Madhya Pradesh High Court
M/S J.K.Enterprises ... vs Commercial Tax Department on 8 January, 2016
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HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE
S.B.: HON'BLE MR. S. C. SHARMA, J
WRIT PETITION No. 3397 / 2015
M/S. J. K. ENTERPRISES
THROUGH PROPRIETOR KARANVEER SINGH CHHABRA
Vs.
STATE OF MADHYA PRADESH
AND THREE OTHERS
AND
WRIT PETITION No. 3398 / 2015
M/S. PIYUSH ALCOHOLS PVT. LTD.,
THROUGH ITS DIRECTOR
CHANDER SINGH SOLANKI
Vs.
STATE OF MADHYA PRADESH
AND THREE OTHERS
*****
ORDER
(08/01/2016) Regard being had to the similitude in the controversy involved in the present cases, the writ petitions were analogously heard and by a common order, they are being disposed of by this Court. Facts of Writ Petition No. 3397 / 2015 are narrated hereunder.
The petitioner before this Court has filed this present writ petition being aggrieved by the inaction on the part of the respondents in not issuing licence for new F.L.9 (Indian
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Made Foreign Liquor (IMFL) bottling Plant) inspite of the fact that the petitioners have completed all requisite formalities.
The respondents have filed a reply and they have stated in paragraphs 4, 5 and 6 that Hon'ble the Chief Minister has made a public announcement that no liquor shops will be opened in the State of Madhya Pradesh and the announcement was made on 23/01/2014.
A similar controversy came up before this Court in the case of M/s. Himalayan Ales Pvt. Ltd., Vs. State of Madhya Pradesh and others (W.P.No. 5216 / 2015, decided on 16/09/2015), the Gwalior Bench of this Court has passed the following order :
6. The Rules of 2002 are framed by the State Government under Section 62 (1) and 62 (2) clause (a), (d), (e), (f), (g) and (h) of the M.P. Excise Act for regulation and control of issuance of licence and construction of brewery and manufacturing of beer and draught beer. As on date there are no amendment in the rules prohibiting grant of licence for establishment of brewery and manufacture of beer / draught beer. Petitioner's application for construction of brewery and manufacture of beer has been processed under Rule 3 and thereafter letter of intent has been issued under sub-rule (5) of Rule 3 of the Rules of 2002. The competent authority is required to issue licence under Rule 4 upon satisfaction of fulfillment of requirements provided therein.
It is not the case of respondents that the petitioner does not satisfy the requirements of the Rules of 2002 for grant of licence, instead after completion of construction of brewery, installation of machineries and equipments as per norms, standards and specifications fixed by the State Government investing huge amount of Rs.12.11 crores, consequent upon the LOI, a committee constituted by respondents has inspected the factory and submitted the report recording its satisfaction and respondent no.3 recommended for licence. Under the circumstances, the contention of the petitioner of having a legitimate expectation for issuance of licence has substantial force, as the principle of legitimate expectation is at the route of rule of law and requires
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regulatory, predictability and certainty in Governments dealings with the public, both substantive and procedural. The procedural part of it relates to a representation that a hearing or other appropriate procedure will be afforded before decision is made. The substantive part of the principle is that if a representation is made, the benefit of substantive nature will be granted and then the same could be enforced. This aforesaid principle of law propounded in English judgments has been followed by the Indian Courts in number of decisions. In the case of MRF Ltd., Kottayam vs. Asstt. Commissioner (Assessment) Sales Tax and Others, (2006) 8 SCC 702 the Hon'ble Supreme Court while considering the legality and validity of the notification withdrawing exemption granted by earlier notification applying the principles of legitimate expectation for the reason the MRF had altered its position relying on the representations contained in the earlier notification and while setting aside the subsequent notification withdrawing exemption the Hon'ble Supreme Court held that the action of State including exercise of executive power tested on the touchstone of Article 14 of the Constitution of India did not withstand the test of rule of law and fairness. Relevant paras of the judgment read as under:-
"38. The principle underlying legitimate expectation which is based on Article 14 and the rule of fairness has been restated by this Court in Bannari Amman Sugars Ltd. v. CTO, (2005) 1 SCC
625. It was observed in paras 8 and 9: (SCC pp. 633-34) "8. A person may have a `legitimate expectation' of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the court to apply for judicial review. It is generally agreed that `legitimate expectation' gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words, where a person's legitimate expectation is not fulfilled by taking a particular decision then the decisionmaker should justify the denial of such expectation by showing some overriding public interest. (See Union of India v. Hindustan Development Corpn., (1993) 3 SCC 499: AIR 1994
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SC 988).
9. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for discernible reasons, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualised than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness." (emphasis supplied)"
"39. MRF made a huge investment in the State of Kerala under a promise held to it that it would be granted exemption from payment of sales tax for a period of seven years. It was granted the eligibility certificate. The exemption order had also been passed. It is not open to or permissible for the State Government to seek to deprive MRF of the benefit of tax exemption in respect of its substantial investment in expansion in respect of compound rubber when the State Government had enjoyed the benefit from the investment made by MRF in the form of industrial development in the State, contribution to labour and employment and also a huge benefit to the State exchequer in the form of the State's share i.e.40% of the Central excise duty paid on compound rubber of Rs.177 crores within the State of Kerala. The impugned action on the part of the State Government is highly unfair, unreasonable, arbitrary and, therefore, the same is violative of Article 14 of the Constitution of India. The action of the State cannot be permitted to operate if it is arbitrary or unreasonable. This Court in E.P. Royappa v. State of T.N., (1974) 4 SCC 3 : 1974 SCC (L&S) 165 observed that where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of "justice and fair play". The attempt to take away the said benefit of exemption with effect from 15-1-1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years, in our opinion, is highly arbitrary, unjust and unreasonable and deserves to be quashed. In any event the State Government has no power to make a
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retrospective amendment to SRO No.1729/93 affecting the rights already accrued to MRF thereunder."
The aforesaid judgment has been followed by the Hon'ble Supreme Court in the case of State of Bihar and others vs. Kalyanpur Cement Limited, (2010) 3 SCC 274. The Hon'ble Supreme Court in paras 79 and 80 of its judgment has observed as under:-
"79. We are also unable to accept the submission that the decisions dated 6-1-2001 and 5-3-2001 had been taken due to the change in the national policy. This was sought to be justified by Dr. Dhavan on the basis of the Conferences of Chief Ministers/Finance Ministers. It is settled law as noticed by Bhagwati, J. in Motilal Padampat Sugar Mills Co. Ltd. v. State of UP, (1979) 2SCC 409 : 1979 SCC (Tax) 144 that the Government cannot claim to be exempt from the liability to carry out the promise on some indefinite and undisclosed ground of necessity or expediency. The Government is required to place before the Court the entire material on account of which it claims to be exempt from liability. Thereafter, it would be for the Court to decide whether those facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from liability. It is only when the Court is satisfied that the Court would decline to enforce the promise against the Government. However, the burden would be upon the Government to show that it would be inequitable to hold the Government bound by the promise. The Court would insist a highly rigorous standard of proof in the discharge of this burden.
80. In the present case, the claim of the Government is based on a change in policy advocated in the Chief Ministers' Conference. These Conferences had taken place before the affidavit was filed on 5-12- 2001. Therefore, the High Court concluded that the Government has not been candid in disclosure of the reasons for passing the order dated 6-01-2001. In our opinion, the aforesaid decisions with regard to the discontinuance of the sales tax exemptions from 1-01- 2000 could not have affected the rights of the Company under the Industrial Policy, 1995. Necessary application was made to the Government seeking exemption on 21-11-1997. For more than three years, the Company and the financial institutions had been assured by the Government that the notification will be issued forthwith. However, it was not issued. We are of the opinion that the action of the appellants is arbitrary and indefensible."
