W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 1 of 30 IN THE HIGH COURT OF DELHI AT NEW DELHI W.P.(C) 4156/2002 & CM 7073/2002 Reserved on: August 18, 2010 Decision on: September 14, 2010 GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI THORUGH PRINCIPAL SECRETARY (FINANCE) ..... Petitioner Through Ms. Avnish Ahlawat with Ms. Latika Chaudhary, Ms. Simran and Mr. Nitesh Singh, Advocates versus CENTRAL DISTILLERY AND BREWERIES LTD. AND ANR. ..... Respondents Through Mr. Neeraj Kishan Kaul and Mr. Jayant Nath, Senior Advocates with Mrs. Anjali K. Verma with Mr. Niraj Gupta, Advocates. WITH W.P.(C) 4686/2002 & CM 7992/2002 GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI THORUGH PRINCIPAL SECRETARY (FINANCE) ..... Petitioner Through Ms. Avnish Ahlawat with Ms. Latika Chaudhary, Ms. Simran and Mr. Nitesh Singh, Advocates versus CENTRAL DISTILLERY AND BREWERIES LTD. AND ANR. ..... Respondents Through Mr. Neeraj Kishan Kaul and Mr. Jayant Nath, Senior Advocates with Mrs. Anjali K. Verma and Mr. Niraj Gupta, Advocates W.P.(C) 4687/2002 & CM 7991/2002 GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI THORUGH PRINCIPAL SECRETARY (FINANCE) ..... Petitioner Through Ms. Avnish Ahlawat with Ms. Latika Chaudhary, Ms. Simran and W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 2 of 30 Mr. Nitesh Singh, Advocates Versus BALBIR DISTRILLERIES LTD. ..... Respondent Through None. W.P.(C) 4689/2002 & CM 7994/2002 GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI THORUGH PRINCIPAL SECRETARY (FINANCE) ..... Petitioner Through Ms. Avnish Ahlawat with Ms. Latika Chaudhary, Ms. Simran and Mr. Nitesh Singh, Advocates versus COX INDIA LTD ..... Respondent Through None W.P.(C) 4782/2002 & CM 8153/2002 GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI THORUGH PRINCIPAL SECRETARY (FINANCE) ..... Petitioner Through Ms. Avnish Ahlawat with Ms. Latika Chaudhary, Ms. Simran and Mr. Nitesh Singh, Advocates versus BALBIR DISTILLERIES LTD. ..... Respondent Through None. AND W.P.(C) 5974/2002 & CMs 10168/02 & 13371/03 GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI THORUGH PRINCIPAL SECRETARY (FINANCE) ..... Petitioner Through Ms. Avnish Ahlawat with Ms. Latika Chaudhary, Ms. Simran and Mr. Nitesh Singh, Advocates Versus MCDOWELL AND CO. LTD AND ANR. ..... Respondents Through Mr. Jayant Nath, Senior Advocate with Mrs. Anjali K. Verma with Mr. Niraj Gupta, Advocates W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 3 of 30 CORAM: JUSTICE S. MURALIDHAR 1. Whether Reporters of local papers may be allowed to see the judgment? No 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in Digest? Yes JUDGMENT 14.09.2010 1. These are six writ petitions which involve the interpretation of clause 7.4 of the Terms and Conditions attached to the licences granted by the Government of National Capital Territory of Delhi („GNCTD‟) to each of the Respondents permitting them to sell liquor at certain prices fixed by the Commissioner (Excise) under the Punjab Excise Act, 1914 („PEA 1914‟). 2. Under PEA 1914, the Delhi Liquor Licence Rules, 1976 („Rules‟) have been framed which prescribe the procedure for grant of licence in the category of L-1 to L-20. L-1 is a licence for a wholesale vend of foreign liquor to be supplied to L-2, L-3, L-4, L-5, L-5A and L-19 licencees. The excise policy is announced by the GNCTD every year for each Financial Year in which the basic criteria for sale of liquor in Delhi is prescribed. After the issuance of the excise policy, the Commissioner (Excise) calls for applications for grant of various types of licences for supply of liquor in Delhi as per terms and conditions finalized by the Commissioner (Excise). 3. Clause 7.4 of the terms and conditions of the licence, as announced for the year 2000-01 reads as under: “7.4 The ex-distillery price shall be determined uniformly on the following basis: (a) In case of all IMFL brands excluding beer, prices will be W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 4 of 30 fixed on the basic premise of lowest ex-distillery price net of all duties, discounts/commissions of whatsoever nature allowed in respect of any market in India excluding National Capital Territory of Delhi, as on 31st March 2000 fixed for 2000-2001. Thus, the existing linkage with CSD will be delinked. (b) Beer price fixation The ex-distillery price of all brands of beer irrespective of the fact that they are new entrants or existing brands will be fixed on the basis of minimum ex-distillery price prevalent in any market of India as on 31st March 2000 provided that these are supported by invoices, documents and declarations. (c) The linkage with CSD price in fixation of ex-distillery price will continue.” 