Andhra HC (Pre-Telangana)
Vel White Horse Distellries Pvt. Ltd., ... vs Government Of Andhra Pradesh, Reptd. By ... on 23 April, 2003
Equivalent citations: 2003(4)ALD189
ORDER V.V.S. Rao, J.
1. The first petitioner is a company incorporated under the Companies Act, 1956 and the second petitioner is one of the Directors of the said company. The petitioners challenge the orders of the first respondent in G.O.Ms. No. 552, Revenue (Ex.III) Department, dated 1-7-1997 and consequential distillery licence granted by the second respondent to the fourth respondent as illegal and discriminatory being opposed to law. The petitioner also seeks a declaration that Rule 10-A of the A.P. Distillery Rules, 1970 (hereafter called 'the Rules') as amended by G.O.Ms. No. 373, Revenue (Excise) Department, dated 9-5-1997 as illegal and unconstitutional. Be it noted, the impugned Rule 10-A empowers the Government to exempt any distillery from obtaining letter of intent from the Government, a no objection certificate from municipality or any local body and a no objection certificate from Chief Inspector of Factories as prescribed under Rules 3 and 9 of the Rules. Be it also noted, by the impugned Government Order, G.O.Ms. No. 552, dated 1-7-1997, the Government exempted the third respondent M/s. White Horse Distilleries from obtaining various certificates from various authorities and as a consequence thereof, the second respondent who is the licensing authority under the Rules issued licence No. 27 dated 25-7-1997 to the fourth respondent, who is alleged to be the proprietor of the third respondent. The case of the petitioner in brief is as follows. The third respondent is a proprietary concern which was initially granted a distillery licence in Form D-2 of the Rules to manufacture Indian liquor, Wine, Whisky, Brandy, Zin and Rum. The licence issued on 2-8-1982 was renewed for 1982-83. The fourth respondent could not commence the business and also failed to pay the licence fee of Rs.1,00,000/-. It is alleged that the fourth respondent approached the second petitioner for financial support promising that the latter would be treated as partner. An application was made under Rule 11-A requesting the second respondent for conversion of proprietary concern into partnership firm in the name and style of M/s. Vel White Horse Distilleries Pvt. Ltd., A partnership deed was also entered into on 27-6-1989. Subsequently, the said partnership concern was converted into an incorporated company under the Companies Act, wherein petitioner No. 2 and respondent No. 4 were Directors. The petitioners allege that as per the understanding, the second petitioner cleared the dues to the tune of Rs.1,40,000/- towards sales tax arrears and also paid licence fee for the years 1989-90, 1990-91 and 1991-92 besides paying an amount of Rs.3,75,000/- for renewal. The petitioners also allege that they also paid amount for purchasing raw material like rectified spirit. They also allege that respondent No. 4 has taken steps for transfer of licence in favour of the first petitioner company. For the year 1988-89, the licnece was not renewed as a belated application was made. The same was challenged in the writ petition being W.P. No. 3655 of 1990 and this Court directed to issue licence. The petitioner company paid an amount of Rs.2,00,000/- by obtaining loan from Canara Bank, Tenayampet, Chennai, for the purpose of purchasing rectified spirit. The petitioners made a request to transfer D-2 licence in their favour, in vain. Therefore, a writ petition being W.P. No. 14704 of 1990 was filed seeking a direction to transfer the licence and this Court, by order dated 17-10-1990 in W.P.M.P. No. 18879 of 1990, directed the second respondent to pass appropriate orders for renewal of licence. The application for renewal of licence was rejected on 17-10-1990.
