IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.6657 of 2010 1. Prabhat Kumar Sinha, S/o Late Dr. Ramanand Sinha, Resident of A64, Magistrate Colony, Patna 800025. 2. Dr. Shambhu Saran Shrivastawa, S/o Shri Harendra Prasad Shrivastav, Resident of 27A, Harding Road, Patna 800001. ------------ Petitioners Versus 1. The State of Bihar through the Chie Secretary, The Government of Bihar, Patna. 2. The Principal Secretary, department of Registration Excise and Prohibition, Government of Bihar, Patna. 3. The Excise Commissioner, the Government of Bihar, Patna. 4. The Managing Director, Bihar State Beverages Corporation Limited, Bailey Road, Patna. 5. The Member Board of Revenue, the Government of Bihar, Patna. 6. The Central Bureau of Investigation through the S.P. C.B.I., Bailey Road, Patna. 7. Zamshed Asraf, Ex-State Minister, Independent Charge Department of Registration Excise and Prohibition, the Government of Bihar, S/o Late Sayed Naziruddin, Resident of 101, Partiputra Colony, P.S. Partiputra, Town and Dist. Patna. ------------ Respondents ----------- For the Petitioner :- Mr. Basant Kumar Choudhary, Sr. Adv. Mr. Arvind Kumar-2 For the Respondent :- Mr. P.K. Shahi, Advocate General Mr. Vikas Kumar, Adv. For the C.B.I. :- Mr. Bipin Kumar Sinha, SCCBI ----------- PRESENT: Hon’ble the Chief Justice Hon’ble Mr. Justice Mihir Kumar Jha O R D E R (19.04.2010) As per Dipak Misra, C.J. The petitioner no.1 was a member of Bihar Administrative Service till 1980 and after submitting his 2 resignation became a social and political activist whereafter he worked as a journalist and columnist for many a journals and eventually, as put forth, became a member of the Bihar Legislative Council for six years from 2000-2006. Presently, he is the Chairman of Loktantrik Samata Dal. The petitioner no.2, as set forth, is an allopathic doctor and was national President of All India Students Federation, member of National Council of Communist Party of the India, Vice President of International Physicians for prevention of Nuclear War and General Secretary of all India Peace and Solidarity Organization and at present is a member of Bihar Legislative Council. 2. The aforesaid facts have been narrated in the petition to highlight that the petitioners have the necessary antecedents to espouse a public cause in a Public Interest Litigation. It is contended that in the present Public Interest Litigation, they are concerned with the serious corruptions that has taken place in Bihar State Beverage Corporation Limited. In paragraph no.2, the petitioners have submitted that because of wrongful action of the aforesaid Corporation, immense financial loss has been caused to the State. The substantial questions of law which are sought to be raised in this petition are as follows:- i. Whether the liquor sourcing policy dated 15.9.2006 formulated 3 by BSBCL fixing an incidental overheads in place of transportation handling, insurance, administrative establishment charges, import export fee, central sales Tax etc. was at all justified and warranted in the facts and circumstances of the case ? ii. Whether determination of 6 percent incidental overheads for over the purchase of brands of Indian made foreign liquor (hereinafter referred IMFL) whose prices are 800 or less than 800; 20 % incidental overheads for Premium brand of IMFL whose price are 801 or more than 801; and 20% incidental overheads for all brands of beers are reasonable and rational exercise in the financial interest of the State ? iii. Whether this whole exercise of allowing incidental overheads to the suppliers was not a ploy to cause wrongful gains to the suppliers for quid pro quo by the authorities concern ? iv. Whether puzzling exercise of allowing the supplier to charge aforesaid incidental overheads relating to certain brands of liquor selectively and omitting to do so in case of certain brands to artificially reduce the price to escape excise duty and VAT is not an altogether a fraudulent, collusive, dishonest and manipulative act on the part of concerned authorities the respondent to cause wrongful gain to suppliers and themselves v. Whether the whole design of system of incidental overheads for outsourcing was an ingenious fraudulent and dishonest method to generate extra and illegitimate profit to the manufacturers and suppliers and bonanza for the concerned authorities, the respondents ? vi. Whether in the facts and circumstances of the case the authorities concerned have not caused wrongful gain to the parties concerned in allowing sale of six lakhs quintal of molasses to the purchasers outside Bihar in lower price necessitating purchase of the molasses by the manufacturers of Liquor in Bihar on higher price ? vii. Whether the permission to sale molasses on lower price was not 4 done for extraneous consideration benefiting the authorities in question ? viii. Whether