# •' MIS KHODA Y DISTILLERIES LTD. ETC v. STATE OF KARNATAKA AND ORS. ETC

- **Citation:** [1994] Supp. 4 S.C.R. 477
- **Court:** Supreme Court of India
- **Decided:** 1994-10-19
- **Bench:** M.N. Venkatachaliah, J.S. Verma, P.B. Sawant, K. Ramaswamy, B.P. Jeevan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-khoda-y-distilleries-ltd-etc-v-state-of-karnataka-and-ors-etc-12570
- **Pages:** 51

## Headnote

Constitution of India-Articles 19(1) (g), 19(6), 47, 298, 300A, 301 to
305 and Entry 8 and 51 of list JI and Entry 52 of list I, Seventh
Schedule-Right to carry trade in liquor-Whether a fundamental right-Held,
Ntr-State can prohibit completely trade or business in potable liquor
Monopoly for manufacture, trade or business in liquor can be created in favour
of State-Reasonable restrictions under Article 19(6) can be placed by subordinate legislation as well, so long as such legislation is not violative of any
provisions of Constitution.
Words and Phrases-Constitution of India-Article 19( 1) (gj-Words
'trade' and 'business'-Meaning of-Held, word 'trade' may include all connotations of word 'business'-lnArticle 19(1) (g), words 'trade' and 'business'
are used synonymously.
A
B
c
D
E
Petitioners, wholesale trades in liquor had challenged the constitutional validity of the Kamataka Excise (Distillery and Warehouse)
(Amendment) Rules, 1989, Karnataka Excise (Manufacture of Wine from
Grapes) (Amendment) Rules 1989, Karnataka Excise (Brewery) (Amend·
ment) Rules, 1989, Kamataka Excise (Sale of Indian and Foreign Liquor)
f
(Amendment) Rules, 1989 and Karnataka Excise (Bottling of liquor)
(Amendment) Rules, 1989 on the group that the Rules in question affected
adversely the fundamental right of the parties to carry on trade or business
in liquor and that the said Rules were violative of Articles 14, 19(l)(g), 47,
300 A, 301 and 304 of the Constitution of India. Some appeals bad also
been tiled against the decision of the Kerala High Court upholding the G
validity of the. Government order dated 9th December, 1992 passed by the
Government of Kerala deciding to cancel all foreign liquor licences issued
under Rule 13 (3) of the Kerala Foreign Liquor Rules, 1974 to Hotels,
Restaurants and Tourist Homes. A bunch of special leave Petitions and
writ petitions were tiled against various decisions of the Andbra Pradesh H
477
478
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A
High Court upholding the validity of the amendments to the A.P. Foreign
Liquor and Indian Liquor Rules, 1970 and A.P. (Regulations of wholesale
Trade, Distribution and Retail Trade in Indian Liquor and Foreign Liquor, Wine and Beer) Act, 1993.
B
Two rival contentions of law raised. One, that there was no fundamental right to trade or business in liquor and that the State had power
to regulate the trade or business by placing restrictions on such trade or
business in the interests of the general
public even to the extent of
prohibiting completely such business or trade. The other contention was
that a citizen had a fundamental right to trade or business in liquor and
C the State could only place reasonable restriction on the said right in the
interests of general public by law made for purpose under Article 19 (6)
of the Constitution. The State could not, therefore, prohibit completely the
said trade or business in liquor in the garb of regulating it, and the
limitations or restrictions placed had to pass the test of reasonableness.
D
These matters were referrel\ to the Constitution Bench to decide
questions, firstly whether the pe:itioners/appellants had a fundamental
right to carry on trade in liquor and secondly, whether the State could
prevent the petitioners from carrying on with the business of liquor as
apart from trade, during the unexpired period of the licences. Two incidenE ta! questions raised were (i) .whether a monopoly for the manufacture,
trade or business in liquor could be created in favour of the State and (ii)
whether reasonable restrictions under Article 19 (6) of the Constitution
could be placed only by Act of Legislature or by a subordinate legislation
as well.
F
It was contended that the State could not carry on trade in liquor
under Article 47 of the Constitution. If the law on the subject was considered to be law under Article 19(6), it bad to be on the basis that a citizen
had got a fundamental right to trade in liquor. If the law was that a citizen

## Text

_Characters 0–39,989 of 125,459. This is a partial read: ask again with offset=39989 for what follows._

•'
MIS KHODA Y DISTILLERIES LTD. ETC.
v.
STATE OF KARNATAKA AND ORS. ETC.
OCTOBER 19, 1994
(M.N. VENKATACHALIAH, CJ, J.S. VERMA, P.B. SAWANT,
K. RAMASWAMY AND B.P. JEEVAN REDDY, JJ.]
Constitution of India-Articles 19(1) (g), 19(6), 47, 298, 300A, 301 to
305 and Entry 8 and 51 of list JI and Entry 52 of list I, Seventh
Schedule-Right to carry trade in liquor-Whether a fundamental right-Held,
Ntr-State can prohibit completely trade or business in potable liquor
Monopoly for manufacture, trade or business in liquor can be created in favour
of State-Reasonable restrictions under Article 19(6) can be placed by subordinate legislation as well, so long as such legislation is not violative of any
provisions of Constitution.
