CIVIL WRIT JURISDICTION CASE No. 312 OF 2009 In the matter of an application under Article 226 of the Cosntitution of India. -------- TRIGGER GOODS PVT.LTD., a private Limited company incorporated under the provisions of the Companies Act, 1956 having its registered office at Room No. 218, 21, Hemant Basu Sarani, Kolkata 700 001 and its local office at Tripolia, P.S. Alamganj, Patna 800 007 through its Director duly authorized by the Board of Directors of the Company, namely, Kajal Karmakar, aged about 39 years, Late Hira Lal Mistry resident of School Para, P.s. Islampur, District Uttar Dinajpur, West Bengal --------- Petitioner Versus 1. The State of Bihar through the Secretary to the State Government-cum- Excise Commissioner, Bihar, Patna. 2. The Member, Board of Revenue, Bihar, Patna. 3. The Excise Commissioner, Bihar, Patna. 4. The Bihar State Beverage Corporation Ltd. having its office at Bidyut Bhawan, 1st floor, Jawaharlal Nehru Marg, Patna through its Managing Director. ---------------------------------------------------------Respondents --------- For the Petitioner :- M/S. Jitendra Singh, Sr. Advocate & Satyabir Bharti For the State Respondents :- Mrs. Nividita Nirvikar, G.P. XVI For the Respondent No. 4:- M/S. P. K. Shahi, Advocate General & Vikas Kumar P R E S E N T THE HON'BLE THE CHIEF JUSTICE & THE HON'BLE MR. JUSTICE DR. RAVI RANJAN ------ Koshy, C.J: This writ petition was filed for setting aside the Liquor Sourcing Policy (CS/SCS) 2008-09 (in short, the liquor policy), by which the Bihar State Beverage Corporation Limited (hereinafter referred to as the Corporation) has laid down terms and conditions for purchase of country liquor and spiced country liquor from manufacturers of country/spiced country liquor. According to the petitioner, the liquor policy is against the provisions of the Bihar Excise Act, 1915 (in short, the Act) and the rules made thereunder. It is also contrary to the terms and conditions of the licence 2 issued by the State Government. It is further contended that the Corporation has no authority or jurisdiction to prescribe such terms and conditions which are against the statutory rules and that the above conditions are onerous, unilateral and arbitrary and thus amount to abrogation of the terms and conditions of the licence. It is also submitted that the Corporation having monopoly to deal with wholesale purchase and supply, it has no authority to impose such conditions taking undue advantage of that position and, therefore, the conditions are unilateral and arbitrary and it alters and the terms and conditions under which the parties are required to deal with liquor. Further, it is contended that it is violative of Articles 14 and 19 of the Constitution of India. Even though one of the prayers in the writ petition was for restraining the Corporation from coercing the petitioner to execute an agreement as stipulated in the Policy, after the filing of the petition, the petitioner, out of compulsion and necessity, signed the agreement under protest. 2. The petitioner is a company registered under the Companies Act, 1956. It is engaged in the manufacture and supply of country liquor. There is no dispute with regard to the fact that only the State Government has got exclusive privilege to deal with manufacture and sale of country liquor in the State. Section 22 of the Act, as amended, provides that the State Government may grant to any person, on such conditions and for such period as it may think fit, the exclusive privilege of manufacturing or supplying of liquor. Section 22 of the Act reads as follows: ―Grant of exclusive privilege of manufacture and sale of country liquor or intoxicating drugs or denatured spirit or any other intoxicant- (1) The State Government may grant to any person, on such conditions and for such period as it may think fit, the exclusive privilege – (a) (i) of manufacturing or supplying wholesale, or 3 (ii) of manufacturing and supplying wholesale, or (iii) of selling wholesale or retail, or (iv) of manufacturing or supplying wholesale and selling retail, or (v) of manufacturing and supplying wholesale and selling retail, any country liquor or intoxicating drug within any specified local, or (b) of manufacturing, storing using, possessing, exporting, importing including wholesale or retail sale of liquor which after manufacture is denatured to render it unfit for human consumption and is thereby termed as denatured spirit, and any other intoxicant; Provided that public notice shall be given of the intention to grant any such exclusive privilege, and that any objection made by any person residing within the area affected shall be considered before an exclusive privilege is granted. (2) No grantee of any privilege under sub-section (1) shall exercise the same unless or until he has received a license in that behalf from the Collector or the Excise