2. The unit became defunct in 1990. The petitioner company filed W.P. No. 17210 of 1990 seeking a direction to divert the rectified spirit to any other licence holder and to transfer the proceeds thereof to Canara Bank from which the loan was obtained. The petitioner company filed another writ petition being W.P. No. 2180 of 1991 to refund the licence fee for four years from 1988 to 1991. When the matter was pending thus, the second respondent by order dated 27-11-1991, issued orders renewing the licence in favour of the fourth respondent for 1988-89 to 1991-92, subject to the outcome of W.P. No. 3655 of 1990 filed questioning the non-renewal. The renewal of licence was issued in favour of fourth respondent without any notice to the petitioner company. The petitioner filed W.P. No. 16703 of 1991, which was dismissed. In writ appeal being W.A. No. 831 of 1992, a Division Bench of this Court directed to maintain status quo. In the meanwhile, the fourth respondent approached the second respondent seeking renewal of licence for the year 1993-94 and the same was rejected.
3. When the second respondent and the fourth respondent were fighting with the Government and the Commissioner as well as between themselves, a revision petition was filed by the fourth respondent against the order of the Commissioner refusing to renew the licence for the year 1990-91, the Government, by orders in G.O.Rt. No. 1367, Revenue (Excise-III) Department, dated 8-9-1994, having noticed various suits between the parties as well as writ petitions pending before this Court, disposed of the revision petition filed by the fourth respondent holding that "it will be appropriate that the revision petition is entertained after the civil disputes are decided by the Courts at various places."
4. In the meanwhile, Prohibition was imposed in the State and by reason of the A.P. Prohibition Act, 1995, sale, manufacture and consumption of any intoxicant substance except toddy was prohibited and made a cognizable offence. The prohibition was lifted some time in 1997. The third respondent appears to have made an application dated 13-5-1997 seeking renewal of licence and also exemption under Rule 10-A of the Rules. The Government accordingly issued G.O.Ms. No. 552, dated 1-7-1997. As a consequence thereof, the second respondent issued D-2 licence dated 25-7-1997. The record also discloses that aggrieved by the renewal of D-2 licence in favour of the third respondent represented by its Proprietor, fourth respondent, the petitioner filed a revision petition under Section 64 of the A.P. Excise Act, 1968 ('the Excise Act') and the same is pending.
5. An elaborate counter affidavit on behalf of respondents 3 and 4 was filed. It is not necessary to refer to the same in detail. The writ petition is opposed on the ground that the petitioners have no locus standi to question the exemption order in favour respondents 3 and 4. All the averments made in the affidavit accompanying the writ petition are denied. It is, however, admitted that the fourth respondent took the second petitioner as partner and later incorporated the firm in the name and style of M/s. Vel White Horse Distilleries Pvt. Ltd., under the Companies Act and that the second petitioner advanced moneys for payment of licence fee. It is also admitted that the business of the third respondent was taken over by the new company some time in October 1989. However, D-2 licence which was initially issued in favour of the fourth respondent continued in his name and it was not transferred as required under Rule 5(1)(a) of the Rules.
6. The fourth respondent who filed counter affidavit further asserts that the second petitioner disregarded his interest and started a scheme to knock away the distillery unit. The second petitioner obtained his signature and applied to the second respondent to grant renewal of licence for the year 1990-91 in the name of the new company on which no orders were passed. When the application for transfer was rejected, the second petitioner filed writ petition obtaining the signature of the fourth respondent on the Vakalat. Later, the fourth respondent requested the counsel for M/s. Vel White Horse Distilleries to take steps to delete his name in the array of the parties and also addressed a letter to the Registrar of this Court to that effect. Be that as it is, the writ petition was dismissed. When disputes started with regard to payment of money, the second petitioner issued a legal notice for which the fourth respondent issued a suitable reply. Necessary steps for dissolution of the partnership firm were also taken by the fourth respondent by publishing the same in the newspapers and the Gazette. Thereafter, the fourth respondent alleges that he retired as Director of the company duly informing the Registrar of Companies in Form 32, which was registered by the said authority. Therefore, he has nothing to do with the first petitioner company and the second petitioner has nothing to do with the third respondent proprietary concern. The second petitioner has no right much less enforceable right to seek invalidation of the impugned Government Order and the consequential order of respondents 1 and 2.