Words and Phrases-Constitution of India-Article 19( 1) (gj-Words
'trade' and 'business'-Meaning of-Held, word 'trade' may include all connotations of word 'business'-lnArticle 19(1) (g), words 'trade' and 'business'
are used synonymously.
A
B
c
D
E
Petitioners, wholesale trades in liquor had challenged the constitutional validity of the Kamataka Excise (Distillery and Warehouse)
(Amendment) Rules, 1989, Karnataka Excise (Manufacture of Wine from
Grapes) (Amendment) Rules 1989, Karnataka Excise (Brewery) (Amend·
ment) Rules, 1989, Kamataka Excise (Sale of Indian and Foreign Liquor)
f
(Amendment) Rules, 1989 and Karnataka Excise (Bottling of liquor)
(Amendment) Rules, 1989 on the group that the Rules in question affected
adversely the fundamental right of the parties to carry on trade or business
in liquor and that the said Rules were violative of Articles 14, 19(l)(g), 47,
300 A, 301 and 304 of the Constitution of India. Some appeals bad also
been tiled against the decision of the Kerala High Court upholding the G
validity of the. Government order dated 9th December, 1992 passed by the
Government of Kerala deciding to cancel all foreign liquor licences issued
under Rule 13 (3) of the Kerala Foreign Liquor Rules, 1974 to Hotels,
Restaurants and Tourist Homes. A bunch of special leave Petitions and
writ petitions were tiled against various decisions of the Andbra Pradesh H
477
478
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A
High Court upholding the validity of the amendments to the A.P. Foreign
Liquor and Indian Liquor Rules, 1970 and A.P. (Regulations of wholesale
Trade, Distribution and Retail Trade in Indian Liquor and Foreign Liquor, Wine and Beer) Act, 1993.
B
Two rival contentions of law raised. One, that there was no fundamental right to trade or business in liquor and that the State had power
to regulate the trade or business by placing restrictions on such trade or
business in the interests of the general
public even to the extent of
prohibiting completely such business or trade. The other contention was
that a citizen had a fundamental right to trade or business in liquor and
C the State could only place reasonable restriction on the said right in the
interests of general public by law made for purpose under Article 19 (6)
of the Constitution. The State could not, therefore, prohibit completely the
said trade or business in liquor in the garb of regulating it, and the
limitations or restrictions placed had to pass the test of reasonableness.
D
These matters were referrel\ to the Constitution Bench to decide
questions, firstly whether the pe:itioners/appellants had a fundamental
right to carry on trade in liquor and secondly, whether the State could
prevent the petitioners from carrying on with the business of liquor as
apart from trade, during the unexpired period of the licences. Two incidenE ta! questions raised were (i) .whether a monopoly for the manufacture,
trade or business in liquor could be created in favour of the State and (ii)
whether reasonable restrictions under Article 19 (6) of the Constitution
could be placed only by Act of Legislature or by a subordinate legislation
as well.
F
It was contended that the State could not carry on trade in liquor
under Article 47 of the Constitution. If the law on the subject was considered to be law under Article 19(6), it bad to be on the basis that a citizen
had got a fundamental right to trade in liquor. If the law was that a citizen
bad no fundamental right, then Article 19(6) could not be applied because
G the said article applied only to those rights which a citizen possessed. What
a citizen could not do under Article 19 (1), the State could not do under
Article 19(6). Secondly, it was submitted that assuming that the State had
got the power to carry on trade in liquor de hors Article 19(6) and under
Article 298 of the Constitution, the power under Article 298 could not
H extend to trade in liquor. Thus was so because the Union Government had
J
KHODAYDISTILLERIESLTD. v. STATEOFKARNATAKA
479
no executive power to trade in commodity which under Article 47 it was A
enjoined to prohibit.
Alleging that the appellants petitioners had a fundamental right to
trade in liquor, it was stated firstly, that Entry 51 of list II specifically
accepted the fact that the manufacture of alcohol could be for human
consumption. Entry 8 of List II specifically provided for production, B
manufacture, purchase and sale of intoxicating liquor. The implication of
this Entry was that till prohibition was introduced by applying Article 47,
there was no prohibition of consumption of liquor, and hence there was
no prohibition for manufacture and sale of liquor. Secondly, it was sub·
mitted that the trade in liquor could not be looked upon as an obnoxious C
trade. Thirdly, the Union . Government itself bad recognised nuder its
Industrial Policy Resolution as early as in 1956 that the production of
potable alcohol as an industry had to be recognised though regulated and
the licences had to be freely granted for the manufacture of the potable
liquor. For all these reasons, it was submitted that there was no warrant
for excluding liquor from the ambit of the word "any occupation, trade or D
business" under Article 19 (l)(g) of the Constitution.
