CHINGLEPUT BOTTLERS

MAJESTIC BOTTLING COMPANY B

March 15, 1984

[A, P. SEN ANn•A. VARADARMAN, JJ.]

Constitution of lndia-4rt. 226-High Court's Jurisdiction .to issue writ of c mandamus in cases where duty sought tq be enforced is-of discretz'onary nature.

Natufal Justice-Applicaiion of rules of natural justice to case$ which relate not to rights but to mere privile'Ces of licences.

Tamil Nada Arrai:k (Manuff(lcture) Rules, 1981-R. 7-Commissioner has no legal duty tO grant /icence-ApprovQl of State_ Government is a pre-requisite for grant of licence-High Court cannot com]lf!l grn/ of licence by Commissioner by issuing writ of mandamus. . .

On the surrender oft.he licence for the manufacture and supply of bottled arrack for the Chingleput District for the financial year 1982·83 by the then existing licensee, the C.Ommissioner of ProJ:iibition and Excise called for fresh appliJ; atiOns from intending persons for the grant of licence 'under the Tamil Nadu Arrack (Manufacture) Rules, 1981 framed under the Tamil Nadu Prohibition Act, 1937. Two firms, namely, Majestic. Bottling Company and ChingleputBottlers, filed there applications and an enquiry with regard to them was held by the .. Assistant Commissioner. The Comniissioner considered the report of enquiry, gave a separate oral hearing to the two applicants and passed an order rejecting both the applications. As regard_s Majestic Bottling Company the Commissioner held that they did not satisfy the requirements of rr. 5(a) and S(e). In the case of Chingleput Bottlers,. he held that they did not satisfy the . requirements of rr. S(a), S(c) and S(e). While recording the finding in respcc(

of CbingJCpU.t Bottlers, the CommissiOner. rCiied on a: report of the Collector and other material gathered by him during the. course of the enquiry, which included a representation. froq-i Majestic Bottling ComPany against the application of Chingleput Bottlers. Both the applicants filed petitipns under Article 226 of the

Constituton questioning the orders passed. by the Commissioner.

A Single judge Of the High O?urt .issued a writ of certiorari quashing the order of the Commissioner insofar as he rejected the application of Majestic Botfling Company an4 also issued ;{w.rit of miindamµs ordaining the' Commis~ sioner tO grant the licen~ to Majestic Bottling Company. As regards ChingJeput Bottiers, the Single Judge rejeced their Contention that tpe Commissioner had acted in breach of rules of natural justice by his failure -to furnish them the report .of the Collector and Observed that nothing preluded them from seeking

ven1sl of. the records or from ~king a demand for a copy of th~ sam~.

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CHINGLEPUT BOTTLERS v. MAJESTIC BOTTLiNG 191

oth the' applicants preferred appeals to t11e D_ivision Bench. The State Government which Was in pOssession of material adverse to the two partners of ' Majestic Bott.ling Compriny did iiot initially file a eparate counter affidavit but only di~ so at the conciusion of the hearing. The Division Bench ruled that the order passed by the Commissioner must be adjud'ged by the reasons stated by him and those reasons cannot be supp1emented by fresh reasons provided by the State Government in its belated affidavit and upheld the judgment of the Single

Judge.

The State Government and piingleput. Traders filed appeals against the

jridgmnt of the Division Bench.

It was contended on behalf of the. State Government that the grant of licence under r: 7 was.subject to the prior approval of the State Government, that if the High Courtwas satisfied that the impugned order of the Commis sioner. was liable to be quashed on the grouncf: that there was an error apparent on the face of the record, the proper course for it to adopt was to issue a writ of mandamus to the Commissioner t"ff re-determine the question of gra11t Or such

priviICge and . that. the High Court had nO power to fssue a writ of mandamus directing the Commissioner .to grant the Jicence in favour of lvlajestic Bottling Company:

It was cpntended on behalf of Ching1eput Bottlers that the Commissioner had acted in breach of rules of na:turaI jusliee in not furnishing them a copy of the report submitted by the Collector and _other material gathered by hi~ during the course of the enquiry.

Allowing the appeal of th'e State Government and disniissing the appeal Of Chingleput Bottlers. .1 .

HELD : 1. No mandamus wil1 lie where the duty sought to be enforced is of a discretionary nature nor wi_ll a rnandamus issue to compel th! performance by a public body or authority of an act contrary to law. [!98H-!99A]

(a) In the instant case the Commissioner was under no legal duty to graht a licence to Majestic Bottling Company ti11 he received the prior. approval of the State Government under r. 7. Even assuming that the Commissioner recommended the grant of a lience to them under f 7, the State Government were .under no compulsion to grant such prior approval.

Th~ grant or refusal of such licence was etirely 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

lcence to Majestic Bottling Company contrary to the provisions of r. 7.

(199A-C] •

de Smith : Judicial Review of Administrative Actin, 4th Ed. pp. 341 and 5~ ;•H.W.R. Wade: Administrative Law, 5th ed. p. 638; referred to.

(b? Absence of a specific plea in the natµre of demurrer wold not.invest H the H1h. Court with jurisdction_ to issue a writ of mandamlJ, J ordaining the

omm1&S1oner to ant a hcene uner ;. 7 without the prior •rproval of the

G '

State Government wic~ is a condition pre-.reqUisite for the grant of such pivi, Iege. The Hjgh Court was unduly technical in applying the rul6s of pleading and shortcircuited the whole procedure upon a wrongful assumption of itS own

power~. The view taken ?Y it is manifestly erronCous; otherwise, the statutory requirements of such prior approval of the S.tate Government under r. 7 would be rendered wholly otiose. [20!CE]

K.N. Guruswamy v. State of Mysore, [1955] 1 S C.R. 305; and P: Bhooma Reddy v. Staie of Mysore, [1969] 3 S.C:R. 14; distinguished . .

