Madhya Pradesh High Court
The State Of Madhya Pradesh Thr. vs M/S Himalayan Ales Pvt. Ltd. Thr. on 14 January, 2016
Author: S. C. Sharma
Bench: D. K. Paliwal, S. C. Sharma
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HIGH COURT OF MADHYA PRADESH : GWALIOR BENCH
D.B. : HON'BLE SHRI JUSTICE S. C. SHARMA &
HON'BLE SHRI JUSTICE D. K. PALIWAL, JJ
WRIT APPEAL No. 318 / 2015
THE STATE OF MADHYA PRADESH
AND THREE OTHERS
Vs.
M/S. HIMALAYAN ALES PVT. LTD.,
O R D E R
(______/01/2016) PER S. C. SHARMA, J :
The present Writ Appeal has been filed u/S. 2(1) of the M.P. Uchacha Nyayalaya (Khand Nyay Peeth ko Appeal) Adhiniyam, 2005 by the State of Madhya Pradesh, through its functionaries, against the judgment dated 16/9/2015, passed by the learned Single Judge in W.P. No. 5216 / 2015 (M/s. Himalayan Ales Pvt. Ltd., Vs. State of M.P. And others).
Facts of the case reveal that the sole respondent, a Private Company registered under the provisions of the Companies Act, 1956, has filed a Writ Petition for issuance of an appropriate writ, order or direction directing the Excise Commissioner, Government of Madhya Pradesh to grant B-3 Licence to the respondent Company for operating a Brewery Unit on Plot No. F-5 to F-9 and F-11, Malanpur Distt. Bhind. A prayer was also made to grant necessary permission for manufacturing draught beer. It was also prayed that appropriate compensation and damages be granted to the
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respondent Company on account of the delay which has taken place in issuance of B-3 licence.
Facts of the case reveal that the respondent Company as was having an intention to establish brewery at Malanpur Distt. Bhind submitted an application on 22/12/2011 (Annexure P/3) to the writ petition under Rule 3(2) of the M.P. Beer and Wine Rules, 2002 (hereinafter referred to as 'the Rules of 2002') in form B-1 through Excise Commissioner. Application of the respondent Company was processed and the State Government through Commercial Tax Department issued a letter of intent to the petitioner Company on 2/7/2012. The letter of intent was valid for 2 years and the respondent Company was required to complete the construction of building installation of plant and machinery in all respect approved by the State Government. The respondent Company completed the entire construction work, the machines were installed within the stipulated time and the District Excise Officer, Bhind was informed vide letter dt. 7/3/2014 that the petitioner Company has completed the construction of the factory and has also installed all the equipments and machineries. A letter was made with a request to inspect the brewery unit and for issuance of licence also.
The respondent Company again on 27/3/2014 requested the appellant No.4 to issue a licence ie., B-3 licence to operate the brewery at Malanpur. The respondent Company on 30/4/2014 again submitted a letter requesting
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appellant No.4 District Excise Officer for grant of permission for manufacturing of draught beer in view of Rule 8 of the Rules of 2002. A challan was also enclosed along with the letter as prescribed under the Rules. The Dy. Commissioner Excise Department issued a letter to the Excise Commissioner, Government of M.P. on 20/5/2014 mentioning categorically that the respondent Company has completed the construction work and installation of machinaries within the stipulated period and as a licence is required ie., B-3 licence an appropriate order be passed. The Excise Commissioner, State of Madhya Pradesh, thereafter issued a letter on 6/6/2014 to the Collector, Bhind and also constituted a Committee for inspection of brewery unit for grant of B-3 licence keeping in view the Rules of 2002. The Collector, Distt. Bhind in response to the letter and keeping in view the directions of the Excise Commissioner, Government of M.P., issued a letter to the Dy. Commissioner Excise, Executive Engineer PWD, Executive / Asstt. Engineer, PWD (E&M) and the District Excise Officer for a joint inspection and a joint report.
That the brewery unit was inspected on 26/3/2014 and a report was also submitted by the Committee. The report was also brought on record. The Committee in its report categorically stated that the brewery unit / factory has been properly constructed and no infirmities were noticed during the course of inspection. The machineries were installed as per their specifications. The Collector, Distt. Bhind issued a
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letter to the Excise Commissioner on 16/7/2014 along with the report and all relevant inspection documents.
