58(2)(e) meaningless and, in fact, it
would involve doing complete violence to the plain meaning of
the words "local area". It may be true that the whole may include
the part (maxim-Omne Majus Continet in Se Minus) but the
converse namely the part would include the whole could not hold
good. Thus, the expression "local area" as used in Section
58(2)(e) would appear to convey the impression that the
legislature intended to confer power on the State to place
restrictions on the number of licences which are to be given qua
any local area. In fact, in the written submission given by the
State of Haryana, a definite case is set up that the State in its
wisdom can conclude that a particular local area owing to the
special conditions should be protected from the harmful effects
of alcohol consumption. An example of tribal sub plan area is
enlisted where the State may be carrying on a special programme.
This view finds support also from another circumstance in the
form of Rule 3 of the 1970 Rules. [Para 13][260-C-F]
1.4 Rule 3 reinforces the view that the expression "number
of licences" which may be granted in the local area is within the
exclusive domain of the State Government and reliance placed
by the appellant on the number of licences which may be granted
in Section 58(2)(e) to strike at the impugned rule which is
otherwise sourced under Section 59 is without any basis. In other
words going through both the Act and the Rules, a distinction is
made between the whole of the State and the local area. In regard
to rule making power, undoubtedly, the legislature has specifically
conferred rule making power qua the number of licences in any
local area upon the State. Unless it can be reasoned that the
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powers to regulate sale of liquor within the meaning of Section
59 which is undoubtedly placed on the shoulders of the financial
Commissioner would not include the power to make rules in
regard to the number of licences for the State as a whole, the
argument of the appellant cannot be accepted. [Para 14][261-AC]
1.5 Having regard to the connotation of the word 'regulate'
it would include power to control the sale of liquor under the Act.
Control of sale is possible by providing for licences as it is through
licencing that the authority can provide for conditions under which
the sale could be best controlled. If the power to regulate include
the power to stipulate licences it undoubtedly also would include
power to provide for number of licences qua the State as a whole,
which does not fall under Section 58(2)(e) of the Act. [Para
17][262-G-H]
1.6 The finding by the Division Bench of the High Court
that the Financial Commissioner has power to decide upon the
number of licenses is upheld. [Para 20][263-D-E]
1.7 The appellant is an association of companies. Article
19 provides for various fundamental freedoms. However, unlike
Article 14 and 21, these freedoms are not conferred on noncitizens. In other words, Article 19 is confined to citizens. It is
well settled that a company though a juristic person but not being
a natural person is not a citizen within the meaning of Article 19.
The writ petition is filed without joining any shareholder who is a
citizen. Therefore reliance placed on Article 19 may not hold good.
Judicial review of policy is justified only if the policy is arbitrary
or unfair or violative of fundamental rights. Courts must be loathe
to venture into an evaluation of State policy. [Paras 24, 25][266H; 267-A-C]
1.8 The guarantee of Article 14 against the State
undoubtedly embraces all spheres of its activities. If the action
falls foul of the mandate of Article 14 it is vulnerable, though
different yardsticks may operate. Undoubtedly the expression
'state' would also include within its sweep an instrumentality of
the State as it would fall under the expression "other authorities"
in Article 12 of the Constitution. The principles have been culled
out with sufficient clarity and there is no occasion or any reason
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to dwell more upon the same as the appellant even does not have
a case that the licensee would be an instrumentality of the State
within the meaning of Article 12 of the Constitution. An effort at
bringing a body within Article 12 must originate specifically in
the pleadings, which is absent. [Paras 28, 29][270-A-C]
1.9 It is noticed that many of the contentions of the appellant
are in the form of apprehensions about what may happen in future.
In fact there is a case for the respondents that no complaint as
such was moved against the licensee during the period. The
licensee is duty bound under the terms and conditions of licence
to submit pricing of each brand at the time of approval of the
brand. The department is bound to approve the maximum sales
price factoring in various elements. The licensee must indicate
among other things, the landing price, expenses, profit margin.
The price is also determined based on the prevalent rates of the
same and equivalent rate at the neighboring states and the
Government levies. [Para 31][270-G-H; 271-A]
1.10 The exclusive licensee is under the condition required
to keep sufficient stock of all brands as are demanded by the
procuring licensees and all such brands as were registered with
the department in 2016-17. Thus, at least two restrictions exist
as in built safeguards which operate against the exclusive licensee.