(c) It is not possible to accept the contention that no useful purose would have been serVed by the High Court remitting the matter for the reconsideration of the Commissioner sinte it hacJ already found that all the reasons that could .be given for upholding the validity of the commissioner's order were bad and unsustainable. This was not a case where it could be said tbt there was nothing for the. State Government to consider while examining the question whether it should accord or." refuse prior approval to the. grant of licence to

Majestic.Brittling Com.pany under r. 7. One .of the .relevant factors that the State Government had to t;:ike into consideration was whethe; the partners of that Company were persons who would abide by the provisions of the Act and the rules. 'I:he facts d, isclosed 'in the counter affidavit of the State Government lay a-serious charge against the partners of that Company and it \vas permissible for "the .State Government to take those facts as justification for refusal to. grant prior 'approval under r. 7. [202C,'203A-B, E-F]

( d) The proper course forthe High Court to adopt was to issue a writ of mandamu1 directing the Commissioner to redeterffiine the Question after following the procedure of r. 7 and in case he ca&te to a decision .to grant the

tince in favour of Majestic Bottling Company, to refer the matter to the State Oovemment for its prior approval. [206A-B]

Mis Hochtief Gammon v. Stateof-Orissa, [1976] l S.C.R. 667; Pad/ieldv.

Minister of Agriculture, Fisheries and Fodd, L.R. [1968] A.C. 997: referred to.

• Gujarat State Financial Corpn. v. M/s. Lotus Hotels Pvt. Ltd., [1983] 3 s.c.c. 379; distingl\ished.

State of Tamil Nadu v. C. Vadiappan, [1982] 2 Mad. L.J. 30; and K.

Ramaswamy v. Government of Tamif. Nadu (Writ App.eat No. 368of1981); overruled.

2. It iS a fundamental rule of law that no decision •ust be taken . which Will affect the rights of any perSonwithout first giving him an.opportuD.ity of putting forward. his case. Strict adherence to the rules of naturai justice is

requiedwhere a public authority or body has to deal with rights. The audi alteram .partem rule may -not apply to cases which relate not to rights or legal expectation but to mere privilege or licence. An authority or body need not observe the ruleS of natural justice where its, decision, although fin<il~ relates not to a 'right' but to a 'privilege' or 'licence'. All that is emphasised in s:uctj . ' ' .

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CWINGLEPUT BOTTLERS v. MAJESTic BOTTLiNG 193 ..

Cases is that the applicatibns for grant of privilege or licence must be considered fairly.

There are no inflexible rules of natural justice of universal application.

Each case depends on its own Circumstances. Rules of natU.ral justice vary with the varying constitutions of statutory bodies and the rules prescribed by the legislature under whih they have to act. [209C-D-G, 213D-E-G]

'The right to know the case to be met docis not necessarily involve any right to know the source of adverse information or to confront the informants, for, in some cases it. wou Id be quite proper for the authority to emJ?IoY confidential sources. [210B-C]

Ridge v. Baldwin: L.R: [1964] A.C. 40 ; R. v. GaminK Board for Great . .

Britain, [1970] 2 All E.R. 528; R. Surinder Singh Kanda v. Govanment of the

Federation of Malaya, L-R. [1962] A.C. 322; Breen v. Amalgamated, Engineerinr C Union, [1971] 2 Q.B. 175; Mac lnne. v. Onslow Fane & Anr., [1978] 3 All E.R. 211; l{ishanChand Arora v .. Commissioner of Police, [1961] 3 S.C.R. 135; and Nakkuda ,\/Iv. M.F. De S. Jayaratne, L.R. [1951] A.C. 66. referred to.

3. In tbe itnt case there is nothing in the language of r. 7 to sUggest that in rCfusig to grant the privilege, the Corpmissioner is obliged to act

judiciallY' The order refusing a licence undet r. 7 is purely. an administrative or executive order f!.nd is not Open to appeal or revision. There is no /is between , the Commissioner and the person who is refused such Privilege. ThC power of ·

refusal of licence unlike the power to grant is not subject to any pte-condition.

The grant-Of a liquor licence under r. 7 'does bt involve any right or expectation , , but it is 3. matter of privilege. The Commissioner was under _no obligation either fo 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 \Vith the applications. without any bias, _and not in an arbitrary or capricious manner.

The Commissioner was entitled to ct on the report of the Collector and also on other material gatheed by him during the course of the enquify.

It~Cannot be , said that" the Commissioner in dealing with the app1icil.tions did not act fairly in -not furnishing a copy of the report of the Collector or in taking a rePresentation from Majesti~ Bottling Company. There is also no suggestion of any ma/ajides on the part of the Commissioner or. the State Government.

[213G-H,'214A-B, C-E, G-H]

_J.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1 1970-, ·; 11972of1983

Appeals by Special leave from the judgment and Order dated G

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the 27th July, 1983 of the Madras High Court in W. A. Nt>s. 523, 531 & 528 of 1983.

K. K. Venugopa/ and C. S. Vaidyanathan for the Appellants in CA-Nos. 1 1970-7118\.

Sahnti Bhushan, A. T. M. Sampath and Mr. K. Subramaniam for the Respondents in CA. Nos. 11970-71/83.

-A -

SUPREME COURT REPORTS • , ll 9841 3 S.C.R. • A. K. Sen an-d A. V. Rangam for the Appellant in CA. No. 11972of1983.

 Soli J. Sorabjee A. T.

M. Sampath and K. Subramantam • for the Respondent in CA. 11972/83.

ihe Judgment of the Court was delivered by

SEN, J. These appeals by special leave directed against a judgment of a Division. Bench of the Madras High Court dated July 7, i983 upholding the judgment and order ()f a learned Single Judge dated.June 13, 1983 relate to the grant of a licence for the manufacturing and supplying of bottled arrack to the wohlesale and. retail licensees for the Chingleput district under r. 7 of the Tamil Nadu Arrack(Manufacture) Rules, 1981 ('Rules', for short) framed under the Tamil Nadn Prohibition Act, 1937 ('Act' for short). These appeals raise separate' anq distinct questions and must therefore receive separate consideration.

Put very shortly, the essential facts are these. On May 28, 1982 one 0. H. Kumar carrying oniJusiness 11nder the name and style of .Messrs Three Star Bottling Company surrendered his Iicene for the mamifacture arid supply of bottled arrack for. the Chingleput district for the financial year 1982-83. The Commissioner of Prohibition & Excise, Madras called for applications from intending persons for the grant of the licence. fn response to the notice 'issued by the Commissioner under r.3(2) of the Rules, '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 anct"by V. Ramabadran, maiiaging 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.

Pnrsuant 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. Atter.the preliminary inquiry and field inspection m!de by the Assistant Commissioner (Excise), the Collector forwarded his 'report dated July 2, 1982 to the Commissioner who fixed July 5, 1982 for oral hearing of the parties.

H On July 5, 1982, the Commissioner &eparately heard both J.