That on 30/7/2014, the Excise Commissioner again issued a letter to the Collector, Bhind stating that his earlier letter dated 16/7/2014 was without any recommendation and without opinion and the Excise Commissioner directed the Collector, Bhind to submit appropriate recommendation / opinion in respect of grant of B-3 licence. The Collector, Bhind again issued a letter on 12/8/2014 to the Excise Commissioner, categorically recommending grant of B-3 licence. The respondent Company thereafter issued a letter of request to the Commissioner to grant B-3 licence enabling to operate brewery situated at Plot No. F-5 to F-9 and F-11 at Industrial Area, Malanpur, Distt. Bhind and also informed that all the legal requirements and formalities, as contained under the Rules of 2002 and the Company has invested a sum of Rs.12.11 crores.
Inspite of repeated requests to the Excise Commissioner and other officers of the State Government, the licence was not issued and, therefore, again on 11/2/2015 the respondent Company submitted a letter to respondent No.2 for grant of B-3 licence stating categorically that they have completed the entire construction and installation of machineries within the stipulated period of 2 years and has also deposited licence fee of Rs.16.40 lacs. The Company also informed the Excise Commissioner that the Company has invested approximately 16 crores as the land has been
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purchased, buildings have been constructed and equipments have been installed. A request was made to grant the licence immediately.
That on 23/2/2015 the Excise Commissioner requested the Principal Secretary, Commercial Tax Department for issuance of B-3 licence under the Rules of 2002 and the Principal Secretary was informed about the investment done by the Company and installation of equipments by the Company. The letter also included the report submitted by the Collector recommending issuance of B-3 licence. The respondent No.2 also sought guidance and permission for issuance of B-3 licence.
That inspite of repeated requests by the Company, no licence was issued and, therefore, the Company was forced to file a writ petition and the same was registered as W.P.No. 2614/2015 and the petition was disposed of by this Court by order dt. 11/5/2015 with direction to the Company to resubmit letter dt. 23/2/2015 along with Note Sheet dt. 29/5/2008 and the Excise Commissioner as well as Secretary of the Commercial Tax Department were directed to pass a reasoned order within a period of 3 weeks. The respondent Company submitted a fresh representation and as nothing was being done, the Company was forced to file a Contempt Petition. The same was registered as Cont. Petition No. 378 / 2015 and during the pendency of the contempt petition, an order was passed on 10/7/2015 rejecting the application preferred by the Company for grant of B-3 licence. The
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reason assigned in the order by the learned Excise Commissioner was that the Hon'ble Chief Minister has made a declaration that no new liquor factory and liquor shop will be granted permit / licence and, therefore, in the light of the declaration made by the Hon'ble Chief Minister, the application is rejected. The respondent Company being aggrieved by the action of the appellant State came up before this Court and a return was filed on behalf of the State of Madhya Pradesh. The sole reason assigned in the return was that a declaration made by the Hon'ble Chief Minister and it was stated that in larger public interest a decision has been taken by the Hon'ble Chief Minister and a public announcement has been made by the Hon'ble Chief Minister that no new distillery will be opened / granted licence in the State of Madhya Pradesh and, therefore, the Authorities have rejected the application for grant of licence in accordance with the announcement / public declaration made by the Hon'ble Chief Minister.
The learned Single Judge has allowed the Writ Petition. The communication dt. 10/7/2015 by which the request for grant of licence was rejected, has been quashed. The learned Single Judge has held that the Company is entitled for grant of B-3 licence for manufacturing of beer and / draught beer under Rule 4 of the Rules of 2002. The aforesaid facts are undisputed facts.
The learned Single Judge after taking into account the arguments canvassed by the learned counsel appearing for
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the parties, has exhaustively dealt with the Rules of 2002. Rule 3 and Rule 4 of the Rules of 2002, reads as under :
3. Construction or establishment of brewery / manufactory.- (1) Brewery or manufactory shall be constructed any / or established only with an explicit permission of the State Government under these rules.
