ORISSA HIGH COURT: CUTTACK W.P.(C).No. 5627 of 2010 In the matter of application under Articles 226 and 227 of the Constitution of India. ----------------- Smt. Sunita Senapati … Petitioner. -Versus- State of Orissa & others … Opp. Parties. For Petitioner : M/s. G.Acharya, T.P.Acharya, J.S.Acharya, P.K.Das, A.K.Mahakud & B.Das For Opp. Parties : Mr.S.S.Mishra, Addl. Government Advocate ---------------- P R E S E N T: THE HONOURABLE MR. JUSTICE A.S. NAIDU AND THE HONOURABLE MR. JUSTICE B.N. MAHAPATRA Date of Hearing: 08.04.2010 : Date of Judgment: 07.05.2010 B.N.MAHAPATRA, J. This Writ Petition has been filed with a prayer for quashing the guidelines prescribed under Clause 23(B) of the Circular dated 25.02.2010 (Annexure-4) for the year 2010-11 (for short Guidelines 2010-11) pertaining to excise duty and fees structure and for a direction to the opp. parties not to reduce the percentage of profit as prescribed under Circular dated 19th December, 2006. 2. Bereft of unnecessary details facts and circumstances giving rise to the present writ petition are that the petitioner is a licencee under O.P. No.1 for running IMFL Off Shop at Patia and Rasulgarh No.II, Bhubaneswar. Prior to 2001, liquor business in the State of Orissa was directly handled by the manufacturers through their wholesalers and retailers. On the 1st day of January, 2001, the Orissa State Beverages Corporation Ltd. (for short ‘the Corporation’) was established to carry on wholesale trade and distribution of foreign liquor in the State of Orissa and it became mandatory for all the IMFL Off Shopkeepers to purchase liquor from the Corporation for the purpose of sale in retail. For the first time in the year 2006, it was decided by the State government for fixation of maximum retail price of IMFL and Beer bottle. Accordingly, the Government of Orissa in Excise Department vide its letter dated 19th December, 2006(Annexure-3) wrote to the Managing Director of the Corporation informing that the Government had approved the recommendation of the Price Fixation Committee of the Corporation regarding the principles and formula for determination of Maximum Retail Price (for short ‘MRP’) of IMFL and Beer bottle. In the said letter, it was further informed that the Corporation had been requested to intimate all the suppliers and manufactures to take effective steps for printing MRP inclusive of all taxes and duties on IMFL and Beer bottles. While determining the MRP, the profit margin for retailers on different products was provided varying from 41% to 25%. However, in the guidelines issued for the year 2010-11 under Annexure-4, the Government of Orissa in Excise Department has reduced the profit margin in respect of retailers like the petitioner on different products varying from 25% to 15%. This being the reason for which the present writ petition has been filed. 3. Mr. Goutam Acharya, learned counsel appearing on behalf of the petitioner vehemently argued that Clause 23(B) of the Guidelines 2010-11 is arbitrary, unjustified and made without proper application of mind. No reason has been assigned by the opp. parties for reducing the profit margin of 2 the retailers in respect of different types of liquor in the Guidelines for the year 2010-11 from the profit margin prescribed in Circular dated 19th December, 2006 (for short ‘Circular 2006’). The Corporation being a licencee under the opp. parties like the petitioner should not be allowed to decide the landing cost of IMFL and Beer along with its own profit margin, when the profit margin of the retailers has been decided by the State Government. This action is clearly violative of Articles 14 and 19(1)(g) of the Constitution. The Guidelines 2010-11 is silent as to who will be benefited by such reduction of the profit margin of the retailers. The petitioner will suffer irreparable financial loss because of such reduction of the profit margin prescribed in the Guidelines 2010-11, which is violative of Article 19(1)(g) of the Constitution. Due to such reduction of profit margin the revenue generation in the State will ultimately hamper to a lot. While the licence fee has been increasing @ 10% from year to year since 2000, the reduction of profit goes to prove the highhandedness of the opp. parties. Manufacturers as well as the Corporation, who are by and large business entities, have not been touched in the Guidelines 2010-11 so far as their profit margin is concerned, whereas the profit margin of dealers/retailers has been reduced arbitrarily. The opp. parties have no authority to reduce the profit margin in the Guidelines 2010-11. 