Disposing of the matter, this Court
HELD: 1.1. The rights protected by Article 19 (1) are not absolute E
but qualified. The qualifications are stated in clauses (2) to (6) of Article
19. The fundamental rights guaranteed In Articles 19 (l)(a) to (g) are,
therefore, to be read along with the said qualifications. (520-F)
1.2. The right to practise any profession or to carry on any occupa·
tion, trade or business does not extend to practising a profession or carryF
Ing or an occupation, trade or business which is inherently vicious and
pernicious, and is commended by all civilised societies. It does not entitled
citizens to carry on trade or business in activities which are immoral and
criminal and in articles or goods which are obnoxious and injurious to
health, safety and welfare of the general public i.e. res extra commercium G
(outside commerce). There cannot be business in crime. (520-H, 521-A)
. . 1.3. Potable liquor as a beverage is an intoxicating and depressent
drink which is dangerous and injurious to health and is, therefore, an
a!"licle which is res-extra Commercium inherently harmful. A citizen bas,
therefore, no fundamental right to do trade or business in liquor. Hence H
480
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A
the trade or business in liquor can be completely prohibited. (521-B-C]
8
c
1.4. Article 47 of the Constitution considers intoxicating drinks and
drugs as injurious to health and impeding the raising of level of nutrition
and the standard of living of the people and improvement of the public
health. It, therefore, ordains the State to bring about prohibition of the
consumption of intoxicating drinks which obviously include liquor, except
for medical purposes. Article 47 is one of the Directive principles which is
fundamental in the governance of the country. The State bas, therefore, the
power to completely prohibit the manufacture, sale, possession, distribution and consumption of potable liquor as a beverage, both because it is
inherently a dangerous article of consumption and also because of the
Directive principle contained in Article 47, except when it is used and
consumed for medical purposes. (521-D-E]
1.5. The State can create a monopoly either it itself or in the agency
created by it for the manufacture, possession, sale and distribution of the
D liquor as a beverage and also sell the licences to the citizens for the said
purpose by charging fees. This can be done under Article 19(6) or even
otherwise. (521-F]
1.6. Again the State can impose limitations and restrictions on the
trade or business in potable liquor as a beverage which restrictions are in
E
nature different from those imposed on the trace or business in legitimate
activities and goods and articles which are res commercium. The restrictions and limitations on the trade of business in potable liquor can again
be both under Article 19 ( 6) or otherwise. The restrictions and limitation
can extend to the State carrying on the trade or business itself to the
F
exclusion of and elimination of others and/or to preserving to itself the
right to sell licences to do trade or business in the same, to others.
[521-G-H, 522-A]
1.7. When the State permits trade or business in the potable liquor
with or without limitation, the citizen bas the right to carry on trade or
G business subject to the limitations, If any and the State oannot make discrimination between the citizens who are qualified to carry on the trade on
business. (522-B]
1.8. The State can accept any mode of selling litences for trade or
business with a view to maximise its revenue so long as the metbod adopted
H
is not discriminatory. (522-C]
KHO DAY DISTILLERIES LTD. v. STATE OF KARNATAKA
481
1.9. The State can carry on trade or business in potable liquor A
notwithstanding that it is an intoxicating drink and Article 47 enjoins it
to prohibit its consumption. When the State carries on such business, it
does so to restrict and regulate productions, supply and consumption of
liquor which is also an aspect of reasonable restriction in the interest of
general public. The State cannot on that account be said to be carrying on
an illegitimate business. [522-D-E]
1.10. The mere fact that the State levies taxes or fees on the produc·
lions, sale and income derived from potable liquor whether the production,
sale to income is legitimate illegitimate, does not make the State a party
B
to the said activities. The power of the State to raise revenue by levying C
taxes and fees should not be confused with the power of the State to
prohibit or regulate the trade or business in question. The State exercises
its two different powers on such occasions. Hence the mere fact that the
State levies taxes and fees on trade or business in liquor or income derived
from it, does not make the right to carry on trade or business in liquor a D
fundamental right, or even a legal right when such trade or business is
completely prohibited. [522-F ·GI
1.11. The State cannot prohibit trade or business in medicinal and
toilet preparations containing liquor or alcohol. The State can, however, ·
under Article 19(6) place reasonable restrictions on the right to trade E
business in the same the interests of general public. [522-H, 52~·A]
1.12. Likewise, the state cannot prohibit trade or business in in·
dustrial alcohol which is not used a beverage but used legitimately for
industrial purpose. The State, however, can place reasonable restrictions
on the said trade or business in the interests of the general public under F
Article 19(6) of the Constitution. [523-B]
1.13. The restriction placed on the trade or business in industrial
alcohol or in medicinal and toilet preparations containing liquor on
alcohol may also be for the purpose of preventing their abuse of diversion G
for use as or in beverage. [523-C]
StateofBombay&Anr. v.F.N. Ba/sara, [1951] SCR682; T.B. lbrahim
v. Regional Transport Authority, Tanjore, [1953] SCR 290; Cooverjee B.