(Emphasis supplied) Therefore, in view of the aforesaid enunciation of law as regards doctrine of legitimate expectation, now turning to facts in hand, in the opinion of this Court, the petitioner can certainly be said to have valid legitimate expectation in law and entitled for the licence having altered his position acting upon the LOI and investing about Rs.12.11 crores in construction of brewery and
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installation of machineries and equipments for manufacture of beer. Moreover, Rules of 2002 under the circumstances do not disqualify petitioner for B-3 licence. Therefore, the contention of learned senior counsel that the impugned communication denying B-3 licence to the petitioner under the pretext of announcement by the Chief Minister on 23/1/2014 is hit by the doctrine of promissory estoppel commends this Court as it has substantial force. Learned senior counsel relied on the judgment of the Hon'ble Supreme Court in the case of Southern Petrochemical Industries Co. Ltd. vs. Electricity Inspector & ETIO and others, (2007) 5 SCC 447 to bolster his submissions. In the said case the Hon'ble Supreme Court reiterated that the doctrine of promissory estoppel shall apply where a party alters its position pursuant to or in furtherance to the promise made by the State. Such promise can be in the form of notifications under statutory provisions or even by the executive instructions. Whenever the ingredients of promissory estoppel are established it shall give rise to a cause of action with substantive right. In the aforesaid case the Hon'ble Supreme Court observed as under:-
"121. The doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications issued under the statutory provisions but also under the executive instructions. The appellants had undoubtedly been enjoying the benefit of (sic exemption from) payment of tax in respect of sale/consumption of electrical energy in relation to the cogenerating power plants.
122. Unlike an ordinary estoppel, promissory estoppel gives rise to a cause of action. It indisputably creates a right. It also acts on equity. However, its application against constitutional or statutory provisions is impermissible in law......."
In the opinion of this Court, in absence of any reason or justification for non-fulfillment of requirements of Rules of 2002, respondents are estopped from denying B-3 licence to the petitioner in the facts and circumstances of the case.
7. True it is that the State has the executive right or privilege of manufacturing and selling liquor. It also has a power to part with the aforesaid privilege by holding public auction for granting right to sale the liquor and there is no fundamental right of any citizen to carry on trade or business in liquor. Law is well settled in that behalf right from the case of The State of Bombay and another v. F.N. Balsara, AIR (38) 1951 SC 318, The State of Assam v. Sristikar Dowerah and others, AIR 1957 SC 414, Nagendra Nath Bora and another v. Commissioner of Hills Division and Appeals, Assam and others, AIR 1958 SC 398, Amar Chandra Chakraborty v. The Collector of Excise, Govt. of Tripura, Agartala and others AIR 1972 SC 1863, The State of Orissa and others v. Harinarayan Jaiswal and others, AIR 1972
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SC 1816, Har Shankar and others etc. etc. v. The Deputy Excise and Taxation Commissioner and others etc., AIR 1975 SC 1121. In the case of Khoday Distilleries Ltd. and others v. State of Karnataka and others, (1995) 1 SCC 574 the Hon'ble Supreme Court has recapitulated the law in the field and summarized the law as regards rights to carry on the trade or business in potable liquor, wherein inter alia it has been held in point no.(g) as under:-
"(g) When the State permits trade or business in the potable liquor with or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make discrimination between the citizens who are qualified to carry on the trade or business."
(Emphasis supplied) While answering the question "as to whether the State can place restrictions and limitations under Article 19 (6) of the Constitution of India in the matter of carrying on trade or business in liquor", the Honb'le Supreme Court in para 64 of the judgment held as under:-
"64. The last contention in these groups of matters is whether the State can place restrictions and limitations under Article 19(6) by subordinate legislation. Article 13(3)(a) of the Constitution states that law includes "any ordinance, order, bye-law, rule, regulation, notification, custom or usage having in the territory of India the force of law". Clauses (2) to (6) of Article 19 make no distinction between the law made by the legislature and the subordinate legislation for the purpose of placing the restrictions on the exercise of the respective fundamental rights mentioned in Article 19(1) (a) to (g). We are concerned in the present case with clause (6) of Article 19. It will be apparent from the said clause that it only speaks of "operation of any existing law insofar as it imposes ..." "from making any law imposing"
reasonable restrictions on the exercise of the rights conferred by Article 19(1)(g). There is nothing in this provision which makes it imperative to impose the restrictions in question only by a law enacted by the legislature. Hence the restrictions in question can also be imposed by any subordinate legislation so long as such legislation is not violative of any provisions of the Constitution. This is apart from the fact that the trade or business in potable liquor is a trade or business in res extra commercium and hence can be regulated and restricted even by executive order provided it is issued by the Governor of the State. We, therefore, answer the question accordingly."
