Pradeep Kumar Walia and Anil Kumar Dixit vs State of U.P. and Others

Supplementary affidavit filed by Mr. I.P. Singh is taken on record.

These two writ petitions were admitted and posted today for hearing on the application for interim relief.

Issue notice to the opposite party No. 6 in writ petition No. 2539(M/B) of 2009.

We have heard Shri Rahul Srivastava and Mr. Rajiv Singh, learned Counsel appearing for the petitioners and Mr. Jaideep Narain Mathur, learned Addl. Advocate General, assisted by Mr. D.K. Upadhyay, learned Chief Standing Counsel and Mr. H.P. Srivastava, learned Addl. Chief Standing Counsel and Mr. I.P. Singh, learned Counsel appearing for opposite party No. 5 in writ petition No. 2539(M/B) of 2009.

As prayed by Mr. J.N. Mathur, learned Addl. Advocate General, one week''s time is allowed to file counter affidavit, one week then for the rejoinder affidavit. List for peremptory hearing on 30.3.2009.

While assailing the advertisement in question as well as the Government Order dated 11.2.2009, followed by the circular dated 12.2.2009, in brief, the submission of the learned Counsel for the petitioners is that the right of renewal of licence has been taken away by the respondents, though the rules empower them to claim for renewal of licence. In this context, he has relied upon a judgment of the Hon''ble Supreme Court reported in Secretary to Govt., Tamil Nadu and Another Vs. K. Vinayagamurthy, It is further submitted that while framing the policy, the State Government has created special zone, i.e. called as Meerut Special Zone including Bareilly Division and provided that the licence for whole sale and retail shops for liquor be granted to the State Corporations and Apex Level Cooperative Societies. He further submits that while framing the policy vide circular dated 11.2.2009 and the rules framed thereafter, the State Government while exercising power u/s 4A of the Excise Act, in short Act, has extended exclusive privilege with regard to grant of licence for whole sale or retail shops to the State Corporation or the Apex Level Cooperative Society. Submission is that while availing the benefit of exclusive transfer of the Meerut Zone, U.P., Apex Level Society has invited applications to form Joint Venture along with the private bodies to manage the retail sale of country liquor and foreign liquor. Supplementing his argument, it has been submitted that by the impugned policy decision, the State Government has adopted two sets of standards in the State of U.P. to regulate the retail sale of the country liquor.

Mr. Rahul Srivastava, learned Counsel appearing for the petitioners submits that the impugned policy decision has been taken not for augmentation of revenues but it has been made to extend undue benefit to the higher-ups and mafias who are working in the field of liquor. He also submits that on account of impugned policy, the State Government shall suffer a loss of almost Rs. 2500 crores and almost 25000 persons who are working with individual licensees'' shops shall be out of job. Further submission of the petitioner''s counsel is that keeping this in view, the impugned provision is contrary to the provisions contained in Sections 24-A, 24-B, 25 of the Act as well the other statutory Rules. According to him, even if assuming that the government has taken a policy decision to involve Apex Level Cooperative Society in sale and purchase of country liquor, the same cannot be contrary to the earlier existing rules as well as various provisions contained in the Act. It has been submitted that involvement of private bodies through agreement shall amount to sub-letting and not permissible under the statute.

On the other hand, Mr. Jai Deep Narayan Mathur, learned Addl. Advocate General submits that the provision has been made to check the smuggling of liquors in Meerut Zone which joins New Delhi, Haryaya and Uttaranchal. He also submits that in view of the provisions contained in Section 36-A of the Act, no unfettered right accrues to the petitioners to claim renewal of the shops in question; rather an argument has been advanced that there is an absolute bar for renewal of licence. The further submission of Mr. Mathur is that the impugned provision has been made just to check the smuggling of country-made liquor from the adjoining States and the State Government has acted fairly and within its jurisdiction to increase its excise revenue. He further submits that under the Rules framed in pursuance to the power conferred by Section 40 of the Act, namely Uttar Pradesh Demarcation and Regulation of Special Zone for Exclusive Privilege of Excise Shops Rules, 2009, in short 2009 Rules, the government has power to allocate the shops to Apex Level Cooperative Societies or the Corporations in the manner different from remaining districts of the State.

