In the High Court of Punjab and Haryana at Chandigarh C.W.P. No. 8692 of 2006 Date of Decision: 26.03.2007 Varinder Singh and others …Petitioners Versus State of Haryana and others …Respondents CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE RAJESH BINDAL Present: Mr. Mohan Jain, Advocate, for the petitioners. Ms. Ritu Bahri, Deputy Advocate General, Haryana, for respondent Nos. 1 to 4. Mr. J.K. Sibal, Senior Advocate, with Mr. Sapan Dhir, Advocate, for M/s Haryana Organics-Intervener. JUDGMENT M.M. KUMAR, J. C.W.P. No. 8692 of 2006 A number of allottees of L-14A liquor Licence for sale of liquor at various places in the respondent State of Haryana, have filed Civil Writ Petition Nos. 8692 of 2006 (Varinder Singh and others v. State of Haryana and others), 8524 of 2006 (Raj Kumar v. State of Haryana and another) and 8698 of 2006 (Pritam Singh and others v. State of Haryana and others) by invoking jurisdiction of this Court under Article 226 of the Constitution in which prayer for quashing of circulars/letters dated 5.5.2006 (P-2 and P-3) concerning distribution of allotted quota of country liquor district-wise/distillery- wise on proportionate basis for the licensing year 2006-2007. It has also been prayed that direction be issued to the respondents restraining them from enforcing the impugned circulars dated 5.5.2006 (P-2 and P-3) on the ground that those circulars have imposed undue restriction with regard to lifting of supply of country liquor only from specified distillery. The principal ground of challenge is that the impugned circulars are contrary to the conditions and terms of allotment of Licence for the year 2006-2007 (P-1) and also contrary to the Punjab Excise Act, 1914 (as applicable to Haryana) (for brevity, ‘the Act’) and the Haryana Liquor Licence Rules, 1970 (for brevity, the 1970 Rules). In order to provide a perspective to the issue raised, few facts may first be noticed, which are being referred from C.W.P. No. 8692 of 2006. For the licencing year 2006-2007, the respondent State of Haryana deviated from the policy of auction of L-14A liquor licence and allotted the same by way of draw of lots. The petitioners 2 C.W.P. No. 8692 of 2006 in all the aforementioned petitions had succeeded in the draw of lots. They were issued L-14A liquor licence (P-1) for the period commencing from 1.4.2006 to 31.3.2007. The allotment of liquor licence by way of draw of lots is regulated by the provisions of the Act and the 1970 Rules. The petitioners have asserted that by issuance of licence it was held out to them that they could obtain supply of liquor from L-13 licence holder and wholesale dealers. The supply could also be obtained from those licensed holder distilleries which were situated within 200 Kms of the boundary of the State of Haryana. In that regard reliance has been placed on clause 33 of the Conditions and Procedure incorporated in Annexure P-1. It is claimed that at the time of draw of lots it was made clear to the petitioners that they could have supply of country liquor from any distillery in the State of Haryana or a licensed distillery situated within 200 Kms. of the limits of the State. After succeeding in draw of lots and obtaining liquor licences the petitioners started obtaining supply of liquor by purchase from wholesale dealers of their choice implying that those who are selling more popular brands or better quality products were preferred by them. It is claimed that there was restriction imposed by allocation of quota of various brands from various distilleries as has been done by circulars dated 5.5.2006 (P-2 and P-3) at the time of grant of licences on 1.4.2006. The grievance made with regard to the circulars issued on 5.5.2006 (P-2 and P-3) is that these circulars have illegally imposed conditions of rationing of supply only from selected wholesale liquor vends holding L-13 3 C.W.P. No. 8692 of 2006 licence and every licence holder is allowed to lift specified quota. It is complained that the respondent State, in pursuance to the aforementioned circulars is contemplating and compelling the petitioners to lift their supplies from 6 specified distilleries proportionately roughly to the extent of 15% from each distillery confined to the respondent State of Haryana. It has been asserted that that once a binding contract between the petitioners and the respondent State had been concluded on 1.4.2006, no deviation or modification of such a contract is permissible throughout the period of operation of the licence. The petitioners have also alleged that there has been no restriction of quota imposed on them by the terms and conditions (P-1) with regard to lifting of stocks confining them only to specified distilleries and that the petitioners were free to purchase their