(2) Any person intending to construct and / or establish a brewery or manufactory shall apply to the State Government through the Excise Commissioner for the required permission in Form B-1. Where a person desired to contract and work a Brewery and also a manufactory, he shall make separate application in this behalf.
(3) Every such application shall be accompanied by:-
(a) detailed plan in quadruplicate of the proposed unit drawn to scale on sheets of tracing cloth;
(b) A challan in proof of payment of fee prescribed by the State Government ;
(c ) The plan referred to in clause (a) shall contain complete details of the proposed unit including the land buildings, fixtures etc., it will clearly indicate the exact location and dimensions of all the rooms, floors, storeys, windows and other openings. The precise location where vats, vessels, tanks, pipelines, valves, revenue locks, electric or gas conduits, refrigeration or heating systems and any other apparatus, appliance, gadget, equipment or machinery shall be installed, fitted or used along with details about their capacity, size use etc., must appear in the plan. The manner in which the rooms halls or buildings comprised in the presmies shall be utilised must be specified in the layout. The points where revenue locks shall be attached may be indicated by the symbol RL;
(d) A detailed project report of the brewery or manufactory in quadruplicate;
(e) A statement in quadruplicate giving in detail the process desired to be adopted for manufacturing beer or wine;
(f) Any other certificate authorisation or clearance required from Central Government, a local body, Town and Country Planning Authority or Department, Madhya Pradesh Pollution Control Board or any other authority or department of the State Government under any enactment or rules, in force.
(4) The Excise Commissioner shall after such examination as may deem proper, forward the application to the State Government with his comments and recommendations thereon.
(5) (i) If the State Government is satisfied of the proposed scheme of the applicant, it may, issue "Letter of Intent"
in Form B-2 to the applicant.
(ii) Where it appears that the application is not complete in all material particulars or is not accompanied by the required documents the State Government or the Excise Commissioner or any other Officer authorised in his behalf shall by a notice served by registered post in writing, requiring the applicant to make good the omission or as the case may be, to furnish the documents not later than 30 (thirty) days from the
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date of communication of the said notice. An application for the grant or renewal made under these rules shall not be refused by the sanctioning Authority only on the grounds that application is not complete in all material particulars or is not accompanied by the documents.
(6) Government reserves the right to reject the application after hearing the applicant.
(7) In addition to issuance of "Letter of Intent", the State Government shall forward the duplicate, triplicate and quadruplicate copies of the project - report and statement of manufacturing process referred to in clause (d) and (e) of sub- rule (3) after duly stamping them with the official seal in token of its approvals, to the applicant the Excise Commissioner and the District Excise Officer of the relevant district respectively. The original shall be retained by the Government. The District Excise Officer shall keep an attested photocopy of both these documents in his office and send the quadruplicate copies bearing he stamp of the State Government to the Officer-in-charge whenever the plant is commissioned.
(8) The "Letter of Intent" thus 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 machinery in all respects according to the plan approved by the State Government and make the unit ready for commissioning.
(9) In case the applicant fails to complete the job within stipulated period of two years. The "Letter of Intent"
granted shall be liable to cancellation without compensation for any damage or loss to the holder thereof:
Provided that, where after receiving the recommendation of the Excise Commissioner, the State Government is satisfied that failure on the part of the applicant to complete the work as per approved plans within the specified period is attributable to circumstances beyond control of the holder of the letter of intent or there are other valid reasons, it may grant extension of the period of the letter of intent upto a period not exceeding one more years.
(10) The "Letter of Intent" is issued under sub-rule (5) shall not create any prerogative in favour of its holder for grant of a licence and shall be liable to be revoked or withdrawn any time in public interest after giving in him a notice to show cause against such action and hearing him if he so desires.
(11) No compensation for damage of loss shall be payable when the "Letter of Intent" is revoked or withdraw under sub-Rule (10).
(12) The holder of "Letter of Intent" shall not, without the previous sanction of the State Government transfer on sub-
lease, it or enter into agreement with any other person for the construction of brewery or as the case may be manufactory or both.
4. Grant and renewal of licence for working a brewery of manufactory.- (1) The holder of "Letter of Intent"
shall report to the Excise Commissioner, the date on which the construction of the premises and installation of plant is complete and formally make a request to him to grant a licence.
