Madhya Pradesh High Court
M/S Himalayan Ales Pvt.Ltd Thr vs The State Of Madhya Pradesh Thr on 16 September, 2015
1 Writ Petition No.5216/2015
[M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others]
HIGH COURT OF MADHYA PRADESH
BENCH GWALIOR
SINGLE BENCH:
HON. SHRI JUSTICE ROHIT ARYA
WRIT PETITION NO.5216/2015
.........Petitioner: M/s. Himalayan Ales Pvt. Ltd.
Versus
.......Respondents : State of M.P. and others
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Shri R.N. Singh, Senior Advocate assisted by Shri Ankur
Maheshwari, Advocate for petitioner.
Shri R.B.S. Tomar, Government Advocate for respondents/State.
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Date of hearing : 04/09/2015
Date of order : 16/09/2015
Whether approved for reporting : Yes
ORDER
(16/09/2015) Per Justice Rohit Arya, This Writ Petition under Article 226 of the Constitution of India is directed against the communication dated 10/7/2015 addressed to the petitioner issued under the signatures of respondent no.2 in the matter of grant of B-3 licence under the M.P. Beer and Wine Rules, 2002 (hereinafter referred to as "the Rules of 2002"), whereby petitioner's application for B-3 licence has been rejected in view of the declaration of the Chief Minister 2 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] that no new permit / licence for new liquor factory or shop shall be granted.
2. Facts relevant and necessary for disposal of this Writ Petition are to the following effect:-
The petitioner submitted an application dated 22/12/2011, Annexure P/3, under Rule 3 (2) of the Rules of 2002 for grant of licence to construct and establish a brewery in Form B-1 through the Excise Commissioner. Thereafter, LOI was issued in Form B-2 to the petitioner on 2/7/2012 (Annexure P/4) by the Commercial Tax Department, wherein it is indicated that the State Government has tentatively decided to approve the proposal for construction of brewery and manufacture of beer. The LOI shall be valid for a period of two years only from the date of its issue. Thereafter, the construction of brewery, installation of machinery and equipments for manufacture of beer was completed fulfilling all the requirements, norms and standards fixed by the respondents/State. Petitioner wrote a letter on 7/3/2014 (Annexure P/5) addressed to District Excise Officer requesting therein to inspect the unit and issue B-3 licence for operation of the brewery followed by another letter dated 27/3/2014 (Annexure P/6) and letter dated 30/4/2011 (Annexure P/7) with requisite deposit of fees, as prescribed in the rules.
The Deputy Commissioner, Excise, wrote a letter to respondent no.2 on 20/5/2014 (Annexure P/8) with reference to 3 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] the order of the State Government, Commercial Tax Department, dated 29/1/2009 for necessary orders upon detailed report as regards completion of construction of brewery and installation of machinery for manufacture of beer within the stipulated period, i.e. for grant of B-3 licence. In turn, respondent no.2 issued a letter to respondent no.3 on 6/6/2014 (Annexure P/9) to constitute a committee for inspection of brewery unit for grant of B-3 licence.
In compliance thereof, a committee was constituted by respondent no.3 on 18/6/2014 (Annexure P/10) consisting of Deputy Excise Commissioner, Executive Engineer, PWD (B & R), Executive Engineer / Assistant Engineer, PWD (E & M) and District Excise Officer for inspection of the brewery to submit the report. The committee inspected the brewery unit on 23/6/2014. The report of the committee is on record (Annexure P/11). The committee has found that the brewery unit has been constructed as per the standards and norms of the State Government, installed machineries and equipments are as per the specifications set by the State Government. Consequently, respondent no.3 after having received the exhaustive report, wrote a letter to respondent no.2 on 16/7/2014 (Annexure P/12) alongwith the report and documents. Respondent no.2 on 30/7/2014 (Annexure P/13) called upon respondent no.3 to submit the appropriate recommendation/opinion for grant of B-3 licence to the petitioner.
Respondent no.3 on 12/8/2014 (Annexure P/14) has sent his 4 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] recommendations for grant of B-3 licence to the petitioner.