The licensee is obliged to keep sufficient number of stock of all
brands which are demanded by the procuring licensees. In the
instant case, the members of the appellant would fall within the
expression 'procuring licensees'. Secondly, there is a regulation
of the maximum price which the exclusive licensee can demand
as the price is to be fixed by the State itself. A question as regards,
as to what would happen if the exclusive licensee himself also
operates retail outlets and he promotes certain brands and/ or
dampens the trade in others. Ordinarily on the principle that a
person would act in his own self interest there would be no reason
for the licensee to deny himself the proceeds of the higher
turnover based on more sales as by seeking to dampen the sale
of certain brands it is the licensee who would suffer a loss. It is
assumed, however that he is placed in a situation where there is
a conflict of interest and by suppressing the sale of certain brands
and permitting the sale of other brands the exclusive licensee is
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placed in a more advantageous position, and therefore, he prefers
it. The complaint of the individual company would be that brand
which it wishes to import and deal in is not made available. Quite
clearly if there is any such concrete incident, it would be an
infraction of the condition of the license. Certainly it would give
rise to power with the authorities to take suitable action as
available in law including in appropriate cases, cancellation of
the license. If such provisions are not already there it would be
observed that the State may devise suitable provisions so that an
individual who acts as the licensee of the State would not do what
the State itself would be forbidden from doing under the
Constitution. At the same time, the State has apparently gained
by way of enhanced collection of revenue by the new regime put
in place. The State's power to experiment in economic matters
shall not suffer invalidation at the hands of the Court. Such power
must be premised solely on State action falling foul of the
Constitution and the laws. State would however, do well to provide
for a suitable mechanism by which it can provide appropriate
safeguards so that there is fair dealing by the exclusive
licensee.[271-B-H; 272-A]
The Kerala Bar Hotels Association & Another v. State
of Kerala & Others AIR 2016 SC 163 : [2015] SCR
256 - distinguished.
D.K. Trivedi and Sons v. State of Gujarat (1986) Suppl.
SCC 20 : [1986] SCR 479; Khoday Distilleries Ltd.
and Others v. State of Karnataka and Others (1996) 10
SCC 304 : [1995] 6 Suppl. SCR 759; Khoday
Distilleries Ltd and Others v. State of Karnataka and
Others (I) (1995) 1 SCC 574 : [1994] 4 Suppl. SCR
477; Maninderjit Singh Bitta v. Union of India and
others (2005) 1 SCC 679 : [2004] 6 Suppl. SCR 496;
Krishna Kumar Narula v. State of Jammu & Kashmir
AIR 1957 SC 1368; Cooverjee B. Bharucha Vs. Excise
Commissioner and the Chief Commissioner, Ajmer and
Others AIR 1954 SC 220 : [1954] SCR 873 - referred
to.
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Case Law Reference
In the Judgment of Navin Sinha, J.
[1963] Suppl. SCR 691
referred to
Para 2
[1994] 4 Suppl. SCR 477
referred to
Para 2
[1995] 6 Suppl. SCR 759
referred to
Para 2
[2004] 6 Suppl. SCR 496
referred to
Para 3
[1991] 3 Suppl. SCR 242
referred to
Para 17
In the Judgment of K.M. Joseph, J.
[1986] SCR 479
referred to
Para 15
[1995] 6 Suppl. SCR 759
referred to
Para 18
[1994] 4 Suppl. SCR 477
referred to
Para 21
[2004] 6 Suppl. SCR 496
referred to
Para 22
[2015] SCR 256
distinguished Para 25
AIR 1957 SC 1368
referred to
Para 23
[1954] SCR 873
referred to
Para 25
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9533
of 2018.
From the Judgment and Order dated 26.05.2017 of the High Court
of Punjab and Haryana at Chandigarh in Civil Writ Petition No. 6870 of
2017.
Gopal Subramanium, Sr. Adv., Aashish Gupta, Aditya Mukharji,
Anirudh Lekhi, Ravinder Nijhawan, S. S. Shroff , Advs. for the Appellant.