Bharucha v. The Excise .commissioner and Ors., [1954] SCR 8733; Commonwealth or Australia v. The Bank of New South Wales, (1950) AC 235; H
482
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A State of Assam v. A.N. Kidwai, Commissioner of Hills Divisions and Appeals, Shillong, [1059] SCR 295; The State of Bombay v. Chamarbaugwala,
[1957] SCR 874; Nagendra Nath Bora andAnr. v. The Commissioner of Hills
Division and Appeals, Assam and Ors., [1958] SCR 1240; Narendra Kumar
and Ors. v. Union of India & Ors., [1960] 2 S.C.R. 375; A.B. Abdul Kadir
B and 0-s. v. The State of Kera/a and Anr., [1962] Supp. 2 SCR 741; Krishna
Kumar Narula and Ors. v. State of Jammu & Kashmir and Ors., [1967] 3
SCR 50; State of Orissa and Ors. v. Harinarayan Jaiswal and Ors., [1972] 3
SCR 784; Amar Chandra Chakraborty v. Collector of Excise Government of
Tripura and Ors., [1973] 1 SCR 533; Nashirwar etc. etc. v. State of Madhya
Pradesh, [1975] 2 SCR 881; Har Shankar and Ors. etc. etc. v. The Dy. Excise
C and Taxation Commissioner and Ors., [1975] 3 SCR 254; Lakhan/a/ Etc. v.
State of Orissa and Ors., [1977] 1 SCR 811; Sat Pal and Co. etc. v. Lt.
Governor of Delhi and Ors., [1977] 3 SCR 651; Southern Petroleum and
Chemicals, Trichur and Ors. v. State of Kera/a and Ors., [1981] 4 SCC 391;
State of M.P. and Ors. v. Nandlal Jaiswal and Ors., [1986] 4 SCC 566;
D Doongaji and Co. v. State of Madhya Pradesh ond Ors., AIR (1991) SC 1947;
Indian Mica Micanite Industries v. The State of Bihar and Ors., [1971] 2 SCC
236; The State of U.P. and Ors. v. Synthetics and Chemicals Limited and Ors.,
[1980] 2 SCC 441 and Synthetics and Chemicals Ltd. and Ors. v. State of
U.P. and Ors, [1990] 1 SCC 109, relied on.
,E
2. Artide 13(3)(a) of the Constitution states that law includes "any
ordinance, order, bye-law, rule regulation, notification, custom or usage
have in the territory oflndia the force oflaw" Clauses. (2) to (6) of Article
19 make no distinction between the law made by the Legislature and the
F
subordinate legislation for the purpose of placing the restrictions on the
exercise of the respective fundamental rights mentioned in_ Article 19 (l)(a)
to (q). Clause (6) of Article 19 only speaks of "operation of any existing
law in so far as it imposes ...... " "from making any law imposing" reasonable
restrictions on the exercises of the rights conferred by Article 19 (l)(g).
There is nothing in this provision which makes it imperative t.J impose the
G restrictions in question only by a law enacted by the Legislature. Hence the
restrictions in question can also be imposed by any snbordinate legislation
so long as such legislation is not violative of any provisions of the Con·
stitution. This is apart from the fact that the trade nr business in potable
liquor is a trade or business in res extra commercium and hence can be
H regulated and restricted even by executive order provided it is issued by
KHODAYDISTILLER!ESLTD.v. SfATEOFKARNATAKA[SAWANT,J.J 483
the Government of State. [524-D-G]
A
3. The word "business" is more comprehensive than ~e word "trade"
since it will include manufacture which the word "trade" may not ordinarily
include. The primary meaning of the word "trade" is the exchange of goods
for goods or goods for money. However, the word "trade" and "industry"
are also used interchangeably many times. It all depends upon the context B
in which the words occur. Thus it is apparent that the word "trade" may
inclnde all the connotations of the word "business". In Article 19 (l)(g) of
our Constitution, the words "trade" and "business" are used synonimously.
Hence, in this case, after the taking-over of the trade, viz., the activity of
buying and selling liquor, no activity was left with the petitioners to carry C
on under the licence held by them. [525-H, 526·A·B, 527-C-D]
Skinner v. Jack Breach Ltd., (1927) 2 KB 220; National Association of
Local Government Officers v. Bolton Corporation, (1943) AC 166; Aviation
shipping Co. Ltd. v. Mu"ay (Inspector of Texas), [1961] 2 All ER 805 and
K.K. Naru/a and Ors. v. State of Jammu and Kashmir and Ors., [1967) 3 D
SCR 50, referred to.
CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal
Nos. 4708-12 of 1989 etc. etc.
From the Judgment and Order dated 13.11.89 of the Karnataka High E
· Court in W.P. No. 16878-82 of 1989.
V.R. Reddy, Additional Solicitor General, K. Madhava Reddy, Shanti Bhushan, R.F. Nariman, A K. Ganguli, T.V.S.N. Chari, Nikhil Nayyar,
B.V. Acharaya, M. Veerappa, K.H. Nobin Singh, D. Prakash Reddy, Mrs.