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(2) The application mentioned in sub-rule (1) shall normally be made through the District Excise Officer of the concerned district who, while forwarding it to the Excise Commissioner, enclose the following documents with it:
(a) Report of the committee appointed by the State Government ensuring that the premises have been built and plant erected in accordance with the approved plan and enclosed with the "Letter of Intent" and that the plant is ready for commissioning.
(b) A copy of challan of the payment of the prescribed licence fee.
(3) The Excise Commissioner after taking into consideration the report of the Committee along with the documents specified in sub-Rule (2) or after making such further inquires as he deems necessary may grant the licence in Form B-
3 or may refuse to grant the licence.
() The licence thus granted shall be for a period ending with the close of financial year in which it is granted, and may be renewed for one financial year at a time of payment of prescribed licence fee by the Excise Commissioner. The request for renewal shall be decided on merits, the factors to be considered being whether the licensee has duly observed the conditions of licence and had complied with all the rules and orders or directions issued by the Excise Commissioner.
(5) The application for renewal of licence shall be submitted through the District Excise Officer of the concerned districts. The application must reach the office of the District Excise Officer by the end of January immediately preceding the financial year for which reveal is desired. If have been additions and alterations to or in building plant, fresh blueprints showing the additions and alterations carried out shall be attached to the application. If there has been no addition or alteration, a certificate to that effect by the Officer-in-Charge shall be attached.
(6) No licence shall be granted or renewed under the applicant or the licensee has deposited a sum prescribed by the Excise Commissioner as security for due performance of licence conditions. Any liability arising against the licensee by way of duty, fee penalty etc., under the provisions of the Act or these Rules shall be recoverable from it. The security amount thus depleted shall be indemnified to that extent by the licensee within fifteen days. In case the licence is cancelled for gross violation of any licence conditions or any other reason on, the security amount shall stand forfeited.
(7) Immediately after the initial grant of a licence or its renewal, the licensee shall executive a counter-part agreement in Form-14 and shall not commence working of the brewery or manufactory unless he has done so.
(8) The Licensee shall not hypothecate, sell, mortgage transfer or sub-lease the licence ore enter into partnership for working of the licence, without the previous permission of the Excise Commissioner. Such a permission of granted shall be endorsed on the licence.
(9) No addition to or alteration in the building or the plant machinery shall be effected without the prior approval in
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writing of the Excise Commissioner:
Provided that minor additions, alterations or repairs of emergent nature may be permitted by the Officer-in-charge subject to immediate report to an subsequent approval of the Excise Commissioner.
(10) A licence granted or renewed under these Rules shall remain in force for the period specified therein unless it is suspended, cancelled, withdrawn or surrender earlier.
The Rules of 2002 have been framed by the State Government in exercise of powers conferred u/S. 61(1) and 62(2). Clause (a), (b), (d), (e), (f), (g) and (h) of the M.P. Excise Act for regulation and control of issue and supply licence on construction of brewery and manufacturing of bear and draught bear. The respondent's application for installation of brewery and manufacture of bear was processed under Rule 3 and thereafter a letter of intent has been issued under sub-Rule (5) of Rule 3 of the Rules of 2002. It is not in dispute that the respondent is satisfying the requirements of Rules of 2002 for grant of licence. It is also an undisputed fact that after completion of construction of brewery installation of machineries and equipments as per norms and standards and specifications fixed by the State Government, a huge investment was done to the tune of Rs.12.11 crores. Consequent upon the issuance of Letter of Intent, a Committee was constituted and has inspected the factory premises and a favourable report has been submitted for grant of licence. The learned Single Judge has held that in the light of the aforesaid circumstances, the contention of the respondent Company of having a legitimate expectation for issuance of licence, has substantial force.