7. The fourth respondent filed an additional counter affidavit making reference to various suits filed by the second petitioner against the him and others in various Courts at Gudur, Sullurpet in Nellore District and at Gunttur and Hyderabad. A reference is also made to the writ petition filed by the petitioners including W.P. No. 8220 of 1998 filed by the petitioners seeking a direction not to renew D-2 licence for the year 1998-99. The same was dismissed on the ground that it has become infructuous. The additional counter affidavit also refers to a revision petition filed by the petitioners before the Government under Section 64 of the Excise Act. It is further stated that pursuant to the orders of renewal, the petitioner paid the licence fee and manufacturing Indian made liquor as per the conditions of licence and that at no point of time the licence was transferred in favour of the first petitioner and that at all times it is only the third respondent who is paying various levies, taxes and other fees to the authorities.
8. A counter affidavit has been filed on behalf of respondents 1 and 2. It is stated that licence in Form D-2 was issued to the fourth respondent on 2-8-1982, being the holder of letter of intent. The licence was renewed up to 1987-88. The fourth respondent made an application dated 24-8-1989 requesting to include the second petitioner as partner of the firm and to renew the licence in the name of M/s. Vel White Horse Distilleries (P) Ltd., The same was rejected by the Commissioner vide proceedings dated 17-11-1990, as, according to Rule 11-A of the Rules, no licensee can include or exclude a partner without prior approval of the Commissioner. The licence was granted in favour of fourth respondent only. It is also stated that after relaxation of Prohibition in the State, Government decided to issue fresh licences to the distilleries and breweries which had already a licence prior to 16-1-1995 before prohibition was imposed. The Government also decided to grant exemption to the distilleries and breweries from obtaining letter of intent from the Government. The fourth respondent was granted exemption from obtaining letter of intent vide G.O.Ms. No. 552, dated 1-7-1997. Thereafter, a fresh D-2 licence was issued in favour of fourth respondent after fulfilling the conditions stipulated in the Rules.
9. Learned Senior Counsel appearing for the petitioner, Sri M.R.K. Choudary, attacks Rule 10-A of the Rules as conferring uncanalised power and on the ground of arbitrariness. The learned Senior Counsel attacks the impugned licence granted by the second respondent on the ground that the same is passed without proper application of mind. Alternative, it is submitted that even if Rule 10-A is held to be intra vires, the exercise of power by the first respondent in issuing the impugned Government Order of exemption is not in accordance with the said Rule.
10. The matter has been coming up for final hearing since long. On 16-4-1998, this Court while directing to post W.P.M.P. No. 26489 of 1997 along with the main writ petition, directed the matter to be listed for final hearing subject to part-heard on 20-4-1998. It was listed for final hearing. On 28-11-2001 and thereafter on six occasions, the matter was adjourned. When the matter was listed before me on 8-1-2003, it was heard in part and in the meanwhile, the Court closed for Sankranthi vacation. Thereafter, on 21-2-2003, the matter was again listed and the learned counsel for respondents 3 and 4 was absent. The matter was heard and directed to be listed under the caption 'for judgment' on 28-2-2003. On 28-2-2003 also, the learned counsel for respondents 3 and 4 was absent. Therefore, arguments of the learned counsel for the petitioners were heard and the matter was reserved for consideration.
11. Question of validity of Rule 10-A of the Rules
12. The challenge to Rule 10-A of the Rules is made only on the ground that the same confers uncanalised and unguided power on the Government and that the same is arbitrary. It is now well settled that the subordinate legislation made by the Executive can be questioned as ultra vires or that it is arbitrary. If the power is conferred on the authority by subordinate legislation to do or not to do certain things without sufficient guidelines, the same undoubtedly must be treated as ultra vires, for the Legislature cannot delegate its essential powers. The Rule can be challenged on the ground of arbitrariness, not in the sense that it is irrational, but in the sense that it is unreasonable violating Article 14 of the Constitution of India. In support of this, a reference may be made to Indian Express Newspapers (Bombay) P. Ltd. v. Union of India, and Maharashtra S.B.O.S. & H.S. Education v. Paritosh, .
