Case: Chingleput Bottlers Vs. Majestic Bottling Company

On May 28, 1982 one O.H. Kumar carrying on business under the name and style of Messrs Three Star Bottling Company surrendered his licence for the manufacture and supply of bottled arrack for the Chingleput district f or the financial year 1 982.83. The Commissioner of Prohibition &Excise, Madras called for applications from intending persons for the grant of the licence. In response to the notice issued by the Commissioner under r. 3(2) of the Rule s, there were two applications filed under r. 5 in Form 1, namely, by J. Balaji. managing partner of Messrs Majestic Bottling Company on June 9, 1982 and by V. Ramabadran, managing partner of Messrs Chingleput Bottlers on June 14, 1982 . The Commissioner issued a questionnaire and directed the Collector, Chingleput to have an inquiry held as regards the suitability of the applicants for the grant of a licence. Pursuant thereto, the Collector had an inquiry held by the Assistant Commissioner (Excise) which lasted for four days i.e. from June 21 to June 24, 1982. After the preliminary inquiry and field inspection made by the Assistant Commissioner (Excise), the Collector forwarded his report dated July 2, 1 982 to the Commissioner who fixed July S, 1982 for oral hearing of the parties.On July 5, 1982, the Commissioner separately heard both J. Balaji and V. Ramabadran. At the hearing, the Commissioner recorded the statements of both J. Balaji and v. Ramabadran in support of their respective claims. On July 31, 1982 the Commissioner passed an order rejecting both the applications. As regards Messrs Majestic Bottling Company, the Commissioner held that their application was in order but that they did not satisfy the requirements of r. S (a), and (e) of the Rules. As to their suitability under r. S (a), he found that though the partnership had been formed prior to the date of the application i.e. On June 9 , 1982 the firm actually got registered subsequent thereto on June 23, 1982 and therefore there was no valid partnership in existence on June 14, 1982 i. e. On the date of the filing of the application. As regards r. 5(e), he held that there was no water facility in the lands owned by the partnershipregards Messrs Chingleput Bottlers, the Commissioner held that the application made by them was not in order because it was not accompanied by a solvency certificate and that there was no potable water available at the proposed site. He further held that there was only one and a half feet water in the well at the site and D it was of poor quality. He also came to the conclusion that the application had not been made bon a fide on behalf of the partnership firm but as benami for others. The Commissioner accordingly held that Messrs Chingleput Bottlers did not fulfil the requirement of r. 5(a), (c) and (e) of thefinding of the Commissioner that Messrs Chingleput Bottlers were mere benamidars of O.H. Kumar, the previous licensee, was based on the report of the Collector and the other material gathered by him during the course of the inquiry.Both Messrs Majestic Bottling Company and Messrs Chingleput Bottlers filed separate petitions under Art. 226 of the Constitution before the High Court questioning the validity of the order passed by the Commissioner. By his judgment dated June 13, 1983 a learned Single Judge held that the Commissioner was not justified in rejecting the application of Messrs Majestic Bottling Company on a wrongful assumption that they did not satisfy the requirement of r. 5(a) and (e) of the Rules. He held that the order w as vitiated by an error apparent on the face of the record inasmuch as J. Balaji, managing partner of Messrs Majestic Bottling Company had produced record with regard to the availability ofLearned Single Judge however set aside the finding of the Commissioner that the application made by Messrs Chingleput Bottlers was not in order because it was not accompanied by a solvency certificate holding that non-production of a solvency certificate would not entail a dismissal of the application on that ground alone, as also the finding with regard to non-availability of water at the proposed site since the blending unit of Messrs Three Star Bottling Company was already functioning there. The learned single Judge rejected the contention of Messrs Chingleput Bottlers that the Commissioner had acted in breach of the rules of natural justice by his failure to furnish the report of the Collector observing that nothing precluded them from seeking perusal of the records; nor did they make a demand forhis judgment, the learned Single Judge by the issue of a writ of certiorari quashed the impugned order of the Commissioner insofar as he rejected the application made by Messrs Majestic Bottling Company on the ground that there was an error apparent on the face of the record but instead of remitting the matter back to the Commissioner to re-consider the question of grant of such privilege, issued a writ of mandamus ordaining the Commissioner to grant the licence to Messrs Majestic Bottling Company. He further upheld the order of the Commissioner rejecting the application of Messrs Chingleput Bottlers for the grant of privilege on the ground that they were mere benamidars of the previous licensee. Aggrieved by the judgment of the learned Single Judge, both the State Government and Messrs Chingleput Bottlers preferred appeals under cl. 1 S of the Letters Patent. Upholding the judgment of the learned Single Judge t he learned Judge of the Division Bench held that learned Single Judge was justified not only in quashing the same but in issuing a writ of mandamus directing the Commissioner to grant the licence in favour of Messrs Majestic Bottling Company without the prior approval the State Government under r. 7 of the Rules.Before proceeding further, we would like to mention that the State Government did not file a separate counter. There was a counter-affidavit filed by R. Lakshmanan, Joint Commissioner (IV), Department of Prohibition &Excise, Madras on behalf of both the State Government as well as the Commissioner of Prohibition &. Excise seeking to support