HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE K.C.BHANU W.P.Nos.12067, 14859, 14346, 13896, 14345, 14299, 14429, 14937, 14610, 14601, 15025, 15797, 16667, 17135, 16554, 16515 and 16729 of 2006 DT. 5-12-2009 WP NO.12067/2006 M/s. Siri Bar & Restaurant, D.No.10-2-9/1, Siripuram Junction, Visakhapatnam, represented by its Proprietor, Kondeti Koteswara Rao …Petitioner V. 1. Government of Andhra Pradesh, represented by its Secretary, Revenue (Excise-II) Department, Secretariat, Hyderabad and others. ..Respondents HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE K.C.BHANU W.P.Nos.12067, 14859, 14346, 13896, 14345, 14299, 14429, 14937, 14610, 14601, 15025, 15797, 16667, 17135, 16554, 16515 and 16729 of 2006 COMMON ORDER: (Per the Hon’ble Sri Justice A. Gopal Reddy) Since the issue involved in all the writ petitions is one and the same, they are heard together and disposed of by this common order. In all these writ petitions, the petitioners seek to challenge Rule 6 (1) (i) (a) contained in G.O.Ms.No.596, Revenue (Excise.II) Department dt. 26-5-2006 amending the corresponding Rule contained in A.P.Excise (Grant of Licence of selling by Bar and Conditions of Licence) Rules, 2005 issued in G.O.Ms.No.997, Revenue (Excise.II) Department dt. 24-5- 2005 as arbitrary and illegal and for a consequential direction to the respondents to grant Form-2B Bar Licence to the petitioner without reference to the amended rule contained in G.O.Ms.No.596 dt. 26-5-2006. Since all the writ petitions contain similar facts, it is unnecessary to notice the facts in all the writ petitions except facts in WP No.12067/2006. The petitioner in WP No.12067/2006 obtained a Bar licence in Form-2B for the excise year 2005-06, vide Licence No.22/2005-06, for conducting the trade of sale of liquor at premises No.10/2/9/1, Siripuram Junction, Visakhapatnam, as per the existing rules issued in G.O.Ms.No.997 dt. 24-5-2005. According to the petitioner, licensed premises is ad-measuring 147.43 sq.meters covered by zinc sheet roof with false ceiling and air-conditioned. Thus, the inside roof of the licensed premises reflects as permanent structure. While so, through the impugned G.O., item (a) in clause (i) of sub-rule (1) of Rule 6 has been amended prescribing a minimum plinth area of 150 sq.meters, and out of which a minimum of 100 sq. meters shall be RCC roof structure. Since grant of license for Bar and Restaurants is on payment of fixed quantum of licence fees and there is no auction system and to encourage sales of liquor in retail wine shops, it has avowed object of discouraging and reducing the number of Bar and Restaurants, the above amendment has brought into existence to deny renewals of bar licences to the Bar and Restaurants which are housed in premises covered by zinc sheet roofing. There is no rationale and no objective is sought to be achieved by introducing the amendment by prescribing a minimum plinth area of 150 sq.meters out of which 100 sq.meters shall be RCC roof structure. Therefore, making a condition of 100 sq.meters RCC roof structure for grant of Bar Licence is arbitrary and illegal and the petitioners who are running business were dis-qualified for obtaining licence in the form of renewal, and the same is liable to be set-aside. The Commissioner, Prohibition & Excise, Andhra Pradesh, Hyderabad filed a counter-affidavit and also additional counter-affidavit. In the counter-affidavit, it is contended that the trade in alcoholic breweries is not protected under Art. 19 of the Constitution of India and having regard to the fact that this trade or business are res extra commercium and no person involved in the trade of business in intoxicants or alcoholic breweries can claim to have a fundamental right. The State under its regulating power has a right to prohibit every form of activity in relation to intoxicants, its manufacture, sale, possession etc., as held by the Supreme Court in KHODAY DISTILLERY Ltd., V. STATE OF KARNATAKA[1]. Bars and shops of liquor are governed by two different set of rules. The licence for a Bar is not an independent licence and it is granted for a period of one year to an establishment which is having a restaurant licence granted by a local authority, whereas shop is an independent licence granted by way of lease for a period of two years by inviting sealed tenders from the intending public. The licence fee for a bar is fixed on the population of a Municipality or a Municipal