4. A number of distilleries including the Respondents in these petitions applied for L-1 license for wholesale supply of Indian Made Foreign Liquor („IMFL‟) in Delhi. Since the facts in these cases are more or less similar, the contentions advanced in detail in the case of W.P. (C) No. 4156 of 2002 concerning the Central Distillery and Breweries Limited („CDBL‟) are discussed hereafter in some detail. W.P. (C) 4156 of 2002 5. The CDBL, the Respondent in Writ Petition (Civil) No. 4156 of 2002, submitted an application on 2nd May 2000 for grant of L-1 licence for the year 2000-01. Along with the application, it submitted a declaration giving the sales figures all over India, the minimum Ex- Distillery Price („EDP‟) all over India excluding Delhi, and the minimum EDP with respect to supplies made to the Canteen Stores Department (CSD). Along with the application, it also W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 5 of 30 enclosed Appendix – C statement indicating information for each brand of IMFL. With respect to Royal Challenge Whisky („RCW‟) the Respondent CDBL indicated that such brand has been sold all over India except Kerala, and while giving the minimum wholesale prices against Tamil Nadu and Kerala, it was indicated that it was “Not sold”. On the basis of the information provided, the L-1 licence was granted to CDBL on 27th June 2000. It is further stated that for fixation of price of various brands, CDBL was called for a hearing and thereafter on 7th July 2000 an order was passed by the Excise Commissioner („EC‟) fixing the EDP of RCW at Rs. 1400 per quart case and maximum retail price („MRP‟) at Rs. 340/- per quart case. The reasoning of the EC was as under: “45. Royal Challenge Whisky – registered with CSD. The existing and CSD prices both are Rs. 1328.38 per quart case and MRP of Rs. 325/- per quart. Seeks revision on the ground that the price was fixed 3 years back, upgradation of packing by providing guala caps. At EDP of Rs. 1400/- and MRP of Rs. 340/-, revenue goes up by Rs. 8.73 per quart out of enhancement of Rs. 15/- per quart. 46. EDP/MRP in UP is Rs. 2100/425, in Rajasthan Rs. 2300/400, in Haryana Rs. 2550/350, in Punjab Rs. 1921/400, in Chandigarh Rs. 2100/350, in Himachal Rs. 2160/400. The proposed EDP and MRP is still the lowest anywhere in India. Keeping the revenue enhancement and parity with the adjoining States, EDP of Rs. 1400/- per quart case and MRP of Rs. 340/- per quart is allowed.” 6. According to the Petitioner, it later transpired that the CDBL had, while submitting the All India EDP, deliberately not disclosed the Tamil Nadu price for RCW, which was much lower than the price in the CSD and other States. W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 6 of 30 7. By a letter dated 20th September 2000, the Tamil Nadu State Marketing Corporation Limited („TASMAC‟) was requested to submit the wholesale price and MRP of all the brands of liquor supplied in Tamil Nadu. By its letter dated 4th October 2000, TASMAC enclosed a copy of the Price List as on 1st June 2000 containing manufacturer‟s basic price, wholesale price and MRP. From the information supplied by TASMAC, it appeared that for Shiva Distilleries Limited which manufactured 1000 ml and 750 ml of RCW, the EDP for 1000 ml pack size was Rs. 962/- and the EDP of 750 ml pack size was Rs. 1003/-. For Shaw Wallace & Company which manufactured Royal Challenge Premium Whisky („RCPW‟), the EDP for 1000 ml pack size and 750 ml pack size was Rs. 962/- and Rs. 1003/- respectively. 8. Accordingly, a show cause notice was issued by the EC to CDBL on 24th October 2000 under Rule 17-B of the Rules as to why the differential amount, by taking the Tamil Nadu rate as the lowest EDP, be not recovered and their L-1 licence not revoked. After taking extension of time, the CDBL finally filed its reply on 18th December 2000 stating that M/s. Pampasar Distillery Limited was a different company and a separate legal entity. It further stated that the whisky sold in Tamil Nadu is Royal Challenge Premium Malt Whisky („RCPMW‟), which is different from RCW being sold by CDBL in the NCT of Delhi. CDBL produced a sample bottle of RCPMW sold in Tamil Nadu by another company, i.e., M/s. Pampasar Distilleries Limited as well as a sample bottle of RCW being supplied by CDBL in the NCT of Delhi. It was maintained that the brand RCW was not sold by CDBL in Tamil Nadu as indicated in the affidavit dated 1st May 2000. This was conveyed to the EC by W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 7 of 30 the