The Rules of 2002 are framed by the State Government
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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. Respondent Company'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 appellants that the respondent Company does not satisfy the requirements of the Rules of 2002 for grant of licence, instead after completion of construction of brewery, installation of machineries and equipments as per norms, standards and specifications fixed by the State Government investing huge amount of Rs.12.11 crores, consequent upon the LOI, a committee constituted by respondents has inspected the factory and submitted the report recording its satisfaction and appellant no.3 recommended for licence. Under the circumstances, the contention of the respondent Company 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
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substantive and procedural. The procedural part of it relates to a representation that a hearing or other appropriate procedure will be afforded before decision is made. The substantive part of the principle is that if a representation is made, the benefit of substantive nature will be granted and then the same could be enforced. This aforesaid principle of law propounded in English judgments has been followed by the Indian Courts in number of decisions. In the case of MRF Ltd., Kottayam vs. Asstt. Commissioner (Assessment) Sales Tax and Others, (2006) 8 SCC 702 the Hon'ble Supreme Court while considering the legality and validity of the notification withdrawing exemption granted by earlier notification applying the principles of legitimate expectation for the reason the MRF had altered its position relying on the representations contained in the earlier notification and while setting aside the subsequent notification withdrawing exemption the Hon'ble Supreme Court held that the action of State including exercise of executive power tested on the touchstone of Article 14 of the Constitution of India did not withstand the test of rule of law and fairness. Relevant paras of the judgment read as under:-
"38. The principle underlying legitimate expectation which is based on Article 14 and the rule of fairness has been restated by this Court in Bannari Amman Sugars Ltd. v. CTO, (2005) 1 SCC 625. It was observed in paras 8 and 9: (SCC pp. 633-34) "8. A person may have a `legitimate expectation' of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important
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place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the court to apply for judicial review. It is generally agreed that `legitimate expectation' gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words, where a person's legitimate expectation is not fulfilled by taking a particular decision then the decisionmaker should justify the denial of such expectation by showing some overriding public interest. (See Union of India v. Hindustan Development Corpn., (1993) 3 SCC 499: AIR 1994 SC 988).
9. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for discernible reasons, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualised than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness."
(emphasis supplied)"
"39. MRF made a huge investment in the State of Kerala under a promise held to it that it would be granted exemption from payment of sales tax for a period of seven years. It was granted the eligibility certificate. The exemption order had also been passed. It is not open to or
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permissible for the State Government to seek to deprive MRF of the benefit of tax exemption in respect of its substantial investment in expansion in respect of compound rubber when the State Government had enjoyed the benefit from the investment made by MRF in the form of industrial development in the State, contribution to labour and employment and also a huge benefit to the State exchequer in the form of the State's share i.e.40% of the Central excise duty paid on compound rubber of Rs.177 crores within the State of Kerala. The impugned action on the part of the State Government is highly unfair, unreasonable, arbitrary and, therefore, the same is violative of Article 14 of the Constitution of India. The action of the State cannot be permitted to operate if it is arbitrary or unreasonable. This Court in E.P. Royappa v. State of T.N., (1974) 4 SCC 3 :
1974 SCC (L&S) 165 observed that where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of "justice and fair play". The attempt to take away the said benefit of exemption with effect from 15-1-1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years, in our opinion, is highly arbitrary, unjust and unreasonable and deserves to be quashed. In any event the State Government has no power to make a retrospective amendment to SRO No.1729/93 affecting the rights already accrued to MRF thereunder."
The aforesaid judgment has been followed by the Hon'ble Supreme Court in the case of State of Bihar and others vs. Kalyanpur Cement Limited, (2010) 3 SCC 274. The Hon'ble Supreme Court in paras 79 and 80 of its judgment has observed as under:-
"79. We are also unable to accept the submission that the decisions dated 6-1-2001 and 5-3-2001 had been taken due to the change in the national policy. This was sought to be justified by Dr. Dhavan on the basis of the Conferences of Chief Ministers/Finance Ministers. It is settled law as noticed by Bhagwati, J. in Motilal Padampat Sugar Mills Co. Ltd. v. State of UP, (1979) 2SCC 409 : 1979 SCC (Tax) 144 that the Government cannot claim to be exempt from the liability to carry out the promise on some indefinite and undisclosed ground of necessity or expediency. The Government is required to place before the Court the entire
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material on account of which it claims to be exempt from liability. Thereafter, it would be for the Court to decide whether those facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from liability. It is only when the Court is satisfied that the Court would decline to enforce the promise against the Government. However, the burden would be upon the Government to show that it would be inequitable to hold the Government bound by the promise. The Court would insist a highly rigorous standard of proof in the discharge of this burden.