Corporation or a village recognized by Tourism Department, whereas, the lease amount of the shop varies from shop to shop depending on the lease amount offered. Bar is an extra facility offered to a restaurant where food items are served to serve liquor. Bar is a place where consumption is allowed, whereas a shop is a place where sealed liquor bottles are sold. Bar and shop licences are governed by different set of rules and different fee structure and modes of selection. In the month of August, 2005, during inspections conducted by a team of officers in Guntur, Krishna, Visakhapatnam, Warangal, Karimnagar and West Godavari Districts, it has come to the notice that a large number of bars sanctioned in 2005 are located in temporary structure having zinc sheet roof, asbestos sheets roofs or fiber sheet roofs. That necessitates to amend the rule and accordingly rule 6 (1) (i) (a) has been amended prescribing that a minimum 100 sq.meters of plinth area of the bar premises will be permanent RCC roof structure. It is denied that to discourage the continuance of bars and restaurants, the amendment has been brought. Since the amendment to rule 6 has been done keeping in view the interest of the customers/consumers, the same is not at all arbitrary and un-constitutional. In the additional counter-affidavit, it is stated that a Division Bench of this Court stayed the amended rule by taking into consideration that the stipulation of 100 sq.meters of RCC roofed structure for grant of licence in the Bar as irrational and arbitrary, but the Honoruable Court did not express any view with regard to stipulation of 150 sq.meters of plinth area for the purpose of granting licence. By virtue of suspension of the rule as a whole, stipulation that 150 sq.meters of plinth area for granting licence also stands stayed. Therefore, requirement of 150 sq.meters is justified for the reason that licenced premises shall house Bar and Restaurant and thereby a minimum space is required. The Bar and Restaurant consists of dining hall, consumption hall, store room for provisions, store room for liquor, counter, toilets for gents and ladies separately and kitchen. In the above circumstances, prescribing plinth area of 150 sq.meters for Bar and Restaurant is justified. Sri Vedula Venkata Ramana, learned counsel for the petitioner in WP No.12067/2006 contended that the parent Act ie., A.P.Excise Act,1968 is silent and has not provided any guidelines on which excise licences were granted. The rule making power under Sec. 72 is general and the rule is a delegated legislation, the rule restricts grant of licence is violative of Art. 14 of the Constitution of India. He further contends that under Sec. 72 (2) (h) Bar Rules were promulgated and no specific parameters are prescribed that a particular licence will be granted on satisfying certain conditions. The petitioners who were granted licences under the old rules suffered disqualification for renewal since the premises do not have 100 sq.meters RCC roof structure, therefore, fixing the requirement 100 sq. meters RCC roof structure as a condition for grant of licence for bar is arbitrary and irrational. The object sought to be achieved in prescribing 100 sq.meters has not been explained. When the rule is under challenge, the rule making authority has not filed any counter-affidavit, namely, responsible Secretary; therefore licensing authority has not justified the rule. Entire purpose appears to be to discourage bar licences so as to increase sales in retail business. In support of the above submissions, reliance is placed on the following judgments: 1. RAM KRISHNA DALMIA V. JUSTICE TENDOLKAR[2] 2. KHODAY DISTILLERIES Ltd., V. STATE OF KARNATAKA; 3. CENTRAL INLAND WATER TRANSPORT CORPORATION LIMITED V. BROJO NATH[3] 4. MANEKA GANDHI V. UNION OF INDIA[4] 5. IN RE. SPECIALCOURTS BILL, 1973[5] To substantiate the contention that the impugned rule violates the principle of equality enshrined in Art.14 of the Constitution of India, reliance is placed on the judgment of the Supreme Court in D.S.NAKARA V. UNION OF INDIA[6]. He further contended that Excise Act does not per se discriminate the interest of the consumer and State, therefore the rule prescribing 100 sq.meters RCC roof structure does not disclose the object sought to be achieved. Learned counsels appearing for the petitioners in other writ petitions have adopted the arguments advanced by Sri Vedula Venkata Ramana. Sri A.Sudershan Reddy, learned Additional Advocate General appearing for the respondents would contend that rule 6(1) (i) (a) as amended prescribing minimum plinth area of 150 sq. meters, and out of which a minimum of 100 sq.meters shall be RCC roof structure equally applies to all the persons who are seeking bar licences. No citizen can have a fundamental right to carry on trade in intoxicating liquor, which should be abided by the regulations framed in that regard. For the said proposition, reliance is placed on the following judgments: 1. COOVERJEE V. EXCISE COMMISSIONER[7] 2. NASHIRWAR V. STATE OF M.P.