Case: GWALIOR DISTILLERIES PVT. LTD Vs. THE STATE OF MADHYA PRADESH

1. The Appellant is a manufacturer of spirits and holds a licence in the form of D-1 granted in the year 2017. A tender notice was issued for supply of country spirit in sealed bottles, in the State of Madhya Pradesh for the year 2018-2019. The condition imposed for participating in the tender was that the tenderer must have a licence for manufacturing, bottling and wholesale supply of country spirit in the State of Madhya Pradesh, issued in the form of CS-1 licence. Clause 2(i) of the tender notice dated 03.02.2018 was challenged by the Appellant on the ground that the stipulation pertaining to possession of CS-1 licence was contrary to Rule 3 of the Madhya Pradesh Country Spirit Rules, 1995 (hereinafter referred to as ‘the Rules?) since such licence could not be granted unless the distiller has participated in the tender process. That according to Rule 3, a successful tenderer is granted an area for supply of country spirit which would enable him to claim a CS-1 licence and CS-1-1B licence. The Writ Petition filed by the Appellant was dismissed. However, the High Court observed that the contention of the Appellant that he could not be granted a licence under the Rules unless an area was allotted to him was not borne out from Section 18 of the Excise Act, 1915 (hereinafter referred to as ‘the Act?) or the Rules.2. Thereafter, the Appellant submitted an application for grant of CS-1 licence on 09.04.2018. By an order dated 26.07.2018, the application filed by the Appellant for grant of CS-1 licence was rejected. Aggrieved by the said rejection, the Appellant filed a Writ Petition which was dismissed by the High Court. Hence, this appeal.3. The order by which the request for issuance of CS-1 licence was rejected by the Respondent No.2 was challenged by the Appellant as being in violation of Articles 14 and 19 (1) (g) of the Constitution of India. The Appellant alleged discrimination since eight other distillers in the State of Madhya Pradesh who were similarly situated to the Appellant, not possessing CS-1 and CS-1-1B licence were allowed to participate in the tender process. The Appellant relied upon the observations of the High Court in its judgment dated 21.03.2018, in Writ Petition No.6525 of 2018 filed by the Appellant, that neither the Act nor the Rules made thereunder required allotment of an area for grant of CS-1 licence.4. The High Court dismissed the Writ Petition by observing that allotment of an area was an imperative pre- condition for grant of CS-1 licence. The High Court further held that there was no fundamental right to trade in liquor and opined that the Appellant was not entitled to any relief. Clause 2 (i) of the tender notice dated 03.02.2018 issued by the Respondents provides that a distiller having a proper licence for manufacturing, bottling and wholesale supply of country spirit shall be eligible to participate in the tender process. The validity of the said condition was challenged by the Appellant in Writ Petition No.6525 of 2018 in the High Court of Madhya Pradesh. The Appellant contended in said Writ Petition that according to the scheme of the Rules, a CS-1 licence will not be granted unless the area is allotted. A Division Bench of the High Court dismissed the Writ Petition finding no substance in the challenge to Clause 2 (i) of the tender notice. While dismissing the Writ Petition, the High Court observed that the allotment of an area was not a pre-requisite for grant of CS-1 licence. Subsequently, the Appellant submitted an application to the Excise Commissioner, Gwalior on 09.04.2018, requesting issuance of a CS-1 licence. The application for granting CS-1 licence was rejected on 26.07.2018 on the ground that the Appellant did not participate in the tender process, published on 20.02.2018 for the year 2018-19. There is no doubt that the Appellant has a D-1 licence. A perusal of Rule 3 would show that manufacturing, bottling and wholesale supply of country spirit can be only undertaken by persons who possess a CS-1 licence. CS-1 licence is granted by the Excise Commissioner after the approval of the State Government. A CS-1 licensee shall operate in such area or areas as may be determined by the Excise Commissioner from time to time. The apprehension of the Appellant that a CS-1 licence would not be granted unless an area was allotted pursuant to a tender process was addressed by the High Court in the earlier round of litigation. The High Court held that the Act and the Rules do not provide for allotment of an area as a condition for issuance of CS-1 licence. The application filed by the Appellant for issuance of CS-1 licence was rejected by the Respondents on the ground that the Appellant did not participate in the tender process.

Reasoning:
6. There is no condition either in Section 18 or Rule 3 that CS-1 licence will be granted only to a person who participated in the tender process. The order passed by the Respondent No.2 is arbitrary and contrary to Section 18 of the Act and Rule 3 of the Rules. By the impugned judgment the High Court held that allotment of an area is a pre-condition for issuance of the CS-1 licence without examining the judgment in Writ Petition No.6525 of 2018. Reference made to Writ Petition No. 6525 of 2018 was restricted to recording a finding that the said Writ Petition was dismissed and the contentions raised by the Appellant in the said Writ Petition were negatived. T o our understanding, Rule 3 (1) provides for allotment of an area to a person who is given a CS-1 licence. Participation in the process of tender as a condition for applying for a CS-1 licence is not found in the Rules. The High Court dismissed the Writ Petition by holding that there is no fundamental right to trade of liquor. However, the other contention raised by the Appellant that there is hostile discrimination against the Appellant as other similarly situated distillers were permitted to participate in the tender, has not been dealt with by the High Court. This Court in State of M.P . & others v. Nandlal Jaiswal & others (1986) 4 SCC 566   has held that no one can claim as against the State the right to carry on trade or business in liquor and the State cannot be compelled to part with its exclusive right or privilege of manufacturing and selling liquor. But when the State decides to grant such right or privilege to others the State cannot escape the rigour of Article 14. It cannot act arbitrarily or at its sweet will. It must comply with the equality clause while granting the exclusive right or privilege of manufacturing or selling liquor. The Appellant?s request for grant of a CS-1 license requires to be considered strictly in accordance with law.