Commission‖. Section 91 of the Act deals with the power of the Board of Revenue to make rules. Section 38 of the Act also authorises the Board to make rules and such restrictions regarding manufacture, etc. of the liquor. The Supreme Court in M.R Patel v. State of Bihar (AIR 1966 SC 343) also held that the Board of Revenue, in exercise of the powers conferred on it by Sections 38 and 91 of the Act, can issue general instructions with regard to the conditions of any licence granted under the Excise Act. Section 92 of the Act provides that all rules made, and notifications issued under the Act shall be published in the official gazette and on such publication it shall have the effect as if enacted under the Act. Therefore, only the Board can issue notifications regarding the conditions of licence and other restrictions on the licensees regarding manufacture and supply of liquor and that too by rules, notifications, etc published in the official gazette. Since only the State is authorised to grant the exclusive privilege of manufacture and supply of liquor, it invited tenders from interested parties to grant the exclusive privilege of manufacture and wholesale supply of country liquor in the Saran Zone comprising of the 4 districts of Saran, Siwan and Gopalganj for the period from 1.6.2005 to 31.3.2008 by notice dated 18.8.2004 (published on 19.10.2004). The petitioner responded to the tender notice and was granted the exclusive privilege of manufacture and wholesale supply of country liquor in the Saran Zone comprising of the districts of Saran, Siwan and Gopalganj, as could be seen from Annexure 2 dated 31.5.2005. It was issued licence in Form 27 for the manufacture and wholesale supply of country liquor in Saran Zone comprising of the districts of Saran, Siwan and Gopalganj. Meanwhile, the State has taken a policy decision to handover the responsibility of wholesale supply of all kinds of liquor to the Corporation with effect from 1.10.2006. Accordingly, the rules were amended, as can be seen from Annexure 3 dated 12.8.2006. Even though the said decision was challenged by some of the parties, that was upheld by the Court as the State has got the exclusive right to deal with foreign liquor and there is no fundamental right for any party to deal in liquor. But, at the same time, the State has a duty to act fairly without any discrimination. Even though licence was granted to the petitioner for manufacture and wholesale supply of country liquor, the second part of the licence was withdrawn as the wholesale supply was handed over to the Corporation. The respondents, by letter dated 27.9.2006, issued guidelines stating that with effect from 1.10.2006, the licence granted to the manufacturers in Form 27 was changed and vide notification dated 21.9.2006, a new licence in From 27(C) was granted to the Corporation enabling it to do the wholesale supply of the country liquor and the manufacturers were required to pay the licence fee of Rs.1,50,000/- annually and the licence fee for the Corporation was fixed at Rs.2/- per L.P litre on the MGQ fixed for the area. Consequently, the condition for supply of country liquor was re-determined and the manufacturer has to supply liquor to the 5 Corporation only. The State Government modified the licence granted to the petitioner and the petitioner is still doing the business on the strength of the licence issued in Form 27 as the Board of Revenue has extended the period of contract as prescribed under Clause 19 of the licence. 3. Now we will see the conditions of licence issued to the petitioner. Clause 4 of the licence reads as follows: ―4. The licence shall be bound by the Bihar Excise (Fee) Act, 1915 and by the rules framed under the Act so far as these may relate to him. He shall deposit a sum of Rs.1,50,000/- (one lac and fifty thousand) in advance in a lump sum as licence fee at the annual rate for each manufactory situated in the area where he wants to sell the country-made liquor after manufacturing.‖ Clause 7 shows that the licensee has to sell the liquor to the Corporation. It is an outright sale. Clause 7 reads as under: ―7. The sale of liquor under this licence shall be made, from time to time, only to the persons (specified as wholesale licensed vendor) producing passes in prescribed form authorizing the sale to them of the same type/types and quantity.‖ Clause 16 provides that the manufacturer shall supply country-made liquor to the Corporation only after receiving bank draft of the cost of country-made liquor. After payment of price by bank draft, on delivery of the article to the designated godown, sale is complete. Clause 16 reads thus: ―16. The manufacturer licensee shall supply the country-made liquor in bottles after receiving bank draft of the cost of country-made liquor from the wholesale licensee. The manufacturer licensee shall give separate receipt of the said received amount to the wholesale licensee. The counterfoil of which shall be kept in safe custody in the guard file of the warehouses.