80. In the present case, the claim of the Government is based on a change in policy advocated in the Chief Ministers' Conference. These Conferences had taken place before the affidavit was filed on 5-12- 2001. Therefore, the High Court concluded that the Government has not been candid in disclosure of the reasons for passing the order dated 6-01-2001. In our opinion, the aforesaid decisions with regard to the discontinuance of the sales tax exemptions from 1-01- 2000 could not have affected the rights of the Company under the Industrial Policy, 1995. Necessary application was made to the Government seeking exemption on 21-11-1997. For more than three years, the Company and the financial institutions had been assured by the Government that the notification will be issued forthwith. However, it was not issued. We are of the opinion that the action of the appellants is arbitrary and indefensible."
(Emphasis supplied) Therefore, in view of the aforesaid enunciation of law as regards doctrine of legitimate expectation, now turning to facts in hand, in the opinion of this Court, the respondent Company can certainly be said to have valid legitimate expectation in law and entitled for the licence having altered his position acting upon the LOI and investing about Rs.12.11 crores in construction of brewery and installation of machineries and equipments for manufacture of beer. Moreover, Rules of 2002 under the circumstances do not disqualify the respondent Company for B-3 licence. Therefore, the contention of learned senior counsel that the
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impugned communication denying B-3 licence to the respondent Company under the pretext of announcement by the Chief Minister on 23/1/2014 is hit by the doctrine of promissory estoppel commends this Court as it has substantial force. Learned senior counsel relied on the judgment of the Hon'ble Supreme Court in the case of Southern Petrochemical Industries Co. Ltd. vs. Electricity Inspector & ETIO and others, (2007) 5 SCC 447 to bolster his submissions. In the said case the Hon'ble Supreme Court reiterated that the doctrine of promissory estoppel shall apply where a party alters its position pursuant to or in furtherance to the promise made by the State. Such promise can be in the form of notifications under statutory provisions or even by the executive instructions. Whenever the ingredients of promissory estoppel are established it shall give rise to a cause of action with substantive right. In the aforesaid case the Hon'ble Supreme Court observed as under:-
"121. The doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications issued under the statutory provisions but also under the executive instructions. The appellants had undoubtedly been enjoying the benefit of (sic exemption from) payment of tax in respect of sale/consumption of electrical energy in relation to the cogenerating power plants.
122. Unlike an ordinary estoppel, promissory estoppel gives rise to a cause of action. It indisputably creates a right. It also acts on equity. However, its application against constitutional or statutory provisions is impermissible in law......."
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In the opinion of this Court, in absence of any reason or justification for non-fulfillment of requirements of Rules of 2002, the appellants are estopped from denying B-3 licence to the respondent Company in the facts and circumstances of the case.
True it is that the State has the executive right or privilege of manufacturing and selling liquor. It also has a power to part with the aforesaid privilege by holding public auction for granting right to sale the liquor and there is no fundamental right of any citizen to carry on trade or business in liquor. Law is well settled in that behalf right from the case of The State of Bombay and another v. F.N. Balsara, AIR (38) 1951 SC 318, The State of Assam v. Sristikar Dowerah and others, AIR 1957 SC 414, Nagendra Nath Bora and another v. Commissioner of Hills Division and Appeals, Assam and others, AIR 1958 SC 398, Amar Chandra Chakraborty v. The Collector of Excise, Govt. of Tripura, Agartala and others AIR 1972 SC 1863, The State of Orissa and others v. Harinarayan Jaiswal and others, AIR 1972 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
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in point no.(g) as under:-
"(g) When the State permits trade or business in the potable liquor with or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make discrimination between the citizens who are qualified to carry on the trade or business."
