Case ID: 4792

Judgment:
Civil Appeals Nos. 1 1970 1 1972 of 1983 Appeals by Special leave from the] judgment and order dated the 27th July	 1983 of the Madras High Court in W. A. Nos. 523	 531 & 528 of 1983. K.K. Venugopal and C. section Vaidyanathan for the Appellants in CA Nos. 1 1970 71183. Sahnti Bhushan	 A. T. M. Sampath and Mr. K. Subramaniam for the Respondents in CA. Nos. 1 1970 71/83. 194 A.K. Sen and A.V. Rangam for the Appellant in CA. No. 1 1972 of 1983. Soli J. Sorabjee A.T.M. Sampath and K. Subranmaniam for the Respondent in CA. 11972/83. The 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	 1983 upholding the judgment and order of 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 wholesale 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 Nadu Prohibition Act	 1937 ( 'Act ' for short). These appeals raise separate and distinct questions and must therefore receive separate consideration. Put very shortly	 the essential facts are these. 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 for 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 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 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	 1982 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 vs Ramabadran in 195 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 partnership firm. As regards 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 bona 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 the Rules. The finding 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 cf the inquiry. Both Messrs Majestic Bottling Company and Messrs Chingleput Bottlers filed separate petitions under article 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 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 of water. The Learned Single Judge however set aside the finding of the Commissioner that the application made by Messrs Chingleput 196 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 for it. By his 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 the 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 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 his 197 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 of misuse. At the conclusion of the hearing of the appeals before the High Court	 the State Government filed a supplementary affidavit of section 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 . There are really two questions that fall for determination. The first is as to the jurisdiction of the High Court to issue a writ of mandamus. It is said that the grant 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. The second question is whether the Commissioner acted in breach of the rules natural justice in not furnishing 198 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 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 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 Smith 's 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 199 issue to compel the performance by such public body or authority of an act contrary to law. 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 the Rules. The learned Judges observed that in normal circumstances they would have 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 should 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 of Messrs Majestic Bottling Company in view of the fact that there were only two applicants in the field and the application of Messrs Chingleput Bottlers having been 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 judgment of the High Court. In substance	 the learned Judges were of the view that failure 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 prudent 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; 200 "It is now open to a court when granting certiorari to remit the matter to the authority with a direction to reconsider and to decide in accordance with the findings of the court. Apart from this	 the role of the courts is limited to ensuring that direction has been exercised according to law. If	 therefore	 a party aggrieved 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 and determine according to law; though by holding inadmissible the considerations on which the original decision was based the court may indirectly indicate the particular manner in which the discretion ought to be exercised. In practice the frontier between 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 duty 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 considerations it will be deemed to have failed to exercise its discretion or jurisdiction at all or to have failed to hear and determine according to law	 and mandamus may issue to compel it to act in accordance with the law " Professor 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 has no power to act at all	 certiorari will quash the decision and prohibition will prevent further unlawful proceedings. If there is power to act	 but the power is abused (as by breach of natural justice or error on the face of the record)	 certiorari will quash and mandamus may issue simultaneously to require a proper rehearing. An example is Board of Education vs Rice cited elsewhere; the Board 's 201 decision was ultra vires 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 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 vs The State of Mysore & or and P. Bhooma Reddy vs 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 202 writ of mandamus under article 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 vs Minister of Agriculture	 Fisheries & Food and that of this Court in Messrs Hochtief Gammon vs State of Orissa & ors. 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 could have been passed	 the Court can direct the authority to reconsider the matter in the light of such relevant matters. But it was urged that no useful purpose would be served in remitting the matter to the authority for reconsideration where all the reasons that can be given for upholding the validity of the order have been found by the Court to be bad and unsustainable. The submission] is that in such a case the Courts will not direct the authority to reconsider 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 's case: "The Executive have to reach their decisions by taking into account relevant considerations. They should not refuse to consider relevant matter nor should they take into account wholly irrelevant or extraneous consideration. They should not misdirect themselves on a point of law. Only such a decision will be lawful. 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 bonafide 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 they should state their reasons and there must be. material to show that they have considered all the relevant facts. 