the respondent authorities have not shown illegal favours to the some successful tenderers for manufacture and sale of country liquor by allowing them to amend the tender papers and insert necessary documents after filling of the same which was absolutely against the terms and conditions of the tender notice ? ix. Whether the respondent authorities have not abused their powers and position in showing undue favours to successful tenderers by violating mandatory conditions of tender notice apparently for their own personnel gain in return ? x. Whether questioning the aforesaid act of authorities the respondent was not legitimate to put a check on the corruption in the excise department and not act in public interest ? xi. Whether the instances of extending undue favours by the authorities to the successful tenderers cannot be highlighted by the general public who is not a participant in the tender process? xii. Whether the process of finalizing tenders which results in instances of corruption in the bureaucracy and loss to the exchequer can be questioned only by an affected party and not by a public spirited citizen ? 3. In paragraph no.6, the petitioners, while questioning the commissions and omissions of the Corporation, have stated thus:- “I. The formation of liquor sourcing policy by BSBCL for the purchase of the same from the manufacturers and suppliers for the purpose of distribution in the State of Bihar and the method the same policy was implemented by the corporation ensuring huge illegitimate profit to the suppliers for quid pro quo. 5 II. The irresponsible and dishonest decision relating to export of molasses to manufacturers outside state in the year 2008-09 on a lower price ultimately causing the revenue loss of Rs. 3.9 Crores to the State by way of loss of VAT. III. The way the excise commissioner the respondent had flagrantly shown favours to the several tenderers for manufacture and sale of country liquor by order of allotment dated 21.6.2009 pursuant to tender notice dated 26. 2. 2009.” 4. Be it noted, though various assertions have been made, yet the central attack is to the decision taken by the Corporation which has been brought on record as Annexure-3. In the said decision, in paragraph no. 10 certain benefits have been conferred and extended to the suppliers. The same which is in Hindi on being translated into English would read as under:- “10. Thereafter, the price sheet of the brands of all the Manufacturers/suppliers was examined one by one and found that the prices in item-2 of Annexure-7 has been quoted in different manner which has much diversity and it was decided that there was need to bring uniformity in it so that the rate of uniform incidental over heads (Transportation, Handing, Insurance, Administrative Establishment, Import-Export Fee, Central Sales Tax etc.) may be fixed. After deliberation from all concerned by the Chairman it was decided that one percent shall be fixed against the lowest quoted EDP in Table-2 of Annexure-5 which should be meant for Incidental overheads. The Chairman asked all the Manufacturers/Suppliers present there as to what percent of lowest quoted EDP should be fixed for incidental overheads for different brand 6 categories of IMFL/BEER and place their points and opinion. The points of all the Manufacturers/Suppliers were heard turn by turn and their opinion were considered at a time. The Committee found that all the Manufacturers/suppliers have suggested different percentage for their different IMFL/BEER brands. After hearing view points of all the committee discussed the policy of the Government corporation for the whole sale of IMFL/BEER in other states e.g. Rajasthan, Delhi, Uttaranchal, Orissa, Karnataka etc. and found that in most of the Corporation, there is provision of fixing EDP and one percent Incidental overheads on the same as per requirement. Hence, in the light of aforementioned facts, the Committee, keeping in view the common interest of all the consumers, retailers, BSBCL, Manufacturers/suppliers and the Government and on the basis of mutual consent, took the following decisions:- (i) The All India Lowest EDP” in Table-2, Annexure-5 of Liquor Sourcing Policy 2006-07 shall be EDP for all the brands of IMFL/BEER. (ii) 6% Incidental overheads shall be valid on all those brands of IMFL whose All India Lowest EDP (which is being treated as valid for BSBCL) in Rs. 800.00 or less than that. (iii) 20% Incidental overhead shall be valid on the premium Brand of IMFL whose lowest EDP is Rs. 801.00 or more than that. (iv) 20% Incidental overheads of All India Lowest EDP shall be valid on all the brands of BEER. All the parties agreed on the aforesaid rates. Hence 7 it was decided that after obtaining the consent of all the Manufacturers/Supplies by 18.9.2006 apprising them of the aforesaid decisions and obtaining price sheet in the amended Annexure-7 for the brands to be purchased from all the Manufacturers/Suppliers, the same may be produced before the Committee.” 