4. Per contra, Mr. Mishra, learned Addl. Government Advocate appearing on behalf of opposite parties argued that nobody has any vested right to deal with liquor trade. It is the privilege of a State. State parts with the privilege for the sake of revenue consideration. While parting with the privilege, the State Government is competent to prescribe the terms and conditions which cannot be termed to be violative of any principles of law. 3 The authority after taking into consideration several factors including interest of the general consumers have come to the conclusion that percentage of profit of the retailers should be reduced for the year 2010-11. The scope of judicial review or interference is very limited. As per Annexure- 3, the retailers were getting profit margin from 12% to 41% depending upon the category of IMFL dealt with by them. The calculation made in Annexures- 3 and 4 are presumptive in nature. In practice, the retail vendors sell the IMFL at a lesser price than the maximum retail price in the competitive market reducing their profit margin. There has been huge growth in the sale of liquor in the State since 2005-06. The Excise Commissioner in his letter No.6517 dated 01.10.2009 suggested the Government for limiting the retailers’ margin while fixing maximum retail price. After the matter was examined at length at the level of the Government in Excise Department and the Government in Finance Department, the Government has prescribed the guidelines under Clause 23(B) (Annexure-4). The matter relating to fixation of MRP has been fully decided by the Price Fixation Committee of the Corporation constituted by the State Government. In the State of Andhra Pradesh, retailers’ profit margin in relation to the IMFL is @ 20% and Beer at the rate of 25%. Similarly, in the State of Bihar, retailers’ margin is prescribed @ 15% on the MRP of the Brand. In support of his contention, Mr. Mishra, drawn the attention of this Court to the true copies of the letter No.8550 dated 10.03.2010 of the Andhra Pradesh Beverages Corporation Ltd. and letter No.5590 dated 09.09.2008 of the Bihar State Beverages Corporation Ltd. under Annexure-B/2 series to the counter affidavit. 4 5. The sole grievance of the petitioner in the writ petition is that while Clause 23(B) of the Guidelines 2010-11 prescribes that the landing cost will be decided by the Price Fixation Committee and Corporation’s margin will be decided by the Corporation itself, the retailers’ margin will be decided in the manner prescribed in the said Guidelines. While the profit margin of the Corporation is remained intact the same has been reduced in case of the petitioner-retailer. According to the petitioner, it is arbitrary, unreasonable and violative of Articles 14 and 19(1) (g) of the Constitution of India. As per Clause 23(B) of Guidelines 2010-11, profit margin with regard to the IMFL up to Rs.850/- and Beer is 25%. In case of IMFL above Rs. 850/-, the profit margin is 20%. In case of Scotch, the profit margin is 15%. The profit margin prescribed in the Guidelines 2010-11 is less in comparison to profit margin prescribed in 2006 Guidelines so far as petitioner-retailer is concerned. 6. Before deciding the issue, it is necessary to keep in mind that there is no inherent right in a citizen to sell intoxicating liquors by retail; it is not the privilege of a citizen, as it is a business attended with danger to the community; it may be entirely prohibited or be permitted under such conditions as will limit to the utmost its evils. The manner and extent of regulation rest in the discretion of the governing authority. (See Cooverjee B. Bharucha Vs. Excise Commissioner and the Chief Commissioner, Ajmer and Ors., AIR 1954 SC 220) In State of Punjab & Anr. Vs. Devans Modern Breweries Ltd. & Anr., (2004) 11 SCC 26, the apex Court held that the right to carry on trade in liquor is a fundamental right within the meaning of Article 19(1)(g) of 5 the Constitution and the State may, however, legislate prohibiting such trade either in whole or in part in terms of clause (6) thereof. In Cooverjee B.Bharucha (supra), the apex Court held that in order to determine the reasonableness of the restriction regard must be had to the nature of the business and the conditions prevailing in the trade. It is obvious that these factors must differ from trade to trade and no hard and fast rules concerning all trades can be laid down. The right of every citizen to pursue any lawful trade or business is obviously subject to such reasonable conditions as may be deemed by the governing authority of the country essential to the safety, health, peace, order and morals of the community. 