supplies either from wholesale dealers holding L-13 licence or from the distilleries of their choice. The petitioners have claimed that they are being compelled to lift and sell sub-standard liquor from the nominated distilleries in the State of Haryana by issuing permit in respect thereof despite the fact that the liquor from those distilleries have no market. It is alleged that the impugned circulars have been issued at the hands of a lobby which is against the system of draw of lots for their vested interests. It is also alleged that the respondents have exceeded their jurisdiction while issuing the impugned circulars on 5.5.2006 (P-2 and P-3). According to the petitioners, the implementation of quota, as provided by the impugned circulars, from specified distilleries would result into 4 C.W.P. No. 8692 of 2006 payment of excise duty even on the un-lifted quota, which would be against the principles of natural justice. The stand of the respondents in their reply is that the sale of liquor in the respondent State is controlled by them which is to ensure supply of quality liquor and exclusion of supply of illicit/spurious liquor. The Financial Commissioner under Section 8 of the Act, is under obligation to control the Excise Administration and exercises various powers. Under Section 59 of the Act, the Financial Commissioner is empowered to frame rules regarding sale of intoxicants and accordingly ‘1970 Rules’ have been framed. The excise policy for the year 2006-2007 was approved by the State Government prescribing overall limit of quota along with the number of outlets which respondent No. 2 i.e. Excise and Taxation Commissioner Haryana had to implement. It is claimed that respondent No. 2 issued a public notice, published in leading national and regional dailies on 1.3.2006, which is aimed at providing smooth and un-interrupted supply of liquor to the retail licensed outlets. Through the aforementioned notice, applications from reputed distilleries located in Haryana or in any other State, located within 200 Kms. of the boundaries of Haryana were invited to ensure supply of 495 lakh proof liter of double distilled spiced pot country liquor of 50o proof strength for the year 2006-2007. The Excise and Taxation Commissioner is stated to have approved six distilleries located in the State of Haryana, vide order dated 28.3.2006, namely, (1) Haryana Distillery, Yamunanagar; (2) Haryana Organics, Smalkha, Panipat; 5 C.W.P. No. 8692 of 2006 (3) Associated Distilleries Ltd., Hisar; (4) Frost Falcon Distilleries Ltd., Jahari Sonepat; (5) Ashoka Distilleries and Chemicals Pvt. Ltd., Hathin, Faridabad; and (6) Panipat Coop Distillery Unit, Panipat. The respondents have placed reliance on condition No. 33 of the licence (P-1) to claim that the approval to the distillery located within 200 Kms of the limits of the State has to be granted by the Commissioner and thereafter the distilleries were to be granted licence for wholesale outlets of country liquor under the ‘1970 Rules’, which was subject to the following conditions:- “a) The approved distilleries shall be required to open wholesale outlets of country liquor (L-13) in every district headquarter of the state to maintain regular and ready supply of country liquor to the retail liquor outlets of country liquor (L-14A). b) The supplies to the retail of country liquor (L- 14A) shall be made from the wholesale outlets of country liquor (L-13) located in the district on permits/passes issued by the respective Deputy Excise and Taxation Commissioner (Excise) of the districts. c) The stock of country liquor at the stage of L-13 shall be duty paid. d) The wholesale outlets of country liquor (L-13) shall maintain a ready stock equal to the five percent of the fixed annual quota of the respective district. 6 C.W.P. No. 8692 of 2006 e) The wholesale outlets of country liquor (L-13) shall obtain permits/passes issued by the respective Deputy Excise and Taxation (Excise) of the districts. f) The annual license fee for the wholesale outlets of country liquor (L-13) shall be Rs. Twenty five thousand per outlet per district to be paid in cash or by bank draft in the name of Deputy Excise and Taxation (Excise) of the district. g) The approved distilleries shall be required to deposit a security amount of Rs. 1 Lakh per L-13 outlet per district in the form of bank draft in the name of Deputy Excise and Taxation (Excise) of the respective district for the performance of contract of supply of double distilled, spiced, pot, country liquor, 50 degrees proof strength in bottled form. h) The proof of having declared an approved distillery by the Excise & Taxation Commissioner, Haryana. i) The licenses for the wholesale outlet of the country liquor (L-13) shall be granted by the Excise & Taxation Commissioner. j) The approved distilleries shall be bound to abide by the rules and provisions laid down in the Punjab Excise Act, 1914 and rules framed there under. 