IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 24/02/2003 CORAM THE HONOURABLE MR. JUSTICE P.K. MISRA WRIT PETITION NO.4046 OF 2003 AND W.P.NOS.4339,4427 to 4496,4520,4575, 4602,4632, 4703,4708,4744 to 4761,4767,4785,4808 to 4820, 4851,4805,4917 to 4922,4943,4961 to 4972, 4980 to 4991, 4996 to 5023, 5025, 5027, 5035 to 5041, 5071,5077,5083, 5090,5092,5107,5118 to 5121,5130 to 5146, 5158 to 5188, 5190, 5191, 5203 to 5205, 5210,5213,5226,5229 to 5234, 5236,5239,5240 ,5347 to 5380, 5396,5420,5423,5425, 5426,5257,5258,5268,5271,5272 , 5275 to 5280,5286,5289, 5305, 5322 to 5325,5336 to 5346, 5501,5502, 5554, 5561 to 5566, 5612,5658,5676,5682, 5688 and 5753 OF 2003 K. Muthusamy, 4/554, Palladam Main Road, Veerapandi Village Panchayat, Tiruppur Taluk, Coimbatore District. .. Petitioner in WP.4046/2003 Vs. 1. The Government of Tamilnadu rep. by its Secretary, Prohibition & Excise Department, Fort St. George, Chennai 600 009. 2. The Commissioner, Prohibition & Excise Department, Chepauk, Chennai 600 005. .. Respondents in WP.4046/2003 Petition filed under Article 226 of the Constitution of India for the issuance of Writ of Certiorari as stated therein. For Petitioners : Mr.K. Vijayan, Senior Counsel for M/s. La Law Mrs. Nalini Chidambaram, Senior Counsel for Mr.L.S.M. Hasan Fizal Mr.K. Selvaraj Mr.R. Subramanian Mr.B. Sundaramoorthy Mr.M.R. Narasimhan Mr.AR.L. Sundaresan For Respondents : Mr.R. Muthukumarasamy Addl. Advocate General Assisted by Mr.K. Mahendran Special Govt. Pleader :J U D G M E N T The petitioners are the licensees in respect of various retail IMFL shops in different districts. They have been allotted such shops on the basis of their application made under Rule 13 of the Tamil Nadu Liquor (Retail Vending) Rules, 1989 (hereinafter called "the Rules"). Under the impugned letters dated 1.2.2003 and 4.2.2003, the Government and the Commissioner respectively have issued instructions to settle the IMFL shops, which have not been settled with anybody, with various Co-operative Societies and the Civil Supplies Corporation. 2. The relevant portion of the letter (Ms) No.42 dated 1.2.2003 issued by the Secretary to the Government to the Commissioner and others is extracted hereunder: " . . . I am directed to state that the Government have examined the question of licensing of the 2,364 shops remaining unsold in the State. The Government consider that the revenue to the Government can be fully realised, only if the shops are allotted to the Cooperative societies and the Tamil Nadu Civil Supplies Corporation. The Government after consultation with the Registrar of Co-operative Societies and the Chairman & Managing Director, Tamil Nadu Civil Supplies Corporation, under the powers vested with them under proviso to Rule 3 of the Tamil Nadu Liquor (Retail Vending) Rules 1989, have decided to permit the Commissioner of Prohibition and Excise to direct the licensing authorities concerned to grant the privilege of retail vending of Indian Made Foreign Liquor in a total of 1500 shops, i.e. 1,300 shops to the Co-operative Societies and 200 shops to the Tamil Nadu Civil Supplies Corporation on nomination basis. 2. Accordingly the Government issues the following guidelines: - (1) For the shops so allotted on nomination basis to Co-operatives/Tamil Nadu Civil Supplies Corporation, the proportionate privilege amount from the date of grant of licence should be collected. The proportionate amount shall be collected in monthly instalments. (2) In so far as the shops notified in Panchayat areas are concerned, wherever the Co-operatives request a change in location, the Collectors concerned are requested to take necessary action to renotify such of those shops for which re-location is considered to be necessary. While considering such relocation, only new areas where there is no other IMFL shop and which are also suitable for location of IMFL shops as per other conditions in the Tamil Nadu Liquor (Retail Vending) Rules, 1989 alone should be selected. The Commissioner of Prohibition and Excise is requested to issue necessary circular instructions for this purpose. (3) As regards working capital and privilege amount for running the shop, the Registrar of Co-operative Societies is requested to take necessary action to arrange cash credit from the Central Co-operative Banks concerned, wherever found necessary. The Chairman & Managing Director, Tamil Nadu Civil Supplies Corporation may take suitable action in respect of shops taken by the Tamil Nadu Civil Supplies Corporation. (4) The Managing Director, Tamil Nadu State Marketing Corporation Limited is requested to make necessary arrangements to grant working capital loan in respect of the shops to be located in Dharmapuri, Sivaganga and Tirunelveli districts, if requested by the Registrar of Co-operative Societies. The loan shall bear interest at current bank lending rate + 