Karnataka High Court
State Of Karnataka, By Its Principal ... vs Hotel Bangalore International ... on 31 January, 2005
Equivalent citations: ILR2005KAR1397, 2005(2)KARLJ503
Author: H.N. Nagamohan Das
Bench: H.L. Dattu, H.N. Nagamohan Das
JUDGMENT H.N. Nagamohan Das, J.
1. The Government of Karnataka vide notification dated 1.4.2003 bearing No. FD 20 PES 2002 amended the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules 1968 (hereinafter referred to as 'Rules') by inserting Sub-rule (2) of Rule 14,14A and 14B and amendment of Form CL-A and insertion of new Forum ACT-CL-1. The subject matter in this lis is insertion of Sub-Rule(2) of Rule 14 of the Rules, under which the CL-2 and CL-9 licensees shall lift for sale, a minimum quantity of liquor per month. The CL-2 and CL-9 licensees being aggrieved by this impugned notification questioned the same in W.P. Nos. 20614-20624/2003 and connected matters. The learned Single Judge of this Court by a common Order dated 18.7.2003 allowed the Writ Petitions and quashed the impugned notification and remitted the matter for reconsideration. Hence, these appeals by the Government of Karnataka (referred to as 'State').
2. Sri B. Anand, learned Government Advocate for appellants contends that the State has followed the procedure prescribed under law and considered the objections filed by the respondents. It is submitted that no standard can be prescribed in the matter of this kind and when it is shown that appropriate authority had considered the objections. Karnataka Government (Transaction of Business) Rules 1977 contemplates only consultation of Law Department and the same is only directory and not mandatory. Trade or business in liquor is not a fundamental right and hence Article 19(g) is unavailing in the case of liquor business. When the respondents have no fundamental right to trade or business in liquor, the non-inclusion of other categories of licencees is neither discriminatory nor violative of Article 14 of the Constitution of India. It is submitted that right to prohibit absolutely would include the narrower right to permit dealing in intoxicant/liquors on such terms as the State deems expedient. Therefore, a writ Court under Article 226 is not concerned with the merits of the decisions which are matters of policy and wisdom of the State.
3. Sri G K Bhat, learned Counsel for the respondents contend that the impugned notification is issued by the State without following the procedure and have not considered the objections filed by the licencees. It is contended that the State shall consult Department of law while amending a Rule as per Karnataka Government (Transaction of Business) Rules 1977 and having not done the same, the impugned notification is bad in law. As per the amended Rule, the respondents who are CL-2 and CL-9 licencees are alone liable to lift a minimum quantity of liquor per month and the other licencees under the Rules who are similarly placed are excluded and as such the same is discriminatory and in violation of Article 14 of the Constitution. Further, under the amended Rule, if the respondents fail to lift the minimum quantity of liquor per month then their licences will be cancelled by way of punitive action and as such the same is opposed to their right to carry on business and violative of Article 19(g) of the Constitution. By virtue of impugned notification, the respondents are forced to lift a minimum quantity of liquor per month and in turn it only makes the public to drink the liquor compulsorily and therefore the same is opposed to the intent and object and mandate of Article 47 of the Constitution. The respondents justify the Order of learned Single Judge.
4. We have heard the arguments on both the sides and carefully perused the entire writ appeal papers and the records of the Government.
5. One of the basic features of our Constitution is decentralisation of powers. The Constitution Bench of Supreme Court in Khoday Distilleries Ltd (1995 AIR SCW 313) held that Article 47 is one of the directive principles which is fundamental in the governance of the country. The State has therefore the power to completely prohibit the manufacture, sale, possession, distribution and consumption of potable liquor as a beverage. Again the Apex Court in Har Shankar settled that the State has the power to prohibit including the power to create a monopoly either in itself or in an agency created by it for the manufacture, possession, sale and distribution of liquor as a beverage. Right from Har Shankar , Khoday Distilleries Limited (AIR 1995 SCW 313) and Mcdowell and Co. , the Apex Court held that a citizen has no fundamental right to trade in intoxicating liquors.
6. Trading in Indian made liquor in the State of Karnataka is governed under the provisions of Karnataka Excise Act, 1965 and the Rules framed thereunder. Under the Rules various kinds of licences are granted and they are CL-1 (wholesale), CL-2 (Retail shop licence), CL-4 (licence to clubs), CL-5 (Occasional licences), CL-6 (Special licences), CL-7 (Hotel and boarding house licence), CL-8 (Military canteen licence), CL-9 (Refreshment room and bar licence), CL-11 (Distributor licence). Section 71 of the Act, empowers the State to frame the Rules and to amend the Rules, to carry out the purpose of the Act.
7. Keeping in view the law governing the field and the dictum of the Apex Court, the controversy in the present case is to be examined. The respondents are CL-2 and Cl-9 licencees . These categories of licencees come in contact with public at large and offer liquor for sale. It is found that over the years, these licencees transacted a meagre business which is insufficient even to meet the prescribed licence fee. This clearly indicates that there was purchase and sale of liquor clandestinely leading to evasion of huge amounts of excise duty. With an object to plug these loopholes and in the interest of State revenue and public interest, the excise Department collected details from various Districts and after thorough examination, notified the draft Rules on 21.6.2002, proposing to amend the Rules by insertion of Sub-rule (2) Rule 14, 14A and 14B of the Rules.