As petitioner did not receive the B-3 licence to operate the brewery, submitted applications on 17/11/2014 (Annexure P/15) 11/2/2015 (Annexure P/16) and 23/2/2015 (Annexure P/17) with request for issue of B-3 licence inter alia contending that the delay caused in issuance of licence has serious financial implications as petitioner-company has invested huge amount of Rs.12.11 crores, completed all the constructions and installed all the equipments and machineries, which has also been inspected by the committee constituted by respondent no.3 and there is a recommendation also of respondent no.3 for grant of B-3 licence.
Under such circumstances, further delay caused shall be highly detrimental to his rights and interest besides recurring loss.
It appears that respondents turned deaf ears towards the petitioner's request and that led to filing of the Writ Petition before this Court vide Writ Petition No.2614/2015. By an innocuous order dated 11/5/2015 the Writ Petition was disposed of with direction to petitioner to resubmit letter dated 23/2/2015 and note-sheet dated 19/5/2008 alongwith copy of the order passed by this Court with further direction to respondents no.1 and 2 to take a final decision by a reasoned order in accordance with law and communicate the decision to the petitioner within three weeks. Still respondents remained indifferent and maintained inertia. Under such circumstances, petitioner preferred a Contempt Petition before 5 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] this Court vide Contempt Petition No.378/2015. During pendency of the Contempt Petition, impugned communication dated 10/7/2015 was issued to the petitioner. This Court while disposing of the Contempt Petition gave liberty to the petitioner to challenge the aforesaid impugned communication dated 10/7/2015 by filing appropriate original proceedings. Accordingly, instant Writ Petition has been filed for the following relief:-
"For quashment of letter dated 10/7/2015 and direction to respondent no.2 to grant B-3 licence to the petitioner-company for operating the brewery unit at plot No.F-5 to F-9 and F-11, Malanpur, District Bhind with further direction to respondent no.2 to grant permission for manufacture of the draught beer and compensation for the delay occurred in granting the licence."
On notice, respondents entered appearance and filed counter-affidavit. In the counter-affidavit the fact of submission of application for grant of B-3 licence, issuance of LOI, completion of construction of brewery, installation of machineries and equipments within time in conformity with the specifications, standards and norms set by the State Government, as indicated in the inspection report Annexure P/11, and recommendations of respondent no.3-Collector for grant of B-3 licence are not disputed. However, it is submitted that issuance of LOI itself did not create any vested right upon the petitioner and the same was 6 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] issued on the tentative approval of the State Government. Petitioner, therefore, cannot claim licence to run a brewery as of right and the Government reserved its right to reject the application. It is submitted that in larger public interest the decision since has been taken by the Chief Minister, as indicated in the impugned communication, respondents are required to act in accordance with such announcement/public declaration made by the Chief Minister. Neither any document is attached in support of the contention advanced in the counter-affidavit nor any material is placed before this Court as regards public interest or / and public policy.
3. Before adverting to the contentions advanced by the parties, it is considered apposite to refer to relevant rules of the Rules of 2002.
Rule 3 of the Rules of 2002 provides for construction or establishment of brewery / manufactory. An application under Rule 3 (2) by a person to construct and / or establish a brewery or manufactory shall be submitted to the State Government through the Excise Commissioner in prescribed Form B-1 with necessary details and documentations, as provided for under sub-rule (3) of Rule 3. The Excise Commissioner upon examination of the application shall forward the application to the State Government with his comments and recommendation thereon under Rule 3 (4). The LOI in Form B-2 is issued by the State Government regarding 7 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] its satisfaction on the proposed scheme of the applicant under Rule 3 (5) (i), however, if upon scrutiny the application is found to be incomplete or lacking in material particulars, the procedure is prescribed to deal with such situation under sub-rule 3 (5) (ii). The State Government reserves the right to reject the application for issuance of LOI after hearing the applicant under sub-rule 3 (6). The LOI issued shall be valid for two years from the date of communication within which period the holder thereof shall complete the construction of the building and installation of plant and machineries in all respects, according to the plan approved by the State Government, and make the unit ready for commissioning under Rule 3 (8). If the applicant fails to complete the aforesaid requirements within a period of two years, the LOI shall be liable to be cancelled without compensation for any damage or loss to the applicant under Rule 3 (9), however, power of condonation of delay and further extension of time is conferred upon the State Government under the proviso thereof. The LOI issued under sub- rule (5) shall not create any prerogative in favour of its holder for grant of licence and shall be liable to be revoked and withdrawn any time in public interest, but after giving a notice to show-cause against such action and affording hearing under sub-rule 3 (10).