1% and subject to necessary hypothecation of assets for the loan amount. (5) As a special concession to the shops to be run by the Cooperative Societies and Tamil Nadu Civil Supplies Corporation, a cash discount, equal to the interest on one month cash credit shall also be allowed by the Tamil Nadu State Marketing Corporation Limited. The working arrangements for this purpose may be finalised by the Managing Director, Tamil Nadu State Marketing Corporation Limited. (6) The Registrar of Co-operative Societies and the Chairman & Managing Director, Tamil Nadu Civil Supplies Corporation are requested to take all necessary steps to ensure that the shops allotted to the Co-operative Societies and the Tamil Nadu Civil Supplies Corporation, as the case may be, start functioning from the 15th February, 2003. (7) The Commissioner of Prohibition and Excise is requested to take necessary action to furnish the district-wise & notified area-wise details of unsold shops to the Registrar of Co-operative Societies and the Chairman & Managing Director, Tamil Nadu Civil Supplies Corporation immediately. 3. The Commissioner of Prohibition & Excise / the Registrar of Cooperative Societies and the Chairman & Managing Director, Tamil Nadu Civil Supplies Corporation / Managing Director, Tamil Nadu State Marketing Corporation Limited are requested to issue necessary instructions to the district level officers of the respective departments and to co-ordinate with each other to implement the above decisions. . . ." 3. The relevant portion of Lr.No.P & E IX (1)/16131/2002 dated 4.2.2 003 issued by the Commissioner is extracted hereunder: - " I wish to state that in their orders first cited, the Government have fixed the total No. of shops at 7000 for the whole State for grant of Indian Made Foreign Liquor retail licences for the year 2002-200 3. It is seen that as on 10.1.03, even after having conducted 5 lots, as against the total No. of 7000 shops notified for the State as a whole for the year 2002-2003 only 4636 shops have been sold leaving a balance of 2364 unsold shops. 2. It is considered that for augmenting excise revenue to Government it is absolutely necessary to sale more number of shops so that the Government gets additional State Excise privilege amount towards the sale of Indian Made Foreign Liquor Retail shops and consequential revenue by way duties and taxes on the increase off-take of IMFS due to the additional shops. 3. As per rule 3 of Tamil Nadu Liquor (Retail Vending) Rules, 1989, where the Commissioner considers it necessary, he may direct the licensing authority to grant on payment of such sum or fee or both as may be fixed by the Commissioner, the privilege in relation to not exceeding forty percentum of maximum number of Retail Vending shops including shops for which eligible applications are not received, permitted by the Government and distributed as far as possible among the various districts by nomination to the TASMAC or the Tamil Nadu Civil Supplies Corporation or Co-operative Societies. 4. In their letter Ms.No.42 P&E (VI) Department, 1.2.2003, the Government have permitted the Commissioner of Prohibition and Excise to direct the licensing authorities concerned to grant the privilege of Retail Vending of Indian Made Foreign Liquor in a total of 1500 shops, i.e. 1300 shops to the Co-operative Societies and 200 shops to the Tamil Nadu Civil Supplies Corporation on nomination basis. 5. The grant of privilege of retail Indian Made Foreign Spirit to the Co-operatives and Tamil Nadu Civil Supplies Corporation relating to payment of privilege fee etc. will be on the following guidelines. i) For the shops so allotted on nomination basis to Co-operatives/Tamil Nadu Civil Supplies Corporation, the proportionate privilege amount from the date of grant of licence should be collected. The proportionate amount shall be collected in 7 monthly instalments. ii) For the issue of Bar licences, wherever applied for the proportionate privilege amount for the respective category from the date of grant of licence should be collected. The proportionate amount shall be collected in 7 monthly instalments. iii) The Security Deposit of Rupees One lakh for Indian Made Foreign Spirit Retail Shop and Security Deposit of Rs.50,000/- for Bar licence wherever applied shall also be collected in instalments along with the privilege amount. iv) In so far as the shops notified in Panchayat areas are concerned, wherever the Co-operatives request a change in location, the Collectors concerned are authorized to take necessary action to renotify such of those shops for which re-location is considered to be necessary. While considering such relocation only new areas where there is no other Indian Made Foreign Liquor shop which are also suitable for location of Indian Made Foreign Liquor shops as per other conditions in Tamil Nadu Liquor (Retail Vending) Rules, 1989, alone should be selected. v) All shops are to be made operational by 15.2.2003. . . ." 