7 C.W.P. No. 8692 of 2006 k) The approved distillery shall, in addition to maintaining the required records and furnishing of statements given in the rules ibid shall in addition be required to e-mail via the internet to the Excise and Taxation Commissioner, Haryana at haryanatax.com daily figure showing the production and dispatch of country liquor.” The following averment made by the petitioners in para 3 of their writ petition has been categorically denied:- “ At the time of draw of lots it was made clear to the prospective allottees of the vends that anybody can purchase country liquor from any distilleries in the state of Haryana or within 200 kilometers of the limits of the State.” The respondents have claimed that neither such an announcement was made at the time of draw of lots and allotment nor any such assurance verbal or in writing, was given that the prospective allottee could purchase country liquor from any distillery in the State of Haryana or from a distillery located within 200 Kms. of the limits of the State of Haryana. It is claimed that it was never announced that prospective allottees of the L-14A licence were free to draw their supplies of country liquor from any distillery in the State and the writ petition is liable to be dismissed on the short ground of making misrepresentation. 8 C.W.P. No. 8692 of 2006 The respondents have claimed that the impugned circulars dated 5.5.2006 (P-2 and P-3) have been issued fixing the monthly quota of country liquor for the year 2006-2007 district- wise/distillery-wise. It was to ensure that no wholesale vend of country liquor goes dry in the State and the petitioners have been given the option to lift 10% of the annual quota of country liquor of their choice. The object of the circulars is stated to be lifting of supply of country liquor from approved distilleries to the retail licences like L-14 without any interruption and without the effect of depriving any brand. It is also claimed that on account of short and deficient supply of liquor, illicit distillation starts and bootleggers come in operation, which the impugned circulars are aimed to check. The respondents have also made an attempt to ensure that each distillery from where supply of liquor is to be made to the whole- seller (L-13) and then to the retail outlets (L-14A) do not suffer from any capacity limitation, over-burdening them or clog them due to all retail venders rushing to one distillery/one whole-seller. The allotted annual quota has been proportionately distributed among all the distilleries so that liquor vends in all parts of the district/State obtain smooth and regular supply without depriving consumers of various brands and quantity. It has also been claimed that such a policy of distribution of quota has not been issued for the first time, which is stated to be in operation for the last many years and has achieved commendable results. In support of their claim, the respondents have placed on record such like policies commencing from the year 2002- 9 C.W.P. No. 8692 of 2006 2003 (R-1 to R-4). The respondents have claimed that respondent No. 4 being the specified officer has issued permits to the petitioners from 1.4.2006 to 31.5.2006 permitting them to lift their quota from wholesale outlets (L-13) of different distilleries located in the district to streamline the distribution and ensuring uninterrupted/smooth supply of liquor. The details of permits issued to the petitioners distillery-wise are as under:- Sr. No . Name of the petitioner & licensee Annua l quota Monthl y quota Haryana Distillery, Y.Nagar Ashoka Distillery Hathin Associate d Distillery Hissar F.F.D . Jahari Haryana Organics Samalkh a Panipat Coop., Panipat. 1. Varinder Singh,L-14A Bahri 21738 1811 2520 Nil Nil Nil Nil Nil 2. Sanjay Kumar,L-14A, Kirmich 21738 1811 3330 NIL Nil 1035 Nil Nil 3. Gurnam Singh, L-14A Ladwa 36230 3119 3150 NIL 1125 450 675 NIL 4. Surinder Kumar Gaba, L-14A Jyotisar 14492 1207 3375 NIL 450 NIL NIL NIL 5. Prabhu Dayal, L-14A Teoker 21738 1811 2700 1687 NIL NIL NIL NIL 6. Dharam Singh, L-14A Kharindwa 21738 1811 2407 450 675 1125 112 NIL 7. P.K. Sharma, L-14A Pipli II 36230 3019 7200 225 NIL 900 675 NIL 8. P.K. Sharma, L-14A, Kishanpura 21738 1811 NIL NIL NIL 225 NIL NIL 9. Parmod Kumar, L-14A Bishangarh II 21738 1811 5625 NIL NIL 225 1350 Nil 10 C.W.P. No. 8692 of 2006 The respondents have claimed that the petitioners have not suffered any loss or harm on account of well regulated distribution system of supplies. Rather there is booming sale and lifting of adequate quota of liquor for their respective