the impugned order passed by the Commissioner. In addition t o the grounds mentioned by the Commissioner for the refusal of the applications for grant of privilege, there was an additional ground taken in paragraph 11 and it was alleged that J. Balaji, managing partner of Messrs Majestic Bottling Company and h is other partner Smt. Shanthi, who incidentally is also his mother were the two erstwhile directors of Messrs Dhanalakshmi Chemical Industries Private Limited, Ranipet upto November 26, 1980 and there was prima facie evidence that the company had misused the large quantity of rectified spirit by diverting alcohol from industries to arrack production and therefore they were persons not likely to abide by the provisions of the Act and the Rules farmed thereunder within the meaning of r. 5(b), and this would have been a relevant point to be taken into consideration by the State Government in the matter of grant or refusal of prior approval under r. 7(1). It was alleged that these two persons were directors during the aforesaid period ofthe conclusion of the hearing of the appeals before the High Court, the State Government filed a supplementary affidavit of S. Ranganathan, Deputy Secretary to the State Government of Tamil Nadu, Department of Prohibition &Excise furnishing further and better particulars of the alleged misuse of rectified spirit by Messrs Dhanalakshmi Chemical Industries Private Limited which had put the State Government to a loss of revenue to the tune of Rs . 2 crores. It was averred that investigation into the case was almost complete and a prosecution was about to be launched against the Company and its directors, including J. Balaji and Smt. Shanthi, the two partners of Messrs Majestic Bottling Company. Inasmuch as no such objection was taken before the learned Single Judge, the learned Judges felt that it was not necessary for them to deal with the facts brought out in the two counter-affidavits. It appears that the learned Advocate-General also did not press the ground at the hearing of the appeals. The learned Judges held that the validity of the impugned order passed by the Commissioner must be adjudged by the reasons stated by him and cannot be supplemented by fresh reasons by the State Government in the shape of affidavit or otherwise .

Court's reasoning:
It is said that the gr ant of licence under r. 7 is subject to the prior approval of the State Government and is in the discretion of the State Government. The High Court is not the granting authority and therefore had no power to issue a writ of mandamus directing the Commissioner to grant a licence to Messrs Majestic Bottling Company. Thesecond question is whether the Commissioner acted in breach of the rules natural justice in not furnishing to Messrs Chingleput Bottlers a copy of the report submitted by the Collector and other material gathered by him during the course of the inquiry tending to show that they were benamidars of one O.H. Kumar, the previous licensee.It is said that Messrs Majestic Bottling Company had at the separate hearing before the Commissioner submitted a brief styled as a representation containing several documents in opposition to the application made by Messrs Chingleput Bottlers on the ground that their application was benami without furnishing a copy of the same to them and this must have influenced the mind of the Commissioner. Even if the Commissioner was not acting in a judicial Or quasi judicial capacity, he was required to act fairly. The rules of natural justice therefore required that Messrs Chingleput Bottlers should not be deprived of this business without knowing the case they had to meet. Both the questions that arise will have to be dealt withfirst issue, as already indicated, raises a question of prime importance and of some difficulty. It would therefore be convenient, in the first instance, to deal with the appeal preferred by the State Government. It is urged that the High Court had no jurisdiction to issue a wri t of mandamus ordaining the Commissioner to grant a licence to Messrs Chingleput Bottlers under r. 7 of the Rules without the prior approval of the State Government. It is said that although a writ of mandamus may be a necessary adjunct to a writ of certiorari the proper course for the High Court to have adopted was, if it was satisfied that the impugned order of the Commissioner was liable to be quashed insofar as he rejected the application made by Messrs Majestic Bottling Company on the ground that there was an error apparent on the face of the record, to have issued a writ of mandamus Commissioner to redetermine the question as to the grant of such privilege. Reliance is placed on de Smiths Judicial Review of Administrative Action, 4th edn. at pp.341 and 544. The contention must, in our opinion. prevail.In order that a writ of mandamus may issue to compel the Commissioner to grant the licence, it must be shown that under the Act and the Rules framed thereunder there was a legal duty imposed on the Commissioner to issue a licence under r. 7 of the Rules without the prior approval of the State Government and that Messrs Majestic Bottling Company had a corresponding legal right for its enforcement. No mandamus will lie where the duty sought to be enforced is of a discretionary nature nor will a mandamus issue to compel the performance by such public body or authority of an act contrary tomust follow that the grant of a liquor licence under r.7 of the Rules does not involve any right or expectation but it is a matter of privilege. The Commissioner was there fore under no obligation either to disclose the sources of information or the gist of the information that he had. All that was required was that he should act fairly, and deal with the applications without any bias, and not in an . arbitrary or capriciousis no suggestion of any mala fides on the part of the Commissioner or the State Government. The Commissioner heard both the parties after he had an inquiry made through the collector to adjudge their suitability for the grant of the licence. The Commissioner had issued a questionnaire and had the material collected by the