5. It is urged by Mr. Basant Choudhary, learned senior counsel that the Corporation has acted in an arbitrary, highhanded and whimsical manner without any rational basis but only to benefit the suppliers as a consequence of which loss is caused to the Corporation and an innovative method has been conceived to have the gratification. In this backdrop, following prayers have been made which we reproduce herein below:- “I. For issuance of an appropriate writ/direction commanding the Central Bureau of Investigation (hereinafter referred to as C. B. I.) or the member board of revenue, the respondents to conduct an enquiry into liquor sourcing policy 2006-07 dated 15.9.2006 formulated by Bihar State Beverages Corporation limited (hereinafter referred to as BSBCL), the respondent and in the whole process of implementation and execution of the said policy for the purpose of storage of Indian made foreign liquors and all brands of beers for the purpose of distribution thereof by BSBCL in the state of Bihar for the period 2006-11. II. For issuance of an appropriate writ/direction directing C.B.I. the respondent or any other appropriate agency to conduct an enquiry into the whole process of finalization and allotment of tenders to various parties who applied for manufacture and sale of country liquors in the State of 8 Bihar apropos the tender notice dated 26.2.2009 in most inappropriate manners to certain parties by illegally relaxing the mandatory conditions and allowing them to amend the tender documents after its submission and thus indulging in extra favour to the favourate parties. III. For issuance of appropriate writ/direction commanding the C.B.I. or any appropriate agency to conduct an enquiry into the act of permitting the parties to sell six lakhs quintals of molasses to the parties outside Bihar at a lower rate and subsequently buying back the same on higher price for manufacturing spirit by local manufacturers. IV. For issuance of any other writ or order which may be deemed fit and proper in present matter in public interest.” 6. It is vehemently canvassed by Mr. Choudhary that fixation of the price in the above manner is nothing but a camouflage to give individual benefits and to have personal benefits causing loss to the Corporation. Learned senior counsel submitted that though certain averments have been made relating to the grant of exclusive privilege relating to country liquor, he would not like to press the same but would restrict and constrict his assail and challenge because of the decision rendered in the case of Humlog Trust & Anr. Vs. The State of Bihar & Ors. in C.W.J.C. No. 675 of 2010 decided on 13.1.2010. Learned senior counsel submitted that his principal assail is to the policy and the decision taken by the Corporation. 7. At this juncture, we may note that the Bihar State 9 Beverage Corporation Limited (for brevity “BSBCL”) has formulated a liquor sourcing policy on 1.9.2006. Clause 5 of the said policy deals with the declaration of prices and landed cost. We think it apposite to reproduce the entire clauses:- “5 Declaration of prices and Landed Cost 5.1 Manufacturers located within the State or outside are required to declare the EDP/EMP of liquor in prescribed Performa Annexure – 5 (page 30-33). Names of and supply details to all the states and Union Territories shall be included and a certificate to that effect appended. The manufactures shall also submit details in prescribed Performa for all such variants of brands having similar key words, whether registered in Bihar or not and sold anywhere within last two years. 5.2 A statement for each brand of FMFL/IMFL/BEER/WINE indicating information for label registration of a brand of FMFL/IMFL/BEER/WINE shall be submitted in the prescribed Performa. Annexure-6. (Page-34). 5.3 While doing so, manufacturers/supplier may ensure that the description of the item in Annexure 5 & 6 is exactly the same as the label approval accorded by the Excise Commissioner, Bihar. In case of any difference, the Corporation would not act on the details submitted by the manufacturer/supplier. 5.4 Suppliers desirous of supplying liquor imported from abroad shall submit a cost sheet containing details of basic price and duties in the form as in Annexure 8 for stocks imported after payment of Customs Duty and as per the form in Annexure 9 for stocks imported duty free. The price shall be indicated in Indian rupees and shall not be contingent upon and fluctuation in foreign exchange rates. 