6. Under Section 20(A) of the Bihar and Orissa Excise Act 1951 (for short ‘Act 1951’) the right to carry on and distribution of foreign liquor in the State is vested in the State Government or an agency of the State Government or a Corporation established and incorporated under the Companies Act, 1956 and wholly owned and controlled by the State Government for the purpose. In exercise of the powers conferred by Section 10-A of Act 1951, the Corporation has been incorporated and established under the Companies Act, 1956 on 6th November, 2000 with the corporate objectives of efficient and effective distribution, import and export of foreign liquor, Beer and C.S. with growth having social responsibility while adhering to legal and financial propriety. The State Government vide Excise Department Notification No.514 dated 30.01.2001 appointed the 1st day of February 2001 as the date on and from which the right to carry on import, export and the wholesale trade and distribution of foreign liquor in the State shall solely vest in the Corporation. The OP-authorities after taking into consideration several 6 factors including the interest of the consumers have come to the conclusion that percentage of profit of retailers should be reduced for the year 2010- 2011. The Excise Commissioner vide his letter dated 01.10.2009 suggested the Government for limiting the retailers’ profit margin while considering the question of fixation of maximum retail price. The matter regarding fixation of MRP and profit margin of the retailers was examined and discussed, as stated in the counter affidavit, in the government level in the Excise Department and in the Finance Department. The matter was also thoroughly decided by the Price Fixation Committee of the Corporation constituted by the State Government. After obtaining due approval from the Government, Clause 23(B) prescribing the margins of profit in relation to different products has been introduced in the Guidelines 2010-11. Law is well settled that a policy decision taken by a State or its authority/instrumentality is beyond the purview of judicial review unless otherwise the same is found to be arbitrary and unreasonable or in contravention of the statutory provisions or the same infringes the fundamental right of an individual guaranteed under the Constitution. In Tamil Nadu Education Deptt., Ministrial and General Sub-ordinate Services Association Vs. State of Tamil Nadu & Ors., AIR 1980 SC 379, the apex Court held as under: “Once the principle is found to be rational, the fact that a few freak instances of hardship may arise on either side cannot be a ground to invalidate the order or the policy. Every cause claims a martyr and however unhappy we be to see the seniors of yesterdays becoming the juniors of today, this is an area where, absent arbitrariness and irrationality, the Court has to adopt a hands-off policy.” 7 In Sterling Computers Ltd. Vs. M/s. M & N Publications Ltd., AIR 1996 SC 51, the Supreme Court held as under :- “It is not possible for Courts to question and adjudicate every decision taken by an authority, because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand, they can come out with a plea that it is not always possible to act like a quasi-judicial authority while awarding contracts. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the Courts, such decisions are up held on the principle laid down by Justice Holmes, that Courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of play in the joints to the executive….. On the basis of those judgments it cannot be urged that the Court has left to the option of the authorities concerned whether to invite tenders or not according to their own discretion and to award contracts ignoring the procedures which are basic in nature, taking into account factors which are not only irrelevant but detrimental to the public interest.” The apex Court in Ekta Shakti Foundation Vs. Government of NCT of Delhi, (2006) 10 SCC 337, held that the policy decision must be left to the Government as it alone can decide which policy should be adopted after considering all the points from different angles. In the matter of policy decisions or exercise of discretion by the Government so long as the infringement of fundamental rights is not shown, the courts will have no occasion to interfere and the court will not and should not substitute its own judgment for the judgment of the executive in such matters. In assessing the propriety of a decision of the Government