Rule 4 of the Rules of 2002 contemplates grant and renewal of licence for working a brewery or manufactory.
4. Learned senior counsel for the petitioner contended that 8 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] petitioner's application for grant of licence for construction and establishment of brewery submitted on 22/12/2011 under Rule 3 (2) was complete in all respects fulfilling the requirements of sub- rule (3). Before issuance of LOI the application with its enclosures was minutely examined by the Excise Commissioner with recommendation for grant of LOI. The State Government after recording its satisfaction on the proposed scheme of the petitioner issued LOI in Form B-2 on 2/7/2012. Acting upon the letter of intent petitioner invested huge amount of Rs.12.11 crores in construction of brewery and installation of machineries and equipments as per set norms, standards and specifications within the stipulated period of two years from the date of issuance of LOI. As such, the petitioner had a legitimate expectation for grant of B-3 licence by respondent no.2 under Rule 4 (3) of the Rules of 2002. Moreso, upon inspection of brewery / factory the duly constituted committed by respondent no.3 submitted a report on 16/7/2014 recording its satisfaction and respondent no.3 forwarded its recommendation to respondent no.2 for grant of B-3 licence on 12/8/2014. However, respondent no.2 for no justifiable reason made a communication to the State Government seeking guidance by letter dated 23/2/2015. The said exercise was wholly unwarranted and contrary to rules. Therefore, non-issuance of B-3 licence is wholly arbitrary and unreasonable violative of Article 14 of the Constitution of India.
9 Writ Petition No.5216/2015
[M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] Learned counsel further contends that in the facts and circumstances of the case respondents are estopped by operation of principle of promissory estoppel while refusing to grant B-3 licence.
Learned senior counsel during the course of arguments submitted that the alleged public announcement in Dewas city made by the Chief Minister that no new permit / licence be issued for opening of new liquor factory or liquor shop was on 23/1/2014, whereas facts of the case demonstrate that the LOI was issued much earlier thereto, i.e. on 2/7/2012. Upon completion of construction of brewery, same was inspected and report was submitted on 23/6/2014, recommendation is made on 12/8/2014. Therefore, rejection of application by the impugned communication dated 10/7/2015 under the pretext of the announcement of the Chief Minister on 23/1/2014 speaks volumes about the typical hostility and depravity shown towards the petitioner subjecting him to unreasonable and arbitrary action of the respondents not informed by reasons or observance of rule of law, as the alleged justification shown in the impugned communication lacks legal sanction.
Learned counsel further contended that even otherwise there is no decision of the State Government on record to show that the State Government has decided not to issue any new permit / licence for liquor factory or liquor shop. A declaration in 10 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] public meeting by the Chief Minister by no stretch of imagination can be construed to be a decision of the State Government. It is submitted that the executive power of the State vests in the Governor under Article 154. The Council of Ministers with the Chief Minister as the head extend aid and advice to the Governor in exercise of the executive power except in exercise of such functions which he is required to do so under the Constitution in his discretion; the collective responsibility of the Government for executive actions under Article 163 of the Constitution of India.
All executive actions of the Government of a State shall be expressed to be taken in the name of the Governor, as provided under Article 166 of the Constitution of India, and it shall be the duty of the Chief Minister to communicate to the Governor of the State of decision of the Council of Ministers relating to administration of the affairs of the State and proposals for legislation etc. under Article 167 of the Constitution of India. Learned senior counsel contended that in view of the aforesaid Constitutional provisions in the Constitution of India neither the announcement of the Chief Minister could be said to be a decision of the Government nor executable by the State machinery under Article 166 of the Constitution of India.
Learned senior counsel further contended that the reason / justification as contained in the impugned communication dated 10/7/2015 is contrary to existing Rules of 2002 and cannot be 11 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] sustained in the eyes of law.