[8] 3. MOHD. FIDA KARIM V. STATE OF BIHAR [9] 4. M/S. UGAR SUGAR WORKS LTD., DELHIADMINSITRATION & ORS[10] 5. VENKATESWARA THEATRE V. STATE OF ANDHRA PRADESH[11] He further contends that in the absence of any discrimination among licence holders and rules are uniformly apply to all bar licences, it is not open for the petitioners to contend that the impugned rule is discriminative in nature and violative of Art. 14 of the Constitution. When bars and shops licences are governed by different set of rules, different standards will always be prescribed for grant of such licences. In reply to the contentions advanced by the learned Additional Advocate General, Sri Vedula Venkata Ramana contends that grant of shop licence is by auction and bar licence by fixed fee, and if there is any arbitrariness or irrationality in imposing any condition for grant of such licences, they can always be challenged as violative of Arts. 19(1)(g) and 14 of the Constitution. Unless the State demonstrates that rational behind such classification prescribing RCC roof structure, the same cannot stand to judicial scrutiny and is liable to be set-aside. In the light of the above submissions, the only point that arises for consideration in all the writ petitions is whether fixing of 100 sq.meters RCC roof structure as a requirement for grant of licence for bar is arbitrary, irrational and is liable to be struck down or not? Section 17 of A.P. Excise Act, 1968 empowers the Government to grant for a fixed period to any person at anyplace a lease or licence for the exclusive privileges of manufacturing or supplying by whole sale or of both; or of selling by whole sale or by retail any liquor. Section 72 of the Act empowers the State Government to make rules for carrying out all or any of the purposes of the Act. In exercise of the said rule making power, the State Government has been making rules from time to time. The present case concerns itself with A.P. Excise (Grant of License of Selling by Bar and Conditions of Licence) Rules, 2005 (for short “the Bar Rules”) notified in G.O.Ms.No.997 Revenue (Ex.II) dt. 24-5-2005 as amended by by G.O.Ms.No.596 dt.26-5-2006. These rules deal with grant and renewal of licence for selling liquor by Bar. To resolve the issue involved in the present writ petitions, it is necessary to refer to some of the rules relevant for this purpose. Rule 3(l) prescribes licence period, means a period of 12 months beginning from the 1st July of the year and ending with 30th June of the succeeding year of part thereof. Rule 9 deals with period of licence and commencement of business. Rule (6) (1) (i) (a) puts a restriction for grant of licence in Form-2B that there will be a minimum plinth area of 150 sq.meters and out of which a minimum 100 sq. meters shall be RCC roof structure. Section 72(e) deals with regulation of the periods and localities in which and the persons or classes of persons to whom, licences for the wholesale or retail sale or buying of any intoxicant, may be granted and regulating the number of such licences which may be granted in any area. Section 72 (ee) deals with grant of licences separately for shop, Bar or in-house to regulate the localities in which and the persons or classes of persons to whom lease or licences or both may be granted and to regulate their number which may be granted in any area and the methods of selection for grant of such privilege, lease or licence. Section 72 (2) (o) deals with any other matter that may be prescribed under the Act. It is not disputed that under rule making power, the State Government made rules known as A.P. Excise (Grant of License of Selling by Bar and conditions of licence) Rules, 2005 (hereinafter called as “the Bar Rules”). Section 2(1-A) defines “bar” as meaning the privilege granted under the A.P. Excise Act to an establishment where food is served, for sale