10 5.5. (A)(i) The price, which will be offered now, shall be valid, at the option of the offerer until revision as mentioned in para (iii). However the Corporation will permit revision of prices consequent upon variations in the statutory duties and taxes imposed by the Government of Bihar on FMFL/IMFL/BEER/WINE, to the extent of actual variation. (ii) In respect of brands manufacturer in Bihar or imported from outside the state the corporation is required to declare the price for sale to retailer and the maximum retail selling price of such products. Manufacturer shall quote the landed price in the Performa given at annexure 7 separate sheets to be used for each brand to be supplied. Based on the cost sheet given in annexure 7 the corporation would take necessary step for recording the price for sale to retailer and the maximum retail selling price. (iii) The manufacturers/suppliers are allowed to reduce their rates up to six times during the currency of the contract. The aforesaid reduction will be in addition to the reduction, which may be allowed at the time of the Agreement. (B) The landed prices quoted should be F.O.R. destination. The manufacturer/supplier has to incur the entire expenditure till the consignment is received and stacked at the destination i.e., designated depots of the Corporation or any other location within Bihar, as specified, in the permit. Unloading of the goods at the depots shall be the responsibility of the manufacturer/supplier and unloading charges shall be borne by him. In respect of the manufacturers/suppliers located both inside and outside the State of Bihar, the consignments have to be dispatched under valid permit issued in the name of the M/s Bihar Beverages Corporation Ltd., Patna by the competent authority. In respect of stocks of FMFL/IMFL/BEER/WINE, imported 11 from outside the State or procured from within the State, all the bottles are to be affixed with holograms if it is supplied by the Excise Commissioner, Govt. of Bihar. (C) The price quoted shall be uniform irrespective of the location of the destination within Bihar. (D) The prices (F.O.R. destination) quoted should be rounded off to the nearest rupee. 5.6 (a) The offerer shall quote only for the brands for which the labels are approved by the Excise Commissioner, Govt. of Bihar, as on the date of submission of offer. (b) The offerer shall indicate the status of ownership of the brands quoted against this offer and in case the brand is not owned by the offerer/he shall clearly specify that a valid agreement exists between the owner of the brand and the offerer for manufacturing that brand and for its supply to the Corporation. The Corporation will not be responsible for any dispute arising with reference to brands. 5.7 The offerer shall quote the prices for their products on competitive basis keeping in view the existing prices of similar brands. 5.8 Manufacturers may please note that they are required to work out the Landed cost and the maximum retail selling price, taking due note of the provisions of the different notifications with respect to duties/fees issued by Government of Bihar (Excise Department)/Excise Commissioner under Bihar Excise Act and rules framed there under. The Corporation reserves the right to decide the extent of incidental overhead to be allowed for Bihar. Incidental overhead will include all other fees/levies/cost applicable other than the EDP. 5.9 The margin of Corporation shall be calculated in such a way that it is not more than 5% of the M.R.P. Likewise retailers margin will also be calculated in such a way that 12 it is not more than 15% of the MRP. 5.10 The Corporation would permit revision in prices by the manufacturer/supplier only with effect from the first of any calendar month. Manufacturers/suppliers who want to revise their price shall submit the revised declarations to Corporation before the 20th of the month preceding the month on which they desire the revision. 5.11 In case of any change in the fee and duty structure, new prices shall become effective from the date of notification issued by the Government. The Corporation would compute the new prices and make necessary changes in prices. 5.12 Manufacturers shall submit a revised Maximum Retail Selling Price in respect of their products, after re- recording such MRP. Till such time they submit there- recorded MRP, no fresh OFS shall be issued. 5.13 In all such cases, if the rates at which the OFSs would be issued would be revised, all pending OFS would be cancelled by the corporation and manufacturers shall surrender all outstanding OFSs & and collect revised OFS immediately. 5.14 Any price reductin on account of a revision due to any change in the Landed Price or due to a change in duty fee structure shall be borne by the manufacturer/supplier. The Corporation would, in respect of the stocks held, debit their accounts with the difference on the day such revision comes into effect. 5.15 Manufacturers shall, before introducing any sales promotion or discount scheme, communicate to the Corporation, the details of such scheme. 