We have considered the arguments advanced by the learned Counsel for the parties at length and perused the record for the purpose of interim relief.

Under 2009 Rules, the State Government has been conferred power to allocate shops to the Apex Level Cooperative Societies or the corporation owned by the State Government in the manner different from other districts. Whether the creation of the special zone is arbitrary and discriminatory exercise of power or not is the subject matter which requires for hearing.

Apart from above, the power has been conferred only to the Apex Level Cooperative Societies or the State owned corporations of the State. Whether such corporation may enter into contract with the private parties as has been done by the impugned advertisement is an important question which also calls for adjudication. Chapter 10 of the Excise Act contains various provisions to punish the licensee for breach of contract or committing any offence under the Excise Act or rules framed thereunder while holding the contract.

Earlier, the U.P. Excise Licences (Tender-cum-Auction) Rules, 1991, in short 1991 Rules, was framed by the Legislature to grant licence for exclusive privilege of selling of country made liquors etc. Under 1991 Rules, the provision was to award contract by adopting the procedure of tender-cum-auction. Thereafter, another rules, namely U.P. Excise (Settlement of Licences for Retail Sale of Country Liquor) Rules, 2002, in short, 2002 Rules, was framed. Under 2002 Rules, a provision has been made for letting out excise liquor by lottery. A provision has also been made for renewal of licence.

Para 5 of the Excise Manual provides that the licence of the retail licensee may be renewed by the District Magistrate. The Excise manual and Rules further provides for taking punitive action against the licensee in case he commits some breach of the conditions of the licence. Thus, from a plain reading of the various Rules placed before this Court indicates that a punitive action may be taken against the licensee in whose name the State Government grants the licence in case he violates any of the terms of the licence. Accordingly, subject to final adjudication of the controversy with regard to entitlement of the State owned corporations or the Apex cooperative societies under the 2009 Rules, prima facie, we are of the view that the corporations while exercising power under the Act shall have no right to enter into joint venture with private bodies.

It is settled law that what cannot be done directly, it cannot be done indirectly. Involvement of private bodies under the garb of licence given to the Apex Level Cooperative Societies, prima facie, seems to be an arbitrary exercise of power and hit by Article 14 of the Constitution of India. Under the Excise Act, 1991 Rules, 2002 Rules as well as Excise Manual, it is the licensee who can be punished because of violation of statutory provisions and the terms and conditions of the licence. Private bodies who are likely to be involved under the garb of joint venture by the Apex Level Cooperative Society seems to be out of clutches of law in case they indulge in mal-practices or they violate the conditions of licence or statutory provisions. Prima facie, involvement of private bodies seems to sub-letting and let them scot free even if they abuse their position while sharing the contractual assignment in the field of country liquor. We fail to understand, how while adopting such procedure, it shall check the smuggling of country liquor from the border States of U.P. Prima facie, we are of the view that the State should not resort to any procedure which may leave violators of law unpunished. There must be accountability to every person involved in contractual assignment or dealing with country liquor under licence for the action or decision taken by such person. Prima facie, we feel that the private share holders under the garb of joint venture shall not be accountable for the wrongs done by them. The letter and spirit of the statutory provisions as well as the rules seems to indicate that the persons involved in the business of liquor under the licence must be accountable and responsible under the law for wrongs done by such persons.

Accordingly, we provide as an interim measure that the respondents may proceed in pursuance to the impugned advertisement but no final decision shall be taken till the next date of listing, i.e. 30.3.2009 under agreement through joint ventures. The action taken by the respondents in pursuance to the impugned circulars dated 11.2.2009 and 12.2.2009 shall be subject to the order passed by this Court.