Balaji and . V. Ramabadran. At the hearing, the Commissioner rec<;>rded the statements of both J. Balaji and v. Ramaba.dra11 .in

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CHINGLEPUT BOTTLERS v. MAJESTIC BOTTLING (Sen, J.) 195

support of their respective claims. On July 31,1982 the Commissio ner passed an order rejceting 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. 5 (a) and (e) of the Rules. As to their suitability under r. 5 (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. S(e), be held that there was no water facility .in the lands owned by the partnership firm. ·

As regafds 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 it was of poor quality. He also came to the conclusion that the appHcation had not been made bona fide on behalf of the partnership firm but as benami for others. The. Commisioner accordingly held that Messrs Chingleput Bottlers did not fulfil the requriements of r.• S(a), (c) and'(e) of the Rules.

The finding of the Commissioner that Messrs Chingleput Bottlers were mere benamidars of 0. H. Kumar, the previous licensee, was based on the report of the Collector and the other material gathered by him during the course ef the inquiry.

Both Messrs Majestic Bottling Company and Messrs Chingle put Bottlers filed separate petitions under Art. 226 of the Constitu- • tion before the High Court questioning the validity of the order passed by the (;:ommissioner. 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. S(a) and (e) of the Rules. He held that the order was 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 ofwater.

The learned Single Judge however set aside the finding of the Commissioner that th.~ appliation made by Messrs Chingleput

• H

• ff

Bottlers was not in order because it was not accompanied by a solvency certificate holding that non-production of a solvency certificate wonld not entail a dismissal ol the application on that Jlround alone, as also the finding with regard to non-availabiiity of water . at the proposed site since. the blending unit of essrs Three Star .

Bottling Company was already functioning there. The learned Single

Judge rejected the contention of Messrs Chinglepnt Bottlers that the Commissioner had acted in_breach of the rules of natural justice by his failure to furnish the report of the Collectot obs<ll'Ving that noth.ing precluded them . from seeking perusal' of' the records; nor did they make a demand for it.

By his judgment, the learned Single Judge by the issue Qf a writ of certiorari quashed the impugned ordr 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 uplteld the order of the Commissioner rejecting the application of Messrs Chinglpet Bottlers for the grant of privilege on the ground that they were mere benamidars of the. previous licensee. AMrieved by the judgment of the learned Single Judge, both the State Govern- ' ment and Messrs Chingleput Bottlers preferred appeals under cf. 15 of the Letters Patent. Upholding the judgment of the learned Single • Jndge the learned Judge of \he Division Bench held ihat learned Single Judge was justifiep 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 mtntiOn 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 Commis sioner. In addition to 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 his other partner Smt. Shanthi, who incidentally is also bis

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bi1NGLBPUf BOTTLERS v. MAJESTIC BOfrLING (Sen,!.) 197

mother were the two erstwhile directors of Messrs Dhana\akshmi Chemial Industries Private Limited, Ranipet up)o Novemb.er 26, 1980 and there was pr/ma facie evidence tltat the company had misused tbe 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.S(b); and this would have been a relevant point to be taken into consideration by the State Government in the matter of grant or refuMl of prior approval. under r. 7(1). It was alleged that these two persons were directors during the afore said period of misuse.

At the ccnclusion 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 inviostigtion into the case was almost complete and a posecution was about to be launched' against the Company and its directors, includiPg J. Balaji and Smt. Shanthi, the two partners of Messrs M, ajestic Bottling Company. Inasmuch as no such abjection 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 t)le 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. ,,

Ther• are really two questions that fall for determination.

The first is as to the jurisdiction of the High Court to iss\le a writ of mandamus. It is said that the grant of licence under r.7 is subject , to th~ prior approval of the late Government and is in thi 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. The second 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 qther ma}erial gathered by him during the course of the inquiry tending to show th.at 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 Commis- .... sioner submitted a brief styled as a representation containing several documents inoppsition to the.application made by'Messrs Chingleput Bottlers on the ground that their application was benanii 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 o'r quasi judicial capacity, he was required to act fairly ... The rU!es of natural justice therefore required . that Messrs Chiugleput 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 with separately.

The first 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 •writ of mandamus ordaining the Commissioner to grant a lrcence to Messrs Chinglepl\t Bottlers under r.7 of the Rules without the prior. approval of the State Government. It s 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 ordr 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 Smith's Judicial Review of Administrative Yi.ction, 4th edn. at pp.341 and 5.f4. The.· • contention must,. in our opinion. prevail. e

Iii order that a writ of mandamus may issue to compel the Commtsioner to grant the licence, jt must be shown thai.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 approvarof the St.ate 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 dicretionary nature nor will a mandamus

CltINGLEPUT BOTTLElls v. MAJESTIC BOTTLING (Se71, J.) 199 • issue to compel the performance by such public body or authority of an act contrary to law. The Commissioner of Prohibition & Excise was ifnder 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 reommended the grant of a licence rt> 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 tll issue a writ of Mandamus to the Commissioner t<l grant a licence to Messrs Majestic Bottljng Company contrar' to the provisions of r.7 of the Rules.

• The learned Judges observed that in normal cicumstances they would h(lve upheld the objection of the learned Advocate-

General as to the jurisdiction of the High Court to issue a writ of mandamus, but in view of the fact that the State Government had chosen not to file a separate return. taking a specific plea that in the event of a writ of certiorari being granted, the Court shou"id not issue a writ of mandamus for the grant of licence since the grant or refusal of licence was subject to the prior approval of the State Government under r.7 of the Rules. The learned Judges accordingly held that the learned Single Judge was justified in issuing a writ in the nature of mandamus directing the Commissioner to issue a licence in favour pf Ms:ssrs Majestic Bottliug Company in view of the fact that there were . only two applicants in the field and the • application of Messrs Chingleput Bottlers having bn rejected, the State Government had no other option but to make .the grant in favour of Messrs Majestic Bottling Company. Further, the learned Judges observed that to sustain the objection would be tantamount to allowing the State Government to sit in appeal over the jdgment of the High Court. In substance, the learned Tudges were of the . view that filure of the State Government to take a specific. plea as to jurisdiction precluded them from raising a question' as 'to the jurisdiction of the High Court to issue a writ of mandamus.

We are afraid, we cannot accept this line of reasoning.