the court cannot 8 interfere even if a second view is possible from that of the Government. In Akhil Bharat Goseva Sang(3) Vs. State of Andhra Pradesh, (2006) 4 SCC 162, the apex Court held as under:- “It is also well settled that policy decision of the Government cannot be interfered with or struck down merely on certain factual disputes in the matter. It is not open to the Court to strike down such decision until and unless a serious and grave error is found on the part of the Central Government or the State Government.” In view of the above legal propositions, it cannot be said that Clause 23 (B) is in any way unreasonable or arbitrary and violative of Article 19(1)(g) of the Constitution of India. 7. The other contention of the petitioner that Clause 23(B) authorizing the Corporation to decide its margin of profit and Government to decide the margin of profit of the retailers is hit by Article 14 of the Constitution does not merit consideration. Article 14 comes into operation only when there is discrimination between two similarly situated persons. The apex Court in Indian Hume Pipe Company Limited Vs. State of Rajasthan, (2009) 10 SCC 187), held that two persons, similarly situated, could not have been treated differently as the same may amount to discrimination. In Krishnan Kakkanth Vs. Government of Kerala, AIR 1997 SC 128, the apex Court observed as under:- “To ascertain unreasonableness and arbitrariness in the context of Article 14 of the Constitution, it is not necessary to enter upon any exercise for finding out the wisdom in the policy decision of the State Government. It is immaterial if a better or more comprehensive policy decision could have been taken. It is equally immaterial if it can be demonstrated that the policy decision is unwise and is likely to defeat the purpose for which such decision has been taken. Unless the policy 9 decision is demonstrably capricious or arbitrary and not informed by any reason whatsoever or it suffers from the vice of discrimination or infringes any statute or provisions of the Constitution, the policy decision cannot be struck down. It should be borne in mind that except for the limited purpose of testing a public policy in the context of illegality and unconstitutionality, Court should avoid embarking on uncharted ocean of public policy.” In State of Himachal Pradesh & Anr. Vs. Anjana Devi & Ors., (2009) 5 SCC 108, the apex Court held that discrimination presupposes classification of similarly situated persons into different groups without any reasonable basis, for extending dissimilar benefits or treatment. Technical services and non-technical services are different categories. Persons appointed against reserved vacancies after reservation was provided, and persons appointed before introduction of reservation, belong to different classes. Persons appointed on or after 03.05.1983 and those appointed prior to 03.05.1983 are not of the same “class”, hence different yardsticks could be applied to them. The respondents could have complained of discrimination only if a benefit had been introduced retrospectively by fixing a cut-off date arbitrarily thereby dividing a single homogeneous class into two groups and subjecting them to different treatments. That is not the case here. Choice of the date 03.05.1983 for extension of benefit of option is not an arbitrary selection of a cut-off date. It is logical and rational, being the date on which reservation was made applicable to technical services. 8. In the instant case, the Corporation is a Public Sector Undertaking, an instrumentality of the Government. It has been incorporated to achieve certain objectives. It distributes IMFL, country liquor, Beer etc. on wholesale basis. The petitioner is an individual; it carries 10 on retail business for the sake of his own interest. There is clear distinction between the Corporation and the petitioner. It is not the case of the petitioner that there are different profit margins provided among the similarly situated individual retailers. Therefore, Clause- 23(B) does not create clash within class. 9. In that view of the matter, we are of the considered view that Clause 23(B) of the Guidelines dated 25.02.2010 (Annexure-4) for the year 2010-11 being not violative of Articles 14 and 19(1)(g) of the Constitution of India we are not inclined to quash Clause 23(B) of the said Guidelines. 10. The writ petition is dismissed accordingly. No order as to cost. ……………………… B.N.Mahapatra,J. A.S. Naidu, J. I agree. ….……..………… A.S. Naidu,J. 11 Orissa High Court, Cuttack Dated 7 th , May, 2010 pcp/skj/sss