Collector. The Commissioner was entitled to act on the report of the Collector and also on other material gathered by him during the course of the inquiry. There is no requirement under the Act for a confronted hearing like the hearing contemplated between rival claimants for the grant of a stage carriage permit underthe Motor Vehicles Act, 1939 into their respective merits an d demerits. The Commissioner separately heard both the parties and had their statements recorded with respect to all the relevant aspects It cannot be said that the Commissioner in dealing with the applications did not act fairly in not furnishing a copy of the report of the Collector or in taking a representation from Messrs Majestic Bottling Company.,The High Court could not have in proceedings under Art. 226 of the Constitution interfered with the impugned order of the Commissioner merely because on a reappraisal of the evidence it might have come to a contrary conclusion. There was no error of jurisdiction on the part of the Commissioner nor was the impugned order vitiated by any error apparent on the face of the record. The fin ding reached by the Commissioner that the application made by Messrs Chingleput Bottlers was not made bona fide on their own account but as benanmi for others is a finding based on appreciation A of evidence. The Commissioner was entitled to rely upon the facts found by the Collector. It may be pointed out that the Collectors report is entirely based on the statement of V. Ramabadran, managing partner of Messrs Chingleput Bottlers. The High Court was therefore justified in dismissing the appeal preferred by Messrs Chingleputt issue, as already indicated, raises a question of prime importance and of some difficulty. It would therefore be convenient, in the first instance, to deal with the appeal preferred by the State Government. It is urged that the High Court had no jurisdiction to issue a wri t of mandamus ordaining the Commissioner to grant a licence to Messrs Chingleput Bottlers under r. 7 of the Rules without the prior approval of the State Government. It is said that although a writ of mandamus may be a necessary adjunct to a writ of certiorari the proper course for the High Court to have adopted was, if it was satisfied that the impugned order of the Commissioner was liable to be quashed insofar as he rejected the application made by Messrs Majestic Bottling Company on the ground that there was an error apparent on the face of the record, to have issued a writ of mandamus Commissioner to redetermine the question as to the grant of such privilege. Reliance is placed on de Smiths Judicial Review of Administrative Action, 4th edn. at pp.341 and 544. The contention must, in our opinion. prevail.In order that a writ of mandamus may issue to compel the Commissioner to grant the licence, it must be shown that under the Act and the Rules framed thereunder there was a legal duty imposed on the Commissioner to issue a licence under r. 7 of the Rules without the prior approval of the State Government and that Messrs Majestic Bottling Company had a corresponding legal right for its enforcement. No mandamus will lie where the duty sought to be enforced is of a discretionary nature nor will a mandamus issue to compel the performance by such public body or authority of an act contrary tolaw. The Commissioner of Prohibition &Excise was under no legal duty to grant a licence to Messrs Majestic Bottling Company till he received the prior approval of the State Government under r. 7. Even assuming that the Commissioner recommended the grant of a licence, to them under r. 7, the State Government were under no compulsion to grant such prior approval. The grant or refusal of such licence was entirely in the discretion of the State Government. The High Court had no jurisdiction to issue a writ of Mandamus to the Commissioner to grant a licence to Messrs Majestic Bottling Company contrary to the provisions of r. 7 of theour judgment, the High Court exceeded its jurisdiction in issuing a writ of mandamus directing the Commissioner to grant a licence to Messrs Majestic Bottling Company without the prior . approval of the State Government as enjoined by r. 7 of the Rules. The High Court was unduly technical in applying the rules of pleadings. Absence of a specific plea in nature of demurrer would not invest the High Court with jurisdiction to issue a writ of mandamus ordaining the Commissioner to grant a licence to Messrs Majestic Bottling Company under r. 7 of the Rules without the prior approval of the State Government which was a condition pre-requisite for the grant of such privilege. It is regrettable that the High Court should have short- circuited the whole procedure upon a wrongful assumption of its own powers. The view taken by the High Court is manifestly erroneous. Otherwise, the statutory requirement of such prior approval of the State Government under r. 7 would be rendered wholly otiose.We should not be understood as laying down an inflexible rule that the High Courts cannot, under any circumstances, regulate or control the manner of grant of a liquor licence by the issue of a writ of mandamus. It would all depend upon the facts and circumstances as to whether the High Court should issue a writ of mandamus or not. The grant of a liquor licence is a matter of privilege. In the very nature of things, the grant of refusal of licence is in the discretion of the State Government. Normally, where the statute vests a discretionary power upon an administrative authority, the Court would not interfere with the exercise of such discretion unless it is made with oblique motives or extraneous purposes or upon extraneous considerations. The present case does not fall within the rule laid down in K. N. Guruswamy v. The State of Mysore ? and P. Bhooma Reddy v. State of Mysore &ors. The decisions in Guruswamys and Bhooma Reddys cases are both in consonance with the well-settled principle that the High Court can always issue a writ of mandamus under Art. 226 of the Constitution against a public authority to compel the performance of a public duty where such authority acts in violation of the law.