It is true that" sometimes it is pfudent to couple a writ of certiorari with a writ of mandamus to control the exercise of discretionary power. The following illuminating passages from de

Smith's Judicial Review of Administrative Action, 4th edn. at pp.341 ; and 544 pithily sum up the function of a writ of mandamus •

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. SUPREME COURT REPORTS . . . . - ·. ~

[1984] 3 S.C.R . • "It is now open to a court when granting certiorari to

. remit the matter to the authority with a direction to recon' ' sider and to decide in a.ccordance with the findiugs of the court. Apart from this, the role of the courts is limited to ensuring that direction has been exercised f according to Jaw.

If, therefore, a party agg.rieved by the exercise of discretionary power seeks an order of mandamus to compel the .authority to determine the matter on the basis legally relevant considerations, the proper form of the mandamus will be one to hear 4 . and determine according. to Jaw ;· though by holding inad- missible the considerations on which the original decision was based the court may 'indirectly indicate the. particular manner in which the discretion ought ti!! be exercised. In practice the frontier beween . control of legality and control of the actual exercise of discretion remains indeterminate, for the courts are sometimes observed to cross the boundaries that they have set .to. their own jurisdiction."

** *" •• •• •• "The dnty to observe these basic principles of legality in exercising a discretion is unlike the "duty" to apply the law correctly to. findings of fact, prima facie enforceable by mandamus. Hence where an authority has misconceived or misapplied its discretionary powers by exercising them for an improper purpose, or capriciously, or on the _basis of irrelevant considerations or without regard to relevant c.onsideratipns, i.t will be deemed to hav.e failed to exercise its di; cretion or . jurisdiction .at all or to have failed to hear and determine according to law, al!d mandamus may issue to compel it to act in accordance with the law."

Prfessor H.W.R .. Wade in his Administrative Law, 5th edn. at p.638 also defines the purpose of a writ of mandamus in these words:

"Mandamus is often used as an adjunct to certiorari.

If a tribunal or authority acts in a matter where it ha.s no power to act at all, .certiorari will quash the decision aud prohibition will prevent further unlawful proceedings. If there is power to act, but the power )s abµsed (as by hreach of natural justice or error on the face of the record), certiorari will quasli and mandamus may '. issue simultaneously to require a proper rehearing.

An example is Board of Educa ' ' . lion v. Rice ll911] AC 179 cited elsewhere ; the Board's

• CliiNGLEPUT BOTTLERS v. MAJESTIC BOTTLING (Sen, i.) 20i

decision was ultra vtres since they had addressed their minds to the wrong question ; consequently it was quashed by certiorari and the Board were commanded by mandamus to determine the matter according to law, i.e. within the limits indicated by the House of Lords."

In our judgment, the High Coµrt exceeded its jurisdiction in issuing a writ of mandamus directing the Commission•:r to grant a licence to Messrs Majestic Bottling Company without the prio"r approval of the State Government as enjoined by r.7 of the Rules ..

The High Court was unduly technical in applying the rules of plead• ings.

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 licen<e' to Messcrs Majestic . . Bottl'tng 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, untler 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 fktts and circum- , stances as to whether the Hlgh Court should issue a wfit of mandamus .or not. The grant of a liquor licence is a matter of privilege. II) the very nature of things, the grant of refusal of Jicence is in the discretion of the State Government. Normally, where the statute vests a discretionary power llj)On an administrative authority, the Court would not interfere with the exercise of such .discretion unless it is mane with oblique motives or extraneous purposes or'upon extraneous considerations. The present case does notfall within the , rule laid down in K. N. Guruswamy v. The State of MyNre & Ors.1 and P. Bhooma Reddy v. State of Mysore & Ors' The decisions in Guruswamy's and Bhooma Reddy's cases are•both in consonance with the well-settled principle that. the High Court can always issue a

(l) [1955] 1 SCR 305

(2) [1969] 3 SCR 14

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writ of madam us 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. . . .

It is urged on behalf of Messrs Majestic Bottling Company placing reliance on the decision of the House of Lords in Padfield

v. Minister of Agriculture, Fisheries & Food1 and that of this Court in Messrs Hochtief Gammon v. State of Orissa &ldrs.2 following the same that, no doubt where the reasons given are bad and the authority had not taken into consideration the relevant matters or real grounds on which the order co.uld have been passed, the Court. can direct the authority to reconsider the matter in the light of such relevant mters. ufit was urged that no useful purpose would

b~ served in remitting lbe matter to the authority for reconsideration where all the reasons that can be given for upholding the validity of the order have beenfound by the Court to be bad and unsustainable. The .submission is that in such a case the Courts will not direct the authority to refonsider the matter for, then there is nothing to . reconsider but the Court will direct the authority to carry out what it has by the impugned order refused to do. In Hochtief Gammon's -case, this Court deduced the following principles from the decision of House of Lords in Padfield';; case:

"The l!xecutive have to reach their decisions by taking into account relevant .considerations. They should not refuse to consider felevant matter no.r should they take into account wholly irrelevant or extraneous consideration. They should not misdirect themselves on a point of law. Only sµch a decision will be lawfuf. The Courts have power to see that the Executive acts lawfully. It is no answer to the exercise of that power to say that. the Executive acted bona fide nor that they have bestowed painstaking consideration. They cannot avoid . scrutiny by courts by failing to give reasons. If they give reasons and they are not good reasons, the court can direct them to reconsider the matter in the light of relevant. matters though the propriety, adequacy or satisfactory character of these reasons may not be open to judicial scrutiny. Even if the Executive .considers it inexpedient to exercise their powers fhey should state their reasons and there must be;/ material to show that they have considered all the relevant facts.

(I) LR [1968] AC 997

) (1976] I SCR 667

.)J

• CH!NGLEPUT BOTTLERS v. MAJESTIC BOTTLING ~Sen, J.) 2b3

This was not a case where it coul'tl be said that there was noth ing for the State Government to consider as to whether should accord or refuse prior approval to the gran~ of a licence to Messrs Majestic Bottling Company under r. 7 of the Rules. The Commissioner by the impugned order rejected the applications for grant .of a licence made by both Messrs Chingleput Bottlersfnd Messrs Majes tic Bottling Company and therefore the. stage was not reached. The stage for the State Government to reconsider the matter of grant of privilege under r. 7 would , only arie when;. the commissioner makes a recommendation for the grant of a licence. to Messrs Majestic Bottling Company. At that stage, the State Government would have to consider whether they should accord prior approval for the grant 'of such privilege to Messrs Majestic Bottjjpg Company having regard to the matters specified in r. 5 of the Rules and the condilions set out in r. 6(c), .in view of the further facts brought out in the supplementary counter affidavit of Deputy Secretary to the State Government, Department of Prohibition•& Excise in support of the objection raised in para 11 of the counter-affidavit. One of the relevant factors that the State Government must, as they should, take into consideration is , the suitability of Messrs Majestic Bottling Company for the graqt of licehce as required under r. S(a) and !he other is whether J. Balaji, the managing partner and Smt. Shanthi the other partner, were per sons who would abide by tlie provisisjons of the Act and the Rules made thereunder as enjoined by).. S(b). The facts lay a serious charge that Balaji, managing partner of Messrs Majestic Bottling Company and his other partner Smt. Shanthi were directors of Messrs Dhanalakshmi Chemical Industries Private Limited, Ranipet upto November 26, 1980 and that there was prima facie evidence showing that the company had misused the rectified spirit issued to it causing a loss of revenue to the State Government to the tune elf Rupees two crores or thereabout. It would be permissible for the