4. The petitioners have challenged the aforesaid instructions as well as the validity of Rule 3 proviso mainly on the ground that allotment of unsold IMFL retail shops to the Co-operative Societies and the Tamil Nadu Civil Supplies Corporation by granting some concessions is opposed to public policy and the Directive Principles of State Policy as contained in Article 47 of the Constitution of India and violative of right of equality under Article 14 of the Constitution of India, being arbitrary and discriminatory and further on the ground that the instructions are contrary to the provisions contained in Tamil Nadu Prohibition Act (hereinafter called as "the Act") and the Rules. 5. A counter affidavit has been filed on behalf of the respondents in one Writ Petition, namely W.P.No.4046 of 2003, which has been taken as the common counter in all the cases. In the said counter, allegations have been denied and the letters issued by the respondents have been justified. 6. Before considering the contentions raised by various learned counsels for the petitioners and the counter contentions raised on behalf of the respondents, it is necessary to extract the relevant provisions contained in the Act and the Rules. Section 17-D provides: 17-D. Payment of a sum in consideration of the grant of any exclusive or other privilege or fee on licences for manufacture or sale. - The State Government may, by rules, levy a sum or fee or both in consideration of the grant of any exclusive or other privilege under section 17-C and also a fee on licences granted under section 17-C. Section 20(d) is as follows: 20. Permits and licences.- The State Government or any officer empowered by them in this behalf may issue, - (a). . . (b). . . (c). . . (d) licences to any person to possess liquor and issue it to persons or institutions who hold permits or licences under this Act or who have been exempted under this Act from so much of the provisions of section 4, sub section (1), clauses (a), (aa), (aaa) or (j), as relates to the possession, consumption or buying liquor. Section 20-B is as follows: " 20-B. Co-operative societies to be given preference.- Where any co-operative society registered or deemed to have been registered under any law in force for the time being, makes an application for the grant of a licence under clause (d) of section 20, the authority competent to grant such licence shall, in granting such licence, give preference to such co-operative society over every other applicant. Section 21 is as follows : "21. Form and conditions of licences and permits.- Every licence or permit granted under sections 6-A,17-B, 17-C, 18, 1 9 or 20 shall - (1) be granted on payment of such fees, if any, for such period, and subject to such restrictions and limitations and on such terms and conditions including - (a) the condition for deposit of such sum as may be prescribed as security for the observance of the terms and conditions of any such licence or permit; (b) the conditions for forfeiture of the whole or part of the sum so deposited for contravention of any term or condition on which the licence or permit has been granted. (c) The condition for the replacement of the sum so forfeited within such time as may be prescribed; and (2) be in such form and contain such particulars as the State Government may direct either generally or in any particular case. Rule 2(v) "privilege amount" means the amount determined by the Commissioner for a shop for the grant of privilege based on the guidelines issued by the Government; " Rule 3. Grant of privilege.- The privilege shall be granted to any person in accordance with the provisions of these rules : Provided that, where the Commissioner considers it necessary, he may direct the licensing authority to grant, on payment of such sum or fee or both as may be fixed by the Commissioner, the privilege in relation to not exceeding forty per centum of the maximum number of retail vending shops including shops for which eligible applications are not received, permitted by the Government and distributed as far as possible among the various, districts by nomination to the Tamil Nadu State Marketing Corporation or the Tamil Nadu Civil Supplies Corporation or Co-operative Societies. The Tamil Nadu State Marketing Corporation or the Co-operative Society interested in the grant of the privilege may apply to the licensing authority in Form IV together with an affidavit in Form II: Provided further that the licensing authority shall, before nominating any Co-operative Society for the grant of the privilege, cause such verification as it may deem necessary to be made and satisfy itself as to the suitability of that society for the grant of the privilege." Rule 4. Fixation of number of shops.