vends. It is claimed that the petitioners have not only lifted whole of their annual quota but have also lifted 50% of the additional quota, which is permitted to be lifted without payment of any additional licence fee, in terms of condition No. 54/55 of the licence L-14A (P-1). It is appropriate to mention here that an additional affidavit dated 21.2.2007, was permitted to be filed by the respondents in C.W.P. No. 8698 of 2006 giving details of quota lifted by the petitioners in that petition. The details as given in Annexure-I of the aforementioned additional affidavit, reads as under:- “DISTILLERYWISE LIFTING OF QUOTA OF COUNTRY LIQUOR DURING THE PERIOD 01.04.2006 TO 31.1.2007 BY THE PETITIONERS IN CWP NO. 8698 OF 2006 (KARNAL DISTRICT) Sr. No. Name of the vend/ licensee/ petitioners Annual Quota Addl Quota 50% Total Quota Quota lifted 1.4.2006 to 31.1.2007 1 Pritam Singh S/o Sh. Lala Ram L-14/A Aungand 6165 3082.5 9247.5 9063 2 Brajesh Kumar S/o Sh. Jagbier Singh L-14A Phoosgarh 21700 10850 32550 22500 3 Ashok Kumar S/o Sh. Nanu Ram L-14A Mangalpur 21700 10850 32550 31950 4 Nanu Ram S/o Sh. Sukar Ram L-14A Tikri Kailash 21700 10850 32550 28849.5 Haryana Distillery, Yamuna Nagar Ashoka Distillery, Hathin Associated Distillery, Hissar Frost Falcon Distillery, Jhari Haryana Organic, Samalkha Panipat Coop Distillery, Panipat 3487.5 1462.5 1750.5 675 225 1462.5 11 C.W.P. No. 8692 of 2006 9225 2025 1350 5400 2250 2250 7875 8100 2025 8550 1800 3600 7474.5 4387.5 4275 1462.5 5850 5400 It has further been claimed that the policy has been uniformly applied by distribution of 90% of the country liquor equally amongst all the six approved distilleries and there is no violation of any terms/condition of the licence nor any provisions of the Act or the 1970 Rules. At this stage it may be noticed that Civil Misc. Application No. 9787 of 2006 in C.W.P. No. 8692 of 2006, was filed under Order 1 Rule 10 read with Section 151 CPC by M/s Haryana Organics, a unit of Globus Agronics Limited, 5th K.M. Stone, Chulkana Road, Samalkha, District Panipat through its Manager, Public Relations Mr. Parvesh Chawla, claiming that they were necessary parties and deserved to be impleaded as respondent in the said writ petition. However, the aforementioned application was dismissed by a Division Bench of this Court, vide order dated 31.5.2006, which was challenged before Hon’ble the Supreme Court in Special Leave Petition (Civil) No. 10282 of 2006. Hon’ble the Supreme Court, vide order dated 27.6.2006, issued notice of the SLP and stayed further hearing in C.W.P. No. 8692 of 2006. The aforementioned S.L.P. later on was converted into Civil Appeal No. 133 of 2007 and while disposing of the same vide order dated 4.1.2007, Hon’ble the Supreme Court passed the following order:- “ Leave granted. 12 C.W.P. No. 8692 of 2006 Having heard the learned counsel for the parties we are of the opinion that interest of justice would be subserved if the appellant herein is permitted to intervene in the writ petition. We place on record the statement made by Mr. S. Ganesh, learned senior counsel appearing on behalf of the writ petitioners – respondents that his client have questioned only the excise policy of the State of Haryana for the year 2006-07 to the effect as to whether a vendor can be compelled to buy the manufactured products only from some distilleries or not. In view of the fact that the State in exercise of its jurisdiction under the Excise Act has laid down the excise policy, we are of the opinion that it is not necessary for the appellant herein to file any counter affidavit in the writ petition. However, keeping in view the fact that the period during which the excise policy was to remain in force would come to an end on 31st March, 2007, we would request the High Court to hear out and dispose of the writ petition itself as expeditiously as possible, preferably within this month. Learned counsel appearing on behalf of the appellant assures that no adjournment shall be prayed for before the High Court on behalf of his client. Mr. Ganesh, learned senior counsel further states that his 13 C.W.P. No. 8692 of 2006 clients shall not place any special order against any individual manufacturer. The appeal is disposed of with the aforementioned observations and directions.” Accordingly, we have allowed the aforementioned distillery to intervene. Mr. Mohan Jain, learned counsel for the petitioners has argued that no circular incorporating new terms altering, varying, supplementing or otherwise adding to the terms and conditions already agreed between the parties at the time of grant of L-14A licence on 1.4.2006, could be permitted as the same would result into complete novation of a concluded contract. According to the learned counsel once the