State Government to take these facts as justification for refusal to grant prior approval under r. 7 of the Rules. .

In Foming to the conclusion they did~ the learned Judges have drawn sustenance from the decision of this Court in Gujarat State Financial Corporation v. Messrs Lotus Hotels Private Limitedl and of the High Court in the State of Tamil Nadu & Anr. v. C. Vadiappan' in support of the view that the High Court had jurisdiction .to issue a writ of mandamus directing the State of Tamil Nadu and

(!) (1983] 3 s.c.c. 379

(2) (1982] 2 Mad. L.J. 30

• 2o4 stJPRBMll COURT REPORTS t19s4J 3 s.c.ft:.

 the Commissfoner of Prohibitit'm & Excise to grant the privilege for the manufacture and supply of bottled arrack to Messrs Majestic .

Bottling Company for tbe Chingleput district under r. 7 of the Rules .. The decision in Gu}wat Stat~ Financial Corporation's case .

(supra) is clearly distinguishable and is not an authority for any such . proposition. No;; uch questiou arose in that case at al1. There, the Court was dealing with a contract entered into by the Gujaat State . Financial Corporation with Messrs Lotus Hotels Private Limited for

the purpose of setting up a 4-star hotel. The Company approached the Corporation for a loan.of rupees 30 !akhs and the Corporation sanctioned a loan of Rs. 29.93 lakhs on certain terms and conditions wl'tich the Company accepted. The Corporation however finally resolved not to disburse the lon to the Company whereupon the Company moved Gujarat High Court by a petition under Act. 226 for the issue of a writ of mandamus to direct the Corporation to disburse the loan. A learned Single Judge of the High Court issued the writ as prayed for and it was confirme<\ by• a Division Bench. ·.

On appeal by the Corporation, this writ Court held that the High Court was justified.in issuing the writ of .mandamus. The decision in G, ujarµt State FinancialCorporation's case, (supra) turned on .the doctrine of promissory estoppel and it does not justify the conclusion reached by the learned ludges in the present case for the issue of a writ of mandamus. It is needless to stress that if the require- . . . ment of law was that the advance of loan to be sanctioned by the Gujarat State Financial Corporation was to be subject to the prfor. approval of the Reserve Bank of India, the decision of the Court would have been otherwise.

It is difficult to subscribe to the doctrine evolved by the High Court in Vadiappan's case, (supra) that 'the Commissioner is the 'sole. arbiter' under r. 7 of the Rules. It relied upon the earlier deci&ion of the High Court in K. Ramaswamy v. Government of Tam ii Nadu & Ors' laying down that .the proviso to r. 6 of the Tamil Nadu Arrack (Supply by Wholesale) Rules, 1981 had to be understood strictly ill a negative sen~. According to the High Court, at best it confers.on the Government a power to .vefo. By itself, the High Court observed, 'it does not make the Government a final arbiter between the competing claims. The High Court further observed in Ramliswamy' s case, supra, that 'the weighing of the pros and cons and the consideration of the merits and demerits of the rival clai-

\ (I,) Writ >.ppeal No. 368of1981.

. ' -, f

CHiNGLEPUT BOTTLERS v. MAJESTIC BOTTLING (Sen, J.) 205

ments remained, from first to last with the Commissioner as his sole responsibility, and that the requirement of the Government's proper approval under the proviso to r. 6 of the' Tamil Nadu Arrack (Supply by Wholesale) Rules "1981 was no doubt a necessary part of the validity of every licence, but 'the enabling power cannot he employed as a machinery for a review in every case but only as a check upon a possible abuse of its power by the Commissioner'.

That approach of the High Court seems to run counter to the scheme of the Act and the Rules framed thereunder. The grant of a liquor licence under r; 7 is a matter of privilege of the State Government.

The Commissioner merely exercises the delegated powers of the State Government. The ultimate responsibility for the grant of such privilege is with the State Government under r. 7 of the Rules .

. Nor can we subscribe to the contention that the Commissioner bad to act under the directions and control of the State Government under sub-s. (2) of s. 2SA of the act while exercising his powers delegated under sub-s (I) of s. l 7C read with s. 25A (I) in the matter or grant of a liquor licence under r. 7 of the Rules. It would not justify the High Court to issue a writ of mandamus to the Commissioner to grant a licence to Messrs Majestic Bottling Com- . pany under r. 7 of the Rules without the prior approval of the State , .

Government. Obviously, the State Government and the Commissioner canot act de hors the scheme of tl)e Act and the Rules framed thereunder. Furter, the contention that the State Government had already made up their mind against the grant of such previlege to Messrs Majestic Bottling Company . and that there was no occasion for the High Court to send back the cae to -the Commissioner as it would have amonnted to the State Governn1ent being asked to sit in appeal over the judgment of the High Court, cannot be accepted. We regret to say,· the High Court has tried to circumveni the whole procedure by issuing a writ of mandamus directing the Commissioner to grant a licence under r. 7 without the prior appro\lal of the State Government. As already stated, the grant of a licence un.der r. 7 of the Rules is a privilege. There are no charges of ma/a fides on the part of the State Government. There is no suggestion that the State Government had already made up their mind. This is also not a case where the rules of necessity require recourse "to a writ of mandamus to command the issue of a licence without con forming to the procedure prescribed under r. 7.