‖ Clause 25 also provides that if the contractor or his representative violates the conditions of the licence, it shall be cancelled or suspended under Section 42 and liable to penalty under Section 57 of the Act. Form 27(C) is the licence to supply, in wholesale, country/spiced country spirit, wherein it is 6 specified under clause (2) that the Corporation is also bound by the provisions of the Act and the Rules and it is also liable to pay licence fee. Clause (2) reads as under: ―The licensee shall be bound by the provisions of the Bihar Excise Act, 1915 and the rules framed thereunder so far as these may relate to him. He shall deposit licence fees at the rate of Rs.2 per L.P liter on guaranteed quantity of the area where he wants to sell the country-made liquor/spiced country-made spirit in wholesale; if supply is more than the guaranteed quantity in a financial year, more licence fee shall be payable for that much quantity‖. It also provides that it can sell/supply the country liquor to the retailers only after receiving the price inclusive of tax by bank draft. A provision for penalty is also incorporated under Clause 7. The above conditions are imposed under the licence on the basis of the notification published by the Board of Revenue. 4. While the dealings were continuing on the terms of the amended licence, the Corporation published a new ‗liquor policy‘ for 2008-09. It is contended by the petitioner that some of the provisions of the ‗liquor policy‘ are contrary to the conditions of licence and the rules. The policy also compels the manufacturers to execute an agreement accepting the conditions in the liquor policy, which, according to the petitioner, is against the terms of the licence. 5. The main objections of the petitioner are directed against Clauses 2(iv), 2(viii), 5.1, 5.5, 9.1, 9.2, 9.3, 9.4, 9.6, 9.7, 10, 10.2, 11 and 15 of the Policy. ―2(iv) - An agreement as in the format at Annexure 4 (page 17 duly executed by the authorised signatory of the manufacturers on a stamp paper of the denomination of Rs.100/- (One hundred) only.‖ ―2(viii) - Security Deposit of Rupees 50,000 (Fifty thousand) only in the form of Bank Guarantee.‖ ―5.1 - Supply of liquor (Country liquor/Spiced Country liquor) by manufacturers to the Corporation shall be based on the O.F.S issued 7 by the Corporation on request of supplier. The Corporation shall issue O.F.S based on the stock requirements of depots after duly considering the quantity held, the sales trend and requests of the manufacturer, if any. To facilitate the process, the manufacturers may indicate the requirement of the type and pack sizes of liquor in various depots. However, the Corporation reserves its right to decide the quantity for which O.F.S may be issued. O.F.S for Spiced Country Liquor (SCL) will be issued from the Corporation Headquarters whereas O.F.S for Country Liquor (CL) will be issued by concerning depot manager.‖ ―5.5. The O.F.S would indicate the validity date within which the manufacturers should complete the delivery. If a manufacturer does not honour the quantity indicated in the O.F.S within the validity period, then the order for the remaining quantity shall lapse automatically. The Corporation may, at its discretion, extend the validity of the O.F.S and the manufacturer shall honour the O.F.S within the extended validity period without fail. However, the Corporation shall charge a fee for extending validity of each O.F.S for CL/SCL as under: (i) For first 3 days or part thereof – Rs.500 per O.F.S (ii) For every next 3 days or part thereof – Rs.1000/- per O.F.S. However, these rates may be revised by the MD, BSBCL from time to time for valid reason.‖ ―9 - Stocks held for sale: 9.1 - Manufacturers may note that supply of liquor to the Corporation against orders for supply shall be construed as an agreement to sell under sub-section 3 of Section 4 of the Sale Goods Act, 1930. The sale shall be concluded only when the liquor is delivered to retailers/buyers by the Corporation. The Corporation would take necessary care of the stored stock as is reasonably possible and expected of it.‖ ―9.2 - Damage to stocks of liquor held for sale as a result of any negligence on the part of the manufacturer/manufacturers or the transporter, would be to the account of the manufacturer concerned. Instances of sachets having perforation/bottles having hairline cracks resulting in steady evaporation or leakage of the contents, quantity filled being less than the declared quantity, damage due to weak carton-boxes, etc., which are controllable by the manufacturer cannot be treated as storage losses attributable to the Corporation. Such or other similar losses whenever detected shall be treated as transit losses and the concerned manufacturer debited accordingly. Any decision of the Corporation as regards the nature and quantum of such losses shall be final. Manufacturers may, if they so desire, depute their representatives to verify such sachets/bottles and satisfy themselves.