affidavit dated 2nd May 2000 where the lowest EDP for RCW was declared as Rs. 1904/- per quart case and that the said price is correct. It was stated that “the said brand which is claimed to have been sold in Tamil Nadu at the alleged ex-distillery price of Rs. 1003/- per case has not been manufactured or sold by us.” It was further stated that CDBL itself did not have any manufacturing facilities in the State of Tamil Nadu and, therefore, was not responsible for the discrepancies in the alleged prices. It was then stated as under: “Without prejudice to the foregoing, it is also pertinent to mention herein that in the last few months no IMFL in the name of Royal Challenge Whisky and/or Royal Challenge Premium Malt Whisky has been supplied and sold in the State of Tamil Nadu. In fact, what has been sold is the Royal Challenge Gold Whisky by other manufacturers the EDP of which is much higher than the EDP for NCT of Delhi.” It was accordingly prayed by the Respondent CDBL that the show cause notice be withdrawn. 9. By a letter dated 22nd/26th December 2000, the EC passed an order fixing the revised EDP for RCW in Tamil Nadu at Rs. 1003/- per quart case under Rule 17-B of the Rules and in accordance with Clause 7.4 of the terms and conditions for the grant for L-1 licence for the year 2000-2001. Consequently, the EC issued directions which read as under: “19. For EDP of Rs. 1003/- per quart case, the wholesale price comes to Rs. 93.28 per quart, the MRP for the quart bottle is fixed at Rs. 280/-. Accordingly, for pints EDP comes to Rs. 1015/- per pint case, wholesale works out to Rs. 47.16 per pint and MRP Rs. 140/- per W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 8 of 30 pint. For nips the EDP works out to Rs. 1027/-, wholesale price works out to Rs. 23.80 and MRP Rs. 70/-. DEO(IMFL) is directed to issue a detailed price structure as above effective from 30th December 2000. 20. The licensee is directed to have the labels of new MRP as above affixed on every bottle stocked in the bonded warehouse before 30th December 2000 and new MRP printed on the labels on new imports of stocks. 21. A separate order regarding price differential to be recovered from the licensee for the supplies made during 18th July 2000 to 29th December 2000 shall be issued. “ 10. The Respondent CDBL filed an appeal against the above order before the Financial Commissioner („FC‟). Since at the relevant time no FC was appointed by the GNCTD, the CDBL approached this Court with Writ Petition (Civil) No. 960 of 2000. The following order was passed by the Division Bench of this Court: “Admittedly the appeal is pending before the Financial Commissioner, Respondent No. 2 against the impugned order. Therefore, we would not like to comment on the merits of the controversy involved in this case. However, we direct Respondent No. 2 to decide the appeal finally within three months from today. Pending final decision of the appeal, the Petitioner is permitted to continue to sell its product at the rate of Rs. 1,400/- per quart case ex-distillery price. The Petitioner will keep the amount of difference between Rs. 1,400 and Rs. 1,003/- in a separate bank account to be opened in a nationalized bank. The Petitioner will supply monthly statement of account with respect to the deposit to the Respondent No. 3. W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 9 of 30 List the petition for directions regarding further orders with respect to the interim order passed today, i.e. with respect to the amount being kept in the separate bank account in pursuance of this order, on 17th July 2001. Interim order dated 12th February 2001 will continue to remain in force. So far as the amount of Rs.1,93,74,335.90p as per Annexure P-8 is concerned, the learned counsel for the Petitioner gives an undertaking to abide by the decision with respect to the said amount at the final stage. This is without prejudice to the contention of the Petitioner that this demand is without authority. In view of the permission granted by us to the Petitioner to sell at the rate of Rs. 1,400/- per quart case, if some directions from Respondent No. 3 are required to be issued to enable the Petitioner to market its product, the said Respondent will issue the same.” 11. Thereafter the appeal was heard by the FC and was disposed of by an order dated 7th February 2002. After noticing the submissions of learned counsel till para 8 of the order, the learned FC held in paras 9 and 10 as under: “9. I am satisfied with the arguments advanced by the Appellant and am of the opinion that the Excise Commissioner should have allowed the minimum EDP fixed