Learned counsel further contended that respondent no.2 is the authority competent under Rule 4 (3) of the Rules of 2002 to grant B-3 licence. Respondent no.2 has been playing fast and loose with his authority in the matter of grant of B-3 licence to the petitioner, as is well evident from the fact that on 3/2/2014 he writes to the Principal Secretary, Commercial Tax Department, that as the petitioner has already completed the construction of brewery and installation of machineries and equipments for manufacture of beer and recommended for grant of licence and conceded that otherwise it shall be difficult to defend the Government if the refusal to grant the licence is challenged in the Court and by subsequent communication dated 23/2/2015 respondent no.2 seeks guidance from the same authority, though he was fully competent to grant B-3 licence under the Rules of 2002. Therefore, the justification given in the impugned communication by respondent no.2 for refusal of B-3 licence in fact and in effect tantamount to refusal to exercise jurisdiction under Rule 4 (3) of the Rules of 2002 for reasons dehors the record and in fact and in effect upon extraneous considerations, hence, the impugned communication dated 10/7/2015 cannot be sustained in the eyes of law.
Learned senior counsel for the petitioner in support of his contentions relied upon following judgments:- 12 Writ Petition No.5216/2015
[M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others]
1. State of M.P. and others vs. M/s Swami Traders, 2001 (4) MPLJ 69.
2. State of Bihar and others vs. Kalyanpur Cement Limited, (2010) 3 SCC 274.
3. Doiwala Sehkari Shram Samvida Samiti Ltd. vs. State of Uttaranchal and others, (2007) 11 SCC 641.
4. Govind Prasad vs. R.G. Prasad and others, (1994) 1 SCC 437.
5. Per contra, learned Government Advocate contended that law is well settled that there is no fundamental right of a citizen to carry on trade or to do business in liquor or intoxicants. The State, under its regulatory powers, has a right to prohibit absolutely every form of activity in relation to intoxicants, i.e. its manufacturing, storage, export, import, sale and possession. Such rights are exclusively vested in State Government and, therefore, it is open to the State Government either to prohibit exclusively or regulate such activities while parting with its exclusive privilege dealing with the intoxicants imposing limitations and restrictions on the trade or business under Article 19 (6) of the Constitution of India or otherwise. Learned counsel further submitted that mere grant of LOI by itself does not bestow upon a prerogative on petitioner for grant of licence. The same can be revoked or withdrawn in public interest as contemplated under Rule 3 (10) of the Rules of 2002. Learned counsel further submitted that the 13 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] State executive is bound to follow the declarations / announcements made by the Chief Minister in public in discharge of their executive powers, as the Chief Minister is the head of the Government. It is further submitted that the announcement that no permit / licence for new liquor factory or shop shall be granted made by the Chief Minister is in public interest and as a measure of public policy, therefore, the same is not liable to be judicially reviewed under Article 226 of the Constitution of India.
Accordingly, it is prayed that the Writ Petition deserves to be dismissed.
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 14 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 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 15 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 16 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 decision- maker 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 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 17 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 18 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 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) 2 SCC 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 19 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 20 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] investing about Rs.12.11 crores in construction of brewery and 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 21 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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, 22 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] AIR 1972 SC 1863, The State of Orissa and others v. Harinarayan Jaiswal and others, AIR 1972 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, 23 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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) 24 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 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?25 Writ Petition No.5216/2015
[M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others]
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 26 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 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. 27 Writ Petition No.5216/2015
[M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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. 28 Writ Petition No.5216/2015
[M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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 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:-
29 Writ Petition No.5216/2015
[M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] "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 30 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] 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.
(Rohit Arya) Judge Arun* 31 Writ Petition No.5216/2015 [M/s. Himalayan Ales Pvt. Ltd. vs. State of M.P. and others] HIGH COURT OF MADHYA PRADESH, JABALPUR, BENCH AT GWALIOR WRIT PETITION NO.5216/2015 .........Petitioner: M/s. Himalayan Ales Pvt. Ltd.
Versus .......Respondents : State of M.P. and others ORDER post for 16/09/2015 (Rohit Arya) Judge 16/09/2015