Ms. Pinky Anand, ASG, Ms. Nidhi Gupta, AAG, Sumit Teterwal,
Vishwa Pal Singh, Sanjay Singh, M. K. Dutta, Ugra Shankar Prasad,
Advs. for the Respondents.
The Judgments of the Court were delivered by
NAVIN SINHA, J. 1. The appellant having been unsuccessful
in its challenge to Rule 24(i-eeee) of the Haryana Liquor License Rules
1970 (as amended by the Haryana Liquor License (Amendment) Rules
2017), (hereinafter referred to as 'the Rules') as being ultra vires the
Punjab Excise Act, 1914 (hereinafter referred to as 'the Act'), is in
appeal before this Court. The amended Rule provides for a single L-1BF
license for the entire State to deal in imported foreign liquor, bottled
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outside India and imported into the country in a bottled form (i.e. bottled
in original). Under challenge is also clause 9.5.1.2 of the State Excise
Policy for the year 2017-2018 to that extent, carried forward to the year
2018-2019 also. The procedure for grant of the single license under the
amended Rule is through tender by e-bidding, with a reserve price of
Rs. 50 crores.
2. Sri Gopal Subramanium, learned senior counsel for the appellant,
submitted that the creation of a monopoly by the State in favour of a
private entity, to trade in liquor, is contrary to Article 19(6) of the
Constitution of India. The impugned order acknowledges that it would
lead to serious distortions in the market, yet erroneously declines
interference holding that once the matter moves from State control into
the hands of private enterprise, the restrictions applicable to the State
cease to apply. Reliance was placed on Akadasi Padhan vs. State of
Orissa, AIR 1963 SC 1047, to contend that if a monopoly is created by
the State in its favour, the same cannot be constitutionally permitted if
the private agents appointed pursuant thereto, act as independent entities.
Sri Subramanium also relied on Khoday Distilleries Ltd. vs. State of
Karnataka (I), (1995)1 SCC 574, to submit that once the State parts
with its privilege to trade in liquor, in favour of private individuals, the
rigours of Article 14 will continue to apply to provide equal opportunity
to all desirous to do so. Alternatively, it was submitted that the absence
of sufficient checks and balances gives untrammeled and uncanalised
powers to the sole licensee which again is constitutionally impermissible.
Sri Subramanium further relied on Khoday Distilleries Ltd. vs. State of
Karnataka (II) (1996) 10 SCC 304, to submit that the interpretation of
Section 58 (2)(e) and 59(a) of the Act by the High Court was flawed.
Rule 24 (i-eeee) was ultra vires the Act. The interpretation put by the
High Court grants wider powers to the Financial Commissioner, than the
State Government itself. The single monopolistic L-1BF license was
also discriminatory and violative of Article 14 of the Constitution in so
far as no such requirement was stipulated for wholesale trade in Indian
made foreign liquor or country liquor in the State. There was no rational
or reasonable classification for this distinction between licensees, having
any rationale or nexus with any object to be achieved.
3. Ms. Pinky Anand, learned Additional Solicitor General, submitted
that the appellant never participated in the bidding process for the L1BF license. A mere apprehension that a single L-1BF license for the
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entire State may affect market dynamics, when the reality was otherwise,
resulting in rise of revenue, negates the challenge laid out by the appellant.
The issue of monopoly in the hands of a private entity is devoid of merit
as the process is through public auction, open to participation by all, and
not tailored to suit any particular person or activated by malafides, relying
on Association of Registration Plates vs. Union of India, (2005) 1
SCC 679. Trade in original bottled foreign liquor was only a fraction of
the entire liquor trade in the State, ranging between 0.64 percent to 1.98
per cent. The aim and object of the amendment was to increase revenue,
curb pilferage, control illicit trade in the State of Indian made foreign
liquor and bottled in original bottled foreign liquor. The Financial
Commissioner was competent under Section 59(a) read with Section 13
to amend Rule 24 by incorporation of Rule 24 (i-eeee) providing for a
single L-1BF license for the entire State, as the competence of the State
for issuance of license under Section 58(2)(e) was limited to a local area
only.