13. In Indian Express Newspapers (Bombay) P. Ltd. v. Union of India (supra), it was observed:
14. A piece of subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a competent Legislature. Subordinate legislation may be questioned on any of the grounds on which plenary legislation is questioned. In addition it may also be questioned on the ground that it does not conform to the statute under which it is made. It may further be questioned on the ground that it is contrary to some other statute. That is because subordinate legislation must yield to plenary legislation. It may also be questioned on the ground that it is unreasonable, unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary. In England, the Judges would say "Parliament never intended authority to make such rules. They are unreasonable and ultra vires".
15. In Maharashtra S.B.O.S. & H.S. Education v. Paritosh (supra), it was held:
................But any drawbacks in the policy incorporated in a rule or regulation will not render it ultra vires and the Court cannot strike it down on the ground that in its opinion, it is not a wise or prudent policy, but is even a foolish one, and that it will not really serve to effectuate the purposes of the Act. The legislature and its delegate are the sole repositories of the power to decide what policy should be pursued in relation to matters covered by the Act and there is no scope for interference by the Court unless the particular provision impugned before it can be said to suffer from any legal infirmity, in the sense of its being wholly beyond the scope of the regulation-making power or its being inconsistent with any of the provisions of the parent enactment or in violation of any of the limitations imposed by the Constitution.
16. The impugned Rule reads as under.
10-A. Where the licence has not been renewed either due to any change in the policy of the Government and subject to the new policy adopted by the Government on a subsequent date, and further subject to such inspection or verification as may be taken up by the Commissioner to satisfy himself that the manufacturing facilities on ground are not modified in any manner in deviation of the provisions of the previous licence, the said previous licence if he applies, may be issued with a fresh licence and Government may, by issue of Notification exempt the applicant from obtaining Letter of Intent from Government, No Objection Certificate from Municipality or other Local Body, and No Objection Certificate from the Chief Inspector of Factories as prescribed under Rules 3 and 9. However, the liability of the licensee including payment of any arrears in the licence fee or any kind of dues to Government, if any, payable and subsisting prior to the issue of fresh licence shall remain unaffected; and shall stand payable to the Government.
17. The analysis of the Rule would show that the same is attracted only when a distillery licence granted to a person is not renewed in the subsequent year due to change in the policy of the Government and subject to new policy to licensed distilleries. In such an event, if the Commissioner of Excise satisfies himself that the licensee has not modified the manufacturing facilities or deviated from the conditions of previous licence may submit a report to the Government to that effect, and the Government can exempt the applicant i.e., a person who was already holding licence and whose licence was not renewed, from producing a letter of intent from the Government, no objection certificates from municipality or local body and Chief Inspector of Factories. Be it also noted that the procedure for obtaining a distillery licence as contained in Rules 3 to 10 of the Rules requires every applicant at the time of applying for licence to produce no objection certificate to the authorities mentioned hereinabove and he can only apply for a distillery licence only after the Government gives a letter of intent permitting establishment of a distillery. Further, under Rule 10(2) of the Rules, a licence granted by the Commissioner shall be valid for a period of one year or for a period as fixed by the Commissioner and as per sub-rule (3) of Rule 10, the licence can be renewed for a period of one year at a time or for such period as the Commissioner may direct.
18. The Rule is silent as to whether a licensee is required to produce letter of intent and no objection certificates as required under Rules 3 to 9 every time an application is made for renewal of distillery licence. But it is arguable that in the event of a distillery unit becoming defunct and no licence is granted to manufacture IML, and a licensee comes up with an application for renewal after a long gap of time, it might be possible to interpret the rules to the effect the same procedure contemplated under Rules 3 to 10 has to be gone through by the applicant even if no distillery unit was established.