(Emphasis supplied) In view of the above stated settled legal position as regards trade or business in liquor, when the State parts with its exclusive privilege and permits citizens to carry on trade or business in liquor, its regulatory powers either by way of subordinate legislation, notification or executive orders must be informed by reasons and State is not permitted to act arbitrarily and unreasonably. The State can also not discriminate between the
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citizens, who are qualified to carry on the trade or business, therefore, in its regulatory measures State is obliged to observe reasonableness, fairness and prevalence of rule of law.
8. The contention of learned counsel for respondents/State that the announcement by the Chief Minister in a public meeting that no new licence / permit shall be issued for new liquor factory or liquor shop is a policy decision of the State Government in public interest and, therefore, State Government has a right to deny B-3 licence to the petitioner, gives rise to following questions:-
1. Whether the public announcement of the Chief Minister can be said to be a policy decision of the State Government? If yes,
2. Whether such policy decision can be enforced without amending the Rules of 2002 or by executive fiat without orders issued in the name of the Governor under Article 166 of the Constitution of India?
3. Whether such public announcement or so called policy decision is not required to conform to equality clause as enshrined under Article 14 of the Constitution of India?
The executive power of the State is vested in the Governor under Article 154 of the Constitution of India. The Council of Ministers with the Chief Minister as the head provide aid and advice to the Governor in exercise of his functions subject to exception as provided for under Article 163 of the Constitution of India. As such, the Governor runs the executive Government of the State with the aid and advice of the Chief Minister and the Council of Ministers. All executive actions of the Government are expressed to be taken in the name of the Governor under Article 166 of the Constitution of India, but for each action / order, so issued, ministers are personally and collectively responsible. Their powers and duties are regulated by law. The Council of Ministers having the collective responsibility are as such accountable to the public at large for the acts and conduct in performance of their duties. The Chief Minister alone is not the Government, as Constitution of India does not envisages so, instead the Council of Ministers with the Chief Minister as the head is the Government or political executive for the aid and advice of the Governor to enable him to perform the executive actions of the Government of a State.
Learned senior counsel for the petitioner relied on the judgment of the Division Bench in the case of State of M.P. And others vs. M/s Swami Traders, 2001 (4) MPLJ 69 and Doiwala Sehkari Shram Samvida Samiti Ltd. vs. State of Uttaranchal and others, (2007) 11 SCC 641 to contend that to enforce the policy of the State Government if any, first there shall be amendment in the Rules of 2002 dealing with the grant of licence for manufacture of beer or by executive orders issued by Governor of the State, but the same cannot be enforced by an executive fiat; as grant of B-3 licence is tramelled by statutory rules. Upon perusal of the Division Bench decision of this Court (supra), it is found that the Division Bench relied upon the
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judgment of Hon'ble Supreme Court in the case of State of M.P. and others, etc. etc., v. Nandlal Jaiswal and others, etc. etc., AIR 1987 SC 251 for the aforesaid proposition held that the recommendations of the Cabinet Sub-Committee or policy decisions, which are contrary to the provisions of general licence conditions, which are statutory and by which parties are bound under law, cannot be enforced by the Court by a writ of mandamus. The Hon'ble Supreme Court has held that though the State Government has a power to change the policy under its executive powers, but only when it is not trammelled in statutes or rules, i.e. both, the Government and the private party are bound by the rules or statute which govern the reciprocal rights and obligations in a given situation in commercial transactions. Government cannot unilaterally take a decision under the garb of policy decision without amending the relevant provisions of the rules or statutes governing the field.