‖ ―9.3 - Manufacturers may appreciate that storage-space as a resource has to be optimally utilised and slow moving/non-moving stocks of 8 any manufacturer/manufacturers should not result in limiting market- access of other manufacturers. It is, therefore, necessary that stocks move regularly and non-moving/slow moving stocks are weeded out. The stocks held by the Corporation would therefore be categorised as under:- (a) Active stocks – Stocks that are upto 21 days old in case of country liquor and 60 days old in case of spiced country liquor, would be treated as active stocks. (b) Inactive stocks – Any stock stored for a period more than 21 days in case of country liquor and 60 days in case of spiced country liquor will be treated as Inactive stock. (c) Inactive stocks as aforesaid shall be charged a demurrage of Rs.2/- per case/per crate per day. The demurrage shall be computed on the basis of carton box/days (i.e. one carton box of an inactive item stored for one day is termed as a carton box/day and would attract a demurrage of Rs.2/-) and adjusted against the payments due to the manufacturer/manufacturers of such stocks.‖ ―9.4 - In the beginning of the month, the Corporation would view details of inactive stocks (items) as at the end of the previous month, with a request to the manufacturer to liquidate them within thirty days. If the manufacturer does not take necessary action to liquidate such stocks within the period aforesaid, the Corporation would dispose of the inactive stocks in any manner as may be appropriate and the difference between the price of delivery of liquor and the amount realised shall be borne by the manufacturer concerned. Such manufacturer shall not have any further claim against the Corporation in respect of such stocks. 9.5 In case manufacturers make a written request to the Corporation about their intention to withdraw stocks of CL/SCL from depots for re-processing in view of their non-movement, deterioration in their quality and packing etc., the BSBCL will recommend to the Excise Commissioner to permit them to take back the stocks for re- processing in the manner to be prescribed by the Excise Department. Corporation margin plus demurrage shall be recovered from the manufacturers in case of taken back stocks for reprocessing, just like other stocks. 9.6 - However, any stock of CL/SCL lying unsold for a period of over six months from the date of bottling/satcheting or stocks declared unfit for human consumption while lying at the depot shall be drained out by the Corporation. Any expenditure incurred by the Corporation towards this shall be recovered from the manufacturer. No compensation shall be payable in respect of such stock. Corporation margin plus demurrage shall be recovered from the manufacturers in case of such stocks also, just like other stocks. 9.7 - The warehouse/depot losses due to breakages and other reasons will be wholly borne by the manufacturer who will participate in joint verification at least once every quarter.‖ 9 ―10 - Inter-Depot Transfers 10.1- The Corporation shall have the liberty to effect inter-depot transfer of stocks for quick and easy disposal. Manufacturers may also request for such transfers, if in their opinion, such transfers would facilitate disposal of stocks. However, the decision of the Corporation in this regard shall be final. 10.2 - Manufacturers shall bear all expenses towards inter depot transfers. If for any reason, the Corporation expends any amount towards the transfer, like permit fees, such amounts shall be immediately debited to the account of the manufacturers. Transit losses due to the transfer shall be borne by the manufacturers. 10.3 – Where any application is presented for issue of inter depot transport order the manufacturers shall be required to deposit fee @ Re.1/- per CB (case-box)/per crate subject to minimum of Rs.50/- per T.O.O (transfer-out order) or as decided by M.D, BSBCL from time to time. However, as regards extension and cancellation of T.O.O, the fees prescribed for extension/cancellation of O.F.S (Order for Supply), as mentioned in relevant clauses shall be applicable.‖ ―11 – Payment of stocks sold 11.1 - The Corporation shall pay the manufacturers only for the stocks sold. Unsold stock shall not be eligible for any payment by the Corporation. 