5.16 Purchase Committee:- There shall be a Purchase Committee duly constituted by Govt. of Bihar which will fix the price of brands quoted. 5.17 Duty Free Imports:- 1. The EXIM policy 2002-07 provides for duty free 13 imports equivalent to 5% of the average foreign exchange earned by exporters (eligible importer). The procedure detailed below shall be applicable for import of liquor into the state under this provision. 2. The eligible importer shall be permitted to import only registered labels approved for consumption in Bihar for the relevant excise year. The eligible importer shall produce a copy of eligibility certificate, if any, issued by the Director General of Foreign Trade for duty free import of such stocks. 3. The eligible importer shall declare the brands and the quality proposed to be imported under this provision. The eligible importer shall also declare the source of import, which shall be a supplier who has submitted initial document of the Corporation. 4. The supplier as declared by the importer shall be responsible to complete customs and other formalities so that the goods can be transported to the stat. 5. The Corporation shall be the indenter of stocks on behalf of the eligible importer. The Corporation shall issue an order for supplies to the supplier. The rate of supply of the item shall be as indicated by the supplier in the cost sheet for duty free import. 6. The supplier shall thereafter remit state levies as may be applicable through the Corporation or to the Excise Department. The Supplier may note that they are responsible for remitting the correct quantum of duties and that they are liable for any short payment of duties. The Corporation shall be entitled to recover any short payment of duty from them, should such instances occur.” 8. On a perusal of the decision which has been taken by the Corporation in Annexure-3 certain aspects which are to be 14 taken note of from paragraph no.8. The said decision which is in Hindi on being translated into English reads as follows:- “8. This fact has come to light on perusal of Annexure-5 and 7 of Liquor Sourcing Policy 2006-07, submitted by Manufacturers/suppliers that the rate quoted in Item-1 and Item-3 of Annexure-7 does not tally with EDP quoted in Table-1 and 2 of Annexure-5. I also found that there is great difference in EDP of price sheet quoted for BSBCL, which is in Annexure-7 than the lowest EDP quoted in Table No.2 of Annexure-5. The EDP quoted for BSBCL is general more than the lowest EDP in Table No.2 of Annexure-5. Expressing surprise over it, the committee compared EDP rates of Annexure-5 and 7 quoted by all Manufacturers/suppliers turn by turn and found that there is great variation in it and for fixing the purchase price, it would be essential to maintain uniformity in price fixation of Brands. Hence, it is unanimously decided that there should be a general basis for fixing purchase price of BSBCL which may be acceptable to all.” 9. On appreciation of the decision in juxtaposition with the policy concerned, we are disposed to think that they are basically in the realm of price fixation, inasmuch as, a conscious decision has been taken by the Corporation to rationalize the price. In this context, we may refer with profit to the decision rendered in Union of India vs. Cynamide India Limited, reported in AIR 1987 SC 1802, wherein it has been held as follows:- “ Legislative action, plenary or subordinate, is not subject to rules of natural justice. In the case Parliamentary legislation, the 15 proposition is self-evident. In the case of subordinate legislation, it may happen that Parliament may itself provide for a notice and for a hearing- there are several instances of the legislature requiring the subordinate legislating authority to give public notice and a public hearing before say, for example, levying a municipal rate- in which case the substantial non-observance of the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation… but where the legislature was chosen not to provide for any notice or hearing, no one can insist on it and it will not be permissible to read natural justice into such legislative activity.” 10. The principle laid down in the said decision has been reiterated by the Constitution Bench in Shri Sitaram Sugar Company Limited vs. Union of India, reported in 1990(3)SCC 223. 11. We have dealt with the said aspect as we have thought it apt to do so for the sake of completeness. However, at this juncture, we should not be oblivious of the fact whether a public interest of this nature should be entertained by the High Court in exercise of power under Article 226 of the Constitution of India. In Humlog Trust (supra), a Division Bench of this Court after referring to the decisions rendered in State of M.P. & Ors. etc. etc. Vs. Nandlal Jaiswal & Ors. etc. etc. reported in AIR 1987 SC 251, Khoday Distilleries Ltd. Vs.