of Indian Made Foreign Liquor and foreign liquor, in loose for consumption on the licensed premises. Under Rule 3(1) (l) licence period means a period of 12 months beginning from the 1st July of the year and ending with 30th of June of the succeeding year of part thereof. Rule 4 deals with licence in form 2-B. Rule 6 envisages restrictions on the grant of licence. Rule 6(1)(i)(a) of the Bar Rules issued under G.O.Ms.No.997 Revenue (Ex.II) Department dt.24-5-2005 known as Andhra Pradesh Excise (Grant of License of Selling by Bar and Conditions of Licence) Rules, 2005, reads as under: “6. Restrictions on the grant of Licence:- 1) A licence in form-2B shall not be granted (a) a minimum plinth area of 100 sq.meters. (b) to (f) x x x x. Clause (i) (a) of sub-rule (1) of Rule 6 has been substituted by G.O.Ms.No.596 Revenue (Ex.II) Department dt. 26-5-2006, which is the subject matter of challenge, which reads as under: 6.Restrictions on the grant of Licence:- 1) A licence in form – 2B shall not be granted. (i) Unless the premises has:- (a) a minimum plinth area of 150 sq.meters. Out of which a minimum 100 sq.meters shall be RCC Roof structure. (b) to (f) x x x x. In RAM KRISHNA DALMIA (1 supra) after referring to the observation of the Constitution Bench in BUDHAN CHOUDHRY V. THE STATE OF BIHAR (AIR 1955 SC 191), wherein, it has explained the true meaning and scope of Art.14, and held that “ (v) A statute may not make a classification of the persons or things to whom their provisions are intended to apply and leave it to the discretion of the Government to select or classify the persons or things for applying those provisions according to the policy or the principle laid down by the statute itself for guidance to the exercise of discretion by the Government in the matter of such selection or classification. If the Government in making the selection or classification does not proceed on or follow such policy or principle, it has been held by this Court. e. g. , in Kathi Raning Rawat v. The State of Saurashtra (AIR 1952 SCR 435) that in such a case the executive action but not the statute should be condemned as unconstitutional” held as under: “…while Art. 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be funded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well established by the decisions of this Court that Art. 14 condemns discrimination not only by a substantive law but by a law of procedure. " In KHODAY DISTILLERIES LTD V. STATE OF KARNATAKA (1 supra) in exercise of the rule making power conferred on the State under the Karnataka Excise Act, 1965 various Rules have been framed by the State of Karnataka, namely, Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968, the Karnataka Excise (Brewery) Rules, 1967, the Karnataka Excise (Distillery and Warehouse) Rules, 1967, and the Karnataka Excise (Manufacture of Wine from Grapes) Rules, 1968 and they have been amended by a notification dt. 13-9-1989 by the State of Karnataka. The effect of amendment carried out to the above rules is, a licencee either for manufacture or sale of liquor is prohibited from selling liquor to anyone other than the holder of a distributor licence and the holder of such a licence can only be a company owned or controlled by the State Government specified under the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968. The Supreme Court after referring to its earlier judgment in INDIAN EXPRESS NEWSPAPERS (BOMBAY) (P) LTD V. UNION OF INDIA (1985) 1 SCC 641) held that “the tests of arbitrary action which apply to executive actions do not necessarily apply to delegated legislation. In order that delegated legislation can be struck down, such legislation must be manifestly arbitrary; a law which could not be reasonably expected to emanate from an authority delegated with the law-making power.” The Supreme Court further held that the business activity of Khoday Distilleries Ltd cannot, therefore, be said to be curtailed in any manner, nor can there be any hardship on the Khoday Distilleries Ltd., Once the rules oblige the manufacturers to supply their product only to the company holding the distributor licence, a corresponding duty is cast on the distributor to place orders with the suppliers concerned whenever demand for a particular product is received by it. Looking to the channelising the role of Mysore Sales International Ltd., specified by the State Government as per the amendment, the fear of discrimination