19. It is settled law by reason of the decisions of the Supreme Court in State of Bombay v. Balsara, AIR 1951 SC 318, Madras City Wine Merchants Association v. State of Tamil Nadu, and Khoday Distilleries Ltd. v. State of Karnataka, and also a decision of a Full Bench of this Court in M/s. Kanaka Durga Wines, Visakhapatnam v. Govt. of A.P., (FB) that it is always competent for the State Legislature to enact a law prohibiting sale, consumption and manufacture of liquor. The right to trade in obnoxious substances and intoxicants being res extra commercium, no fundamental right can be claimed by any person. What would happen to a distillery licensee whose activities are put to an abrupt end by reason of a State law prohibiting manufacture? Such licensee has to stop all manufacturing activities and his licence as the licence stands withdrawn under Section 32 of the Excise Act. In case the State or the Government reverses the policy of prohibition and again permits sale, consumption and manufacture of IML, whether a licensee whose activities came to an abrupt end by reason of the State law imposing prohibition, has to apply for a fresh licence or apply for renewal of licence and whether such licensee has to obtain a letter of intent and no objection certificates from all officials? The Government made the Distillery Rules in exercise of their powers under Section 72 of the Excise Act. In exercise of the same power, the Government inserted Rule 10-A in the Rules by amending the same by notification vide G.O.Ms. No. 373, Revenue (Excise-III) Department, dated 9-5-1997. The Government has ample power to insert a rule granting power to exempt the applicant for renewal of licence from obtaining letter of intent and no objection certificates.
20. The question of ultra vires and the question of the Rule being bad for conferring uncanalised power can only be considered by reference to the relevant provisions of the Excise Act and the Rules.
21. The Excise Act is a consolidated and amending law relating to production, manufacture, possession, transport, purchase and sale of intoxicating liquor and drugs and levy of duties, excise etc. on alcoholic liquors for human consumption. Chapter IV of the Act deals with manufacture, possession and sale of intoxicating liquor. The activities of manufacturing, possession and sale require a licence granted in accordance with Sections 13, 14 and 15 read with the Rules. Section 16 deals with establishment of private distilleries and is to the effect that the Commissioner, inter alia, with the previous sanction of the Government of India can grant licence on such condition as the Government may impose on the construction and working of a distillery or brewery and licence to a warehouse where intoxicant substances are kept. Section 17 of the Act further provides that subject to the provisions of Section 28, the Government may impose conditions while granting licence for manufacturing liquor or any other intoxicant substance. Section 28 which appears in Chapter VI which deals with licence and permit, empowers the licensing authority to impose conditions while granting licence including a condition that the licensee shall bear the expenses of the Prohibition & Excise Officer posted at the distillery/brewery. The relevant provisions of the Act do not in any way specify the conditions to be imposed by the Government or the licensing authority on any licensee including a distillery licensee. The same is left to the rule making authority to make subordinate legislation. Under Section 72 of the Act, the A.P. Distilleries Rules have been promulgated in exercise of the said power and provides various conditions as noticed hereinabove.
22. The parent Act is silent as to the conditions to be imposed or conditions precedent for granting a distillery licence. The Rules provide for the same. When it is left to the rule making authority and the authority itself provided that a licensee should obtain no objection certificates from various authorities and letter of intent from the Government, it is always permissible for the rule making authority not to insist upon such conditions in respect of a class of distilleries, provided such classification answers the twin test of classification namely, rationality test and nexus test. Further, the submission of the learned Senior Counsel that Rule 10-A of the Rules confers arbitrary power without providing any guidelines, is without any substance. I have referred to the various provisions of the Act and the Rules. There are sufficient guidelines prescribed therein. It is well settled that the delegation cannot be said to be excessive or a provision cannot be invalidated on the ground that the same confers uncanalised power if the guidelines can be gathered from the preamble, the object and reasons and the provisions of the Act itself.