(Emphasis supplied) While answering the question "as to whether the State can place restrictions and limitations under Article 19 (6) of the Constitution of India in the matter of carrying on trade or business in liquor", the Honb'le Supreme Court in para 64 of the judgment held as under:-
"64. The last contention in these groups of matters is whether the State can place restrictions and limitations under Article 19(6) by subordinate legislation. Article 13(3)
(a) of the Constitution states that law includes "any ordinance, order, bye-law, rule, regulation, notification, custom or usage having in the territory of India the force of law". Clauses (2) to (6) of Article 19 make no distinction between the law made by the legislature and the subordinate legislation for the purpose of placing the restrictions on the exercise of the respective fundamental rights mentioned in Article 19(1) (a) to (g). We are concerned in the present case with clause (6) of Article 19. It will be apparent from the said clause that it only speaks of "operation of any existing law insofar as it imposes ..." "from making any law imposing" reasonable restrictions on the exercise of the rights conferred by Article 19(1)(g). There is nothing in this provision which makes it imperative to impose the restrictions in question only by a law enacted by the legislature. Hence the restrictions in question can also be imposed by any subordinate legislation so long as such legislation is not violative of any provisions of the Constitution. This is apart from the fact that the trade or business in potable liquor is a trade or business in res extra commercium and hence can be regulated and restricted even by executive order provided it is issued by the Governor of the State. We, therefore, answer the question accordingly."
(Emphasis supplied) In view of the above stated settled legal position as regards trade or business in liquor, when the State parts with its exclusive privilege and permits citizens to carry on trade
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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.
The contention of learned counsel for appellants/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 respondent Company gives rise to following questions:-
1. Whether the public announcement of the Chief Minister can be said to be a policy decision of the State Government? If yes,
2. Whether such policy decision can be enforced without amending the Rules of 2002 or by executive fiat without orders issued in the name of the Governor under Article 166 of the Constitution of India?
3. Whether such public announcement or so called policy decision is not required to conform to equality clause as enshrined under Article 14 of the Constitution of India?
The executive power of the State is vested in the Governor under Article 154 of the Constitution of India. The
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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 respondent Company relied on the judgment of the Division Bench in the case of State of M.P. And others vs. M/s Swami Traders, 2001 (4) MPLJ 69 and Doiwala Sehkari Shram Samvida Samiti Ltd. vs. State of Uttaranchal and others, (2007) 11 SCC 641 to contend that to enforce the policy of the State Government if any, first there shall be amendment in the Rules of 2002 dealing with the grant of licence for manufacture of beer or
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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. 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
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Supreme Court in the case of Murlidhar Agrawal and another v. State of Uttar Pradesh and others, AIR 1974 SC 1924 has dealt with the concept of public policy and referred to Winfield's definition of public policy in English Common Law, 42 Harvard Law Rev.76 "as a principle of judicial legislation or interpretation founded on the current needs of the community".
The Hon'ble Apex Court while dealing with the concept of public policy in the case of Secretary Jaipur Development Authority, Jaipur v. Daulatmal jain and others, (1997) 1 SCC 35 has in following paragraph held that the public policy must be for public welfare and in public interest. It cannot be camouflaged for abuse or misuse of power. The Court has a power to judicially review to ascertain as to whether replacement of public motive for a private one with ulterior motive to achieve collateral purpose or it is a bonafide formulation of policy for public, i.e. whether any pursuit of private satisfaction is distinguished from public interest. Relevant para 13 of the judgment reads as under:-
"13. All purposes or actions for which moral responsibility can be attached are actions performed by individual persons composing the Department. All Government actions, therefore, means actions performed by individual persons to further the objectives set down in the Constitution, the laws and the administrative policies to develop democratic traditions, social and economic democracy set down in the Preamble, Part III and Part IV of the Constitution. The intention behind the government actions and purposes is to further the public welfare and the national interest. Public good is synonymous to protection of the interests of the citizens as a territorial unit or nation as a whole. It also aims to further the public policies. The
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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:-
"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."
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
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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 respondent Company by the impugned communication dated 10/7/2015 is a glaring instance of irrationality or perversity of decision, if tested on the touchstone of Wednesbury principle of reasonableness and, therefore, cannot be sustained in the eyes of law.
Consequently, in the opinion of this Court, appellant 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 respondent 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. The respondent 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 appellant No.2 / appellants forthwith.
Resultantly, this Court is of the considered opinion that the Writ Appeal preferred by the State of Madhya Pradesh deserves to be dismissed and is accordingly hereby dismissed.
(S. C. SHARMA) (D. K. PALIWAL)
JUDGE JUDGE
KR