D. Bharathi Reddy, R.N. Naidu, N.Reddy, S.Sukumaran, C.N. Sreekumar,
P. Mahale, P.N. Ramalingam, E.M.S. Anam, P.K. Pillai, M.A. Firoz,
A.T.M. Sampath, E.C.Agrawala, P.P. Tripathi and B. Kanta Rao for appearing parties.
The Judgment of the Court was delivered by
SAWANT, J. This is a bunch of appeals, special leave petitions and
F
G
writ petitions. The first group consists of C.A. Nos. 4708- 12/89, 4718-27/89,
W.P. (C) Nos. 666 667, 693, 694, 774 and 910of1990 wherein constitutional
validity of the (i) Karnataka Excise (Distillery and Warehouse) (Amendment) Rules, 1989, (ii) Karnataka Excise (Manufacture of Wine from H
484
SUPREME COURT REPORTS ·[1994] SUPP. 4S.C.R.
A
Grapes) (Amendment) Rules, 1989, (iii) Karnataka Excise (Brewery)
(Amendment) Rules, 1989, (iv) Karnataka Excise (Sale of Indian and
Foreign Liquors) (Amendment) Rules, 1989 and (v) Karnataka Excise
(Bottling of Liquor) (Amendment) Rules, 1989 was unsuccessfully challenged by various parties before the Karnataka High Court, inter alia on
B the ground that the Rules in question affected adversely the fundamental
right of the parties to carry on trade or business in liquor and that the said
Rules were violative of Articles 14, 19 (1) (g), 47, 300A, 301 and 304 of the
Constitution of India. A Bench of three learned judges of this Court which
heard this group of matters has referred them to the Constitution Bench.
C
The second group consists of C.A. Nos. 6043-50, 6051 and 6052 of
1993. These appeals arise out of the deciding of the Kerala High Court
upholding the validity of the Government Order 9th December, 1992
passed by the Government of Kerala deciding to cancel all foreign liquor
licences issued under Rule 13(3) of the Kerala Foreign Liquor Rules, 1974
D to Hotels, Restaurants and Tourist Homes. A Bench of two learned Judges
has referred the said matters also to the Constitution Bench for decision
on the question whether appellants have a fundamental right to carry on
trade in liquor.
E
F
G
H
The third group consists of SLP (C) Nos. 13817- 28, 16208, 16601-02,
17935, 17953 of 1993, 185, 2479, 2962-63, 5898 of 1994, and W.P. (c) Nos.
587, 591, 592, 608, 612 & 625 of 1993. These matters arise out of various
decisions of the Andhra Pradesh High Court upholding the validity of the
amendments to the Andhra Pradesh Foreign Liquor and Indian Liquor
Rules, 1970 from time to time and A.P. (Regulation of Wholesale Trade,
Distribution and Retail Trade in Indian Liquor and Foreign Liquor, Wine
and Beer) Act, 1993 (hereinafter referred to as the "A.P. 1993 Act"). The
High Court has held that the Rules and the amendments thereto as well
as the Act are not invalid on the ground that they violate the right to carry
on trade in liquor which is not fundan1ental.
In appears that some of the parties affected by the decision of the
Andhra Pradesh High Court upholding the validity of the enactments and
rejecting the argument that the petitioners have a fundamental right to
carry on trade in liquor, filed writ petitions in the High Court for a
declaration that though the validity of the enactments had been upheld by
the High Court the A.P. 1993 Act deals only with the taking over of trade
KHODAYDISTILLERJESLID.v. STATEOFKARNATAKA[SAWANf,J.] 485
but not business in liquor and, therefore, the State had no right to prevent A
the writ petitioners from carrying on which the business of liquor during
the validity of their licences. The argument was that "trade" is different
from "business". The High Court dismissed the petitions, S.L.P. (c) Nos.
9422-24 of 1994 filed against the said decision, forming the fourth group,
has also been referred to the Constitution Bench to be decided along with
the matters in the above three groups.
2. Thus in matters in the first three groups, this Bench has to answer
B
one question viz., whether the appellants/petitioners have a fundamental
right to carry on trade in liquor. The question involved in matters in the
fourth group is different, viz., since the A.P. 1993 Act referred to above, C
deals. only with the taking over of trade in liquor but not business, whether
the State can prevent the petitioners from carrying on with the business of
liquor as apart from trade, during the unexpired period of the licences.
3. We will first deal with the matters in groups 1, 2 and 3 and, D
therefore, with the question whether the appellants/petitioner have a fundamental right to carry on business in liquor.
4. Before we proceed to examine the question, it is necessary at the
outset to focus our attention on the precise controversy raised before us
and which, it is claimed, arises out of the conflicting decisions of this Court.