23. In Consumer Action Group v. State of Tamil Nadu, 2000 AIRSCW 3357, the provisions of Section 113 of the Tamil Nadu Town and Country Planning Act, 1972 was challenged as being ultra vires Article 14 of the Constitution of India. It was contended that the said provision empowering the Government to grant exemption from the provisions of the said Act confers uncanalised and excessive power. The Supreme Court after referring to various earlier decisions in The State of Bombay v. F.N. Balsara, AIR 1951 SC 318, Harishnkar Bagla v. The State of Madhya Pradesh, , Sardar Inder Singh v. The State of Rajasthan, , Kunnathat Thathunni Moopil Nair v. The State of Kerala, , P.J. Irani v. The State of Madras, and Registrar of Co-operative Societies Trivandrum v. K. Kunhambu, held that if the guidelines can be gathered from the provisions of the Act as well as preamble and objects and reasons the rule cannot be invalidated on the ground that it confers uncanalised power. It is apposite to excerpt the following.
24. The catena of decisions referred to above concludes unwaveringly in spite of very wide power being conferred on delegatee that such a section would still not be ultra vires, if guideline could be gathered from the Preamble, Object and Reasons and other provisions of the Acts and Rules. In testing validity of such provision, the Courts have to discover, whether there is any legislative policy purpose of the statute or indication of any clear will through its various provisions, if there be any, then this by itself would be a guiding factor to be exercised by the delegatee. In other words, then it cannot be held that such a power is unbridled or uncanalised. The exercise of power of such delegatee is controlled through such policy.
25. The impugned rule deals with the Distillery whose licence could not be renewed due to change of policy of the Government. In this case, imposition of prohibition enables the Government to exempt them from applying to letter of intent and producing no objection certificates. In effect, while granting licence to such a distillery whose licence could not be renewed due to change in policy, the case was treated as a case of renewal and not grant of fresh licence. A person who applies for a fresh licence and a person who applies for renewal of licence for obvious reasons are two different classes of persons and there is discernible criteria. If the rule empowers the authority to exempt the latter class of person or distillery the same has rationale nexus with the object sought to be achieved namely to mitigate the hardship meted out to a distillery whose licence could not be renewed. Therefore, I am of the considered view that Rule 10-A of the Rules is not ultra vires Article 14 of the Constitution and it is not unreasonable or arbitrary. The question of validity of Rule 10-A is answered accordingly.
Question of validity of the impugned order
26. In the impugned order, the first respondent, purporting to exercise their power under Rule 10-a of the Rules exempted the third respondent from obtaining letter of intent and no objection certificates from the Chief Inspector of Factories, municipality or local body as prescribed under Rules 3 and 9 of the Rules. In the counter affidavit filed on behalf of respondents 1 and 2, it is stated that, "after relaxation of Prohibition in the State, Government decided to issue fresh licences to all the distilleries and breweries which already had a licence prior to 16-1-1995 before the prohibition was imposed and that the Government decided to grant exemption to the distilleries and breweries on application from obtaining letter of intent from the Government". (underlining is mine). Therefore, the Government amended the Rules and inserted Rule 10-A to enable the competent authority to issue fresh licence to existing distilleries exempting the applicant from obtaining letter of intent and other no objection certificates.
27. Learned Senior Counsel contends that Rule 10-A, insofar as the third respondent is concerned, has no application and that the Government acted in an illegal manner in extending the benefit of Rule 10-A in passing the impugned order. He placed reliance on various rules.
28. It is now well settled that as enunciated by Lord Diplock in Council of Civil Services Union v. Minister for Civil Services, (1985) A.C. 374, illegality, irrationality and impropriety form the trinity of grounds of judicial review. Illegality has been explained by De Smith, Wolf and Jowell in their book "Principles of Judicial Review" (1990 Sweet & Maxwell, London) explained the doctrine of illegality as under.
"An administrative decision is flawed if it is illegal. A decision is illegal if:
(1) it contravenes or exceeds the terms of the power which authorises the making of the decision; or (2) it pursues an objective other than that for which the power to make the decision was conferred.