4. Sri M.K. Dutta, learned counsel for the sole L-1BF licensee
for 2017-2018, submitted that the appellant was not even a bidder. The
question of any apprehension on its part simply does not arise. There are
sufficient checks and balances in the excise license providing for
cancellation also if the conditions of the license were not followed. The
grant of a monopolistic license as the agent of the State Government
was permissible in the law for trade in liquor.
5. We have considered the submissions on behalf of parties. The
appellant assails the amended Rule 24(i-eeee) as ultra vires the provisions
of the Act. Integral to the issue is whether the state government is
competent to issue licences for a local area alone under Section 58(2)(e)
of the Act, while the Excise Commissioner, a sub-delegate of the Financial
Commissioner is competent under Section 13(b) read with Section 59(a)
to issue L-1BF licence for the entire state under the amended rule,
notwithstanding the prohibition in Section 13(a) to the delegation of powers
under Section 58 by the State Government. The amended Rule 24(ieeee) relevant to the controversy reads as follows:
" (xiv)
for clause (i-eeee), the following clause shall be
substituted, namely: -
(i-eeee) For a license in form L-1BF -
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(a) Reserve price shall be Rs.50,00,00,000/-.
(b) The license in form L-1BF shall be allotted through e-bidding
to the highest bidder.
(c) There shall be only one L-1BF license in the State."
6. Under Section 8 of the Act, the State government exercises
general superintendence and control of Excise Administration and Excise
Officers. Section 9 provides for vesting powers of the Financial
Commissioner in the Excise Commissioner by the State Government.
Section 13 dealing with delegation of powers provides:
"Delegation:
(a) The State Government may by notification delegate to the
Financial Commissioner or Commissioners all or any of its powers
under this Act, except the powers conferred by sections 14, 21,22,
31, 56 and 58 of this Act.
(b) The State Government may by notification permit the delegation
by the Financial Commissioner, Commissioner or Collector to any
person or class of persons specified in such notification of any
powers conferred by this Act or exercised in respect of excise
revenue under any Act for the time being in force."
The Financial Commissioner is therefore competent to delegate
only such powers to the Excise Commissioner which the State
Government can delegate to the former under the Act, in view of the
prohibition contained in Section 13(a) of the Act.
7. Section 58 of the Act, in its relevant extract reads as follows:
"Power of State Government to make Rules:
(1) The State Government may by notification make rules for the
purpose of carrying out the provisions of this Act or any other law
for the time being in force relating to excise revenue.
(2) In particular and without prejudice to the generality of the
foregoing provisions, the State Government may make rules:
......
(e) Regulating the period and localities for which, and, the persons
or classes of persons, to whom licenses, permits and passes for
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the vend by wholesale or by retail of any intoxicant may be granted
and regulating the number of such licenses which may be granted
in any local area;
(3) Previous publication of rules: - The power conferred by this
section of making rules is subject to the condition that the rules be
made after previous publication;
Provided that any such rules may be made without previous
publication if State Government consider that they should be
brought into force at once."
Under Section 58(2)(e) of the Act, the State Government alone
has the power to regulate the number of licenses which may be granted
in any local area for wholesale or retail sale.
8. Relevant to the discussion are also Rules 3 and 4 which provide
as follows :
"3. The authority given by these rules to grant and renew licenses
is, in each case, subject to the restrictions contained in the Punjab
Intoxicants License and Sale Order as to the localities in which
licenses may be granted and the number of licenses which may
be granted in any local area, and to such reservations from the
general superintendence of the Financial Commissioner as the
State Government may notify under Section 8 of the Punjab Excise
Act, 1914.
4. Every license shall be granted to a particular licensee in respect
of particular premises/area."
9. Chapter D of the Punjab Intoxicants License and Sales Orders,
1956 (hereinafter referred to as 'the Order') provides for the number of
licences and reads as under :
"6. The number of liquor vends except vends licenced in form L2 for the wholesale and retail sale of foreign liquor to the public
only and drug shops, which may be licenced in any local area,
shall be the number which the Financial Commissioner, subject to
the control of the State government considers necessary. The
number of L-2 vends, which may be licenced in any local area,
shall be the number of such licences granted by the Collector
under the rules."
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10. In the scheme of the Act, the Rules and the Order read together
it is apparent that a liquor license is to be granted for a local area only.