 II>

In the premises, it was not a . proper exercise of jurisdiction for the High Court to have 'iss\led a writ . of mandamus under Art, 226 ·

ff;

,,.

of the Constitution ordaining the Commissioner to grant a licence to

Messr~ Majestic Bottling Company under r.7 of the )lules 'without . the pr10r approval of the State Government. In our opinion, the proper course for the High Court to adopt was to issue a writ of mandamus directing the Commissioner to redetermine the question after following the procedure of r. 7 and in case he came to a decision to grant the licence in favour of Messrs Majestic Bottling Company, to refer the matter to the State Government for its prior approval. Otherwise r.7 of the Rules would be rendered. completely otiose . .

Turningto the appeai preferred by M/s Chingleput Bottlers, le'arned counsel for them has mainly advanced a three-fold sub mission: (1) The Commissioner had acted in flagrant violation of the rules.<)[ natural justice in not furnishing to Messrs Chingleput Bottlers a copy of the report of the Collector and other extraneous material comprising of a representation received from Messrs Majestic Bottling Company along with various other documents.

Nor had. he disclosed to them the substance of the report of the Collector or other information gathered by him irrespective of the source.

(2) The impugned order passed by the Commissioner was vitiated by errors apparent on the face of the record. There was no factual basis for. the assumptidn that the three persons from whom Messrs Chingleput Bottlers had taken the lease of the land on which the blending unit is located. viz, K.J. Geo"'5e, M/~. Visvam baran and E.K. Chandrasekaran, were real partners of Messrs Three.

Star Bottling Company. There was also no warrant for the suspicion cast by the Collector in is report that Messrs Chingleput Bottlers were mere benamidars of otie . O.H. Kumar, proprietor of Messrs Three Star Bottling Company, the existing licensee, on the ground that they bad entered into an agreement to purchase the blending unit from him. The function of the Commissioner in making the grant of'privilege under r. 7 qf the Rules of being a quasi-judicial nature, the Commissioner could not act on unwarranted conjecture,; and mere surmises. (3) The 'commissioner had not acted fairly inasmuch as 'he adopted a double standard. For a secret inquiry was conducted against Messrs_Chingleput Bottlers for adjudging their, suitability for the grant of privilege while no. such inquiry was mqde against Messrs Majestic Bottling Company. The Commissioner had thus treated Messrtchingleput Bottlers and Messrs Majestic Bottling Company on an unequal footing and thus the procedure adopted was violative of Art. 14. The observation made by the Commissioner that the pepqsit of Rs. 10,01,00) made by Messr~ Chingleput Bottlers with.

, J/

...

CIUNGLEPUT BOTTLEM v; MAJESTIC BOTTLING (Sen, J.) 207

the Indian Overseas Bank ha.d not come from bona fide sources and that obviously there was some secret understanding between O.H . . Kumar and Me; srs Chingleput Bttlers was not based on any material at all. The Commissioner knew that O.H. J(umar, the previous licensee, was not in a position to advance rupees 10 lakhs and odd to Messrs Ching!eput Bottlers. Again, no such inquiry was made as to the financial capacity of Messrs Majestic Bottling Company. Further, the Commissioner had wrongly assumed that

Mers Chingleput Bottlers and given theiraddress as 'Ramabadran, c/o essrs Three Star lk>ttling Company, lyanchery' when no such address was ever furnished and therefore the impugned order is vitiated by an error apparent on the face of the record.

In support of the contention that the Commissioner acted i11 violation of the' rules of natural justice, the learned counsel contends that Messrs Chingleput Bottlirs had a right to be heard. It is urged that there was clear breach of the principle of audi alteran partem . inasmuch as neither a copy of the report of the Collector was furnished to Messrs Chingleput Bottlers nor a copy of >the representation submitted by Messrs Miijestic Bottling Company against the grant of licence to them. The argument is that a hearing where a party does not know the case he has to meet is no hearing at all, while the learned counsel concedes that the right to know the case to be met does not necessarily involve any right to know the sources of adverse inference or to confront informants,' for in many cases it will be quite proper for the authority to employ confidential sources, the rules of natural justice require that the information itself should be disclosed so that there is a fair opportunity of

meeting the case.

In the file relating to Messrs Majestic Bottling Company there is a representation filed by J. Balaji, managing partner of Messrs Majestic Bottling Company, consisting of 131 pages and was apparently handed over by J .. Balaji at the time of heafing, before the Commissioner on July 5, 1982. The rresentation dated July 5, 198? is in the forrn of a petition in continuation qf the application for grant made on June 9, 198,2. Regarding Messrs Chingleput Bottlers, certain objections are raised to the grant of licence. The objections are formulated in a document marked Annexure 'A'. It is alleged that the existing licensee 0.H. Kumar is running the show under the name and style of Messrs Three Star Bottling Company which is

uder the control of three person§. namely, K.J, George, M:S.

V1svaml,>aran and E.K. Chanctrasekara, n. It recites th11t now finq-

B .. ,

.. ' '

' 208

WPREME COURT REPORTS _{1984} 3 s.c.R.

ing that O.H. Kumar could not get the present licence, they have sef up Ramabadran who has himself shown his address as care of : Messrs Three Star Bottling Company. This .itself clearly shows that the. applicant. Ramabadran is a benamidar of Messrs Three Star Bottling Company. In support of the assertion that Ramabadran is a benamidar of 0.H. Kumar, there is a copy of the judgment of the High Court of Madras in Writ Petition No. 1239 of 1961 filed along with other papers .. In the file relati, ng to ssrs Chingleput Bottlers there is a two-page note which formulates . . certain objections to the grant of privilege to Messrs Chirfllleput Bot(lers. It was obviously handed over by J. Balaji, managing partner of Messrs Majestic Bottling Company to the Assistant Commissionef"(Excise) during his inspection of the blendipg unit or before the C9llector before the submission of his report.

' ' We do not think that the Comissioner was under an obliga-·; lion to furnish Messrs Chingleput Bottlers with a copy of.the report submitted by the.Collector or of the representation made by Messrs Majestic Bottling Company. Thf~ equally applies to the two-page note appearing in.the file of Messrs Chingleput Bottlers. It was. quite pro- . per.for the Commissioner to make secret and discreet inquiries from confidential sources. There was no duty cast on him to disclose to Messrs Chingleput Bottlers the sources of adverse information or to give. them an oppt>rtuniiy to confront the informants.

Rules of fairplay only enjoin that Messrs Chinglepnt Bottlers should kiiow the case against thFm. This apparently they did from the questionnaire issued by the Commissioner and the questions put by the Commissioner on July 5, 1982 on the basis of the information gathered by him.