The task for the courts in evaluating whether a decision is illegal is essentially one of construing the content and scope of the instrument conferring the power in order to determine whether the decision falls within its "four corners". In so doing the courts enforce the rule of law, requiring administrative bodies to act within the bounds of the powers they have been given."
29. The Supreme Court of India in Tata Cellular v. Union of India, , while quoting Lord Diplock with approval explained the doctrine of illegality as to mean that decision-maker must understand correctly the law that regulates his decision making power and to give effect to it. The doctrine of illegality in Administrative Law is concerned with the question whether the decision-maker has exceeded his power, committed an error of law, committed breach of rules of natural justice or whether the decision-maker abused his powers. The decision-maker must consider relevant facts and factors for arriving at a decision and apply the correct law to the facts. If the decision-maker arrives at a finding which is based on irrelevant considerations as well as relevant considerations, the decision must suffer invalidation as it could not be possible as to which of the considerations weighed with the decision-maker. Impropriety was described by Lord Diplock as not failure to observe rule of natural justice or failure to act in procedural unfairness but also including failure of administrator to observe procedural rules that are expressly laid down in the statutory instrument by which the jurisdiction is conferred. The grounds of impropriety for judicial review is mainly concerned not with the exercise of jurisdiction but the manner of exercise of jurisdiction.
30. The doctrine of irrationality is, it is now settled principle of Wednesbury unreasonableness. In Om kumar v. Union of India, (2001) 2 SCC 386, the Supreme Court explained irrationality thus:
.........where administrative action is challenged under Article 14 as being discriminatory , equals are treated unequally or unequals are treated equally, the question is for the Constitutional Courts as primary reviewing courts to consider correctness of the level of discrimination applied and whether it is excessive and whether it has a nexus with the objective intended to be achieved by the administrator. .......But where an administrative action is challenged as "arbitrary" under Article 14......the question will be whether the administrative order is "rational" or "reasonable" and the test then is the Wednesbury test. The courts would then be confined only to a secondary role and will only have to see whether the administrator has done well in his primary role, whether he has acted illegally or has omitted relevant factors from consideration or has taken irrelevant factors into consideration or whether his view is one which no reasonable person could have taken. If his action does not satisfy these rules, it is to be treated as arbitrary.
31. Whether the impugned order suffers from illegality? This has to be examined keeping in view the principles of illegality summarized hereinabove as well as in the context of the power of respondents 1 and 2 in granting licence. As seen from the provisions of the Act, no person can manufacture intoxicating liquor without a licence issued under Sections 17 and 28 read with the relevant rules. Rule 3 of the Distillery Rules requires an application to be made in Form D-1 addressed to the Commissioner within six months from the date of sanction of the Government under Rule 9. Rule 9 contains the procedure to be followed by an applicant for getting sanction of the Government before making an application in Form D-1. Rule 9(2)(c) of the Rules empowers the Government to issue a letter of intent in Form D-9 after satisfying themselves with the proposed scheme submitted by the applicant. The letter of intent as per Form D-1 is valid for a period of six months, but as per Rule 9(2)(c), the letter of intent shall be valid initially for a period of two years from the date of issue. The applicant is required to pay security deposit before obtaining letter of intent. It is only after getting letter of intent/sanction from the Government that an applicant has to make application in Form D-1 to the Commissioner for grant of licence. The application in Form D-1 for licence has to accompany {See Rule 3(2)}, inter alia, with a no objection certificate from the Chief Inspector of Factories under the Factories Act, 1948 authorising the municipality or local body that there is objection on sanitary grounds to the construction of distillery or to the distillation of spirit on the site and the buildings shown in the accompanying plans. After considering the letter of intent and the application along with enclosures, the Commissioner may grant licence to the applicant under Rule 5(1) after satisfying that the applicant fulfilled the conditions specified in Rule 4 i.e., giving security deposit. As per Rule 4, the Commissioner is required to satisfy that the proposed building, plant and apparatus to be used in connection with distillation and storage and issue of spirit are built in accordance with the regulations and that due precaution has been taken against fire. As already noticed, the licence issued is valid for a period of one year and it has to be renewed under Rule 10(3) for a period of one year at a time. Thus, the conspectus of various rules would show that these rules are intended to be mandatory as the subordinate legislation has shown anxiety to take all precautions against misuse of licence and also with reference to safety of running the industry/unit.