The power to determine the number of licences that may be granted in
any category in a local area is exclusively vested in the State Government
under Section 58(2)(e) of the Act. The delegation of this power by the
State Government to the Financial Commissioner is prohibited by Section
13(a). This is only in consonance with the general power of
superintendence vested in the State Government under Section 8.
11. In Khoday Distilleries vs. State of Karnataka (II) (supra), a
similar provision under the Karnataka Excise Act 1965 fell for
consideration therein:
"71(1):
The State Government may, by notification and after
previous publication, make Rules to carry out the purposes of this
Act.
(2) In particular and without prejudice to the generality of the
foregoing provision, the State Government may make Rules -
.....
(e) regulating the periods and localities in which and the persons
or classes of persons to whom, licenses for the wholesale or retail
sale of any intoxicant may be granted and regulating the number
of such licenses which may be granted in any local area:
(f) ......
(g) ......
(h) prescribing the authority by which, the form in which and the
terms and conditions on and subject to which any license or permit
shall be granted, and may, by such Rules, among other matters."
This Court held as follows :-
"11. ....The Act itself provides that the number of licenses can be
regulated by the State. If the State chooses to regulate licenses
by providing that the license shall be granted only to a company
owned by the State, it cannot be said that such a license is
something which is outside the purview of the Act or the rulemaking authority of the State under the Act."
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12. The Act maintains a clear distinction between a local area as
the unit for grant of licence, and the entire State for other purposes. The
State government is the sole repository of these other powers with regard
to the entire State evident from Sections 5 and 6 which read:
"5. Power of State Government to declare limit of sale by
retail and by wholesale- The State Government may by
notification declare with respect either to the whole of Punjab or
to any local area comprised therein, and as regards purchasers
generally or any specified class of purchasers, and generally or
for any specified occasion, the maximum or minimum quantity or
both of any intoxicant which for the purposes of this Act may be
sold by retail and by wholesale.
6. Power to limit application of notifications, permits, etc.,
made under this Act.- Where under this Act any notification is
made, any power conferred, any appointment made or any license,
pass or permit granted, it shall be lawful to direct -
(a) That it shall apply to the whole of Punjab or to any specified
local area or areas;
 xxxxx"
The power to declare by notification that a licence granted shall
be applicable to the entire State is exclusively vested in the State
Government under Section 6(a) of the Act.
13. The High Court has held that in contradistinction to Section
58(2)(e) of the Act, which limits the powers of the State Government to
grant of licence for a local area, the Excise Commissioner, as the delegatee
of the Financial Commissioner, was competent under Section 59(a) to
grant a single L-1BF licence for the entire State.
"59. Powers of Financial Commissioner to make rules:-
The Financial Commissioner may, by notification, make rules,-
(a) regulating the manufacture, supply, storage or sale of any
intoxicant, including-
(i) the character, erection, alteration, repair, inspection,
supervision, management and control of any place for the
manufacture, supply, storage or sale of such article and the
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fittings, implements, apparatus and registers to be maintained
therein;
(ii) the cultivation of the hemp plant and the collection of
spontaneous growth of such plant and the preparation of
any intoxicating drug;
(iii) the tapping or drawing of tari from any tari producting
tree;
(b) regulating the bottling of liquor for purposes of sale;
(c) regulating the deposit of any intoxicant in a warehouse and
the removal of any intoxicant from any warehouse or from
any distillery or brewery;
(d) prescribing the scale of fees or the manner of fixing the fees
payable in respect of any license, permit or pass or in respect
of the storing of any intoxicant;
(e) regulating the time, place and manner of payment of any duty
or fee;
(f) prescribing the authority by, the restrictions under, and the
conditions on, which any license, permit or pass may be granted,
including provisions for the following matters-
(i) the prohibition of the admixture with any intoxicant of any
substance deemed to be noxious or objectionable;
(ii) the regulation or prohibition of the reduction of liquor by a
licensed manufacturer or licensed vendor from a higher to
a lower strength;
(iii) the strength at which intoxicant shall be sold, supplied or
possessed;
(iii-a) the fixing of the price below and above which any
intoxicant shall not be sold or supplied by the licenced vendor.