E
For the purposes of contentions advanced before us, liquor covers not only
those alcoholic liquids which are generally us"d as beverages and produce
intoxication but also all liquids containing alcohol. Liquor is classified
· broadly·into three classes, viz., (i) potable liquor which is used as beverage,
(ii) liquor used in medicinal and toilet preparation and (iii) ·industrial F
liquor used for industrial purpose. Two rival contentions of law are canvassed before us. One, that there is no fundamental right to trade or
business in liquor and that the State has power to regulate the trade or
business by placing restrictions on such trade or business in the interests
of the general public even to the extent of prohibiting completely such G
business or trade. The incidental consequence which flows from this contention is that the State has the exclusive privilege to sell liquor and this
privilege can be sold under the relevant law. The State can, therefore, have
also a monopoly in manufacturing, possessing and distributing liquor. The
other contention is that a citizen has a fundamental right to trade or
business in liquor and the State can only place reasonable restrictions on H
486
SUPREME COURT REPORTS [1994] SUPP. 4S.C.R.
A
the said right in the interests of general public by law made for the purpose
under Article 19( 6) of the Constitution. The State cannot, therefore,
prohibit completely the said trade or business in liquor· in the garb of
regulating it, and the limitations or restrictions placed have to pass the test
of reasonableness as in the case of trade or business in any other article.
B It is in light of these rival contentions that we have to examine the question
raised before us.
5. Two incidental question which, therefore, arise are (i) whether a
monopoly for the manufacture, trade or business in liquor can be created
in favour of the State and (ii) whether reasonable restrictions under Article
C
19( 6) of the Constitution can be placed only by Act of Legislature or by a
subordinate legislations as well.
It is contended that the State cannot carry on trade in liquor under
Article 47 of the Constitution. If the law on the subject is considered to be
D law under Article 19 (6), it has to be on the basis that a citizen had got a
fundamental right to trade in liquor. If the law is that a citizen has no
fundamental right, then Article 19 (6) cannot be applied because the said
Article applies only to those rights which a citizen possesses. What a citizen
cannot do under Article 19 (1), the State cannot do under Article 19 (6).
Secondly, it is submitted that assuming that the State has got the power to
E
carry on trade in liquor de hors Article 19 (6) and under Article 298 of the
Constitution, the power under Article 298 cannot extend to trade in liquor.
This is so because the Union Government has no executive power to trade
in a commodity which under Article 47 it is enjoined to prohibit.
F
In support of the contention that the appellants/petitioners have a
fundamental right to trade in liquor, it is argued firstly, that Entry 51 of
List II specifically accepts the fact that the manufacture of alcohol can be
for human consumption. The said Entry, among others, provides as follows
: "Duty of Excise on intoxicating liquor for human consumption". Entry 8
of List II specifically provides for production, manufacture, purchase and
G sale of intoxicating liquor. The implication of this Entry is that till prohibition is introduced by applying Article 47, there is no prohibition of consumption of liquor, and hence there is no prohibition for manufacture and
sale of liquor. Secondly, it is submitted that there are other substances like
tobacco which are more harmful to health than alcohol and they are being
H sold freely. A ljlajority of the States did not introduce prohibition and some
KHODAY DISl1LLERIESLTD. v. SfATEOFKARNATAKA(SAWANf,J.J 487
States' which purported to do it, failed and reverted to the earlier preA
prohibition condition. On the other hand, the revenue from the auction of
excise, vend-fees, liquor and other levies forms a major source of the
revenue of the State. Hence the trade in liquor cannot be looked upon as
an obnoxious trade. Thirdly, the Union Government itself has recognised
under its Industrial Policy Resolution as early as in 1956 that the producB
lion of potable alcohol as an industry has to be recognised though regulated
and the licences have to be freely granted for the manufacture of the
potable liquor. During the last several years, a large number of distillery,
brewery and winery licences have been granted all over the country. For
all these reasons, it is submitted that there is no warrant for excluding
liquor from the ambit of the words "any occupation, trade or business" C
under Article 19( 1) (g) of the Constitution.
6. We will first refer to the relevant provisions of the tonstitution
which have a bearing on the subject.
Article 19( 1) (g) provides that all citizens shall have the right to
practise any profession or to carry on any occupation, trade or business.
This right conferred by the aforesaid provision is circumscribed by the
provisions of clause ( 6) of the very Article which reads as follows :
D
"(6) Nothing in sub-clause (g) of the said clause shall affect the E
operation of any existing law in so far as it imposes, or prevent the
States from making any law imposing, in the interests of the general
public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said
sub-clause shall affect. the operation of any existing law in so far F
as it relates to, or prevent the State from making any law relating
to -
(i) the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or
business, or
G
(ii) the carrying on by the State, or by a corporation owned or
controlled by the State, of any trade, business, industry or service,
whether to the exclusion, complete or partial, of citizens or otherwise."
H
A
B
c
488
SUPREME COURT REPORTS [1994) SUPP. 4 S.C.R.
Thus Article 19(1) (g) read with Article 19 (6) spells out a fundamental right of the citizens to practise any profession or to carry on any
occupation, trade or business so long as it is not prohibited or is within the
framework of the regulation, if any, if such prohibition or regulation has
been imposed by the State by e1.acting a law in the interests of the general
public. It cannot be disputed that certain professions, occupations, trades
or businesses which are not in the interests of the general public may be
completely prohibited while others may be permitted with reasonable
restrictions on them. For the same purpose, viz., to subserve the interests
of general public, the reasonable restrictions on the carrying on of a
profession, occupation, trade etc., may provide that such trade, business
etc., may be carried on exclusively by the State or by a Corporation owned
or controlled by it. The right conferred upon the citizens under Article 19
(l)(g) is thus subject to the complete or partial prohibition or to regulation,
by the State. However, under the provisions of Article 19 (6) the prohibition, partial or complete, or the regulation, has to be in the interests of the
D general public.