between different suppliers expressed by the Khoday Distilleries Ltd., does not appear to be justified and upheld the rules. In MANEKA GANDHI (4 supra), the Supreme Court held that “the principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non arbitrariness pervades Article 14 like a brooding omnipresence and the procedure contemplated by Article 21 must answer the test of reasonableness in order to be in conformity with Article 14. It must be "right and just and fair" and not arbitrary, fanciful or oppressive; otherwise, it. would be no procedure at all and the requirement of Article 21 would not be satisfied”. In IN RE SPECIAL COURTS BILL,1973 (5 supra), Justice Y.V.Chandrachud speaking for the majority of the Bench laid down propositions, which emerge from the judgments of the Supreme Court. They are as follows” “ (1) to (6) x x x x (7) The classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation. In order to pass the test, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others and (2) that that differentia must have a rational relation to the object sought to be achieved by the Act. (8) to (13) x x x In COOVERJEE (7 supra), the supreme Court while dealing with Art.19(1)(g) of the Constitution of India and law prohibiting trade in intoxicating liquor held as under: “…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. …. ..” In NASHIRWAR (8 supra), the Supreme while dealing with the auction of liquor licences under (Kerala) Abkari Act, after referring to its earlier judgment and while emphasizing three principal reasons to hold that there is no fundamental right of citizens to carry on trade or to do business in liquor, namely, First, there is the police power of the State to enforce public morality to prohibit trades in noxious or dangerous goods. Second, there is power of the State to enforce an absolute prohibition of manufacture or sale of intoxicating liquor. Article 47 states that the State shall endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and of drugs which are injurious to health. Third, the history of excise law shows that the state has the exclusive right or privilege of manufacture or sale of liquor, held that the State has the exclusive right or privilege of manufacturing and selling liquor and grants such right or privilege in the shape of a licence or a lease and has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease. In M/S. UGAR SUGAR WORKS LTD (10 supra), the Supreme Court while dealing with the notification laying down terms and conditions for registration of different brands of Indian Made Foreign Liquor for supply within the territory of Delhi during 2000-2001 and laying down Minimum Sales Figures as a criteria of eligibility for grant of licence in Form-L, after summarizing its earlier judgments held that “the impugned notification in our opinion furthers the object of providing good liquor having larger acceptability. The policy is made in the interest of health, welfare and morals to benefit all citizens of Delhi and not the big industrial houses as alleged. Determination of wide scale acceptability on the basis of revised minimum sales figure does not strike us as being unreasonable let alone irrational, arbitrary or unfair” and accordingly upheld the notification. In VENKATESWARA THEATRE (11 supra), imposition of entertainment tax in respect of cinema theatres located in the State of Andhra Pradesh by replacing the mode of levy of entertainment at a rate fixed on the basis of percentage of the payment made by a person for admission to any entertainment with the mode of levy of tax payable on the basis of a percentage of the gross collection capacity, was the subject matter of challenge. The Supreme Court while dealing with the said challenge held that if there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment and upheld the amended rule. All the judgments on which reliance was placed by the learned Additional Advocate General do not deal with irrationality of a provision on the ground of absence of object sought to be achieved by the rule making authority by way of subordinate legislation. Sub-section (1) of Sec.17 of the A.P. Excise Act,1968 deals with grant of exclusive privilege subject to provisions of Section 28 and any rules made in that behalf for grant of lease or licence or both for the exclusive privilege of selling by bar. Section 28 only prescribes form and conditions of licence etc., It was proposed to make separate