(iv) the prohibition of sale of any intoxicant except for cash;
(v) the fixing of the days and hours during which any licensed
premises may or may not be kept open, and the closure of
such premises on special occasions;
(vi) the specification of the nature of the premises in which
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any intoxicant may be sold, and the notice to be exposed at
such premises;
(vii)
the form of the accounts to be maintained and the returns
to be submitted by license-holders; and
(viii)
the prohibition or regulation of the transfer of licenses;
(g) (i) declaring the process by which spirit shall be denatured;
(ii) for causing spirit to be denatured through the agency or
under the supervision of its own officers;
(iii) for ascertaining whether such spirit has been denatured;
(h) providing for the destruction or other disposal of any intoxicant
deemed to be unfit for use;
(i) regulating the disposal of confiscated articles;
(j) prescribing the amount of security to be deposited by holders
of leases, licenses, permits or passes for the performance of
the conditions of the same."
14. The nature of powers conferred under Section 59 of the Act,
make it manifest that it is but a regulatory power available only after a
license is granted to the licensee for a local area, to ensure supply, storage,
sale or otherwise that the conditions of the license are adhered to and
necessary directions can also be given for the purpose.
15. The Excise Commissioner, a sub-delegate of the Financial
Commissioner, in exercise of the powers conferred under section 59 of
the Act by virtue of the Haryana Government Excise and Taxation
notification dated 01.04.2016, made the impugned amendment to the
Haryana Liquor License Rules, 1970. The same were notified on
29.03.2017. These rules were called the Haryana Liquor License
(Amendment) Rules, 2017. Rule 1(2) stated that they shall come into
force with effect from 01.04.2017. Rule 3 of the amendment substituted
Rule 24 (i-eeee) which provided that there shall be only one L-1BF
license in the State. The amendment with regard to the number of
licenses that could be issued for the entire State is in teeth of Sections 6
and 58(2)(e), delegation of which by the State Government is expressly
prohibited by Section 13(a).
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16. The distinction sought to be drawn by the High Court with
regard to the term 'local area' under Section 58(2)(e) of the Act as
being confined to small compact area only and that the Financial
Commissioner by virtue of the power to regulate supply, storage or sale
of any intoxicant had the power to determine the number of licenses to
be granted for the entire State in a particular category, in our view, is not
only unreasonable but also in teeth of the statutory Scheme and its
provisions. To hold that the power of Financial Commissioner under
Section 59(a) of the Act to regulate sale of liquor, and that sale could be
regulated through grant of licence, the Financial Commissioner was vested
with the power to determine the number of licences, to our mind is not
only unreasonable but also unsustainable. Such an interpretation amounts
to reading words into the statute which the legislature itself never intended.
The amendment notified by the Excise Commissioner as a delegate of
the Financial Commissioner was per se ultra vires the powers of the
latter under Section 6 and 13(a) read with Section 58(2)(e) of the Act.
The unreasonableness and incongruity in the reasoning by the High Court
would vest wider powers in the Excise Commissioner than the State
Government itself. While the State Government would have the power
to determine the number of licences and to issue licence for a local area
only, the Excise Commissioner would have a superior power to determine
the number of licences and issue licences for the entire State.
17. The meaning and scope of a regulatory power fell for
consideration in Deepak Theatre vs. State of Punjab, 1992 Supp (1)
SCC 684,
"4. The power to regulate includes the power to restrain, which
embraces limitations and restrictions on all incidental matters
connected with the right to trade or business under the existing
licence. Rule 12(3) regulated entry to different classes to the cinema
hall and it was within the rule making power of the State
Government to frame such rule. The court further held that fixing
limit of rate of admission was an absolute necessity in the interest
of the general public and the restriction so placed was reasonable
and in public interest...."
18. The Financial Commissioner was therefore not competent to
amend the Rules with regard to grant of number of licences for the
entire state, and which power was exclusive to the State Government
under Section 6 read with Section 13(a) and 58(2)(e) of the Act. In
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conclusion, we hold that Rule 24(i-eeee) as amended by the Financial
Commissioner in exercise of powers under Section 59(a) of the Act is
ultra vires the powers of the Financial Commissioner under the Act and
is therefore struck down. In view of Rule 24(i-eeee) itself having been
struck down, it is not considered necessary to discuss or consider the
other grounds of challenge raised.
19. The appeal is allowed.
K.M. JOSEPH, J. 1.