E
F
Article 47 which is one of the Directive Principles of the State Policy
reads as follows :
"47. Duty of the State to raise the level of nutrition and the standard
of living and to improve public health. - The State shall regard the
raising of the level of nutrition and the standard of living of its
people and the improvement of public health as among its primary
duties and, in particular, the State shall endeavour to bring about
prohibition of the consumption except for medicinal purposes of
intoxicating drinks and of drugs which are injurious to health."
This Article enjoins upon and in turn enables the state to take
measures to raise the level of nutrition and the standard of living of its
people and to improve the public health. Towards this end, the State is
required to bring about prohibition of the consumption of intoxicating
G drinks and drugs which are injurious to health. The prohibition may be
complete or partial and it would also include regulation. It cannot be
disputed that liquor is one such drink.
Article 298 of the Constitution provides as follows :
H
"298. Power to carry on trade, etc. - The executive power of the
KHODAYDISTILLERIESLTD.v. STATEOFKARNATAKA[SAWANT,J.j
489 '
Union and of each State shall extend to the carrying on of any A
trade or business and to the acquisition, holding and disposal of
property and the making of contracts for any purpose :
Provided that -
(a) the said executive power of the Union shall, in so far as such B
trade or business or such purpose is not one with respect to which
Parliament may make laws, be subject in each State to legislation
by the State; and
(b) the said <executive power of each State shall, in so far as such C
trade or business or such purpose is not one with respect to which
the State Legislature may make laws, be subject to legislation by
Parliament."
Thus both the Union and the State Government have within their
respective spheres, power to carry on trade or business.
D
Article 300A proyides that no person shall be deprived of his property save by authority of law. It is undisputed that if a citizen is carrying on
the business according to the provisions of law, his business cannot be
taken away save by authority of law, if such a law is enacted to further the
purpose whether of Article 19 ( 6) or Article 47.
E
Article 301 reads as :
"301. Freedom of trade, commerce and intercourse- Subject to the
other provisions of this part, trade commerce and intercourse
throughout the territory of India shall be free."
The right given by this Article to freely carry on trade, commerce
and intercourse throughout the territory of India is undisputedly subject to
the same restrictions as is the right under Article 19(1)(g).
F
Apart from the restrictions placed on the right under Article 301 by G
the provisions of Articles 19( 6), 47, 302 and 303, the provisions of Article
304 also place such restrictions on the said right. So do the provisions of
Article 305, so far as they protect existing laws and Jaws creating State
monopolies. The provisions of the aforesaid Articles, so far as they are
relevant for our purpose, read together, therefore, make the position clear H
490
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
A
that the right conferred by Article 19(1)(g) is not absolute. It is subject to
restrictions imposed by the other provisions of the Constitution. Thoso
provisions are contained in Articles 19 (6), 47, 302, 303, 304 and 305.
B
c
D
E
F
7. We may now refer to th~ relevant Entries of List II of the Seventh
Schedule to the Constitution which give power to the State Governments
to make the laws in question. Entry 8 reads as follows :
"8. Intoxicating liquors, that is to say, the production, manufacture,
possession, transport, purchase and sale of intoxicating liquors.
Entry 51 reads as follows :
"51. Duties of excise on the following goods manufactured or
produced in the State and countervailing duties at the same or
lower rates on similar goods manufactured or produced elsewhere
in India:-
(a) Alcoholic liquors for human consumption;
(b) Opium, Indian hemp and other narcotic drugs and narcotics;
but not including medicinal and toilet preparations containing
alcohol or any substance included in sub-paragraph (b) of this
Entry.
11
Thus a State has legislative competence to make laws in respect of
the above subjects.
The relevant Entry in List I which has a bearing on the subject is
Entry 52 which reads as follows :
"52. Industries , the control of which by the Union is declared by
Parliament by law to be expedient in the public interest."
Under this Entry, the Parliament has enacted the Industries
G (Development and Regulation) Act, 1951 (for short 'IDR Act') and Item
26 of Schedule I of that Act reads as "Fermentation Industries - (1)
Alcohol, (2) Other products of Fermentation and Distillery". Read with
Section 2 of the IDR Act, the said Entry would mean that the alcohol
industry dealing in potable or non- potable alcohol is a controlled industry
H
within the meaning of the said Act. We are not in this reference concerned
'
KHODAYDISTILLERIESLID.v. SfAIBOFKARNATAKA[SAWANf,J.]