32. Insofar as the third respondent unit is concerned, the following facts are not denied. The fourth respondent, as proprietor of the third respondent, obtained a letter of intent during the year 1974-75 for establishing a distillery unit. Whatever be the reason, the licence was granted only on2-8-1982. In the usual course, the licence was renewed up to 1997-98. When the Commissioner refused to renew the licence subsequently, a writ petition was filed in this Court and by reason of the orders of this court the licence was renewed up to 1988-89 and thereafter it was not renewed. The unit almost became defunct. Having regard to the counter averments that Rule 10-A was introduced to mitigate the hardship of distilleries who had licence prior to imposition of prohibition on 16-1-1995, it must be held that the third respondent unit which did not have a licence in 1990 is not one such distillery in relation to which exemption was mooted under Rule 10-A. Licence No. 27, dated 25-7-1997 issued by the second respondent pursuant to G.O.Ms. No. 552, dated 1-7-1997 may be extracted.
FORM D-2 (See Rule 5) DISTILLERY LICENCE (FOR SPIRITS AND INDIAN LIQUOR) Licence No. 27 Dated: 25-7-1997
I, Sri A.K. Goel, Commissioner of Excise under the provisions of Andhra Pradesh Distilleries Rules, 1970 and in pursuance of the Letter of Intent No. 191/E/81-1, R/o G.O.Ms. No. 552, Rev. (Ex.III) Dept., dated 1-7-1997 issued by the Government of Andhra Pradesh and on payment of annual fee of Rs.4,00,000/- licences you Sri K. Subbaramaiah, Prop. The White Horse Distilleries, hereinafter called the "licensee" to manufacture the following varieties and quantities of liquors from 25-7-1997 to 31-3-1998 subject to the conditions laid down by the Government.
The licence as seen above, would show that a fresh licence was issued to the third respondent and not the proceedings renewing the licence. This would show that even the second respondent treated the unit of the third respondent as a fresh unit. Having regard to the provisions of Rules 3 and 9 of the Rules, it must be held that the grant of licence to the third respondent duly exempting under Rule 10-A from complying with the mandatory conditions is ex facie illegal. As already noticed by me: indeed, it is the case in the counter affidavit; Rule 10-A is intended only for those distillery units who had a licence immediately before 16-1-1995 and whose licence could not be renewed due to prohibition. The unit of the third respondent was closed long back in 1990 and, therefore, it is not one of the units which had a licence immediately prior to 16-1-1995 and, therefore, the licence could not be renewed due to prohibition. Applying the principles of illegality as enunciated by the Supreme Court, the decision-maker, it must be held, has not understood Rule 10-A of the Rules correctly and by misdirection in law applied the same to the third respondent, which is not entitled to be given exemption under Rule 10-A of the Rules. This point is answered accordingly.
In the result, for the above reasons, the writ petition is allowed as under.
i) Rule 10-A of the A.P. Distillery Rules, 1970 is valid and is not violative of Article 14 of the Constitution of India;
ii) The impugned order issued by the Government being G.O.Ms. No. 552, Revenue (Excise-III) Department, dated 1-7-1997 and the notification issued thereafter as well as the consequential licence issued by the second respondent and any renewal thereafter in favour of respondents 3 and 4 are illegal and are accordingly set aside;
iii) It is open to the third respondent to apply for a fresh licence if the existing law and existing Excise Policy so permit; and
iv) There shall be no order as to costs.