- (1) The maximum number of shops to be established in the State shall be determined by the Government. (2) Subject to the maximum number of shops fixed under sub-rule(1), the Commissioner, shall, in consultation with the Collector and after taking into account the needs of the district, fix the number of shops for each district. (3) The Collector shall, taking into account the interests of the revenue of the State, notify the area in the district and shall, taking into account the need of such area, determine the number of shops in such area. Provided that the Collector may with the permission of the Government increase or reduce the number of shops in the area taking into account the subsequent need and the prevailing conditions including demand in the area. Rule 13. Application for the grant of privilege and licence.- (1) Any person interested in getting the privilege for retail vending of Indian Made Foreign Liquor in an area shall make an application in Form VI to the licensing authority along with the following :- (i) A Demand Draft for an amount equivalent to one half of the privilege amount fixed for the shop, drawn on a nationalised bank favouring the Collector of the district. (ii A Demand Draft for Rs.500/- (Rupees five hundred only) towards application fee drawn on a nationalised bank favouring the Collector of the district : . . . Rule 13-A. Grant of licence to grantee by nomination.- Upon the nomination under the first proviso to sub-rule (1) of rule 3 for the grant of privilege, the nominee shall furnish a certificate in Form III and remit- (a) an application fee of Rs.500/- (Rupees five hundred only); (b) the sum or fee or both fixed by the Commissioner; (c) the licence fee of Rs.5,000/- (Rupees five thousand only); and (d) a security deposit of Rs.1,00,000/- (Rupees one lakh only) and obtain a licence in Form VII which shall be valid for a period of one year. Rule 17. Shifting of shop.- (1) No licensee shall change the premises in which he carries on business under his licence except with the previous permission of the licensing Authority : Provided that no permission to shift the business place outside the area shall be granted. (2) If a licensee intends to change the premises in which he carries on business under his licence, he shall apply to the licensing authority in Form VIII-A together with an application fee of Rs.1,000/- ( Rupees one thousand only) 7. One of the main contentions raised by several learned counsels relates to the policy of the Government in encouraging business in liquor by various Co-operative Societies. It has been submitted that under Preamble of the Co-operative Societies Act as well as under Section 4 of such Act, it is the avowed intention of the Legislature to strengthen the co-operative movement. By no stretch of imagination it can be said that the Legislature has intended to encourage the Cooperative Societies to carry on business in liquor trade. At any rate, in view of the Directive Principles of State Policy contained in Article 47 of the Constitution of India, the State should not encourage the Co-operative Societies in carrying on liquor business. 8. If a moralistic stand is taken, the policy of the Government in encouraging trade in liquor by the Co-operative Societies may appear to be rather incongruous. However, once the State Government decides not to impose policy of prohibition and permits trade in liquor by individuals, no fault can be attributed to the Government in permitting or even encouraging the Co-operative Societies to undertake such business. Since the petitioners themselves are the beneficiaries of policy of the Government in not imposing the policy of prohibition and they are being permitted to trade in liquor, criticism by such beneficiaries of the Government policy in the matter relating to undertaking of such business by the Co-operative Societies does not appear to be justified. It is no doubt true that Article 47 enjoins upon the State Government to effect policy of prohibition, but since such prohibition policy has not been adopted by the State Government, nay, by most of the State Governments, it would be futile to contend that the provisions contained in the statute or the Rules permitting the Cooperative Societies to carry on business in liquor should be struck down as opposed to public policy. 9. The next contention relates to excessive delegation of power under Rule 3 of the Rules. In this context it is contended that two letters in question have also conferred unbridled and unguided power in the matter of allotment on nomination basis to the Co-operative Societies. Even though such a contention appears to be attractive on the face of it, on a closer scrutiny, the provisions contained in the Act and the Rules make it amply clear that neither Rule 3 nor two letters cannot said to be suffering from the vice of excessive delegation. 