There is no material on record to suggest that the aforesaid announcement of the Chief Minister is in public interest or a policy decision of the State Government. It is considered apposite to examine "what is meant by public policy and parameters for its judicial review". The Hon'ble Supreme Court in the case of Murlidhar Agrawal and another v. State of Uttar Pradesh and others, AIR 1974 SC 1924 has dealt with the concept of public policy and referred to Winfield's definition of public policy in English Common Law, 42 Harvard Law Rev.76 "as a principle of judicial legislation or interpretation founded on the current needs of the community".
The Hon'ble Apex Court while dealing with the concept of public policy in the case of Secretary Jaipur Development Authority, Jaipur v. Daulatmal jain and others, (1997) 1 SCC 35 has in following paragraph held that the public policy must be for public welfare and in public interest. It cannot be camouflaged for abuse or misuse of power. The Court has a power to judicially review to ascertain as to whether replacement of public motive for a private one with ulterior motive to achieve collateral purpose or it is a bonafide formulation of policy for public, i.e. whether any pursuit of private satisfaction is distinguished from public interest. Relevant para 13 of the judgment reads as under:-
"13. All purposes or actions for which moral responsibility can be attached are actions performed by individual persons composing the Department. All Government actions, therefore, means actions performed by individual persons to further the objectives set down in the Constitution, the laws and the administrative policies to develop democratic traditions, social and economic democracy set down in the Preamble, Part III and Part IV of the Constitution. The intention behind the government actions and purposes is to further the public welfare and the national interest. Public good is synonymous to protection of the interests of the citizens as a territorial unit or nation as a whole. It also aims to further the public policies. The limitations of the
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policies are kept along with the public interest to prevent the exploitation or misuse or abuse of the office or the executive actions for personal gain or for illegal gratification."
The Hon'ble Apex Court while addressing on Fundamental Policy of the Indian Law in the case of Oil and Natural Gas Corporation Limited vs. Western GECO International Limited, (2014) 9 SCC 263 has laid emphasis upon the safeguards for observance of principle of natural justice by Courts, Tribunals or quashi judicial authorities and judicial approach exercising powers that affect rights or obligation of the parties and observance of fair, reasonable and objectivity in decision making process on touchstone of Wednesbury principle and in para 39 of the judgment has observed as under:-
"39. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle, Associated Provincial Picture House Ltd. v. Wednesbury Corpn., (1948) 1 KB 223:
(1947) 2 AII ER 680 (CA) of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes whereever the same are available."
9. In the backdrop of aforesaid review of concept of public policy and that of fundamental policy of Indian Law, on examination of facts in hand, it is evident that the aforesaid so called policy decision, i.e. the announcement of the Chief Minister in public that there shall not be any new licence / permit for opening the liquor factory / liquor shop is not the policy of the State Government based on any relevant consideration, but an individual perception of the Chief Minister and it has no legal sanction. Even otherwise, the same is not informed by reasons, justifications or supported by any relevant material placed on record.
In fact and in effect such announcement culminated into denial of B-3 licence to the petitioner by the impugned communication dated 10/7/2015 is a glaring instance of irrationality or perversity of decision, if tested on the touchstone of Wednesbury principle of reasonableness and, therefore, cannot be sustained in the eyes of law.
Consequently, in the opinion of this Court, respondent no.2 has abdicated his authority under Rule 4 of the Rules of 2002 in the matter of grant of B-3 licence to the petitioner and has acted in an arbitrary unreasonable manner influenced by considerations not perceptible in law while issuing impugned communication dated 10/7/2015. Accordingly, Annexure P/1 dated 10/7/2015 is quashed. Petitioner is held entitled for grant of B-3 licence for manufacture of beer and/or draught beer to be issued under Rule 4 of the Rules of 2002 by respondent no.2 forthwith.
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The present Writ Petition stands covered by the judgment delivered by the Gwalior Bench in the aforesaid case.
Resultantly, this Court is of the considered opinion that the present Writ Petition also deserves to be allowed and is accordingly allowed. The petitioners are entitled for grant of F.L.9 (Indian Made Foreign Liquor (IMFL) bottling Plant). The respondents are directed to issue the licence to the petitioner within a period of 30 days from today.
(S. C. SHARMA) JUDGE KR