The Commissioner has relied upon the report of the Collector and the conclusions reached by the Collector are based on the statement of Ramabadran recorded by the Assistant Commissionr (Excise).

Further, at the heating on July 5, I 982, the Commissioner recorded the statementoof Ramabadran, managing partner of Messrs Chingleput Bottlers. There 'was no occasion for the Commissioner to have recorded the statement of Rartiabadran over again unless this was to give him an opportunity to exp)ain \be substance of the report of the Collector or other information gat\\ered by hi.m irrespective of the source.

The learned Judg_es . repelled. the contention of Messrs Chingleput Bottlers, that the Comissioner acted in breach of therules 9f natural justice by his failure to furnish theD! with a copy of th~

' ..

CllINGLEPUT BOTTLERS v. M~JESTIC BOTTLING (Sen, J.) 209

repoi; t of Collector on the ground that there is no fund<1mental right in a citizen to carry on any trade ln liquor. According to them, the Commissioner under the Rules performs an admi11istrative function and having regard to the reuirements of r .5 of the Rules, and in view of the fact that Messrs Chingleput Bottlers had neither a legal right nor a legal expectation that they would be granted the privilage all that was required was that the Commissioner should act fairly in dealwg with the application and not in a capricious or arbitrary manner. _On the material on record, the learned Judges held that they w•re satisfied that the Commissioner acted fairly and reasonably and not arbitrarily or capriciously in coming to the conclusioo that Messrs Chinglepnt Bottlers had not made the application on their own behalf, but betiami for others and in rejecting their application for the privilege for setting up a blending uit for arrack.

Incidentally, they pointed out that Messrs Chingleput Bottlers did not specifically make a grievance of the fact in the writ petition that principles of natural justice had not been complied with. It is a. fundamental rule of law that no decision mnst be taken whiCh. will affect the rights of any persQn without first giving h_im an opportunity of putting forward his case.

There has ever since the -judgment of Lord Reid in Ridge v.

Ba(dwin, supra, been considerable fluctuation of judicial opinion in 'England as tD the degree of strictness with which the rules ofnatural justice should be extended, ad there is growing awareness of the problems created by the extended application of principles 9f natural justice, or the duty to act fairly, which tends tQ sacrifice the administrative efficiency and despatch, or frµstrates the object of the bw in question. Since this Court had held that Lord Reid's judgmc:it in Ridge v. Baldwin would be of assistance in deciding questi@ns relating to natural justice, there is always "the duty to act judicially''. whenever the rules of natural justice are applicable. There is therefore the insistence upon the requirement of a "fair hearing". . .

In the light of the settled principles, we have to see whether the G Commissioner. acted in breach of the rules of natural justice or fairplay in passing the jmpugned order:

There is authority for the proposition that an authority or body need' not observe the rules of natural justice where its decision, although final, relates not to a 'right' but to a 'privilege or ficeµce'.

Jn a: nunibr of recent decisions, the Conrts have, while extending

the protection of natural justice in the former 'Category of claims, denie\I such proiection to the latter ca!egory. All that is emphasize(! in such cases is that the applications must be considered fairly.

In R. v. Gaming Board for Great Britain.e:Xparte Bneailn & Khaida1 the

Court of Appeal held that in refusing a certificate for reasons concerning the character and suitability of the applicants, the Board must act fairly and obey th~ broad principles .of natural justice, In fact, it was held that they had done so _since they had given the applicants full opportunity to know and contest the case again!t them, ven though they had not revealed the sources of their infor- • tfiatiim or given their reas, ons. It follows that the right to know the case to be met does not necessarily involve any right to know the source of adverse information or to confront the informants, for id. some cases it would be quite proper for the authority to employ confidential sources.

The Master of' Rolls referred to the contention advanced by counsel appearing for the applicants. that they ougbt not to be deprived of the chance to get licence for the gaming business without knowing the case they had to meet. The counsel criticized especially the way in which the Board proposed to kee,. that confidential information and relied on.some words of his in R. Surinder Singh Kanda v. Government .~! the ~Federation of Malaya• where he had said:

'Thatthe Judge or whoever lras to adjudicate must not hear evidence or receive representation from one side behind the pack of the.other." ·

Lord' Denning rejected the contention by observing that 'the CO\Jnsel had put hjs case too high'. The ]earned Master of Rolls then observed.: ·

. . "It is an error to regard Crockfor!l's. as having any right of which they are being deprive(!. They have not bad in the past, and they have not now, any right to play these games of chance-roulette, cheminde-fer, baccarai and the like for their own profit. What they are really seeking is a privilege:almost, I might say, a franchise'to carry on gaming

H (!). [1970)" 2 All B.R. 528

(2). LR [1962) AC 3~.

• f • .•

-r.

CHINGLEPUT. BOTTLERS v. MAJESTIC BOTTLING (Sen, J.) 211

for profit, a thing never hitherto allowed in this country. It A

is for them to show that they are fit to be trusted with it."

Iu Breen v. Amalgamated Engineering Union.' Lord Denning said :

"If a man seeks a privilege to.which he has no particular claim-such as an appointment to some post or other- ' . then lie can be turned away without a word." •

The Master of Rolls went on to say that nonetheless statutory and in some cases domestic bodies must act

0fairly and this may involve a. hearing. althoug_h it is not clear from the judgment whether the duty applies where .an initial application is being considered. or only where an existing privilege is being terminated.

In Mcinnes .v.Ons/ow Fane & Anr., Megarry, V.Cc has drawn a distinction between initial applications for grant of licence and the revocation, suspension or refusat to renew licences already granted.

The learned Vice-Chancellor says:that there i~ a substantial distinction between 'application cases' and 'forfeiture cases'. He observes. that while an apJ, llicanf for _grant of licence has neither a right to such a grant nor a reasonable expectation that su.ch grant would be •. made in his favour, but cancellation or forfeiture of an existing licence orrefusa!' to renew a licences, involves. a right to a hearing as the applicant has what may be called 'reasonable expectation'; Megarry, V.C. dealt with the question whether the grant or refusal of licence by the Boara of Control is sbject to any requirement of natural justice or fairness which would be enforced by the Courts.

In dealing with the nature of the right to claim a licence, he said that it was nothing but a privilege. The three distinct categories can "- best be discerned in his own words : ;.

""· I

"First, there are what may be called the forfeiture cases.