for 2000-2001 as stipulated under clause 7.4 of the terms and conditions for grant of licence and also keeping in view that the brand is different and prices of raw materials and other charges are increasing every year. 10. Therefore, in view of the above, I accept the appeal and set aside the order dated 22nd/26th December 2000 and the demand notice dated 5th January 2001 issued by the Excise Commissioner. The minimum EDP for 2000-2001 is given at Rs. 1400/- per quart case. Consequently, the EDP of Rs. 1,400/- per W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 10 of 30 quart case which is the minimum among the States in which supplies were being made by the Appellant is allowed for the excise year 2000-2001 in respect of „Royal Challenge Whisky‟ brand.” Aggrieved by the above decision, the GNCTD has filed the present writ petition. Pleadings 12. The case of the GNCTD in the writ petition is that the EDP shall be determined, in terms of Clause 7.4 of the terms and conditions, uniformly while taking the basic premise of the lowest EDP in respect of any market in India excluding National Capital Territory of Delhi. It is pointed that the Respondent CDBL deliberately did not disclose the Tamil Nadu EDP when clearly the Royal Challenge brand was being sold in Tamil Nadu by different distilleries i.e. Shiva Distilleries Limited and Shaw Wallace & Company. Although it did not refer to M/s. Pampasar Distillery Limited as one of the manufacturers of Royal Challenge Brand, it was perhaps possible that later M/s. Pampasar Distillery also started manufacturing the Royal Challenge Brand under their franchise. It is contended that it may have made no difference whether the whisky was RCPMW or RCW and the fact remains that both brands were identical in quality and, therefore, both are having the same rates. It is further submitted that the FC‟s order is in fact a non-reasoned one. It is submitted that mere shifting of brand from one distillery to another cannot absolve the Respondent from ensuring that the EDP is correctly fixed under Clause 7.4. An erroneous interpretation has been placed by the FC in concluding that since the brand was different and prices of raw material and other charges were increasing every year, higher EDP was permissible. This W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 11 of 30 will defect the very price fixation policy. 13. In the counter affidavit filed by CDBL, a preliminary objection was raised to the maintainability of a writ petition filed by the EC, whose rank is below the FC. The applications praying for impleadment of GNCTD as Petitioner No. 1 and consequential amendment of the writ petition were filed way back in the year 2003. They have been allowed by a separate order passed by this Court. This Court accordingly rejects the preliminary objection. Submissions of Counsel 14. Ms. Avnish Ahlawat, learned counsel appearing for the Petitioner submitted that at the time the EDP was initially fixed, the EC did not have the information that was later on furnished by TASMAC. This clearly showed that the EDP of 750 ml RCW sold by Shiva Distilleries Limited was Rs. 1003/-. Likewise, the EDP of 750 ml of RCPW manufactured by Shaw Wallace & Company was also Rs. 1003/-. The FC overlooked the above facts in fixing the price at Rs. 1400/- per quart case. It was further submitted that though the public at large had paid the higher price, the Respondent cannot get the benefit of unjust enrichment in the matter. It is pointed out that the extra benefit which the Respondent derived has to go back to the State as the money coming to the State is utilised for the public. The question was not of higher revenue generated by the State but was about the customer having to pay more for a brand of whisky that was sold cheaper elsewhere. According to Ms.Ahlawat, the doctrine of unjust enrichment is not applicable so far as the State is concerned. The liberalised policy with respect to price fixation was adopted in later years and such later policy will not be applicable for W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 12 of 30 determination of price fixation for the year in question. It is further pointed out that it is the price of the brand which is required to be seen and not the company or distillery manufacturing that brand. 