8. The respondents Association and some of the respondents and others filed their objections to the draft Rules. We carefully examined the entire Government records in respect of the matter in issue. It is found from the records that the sum and substance of all the objections to the draft Rules are listed and discussed at various levels and considered. The finding of the learned Single Judge that State has not considered the objections of the respondents solely on the basis of note No. 59 and note No. 63 is not correct. A careful examination of the entire Government file placed before us leaves no doubt in our mind that the State has considered the objections. The record discloses that due consideration is given to the objections filed by the respondents and others before arriving at the decision. The omission to record reasons to reject the objections of respondents, is neither opposed to principle of natural justice nor can it be said that there is non-consideration of objections. The notings in the entire record bridges the link between the object, objections and the decision taken by the State.
9. The power to amend the Rules is specified in Section 71 of the Act, which reads' as under;
"The State Government may, by notification and after previous publication, make Rules to carry out the purpose of the Act'.
In the instant case, State published draft Rules on 21.6.2002 and invited objections. Accordingly, the respondents and others filed objections. The State after due consideration of objections issued the final notification on 1.4.2003. Section 71(1) of the Act, do not contemplate for a personal hearing to the respondents. Under the circumstances, it cannot be said that State has not followed the procedure, There is no substance in the contention of the respondents that the State has not consulted the law Department as required under Rule 62(l)(a) of the Karnataka Government (Transaction of Business) Rules, 1977. Firstly, these Business Rules contemplates a consultation with the law Department on construction of Statutes, Acts and Regulations and the Statutory Rules and Orders or Notifications. In the instant case, construction of a Statute or Rules are not involved. Secondly, these Rules contemplate consultation and the same is in the nature of directory and not mandatory. Therefore, it cannot be said that the State has not followed the procedure.
10. This takes us to the next contention of respondents that under the impugned notification, by insertion of Sub-rule (2) of Rule 14 of the Rules, CL-2 and CL-9 licencees are required to lift a minimum quantity of liquor per month failing which their licences are liable to be cancelled and as such the same is violative of Article 19(g) of the Constitution, the right to carry on business. Right from the decisions in HAR SHANKAR AND ORS. v. THE DEPUTY EXCISE AND TAXATION COMMISSIONER AND ORS, ; KHODAY DISTILLERS v. STATE OF KARNATAKA, AIR 1995 SCW 313; and STATE OF ANDHRA PRADESH AND ORS. v. MC DOWELL & CO. AND ORS, ., the Apex Court continuously and consistently has held that a citizen has no fundamental right to trade in intoxicating liquors. The Apex Court in Me Dowell & Co. observed in para 41. The contention that a citizen of this country has a fundamental right to trade in intoxicating liquors refuses to die, in spite of the recent Constitution Bench decision in Khoday Distilleries.
(emphasis supplied) Nearly a decade after, again the same question whether a citizen of this country has a fundamental right to trade in intoxicating liquor is urged before us. Though this right is buried in Mc dowell & Co. by the Supreme Court, the same is refusing to decay. We reject the contention of respondents that the impugned notification is violative of Article 19(g) of the Constitution.
11. Sri O.K. Bhat, learned Counsel for respondents contends that under the Rules, various kinds of licences are granted (CL-1, CL-2, CL-4, CL-5, CL-6, CL-7, CL-7A, CL-7B, CL-8, CL-9, and CL-11). All these licencees are dealers engaged in the business of sale of liquors. Under the impugned notification, only CL-2 and CL-9 licencees are referred and others are excluded and as such the same is discriminatory and opposed to Article 14(g) of the Constitution. The Apex Court in SAKHAWANT ALI v. STATE OF ORISSA, it is held as under:-
"Legislation enacted for the achievement of a particular object or purpose need not be all embracing. It is for the Legislature to determine what categories it would embrace within the scope of
4. legislation and merely because certain categories would embrace within the scope of legislation and merely because certain categories which would stand on the same footing as those which are covered by the legislation are left out would not render legislation which has been enacted in any manner discriminatory and violative of the fundamental right guaranteed by Art. 14".
In PANNALAL BANSILAL PATIL v. STATE OF A.P., it is held as under:
"12...... A uniform law, though is highly desirable, enactment thereof in one go perhaps may be counter productive to unity and integrity of the nation. In a democracy governed by Rule of law, gradual progressive change and Order should be brought about. Making law or amendment to a law is a slow process and the legislature attempts to remedy where the need is felt most acute. It would therefore, be inexpedient and incorrect to think that all laws have to be made uniformly applicable to all people in one go. The mischief or defect which is most acute can be remedied by process of law at stages",
12. It is now well settled that Article 14 does not forbid reasonable clarification for the purpose of legislation. In the present case, among the various categories of licencees, it is CL-2 and CL-9 lecencees who come into contact with public at large and offer liquor for sale. According to the information collected by the State, the business transacted by these categories of licencees is so meagre and insufficient even to meet the prescribed licence fee. This clearly indicates that there was purchase and sale of liquor clandestinely leading to evasion of huge amounts of excise duty. In Order to plug these loopholes and in the interest of revenue, the State under the impugned notification referred only CL-2 and CL-9 licencees and excluded the other categories of licencees. This classification by the State can neither be said to be arbitrary nor discriminatory. To achieve the object which is expedient, the State in its wisdom included the CL-2 and CL-9 licencees in the impugned notification. It is clear that the differentiation has a rational relation to the object sought to be achieved by the impugned notification. Therefore, the contention of respondents that the impugned notification is violative of Article 14 of the Constitution is liable to be rejected.
13. With respect, we disagree with the findings of learned Single Judge and we cannot sustain the impugned Judgment in these writ appeals. In the result, we allow these appeals, set-aside the common Order of learned Single Judge dated 18.7.2003 and consequently the Writ Petitions are dismissed with no Order as to costs.