offer given by the petitioners was accepted by the respondent Department, a binding agreement had come into existence between the parties and the condition of auction becomes the terms of the contract which cannot be alterted lateron. In support of his submission, learned counsel has placed reliance on para 21 of the judgment of Hon’ble the Supreme Court in the case of Har Shankar v. Deputy Excise and Taxation Commissioner, AIR 1975 SC 1121. He has further submitted that the impugned circulars issued on 5.5.2006 (P-2 and P-3) can operate prospectively only in respect of the policy concerning year 2007-2008 and permitting such a circulars to be binding on the petitioners, who have obtained L-14A licences on 1.4.2006, would result into their retrospective operation, which is impermissible in law. In support of his submission, learned counsel 14 C.W.P. No. 8692 of 2006 has placed reliance on para Nos. 55, 56, 57 and 62 of the judgment of Hon’ble the Supreme Court in the case of Ashok Lanka v. Rishi Dixit, (2005) 5 SCC 598. He has also placed reliance on para 12 of the judgment of Hon’ble the Supreme Court in the case of Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal Corporation, (2000) 5 SCC 287, to argue that the rules of the game after it had begun cannot be changed. Mr. Mohan Jain, learned counsel for the petitioners, has further argued that the expression ‘permit’ has been defined by the Punjab Liquor Permit and Pass Rules, 1932 (for brevity, ‘the 1932 Rules’), which have been framed under Section 58 of the Act. According to the learned counsel, clause (e) of sub-section (2) of Section 58 of the Act contemplates framing of rules regulating the period and localities for which, and, the persons, or classes of persons, to whom licenses, permits and passes for the vend by wholesale or by retail of any intoxicants could be granted. It could also frame rules regulating the number of such licenses which may be granted in any local area. He has then referred to the definition of expression ‘permit’, as used in Rule 1(a) of the 1932 Rules, which is confined to issuance of a No Objection Certificate by the specified officer of the district in respect of the destination but it does not empower him to authorise removal from the place of issue. The expression ‘permit’ has been defined as a permission authorising possession of liquor exceeding the limit of retail sale. He has also referred to the expression ‘pass’ as defined in Rule 1(b) of the 1932 15 C.W.P. No. 8692 of 2006 Rules to mean a document which actually authorises the removal of liquor. According to the learned counsel, there is nothing in clause 33 of the terms and conditions of the licence L-14A (P-1), which may go to the extent of authorising the specified officer to issue permit in respect of lifting its supply from a particular distillery. He has also referred to Rule 38(15)(a) and (16) of the 1970 Rules to argue that once a licence L-14/L-14A is given then the licence holder is to get the supply of his requirement of country liquor from a person having licence to sell as wholesale in district concerned. The arguments appears to be that no condition of obtaining supply in a regulated manner has been imposed by the terms and conditions of licence L-14A (P-1) except that such a licensee was to lift his supply of country liquor from a person licensed to sell such liquor by wholesale in the district concerned. He has also placed reliance on para 26 of the Division Bench judgment of this Court in the case of Ram Chander v. State of Haryana, 2006 (3) PLR 392. Ms. Ritu Bahri, learned Deputy Advocate General, Haryana and Mr. J.K. Sibal, learned senior counsel for the intervener, have argued that the contention of the petitioners is based on non- existent factual position. Both the learned counsel have referred to the averments made by the petitioners in para 3 and the corresponding reply in para 3 of the written statement filed by the respondents. The assertion made by the petitioners in para 3 of the petition is that at the time of draw of lots it was made clear to the prospective allottees of the liquor vends that they could purchase the country liquor from any 16 C.W.P. No. 8692 of 2006 distillery in the State of Haryana. According to the learned counsel for the respondents in the corresponding para 3 of the written statement as well as in the preliminary submission it has been averred that no such announcement, clarification or statement was made by respondent No. 4 which may constitute a binding term of contract between the parties. The replication filed by the petitioner to the assertions made by the respondents does not improve the case of the petitioners as there is no supporting material to substantiate that any conditions were announced at