15. It is submitted by Mr. Neeraj Kishan Kaul and Mr. Jayant Nath, learned Senior counsel for the Respondent CDBL that for the subsequent excise year 2002-03, Clause 7.4 of the terms and conditions has been modified and now the prices of IMFL brands excluding beer shall be fixed “on the basic premise of the lowest ex-distillery price net of all duties, discounts/commissions of whatsoever nature allowed in respect of any market in India, irrespective of the fact whether the brand is supplied by the applicant distillery/brewery/ bottling plant or any other distillery/brewery/bottling plant under any kind of usership/franchise agreement or under any other arrangement. For this purpose, the minimum ex-distillery price as on 31st March 2002 will be the basis for fixation of prices.” Therefore for the earlier year unless the Respondent CBDL itself manufactured and sold RCW at a lower EDP elsewhere, lowest EDP could not be that charged by some other distiller. It is accordingly submitted that the Petitioner was trying to misread Clause 7.4 of the terms and conditions. Reference is also made to test report which brought out the distinction between the RCPMW manufactured by Pampasar Distilleries Limited in Tamil Nadu and the RCW which has been manufactured and marketed by CDBL in Delhi. According to the Respondent, RCW manufactured by it has a distinctive and superior bottle, mono-carton, logo, design and cap etc. The alcohol content and the blend also justified the higher price. It is further submitted that the price list furnished by TASMAC did not give the sales figures and, therefore, both parties had proceeded on the W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 13 of 30 assumption that RCW was not being sold in Tamil Nadu at all by anyone. During the relevant period, what was sold was only RCPMW. It was for this reason that the EC had undertaken a comparison of the test results of the two brands which were called for by him. The Petitioner was trying to change the very basis of this case in this Court by producing a price list sent by TASMAC, which was never produced either before the FC or before the EC and, also not shown to the Respondent. 16. It is further submitted that an identical order was passed by the FC for the subsequent year 2001-02 for the same brand of IMFL whisky. That order had been accepted by the GNCTD and had become final. Reference is made to the decisions in Union of India v. Kaumudini Narayan Dalal (2001) 249 ITR 219 and Commissioner of Central Excise & Customs, Cochin v. Alsthom T&D Transformers Ltd (2005) 12 SCC 419. It is submitted that since the FC‟s similar order for the subsequent year has been accepted by the GNCTD, the present petition by the GNCTD for the earlier year challenging the FC‟s order was misconceived. It is further pointed by Mr. Kaul that pursuant to the interim order passed by this Court, the difference in the price between Rs. 1400/- per quart case and Rs. 1003/- per quart case was deposited by the Respondent in a separate bank account. This amount then got released to them in pursuance of the order dated 22nd May 2002 passed by the Division Bench of this Court after the impugned order was passed by the FC. By the time the present writ petition was filed, the said amount was already released back to the Petitioner. By filing the present writ petition, the GNCTD was seeking to recover the amount which has been permitted by this Court to be released to the Respondent after the order of the FC. He submitted that this was W.P. (Civil) Nos. 4156, 4682, 4686-87, 4689, 5974/2002 Page 14 of 30 impermissible in law. 17. It is next submitted that on the date of the order passed by the EC i.e. on 22nd/26th December 2000, the sale of RCPMW had discontinued even in Tamil Nadu. A further objection was raised by Mr. Jayant Nath, learned Senior counsel that the EC wrongly relied upon Rules 33 (17A) and 33 (17B), which had in fact been amended on 16th May 1994. Under the amended Rule 33 (17A), the criteria for fixation of price had to be with the prior approval of the Lieutenant Governor („LG‟). In the present case, the Petitioner had not shown any document which would indicate that the LG had approved the terms and conditions. 18. The above submissions have been considered by this Court. Interpretation of Clause 7.4 of terms and conditions 19. The interpretation of Clause 7.4 of the terms and conditions which has been extracted hereinabove makes a distinction between beer and other IMFL brands of liquor. In the present case, the criteria for fixing the price as announced for the year 2000-01 arises for consideration. It is immaterial whether Clause 7.4 of the terms and conditions has been differently worded for the subsequent years. Even otherwise, the wording of Clause 7.4 for the subsequent year does not, in the view of this Court, introduce any new criteria. It is but clarificatory of the criteria set out in the year 2000-01. This Court is