491
with the question as to whether there is any conflict between the relevant A
Acts of the respective State Legislatures and the Rules, Regulations,
Notifications and Orders issued under the said Acts and the provisions of
the IDR Act. It cannot further be denied that the pith and substance of
the ID R Act is to provide the Central Government with the means of
implementing their industrial policy which was announced in their resoluB
tion of 6th April, 1948 and approved by the Central legislature. That brings
under central control the development and regulation of a number of
important industries, the activities of which affect the country as a whole
and the development of which must be governed by economic factors of
all India import. The development of the industries on sound and balanced
Jines is sought to be secured by the licensing of all new undertakings. f!ence C
the ID R Act confers on the Central Government power to make rules for
the registration of existing undertakings and for regulating the production
and development of the industries mentioned in the Schedule and also for
consultation with the Provincial (now-State) Governments in these matters.
The Act ooes not in any way denude the power of the State Governments D
to make laws regulating and prohibiting the production, manufacture,
· possession, transport, purchase and sale of intoxicating liquors meant for
human consumption (but not for medicinal or toilet preparations) and
levying excise on them under Entries 8 an 51 of List II. If there is any.
incidental encroachment by the relevant State Acts on the area occupied
. by the IDR Act, that will not invalidate the State Acts. The impugned E
judgments of the High Courts also mention that the State Acts have
received the assent of the President. Be that as it may.
8. We may now refer to the relevant authorities cited atthe Bar.
F
In State of Bombay & Anr, v. F.N. Balsara, [1951] SCR 682 which is
a decision of the Constitution Bench of five learned Judges, what fell for
consideration was the validity of the Bombay Prohibition Act, 1949. In that
case, this Court held that in view of the provisions of Article 47 of the
Constitution, the total prohibition on potable liquor would be reasonable.
It does not appear that any contentions were raised there on the .basis of G
Article 19(1) (g) and hence there is no di&cussion with reference to the
said provision.
In T.B. Ibrahim v. Regional Transport Authority, Tanjore, (1953] SCR
290 what fell for consideration was the validity of the amendment in 1950 H
492
SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.
A
to Rule 268 of the Madras Motor Vehicles Rules, 1940 to empower the
Transport Authority to alter from time to time the starting place and
termini for motor vehicles. The appellant was the owner of a bus-stand in
the municipal limits which was being used for several years as a starting
place and terminus for buses plying to and from the said limits. The
B Transport authority passed a resolution changing the starting place and
terminus for convenience of the public. The appellant challenged the said
resolution and consequently the amendment to Rule 268, among others, as
repugnant to Article 19 (l){g) of the Constitution. A Constitution Bench
of five learned Judges dealing with this contention held that the restrictions
placed upon the use of the bus-stand for the purpose of picking up or
C setting down passengers cannot be considered to be unreasonable. It may
be that the appellant by reason of the shifting of the bus-stand has been
depiived of the income he used to enjoy when the bus-stand was used for
outward journeys. There is no fundamental right in a citizen to carry on
business wherever he chooses and his right must be subject to any
D reasonable restriction imposed by the executive authority in the interests
of the public convenience. The restriction imposed has the effect of terminating the use to which the stand has been put hitherto. The restriction
cannot be regarded as being unreasonable if the authority imposing such
restriction has the power to do so. Whether the abolition of the stand was
conducive to public convenience of !IOI is a matter entirely for the
E Transport Authority to judge and it is not up to the Court to substitute its
opinion with that of the authority which is in the position having regard to
its knowledge of local conditions, to appraise the situation.
F
G
In Cooveijee B. Bharncha v. The Excise Commissioner and the Chief
Commissioner, Ajmer & Ors., (1954] SCR 873 where the vires of Excise
Regulation I of 1915 was under challenge on the ground of violation of
Article 19(1)(g), the Constitution Bench of five learned judges among
others things, held that :
(a) In order to determine the reasonableness of restrictions, envisaged by Article 19 (6), regard must be had to the nature of the
business and the conditions prevailing in that trade These factors
would differ from trade to trade and no hard and fast rule concerning all trade and no hard and fast rule concerning all trades
can be laid down. It cannot also be denied that the State has the
H
power to prohibit trades which are illegal or immoral or injurious
KHO DAY DISTILLERIES LTD. v. SfATE OF KARNATAKA [SAWANf, J.]
493
to the health and welfare of the public. Laws prohibiting trades in A
noxious or dangerous goods or trafficking in women cannot be held
to be illegal as enacting a prohibition and not a mere regulation.
The nature of tlfe business is, therefore, an important element in
deciding the reasonableness of the restrictions. The right of every
citizen to pursue any lawful trade or business is obviously subject
to such reasonable conditions as may be deemed by the governing
authority of the country essential to the safety, health, peace, order ·
and morals of the community. Some occupations by the noise made
in their pursuit, some by the odours they engender, and some by
the dangers accompanying them require regulation as to the
locality in which they may be conducted. Some, by the dangerous
character of the article .used, manufactured or sold require also
special qualification in the parties permitted to use them, manufacture or sell them. The Court in this connection referred to the
observation of Field J. in P. Crowley v. Henry Christensen, 34 L.ed.
620 a part of which is as follows ·:
" ...................