11.2 – It is the responsibility of the manufacturers and not the Corporation to effect the sales. The role of the Corporation shall be that of a facilitator only. 11.3 – The amount payable to manufacturers for the sales provisionally recorded within the week ending every Saturday shall be computed and paid on the following Wednesday. Any amounts to be recovered from the manufacturer due to demurrage, interest, etc. shall be recovered out of the amounts payable. The Corporation would provide a statement of provisional sales recorded to facilitate reconciliation. Any missing data due to delays/failures in electronic transfer of data shall be reckoned in the succeeding week, and adjusted. 11.4 – The Corporation prefers to transfer the amounts due to the manufacturer directly to their bank accounts. To facilitate such transfer, manufacturers may open their accounts with any one of the bankers to the Corporation. 11.5 – The Corporation would not be a party to any bill discounting arrangement that the manufacturer may enter into with his bank. 11.6 – Once in three months, the Corporation would verify un-audited sales data and rework the payment due to the manufacturer. Any adjustment necessary would be made after such verification. 10 11.7 – The Corporation would provide an extract (statement) of all transactions of the manufacturer concerned before the 10th of the succeeding month. Manufacturers may verify the statements and point out instances of differences, if any, within the next two months. The Corporation would, after confirmation, initiate corrective action. However, the Corporation shall entertain no such difference after two months of the close of the financial year. 11.8 – The Managing Director, M/s. Bihar State Beverages Corporation Ltd., Patna reserves the right to modify the terms of payments with the consent of the manufacturers. 11.9 – The manufacturers shall be liable to pay VAT as per provisions of the law, and at rates applicable in the Bihar VAT Act.‖ ―15 - Prejudicial act: If during the currency of the contract, the manufacturers or any of their representatives, workers or agents are found indulging in any activity, which directly or indirectly, is prejudicial to the interest of the Corporation or the Government of Bihar, or are found of – a) offering illegal gratification of any kind including a bribe, reward or advantage, etc., pecuniary or otherwise, to any officer or employee of the Corporation, or b) indulging in any malpractice, such as, forgery, falsification or fabrication of any documents, bills, vouchers, delivery challans, etc., or introducing any liability in connection with the supply of CL/SCL which amounts to an offence punishable under the Indian Penal Code or any other law in force; the Corporation, without prejudice to other legal rights, shall have the right to terminate the contract forthwith, black-list the manufacturer/concerned and forfeit its amounts as may be lying with the Corporation besides initiating other appropriate action. All losses that may be incurred by the Corporation in this regard shall be recoverable from the manufacturer. 15.1 – The Corporation reserves the right to terminate any contract with any manufacturer with one month‘s notice without assigning any reason. The manufacturers should abide by the provisions of the Bihar Excise Act, 1915, and the rules made thereunder in force from time to time and any other relevant enactment like the Standards of Weights & Measures Act, 1976, and Packaged Commodities Regulations, 1975, etc. The manufacturer is solely and individually responsible for all the consequences arising out of any violation in this regard. Any legal complications arising out of failure to comply with various rules shall be the liability of the manufacturers concerned. Any losses/damages suffered by the Corporation due to any lapse on the part of the manufacturers in not complying with any of the rules will be made good by the manufacturers concerned. 15.2 – Dues recovery process:- Any outstanding liabilities or dues since the inception of BSBCL, not honoured by the manufacturer/suppliers shall henceforth be treated as Public Demand 11 under the Bihar and Orissa Public Demand Recovery Act 1913 and it shall be recovered by the procedure laid down for the same in the aforesaid Act‖. 6. The petitioner wrote Annexure 8 letter of objection to various authorities including the respondents questioning the liquor policy and against the execution of such agreement. Questioning the liquor policy, he filed this writ petition on 6.12.2008. But, in view of the compulsion and necessity, he signed the agreement on 15.12.2008 with a specific endorsement, which reads as follows: ―Note: The above agreement is without prejudice to our right and contention as raised in writ petition already filed, copy whereof has been served on the BSBCL and the conditions contained in the agreement hereby executed which are contrary to or modify the provisions of the New License conferred or the scope of the Govt. resolution dated 12.8.2006 shall not be binding on us‖. It is also followed by another letter of protest dated 15/18.12.2008. 7. The learned Advocate General submitted that the