In these, there is a decision which takes away some existing right or position, as where a member of an organization is expelled or a licence is revoked. Second, at the other extreme there are what may be called the application cases. There are cases where the decision merely refuses to grant the applicant the right or position that he seeks, such as membership

(!). [1971] 2 QB 175 (2). (1978) 3 J\ll. BR 211

of the organization, or a licence to do certain acts. Third "there is an interme<; liate category, which may be called th:

expectation, cases, which differ from the application cases only in thar the applicant has spme legitimate expectation from what has already happened that his application will be granted. This head includes cases where an existing licence holder applies for a renewal of his licence, or a person already eleceted or appointed to some position seeks confirmation from some confirming autf10rity.

The learned Vice-Chancellor went on to say that there was a substantial distinction betwi:en forfeiture cases and application cases: In forfeiture cases, there is a threat to take sometl)ing away for some reason. In such cases, the right to an unbiased tribunal, th.e right to notice of the charges arid the right to be heard in answer to the charges which were:the three features of natural justice are plainly apt. In application cases, on the other hand, nothing is being taken away, and i.n all normal circumstances there are no charges', and so no requirement of an opportunity of being heard in answer to the charges. Indeed, there is the.far wider and less defined questions of the general suitability of the applicant for membership or a licence. The distinction is well recognized, for in general it is clear that tho Courts will require natilral justice to be observed for expulsion from a social club, but not on an application for admi!!llion to' it. The intermediate category i.e. of tqe expectation cases, may at least in sonze respects be regarded s being more akin to forfeiture cases than application cases ; for although in form there is no forfeitnre bu' merely an attempt at acqnisition that fails, the legitimate expeCtation of a renewal of the licence or conformation of the' membership is one which raises tbe question of what it is that has happened to make the applicant unsuitable for {he membership or licence for which he was previously thought suitable,

Iil such cases, Megarry, V.C. felt that. much help cannot be had from discussirig whether 'natural justice' or 'fairness' was the more appropriate term'. He.observes that if one expects that naturnl justice is a flexible term which imposes different requirements in different cases; it is capable of.applying appropriately to the whole range of situations indicated by the terms such as 'judicial,' 'qnasi judicial' and 'administrative'. The content of the 'duty to act f\\irly'

1lid. not impose on :he Board to give either oral hearing to the .

j ,

' -

. '

CltlNGLEPUT BOTTLERS v. MAJESTIC BOTTLING (Sen, J.) 213

. ' applicant or to disclose the case against him nor was it under any obligation to give r_easons for a decision: The learned Judge then went on to say that there was no obligation for the Board to give the applicant even the gist of the reasons while they refused his applicatibu, or proposed to d_o so, and added:

The concepts of natural justice and the duty to be fair must not be allowed to discredit themselves while making unreasonable requirements and imposing undue bµrdens."

1n such cases, the right to hearing has been denied on the ground .

that the claim or interest or legitimate' expectation is a more 'privilege c or 'licence' .. This is in consonance with the decision of a Constitu- . lion Bench of this Court in Kishan Chand Arora v. Commissioner of

. Police, Calcutta' following the judgmet of the Privy Council in Nakkuda Ali v. M.F.De S. Jayaratne's' case.

" It is beyond the scope of the .present judgment to enter into a discussion on the apparent conftict between the decision of the Privy Council in Nakkuda Ali's case and the observations of Lord Reid in Baldwin's case. It would appear that the long line of cases beginning. with 82/dwin's cse and ending with D'arcy Ryan'J case are cases dealing with interference with property rights, deprivation of member>hip of professional or other non-statutory bodies, dismissal from office, imposition of penalties and deprivation of advantages etc.

Both the Privy Council as well as this Court have required strict

apherenc~ to the rules of natural justice wfiere a public authority or body has_ to deal with rights. But the principle that there was a duty to observe the audi alteram partem rule may not apply to cases whi_ch relate not to rights or legal expectations but to. mere pivilege

or licence. •

It is now well-settled that, while considering the question of breach of the principles of natural justice, the Court should not proceed as if there are intlexible rules of natural justice of universal application. Each case depends on lits own circumstances. Rnles of natural justice vary with the varying constitutions nf statutory bodies and the rules 'prescribed by the legislature under which they

have to act.

' H I

(I). [19611 3 SCR _135.

(2). LR [1951) AC 66.

214 SUPREME cotlRT REPORTS [1984} 3 ~.:;.i>: •

There is nothin$ in the language of r. 7 of the Rules to suggest that in refusing to grant the privilege, the Commissioner is obliged to act 'judicially'. The order refusing a licence under r. 7 is purely an administrative or executive order and is not open to appeal or revision. There is no /is between the Commissioner and the person who is refused such privilege. The power of refusal of licence unlike the power to grant is riot subject t.o any pre-condition.

It mus; follo)l' that the grant Of a liquor. icence under r. 7 of the Rules does no{ involve any right or expectation but it is a'inatter ot privilege. The Commissioner was therefore 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 capricious manner. - . ..

There is no suggestion of any 1iiala fide!; 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

f •

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 under . the Motor Vehicles Act, 1939 into' their respective merits and demerits. The Commissioner separately heard both the parties and had their statements recorcied with respect to all the relevant aspects.

It canntlt 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 Jiigh Court could not have in proceedings under Art. 126 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 errclr of jurisdiction on the part of the Commissioner nor was the impugned order vitiaJed by any error apparent on the face of the record. The finding reached by the Commissioner that the application made by' Messrs Chingleput Bottlirs was not, made bona fide on their own

: •.

C!!IN.GLEPUT norrLEks v. MAJEsnc lior:rtna (Sen, J.) 215

accQunt but as benami for others is a :finding based on appreciation of evidence .. The Con:imissioner was entitled to rely upon the facts found by the Collector. It may be pointed out that the Collector's report is entirely based on tl)e statement of V. Ramabadran, managing partner of Messrs Chingleput Bottlers. The High c;, ourt was therefore justified in dismissing the appeal preferred by Messrs Chingleput Bottlers. ' • In the result, the appeal preferred by the State povemment must succeed and is allowed .. The judgment. and brder passed by the High Court fot the issue of a writ of mandamus directing the Commissioner of Prohibition & Excise, .Madras is set aside and the case' is remanded to the Commissioner for a decision afresh according to law. For th.e reasons stated, the appeal filed by Messrs Chingleput Bottlers must fail and is 'dismissed.

S.R.

There shall be no order as to costs.

' .

C.As .. 11970-71 /83 dismissed and C.A. / 1'172/83 allowed