10. In Rule 3 itself it has been made clear that grant of privilege to the Tamil Nadu State Marketing Corporation or the Tamil Nadu Civil Supplies Corporation or Co-operative Societies shall not exceed forty per centum of the maximum number of retail vending shops. Rule 3 also makes it amply clear that before nominating the Co-operative Societies for the grant of privilege, the licensing authority is empowered to cause such verification, as he may deem necessary, so as to satisfy the suitability of the Society for the grant of the privilege. In the letters issued by the Government and the Commissioner, such requirement has been reiterated in no uncertain term. The power to be exercised under Rule 3 and the power to grant licence have been vested with high and responsible officers. In such view of the matter, it is not possible to accept the contention that Rule 3 and the subsequent letters are vitiated. 11. It is further contended that the respondents have given direction for allotment of 1500 shops on the basis of nomination even though about 2364 shops have remained unallotted. It has been contended that by limiting the number to 1500, the respondents have kept the door ajar for arbitrariness to sneak in and it is very likely that the authorities may select locations for establishing such new shops with a view to harass such of those existing IMFL shop vendors who are not to the liking of the officers concerned. Such a general allegation is very far-fetched and difficult to accept. There is no presumption that any officer of the Government and that too highly placed officer is prone to exercise his power arbitrarily in a malafide manner. If any particular officer misuses his power or position, the action taken by him can be challenged before appropriate forum in an appropriate manner. However, the mere remote possibility of such abuse is not sufficient to vitiate the two letters issued by the respondents. Moreover, as has been submitted by the learned Additional Advocate General representing the State, even the number of applications, which have been received for grant of privilege on the basis of nomination, is far below the stipulated number of 1500. 12. The next contention is to the effect that the Co-operative Societies are not instrumentalities of the State and no preference could have been given. Moreover, the bye-laws of the Co-operative Societies would not permit the carrying of business in the matter relating to sale of liquor. There is no doubt that it has been held by the Full Bench of this Court in 2001 WLR 1 (M. THANIGACHALAM v. MADHURANTHAGAM AGRICULTURAL PRODUCERS CO-OPERATIVE MARKETING SOCIETY LIMITED AND OTHERS) that for the purpose of Article 12 or even 226 of the Constitution, a Co-operative Society as such cannot be considered as instrumentality of the State. This, however, does not mean that no provision can be made giving preference to Co-operative Societies in the matter relating to undertaking of any work or business. For instance, under Section 20-B of the Act, a specific provision has been made for giving preference to the Co-operative Societies in the matter relating to grant of licence under clause (d) of section 20. Moreover, the validity of Rule 3 proviso has been upheld in several decisions of this Court such as the judgment dated 24.12.1996 in W.P.No.9170 of 1996 and, the decision dated 24.7.2002 in W.A.No.2209 of 2002, and the decision reported in 1991 WLR 275 (GOVINDASWAMY v. STATE OF TAMIL NADU REP. BY THE SPECIAL COMMISSIONER AND SECRETARY TO GOVERNMENT, HOME PROHIBITION AND EXCISE DEPARTMENT, FORT ST. GEORGE, MADRAS . 13. It has been next contended that under Rule 3 power has been vested with the Commissioner to direct the licensing authority to grant licence to the Corporation, Co-operative Society, etc. by nomination and the Government had no jurisdiction to curtail such discretionary power of the Commissioner by issuing any direction. In this context relying upon the decision reported in A.I.R. 1969 SC 634 (STATE OF GUJARAT v. SHANTILAL MANGALDAS AND OTHERS) it has been contended that when a statute provides a particular manner of exercising power, such jurisdiction must be exercised in the manner prescribed or not at all. 14. Even assuming that it is the exclusive power of the Commissioner to give directions, the mere fact that the Government has issued a letter to the Commissioner would not vitiate the exercise of power by the Commissioner. It has to be remembered that the power conferred under Rule 3 is essentially an administrative power and not a judicial or quasi-judicial power. Law is well-settled that the State Government has right to deal the privilege in liquor business. Keeping in view the utmost benefit to the Government various provisions have been made in that regard. In such view of the matter, issuance of any policy direction by the Government from time to time advising