203 This was not a case where it could be said that there was nothing for the State Government to consider as to whether should accord or refuse prior approval to the grant 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 Bottlers and Messrs Majestic 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 arise 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 Bottling Company having regard to the matters specified in r. 5 of the Rules and the conditions 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 grant of licence as required under r. S(a) and the other is whether J. Balaji	 the managing partner and Smt. Shanthi the other partner	 were persons who would abide by the provisions of the Act and the Rules made thereunder as enjoined by r. 5(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 of Rupees two crores or thereabout. lt 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 coming to the conclusion they did	 the learned Judges have drawn sustenance from the decision of this Court in Gujarat State Financial Corporation vs Messrs Lotus Hotels Private Limited and of the High Court in the State of Tamil Nadu & Anr. vs 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 204 the Commissioner of Prohibition & Excise to grant the privilege for the manufacture and supply of bottled arrack to Messrs Majestic Bottling Company for the Chingleput district under r. 7 of the Rules. The decision in Gujarat State Financial Corporation 's case (supra) is clearly distinguishable and is not an authority for any such proposition. No such question arose in that case at all. There	 the Court was dealing with a contract entered into by the Gujarat 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 lakhs and tile Corporation sanctioned a loan of Rs. 29.93 lakhs on certain terms and conditions which the Company accepted. The Corporation however finally resolved not to disburse the loan 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 confirmed 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 Gujarat State Financial Corporation 's case	 (supra) turned on the doctrine of promissory estoppel and it does not justify the conclusion reached by the learned Judges in the present case for the issue of a writ of mandamus. It is needless to stress that if the requirement of law was that the advance of loan to be sanctioned by the Gujarat State Financial Corporation was to be subject to the prior 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 decision of the High Court in K. Ramaswamy vs Government of Tamil 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 in a negative sense. According to the High Court	 at best it confers on the Government a power to veto. 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 Ramaswamy 's case	 supra	 that 'the weighing of the pros and cons and the consideration of the merits and demerits of the rival clai 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 be 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 had to act under the directions and control of the State Government under sub section (2) of section 25A of the act while exercising his powers delegated under sub s (1) of section 17C read with section 25A (1) 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 Company under r. 7 of the Rules without the prior approval of the State Government. Obviously	 the State Government and the Commissioner cannot act de hors the scheme of the Act and the Rules framed thereunder. Further	 the contention that the State Government had already made up their mind against the grant of such privilege to Messrs Majestic Bottling Company and that there was no occasion for the High Court to send back the case to the Commissioner as it would have amounted to the State Government 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 circumvent the whole procedure by issuing a writ of mandamus directing the Commissioner to grant a licence under r. 7 without the prior approval of the State Government. As already stated	 the grant of a licence under r. 7 of the Rules is a privilege. There are no charges of mala 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 conforming to the procedure prescribed under r. 7. In the premises	 it was not a proper exercise of jurisdiction for the High Court to have issued a writ of mandamus under article 226 206 of the Constitution 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. 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. Turning to the appeal preferred by M/s Chingleput Bottlers	 learned counsel for them has mainly advanced a three fold submission: (1) The Commissioner had acted in flagrant violation of the rules of 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 assumption 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. George	 M/s. Visvambaran 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 his report that Messrs Chingleput Bottlers were mere benamidars of one O.H. Kumar	 proprietor of Messrs Three Star Bottling Company	 the existing licensee	 on the ground that they had 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 of the Rules of being a quasi judicial nature	 the Commissioner could not act on unwarranted conjectures and mere surmises. (3) The Commissioner had rot 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 made against Messrs Majestic Bottling Company. The Commissioner had thus treated Messrs Chingleput Bottlers and Messrs Majestic Bottling Company on an unequal footing and thus the procedure adopted was violative of article 14. The observation made by the Commissioner that the deposit of Rs. 10	01	001 made by Messrs Chingleput Bottlers with 207 the Indian overseas Bank had not come from bona fide sources and that obviously there was some secret understanding between O.H. Kumar and Messrs Chingleput Bottlers was not based on any material at all. The Commissioner knew that O.H. Kumar	 the previous licensee	 was not in a position to advance rupees 10 lakhs and odd to Messrs Chingleput Bottlers. Again	 no such inquiry was made as to the financial capacity of Messrs Majestic Bottling Company. Further	 the Commissioner had wrongly assumed that Messrs Chingleput Bottlers and given their address as 'Ramabadran	 c/o Messrs Three Star Bottling Company	 Iyanchery ' 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 in violation of the rules of natural justice	 the learned counsel contends that Messrs Chingleput Bottlers had a right to be heard. It is urged that there was clear breach of the principle of audi alteram partem in as much 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 Majestic 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 hold he 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 hearing before the Commissioner on July 5	 1982. The representation dated July 5	 1982 is in the form of a petition in continuation of the application for grant made on June 9	 1982. 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 O.H. Kumar is ruling the show under the name and style of Messrs Three Star Bottling Company which is under the control of three persons	 namely	 K.J. George	 M.S. Visvambaran and E.K. Chandrasekaran. It recites that now find 208 ing that O.H. Kumar could not get the present licence	 they have set 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 o. 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 relating to Messrs Chingleput Bottlers there is a two page note which formulates certain objections to the grant of privilege to Messrs Chingleput Bottlers. It was obviously handed over by J. Balaji	 managing partner of Messrs Majestic Bottling Company to the Assistant Commissioner (Excise) during his inspection of the blending unit or before the Collector before the submission of his report. We do not think that the Commissioner was under an obligation 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. This equally applies to the two page note appearing in the file of Messrs Chingleput Bottlers. It was quite proper 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 opportunity to confront the informants. Rules of fairplay only 'enjoin that Messrs Chingleput Bottlers should know the case against them. This apparently they did from the questionnaire issued by the Commissioner and the questions put by the Commissioner on July S	 1982 on the basis of the information gathered by him. p 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 Commissioner(Excise). Further	 at the hearing on July 5	 1982	 the Commissioner recorded the statement of Ramabadran	 managing partner of Messrs Chingleput Bottlers. There was no occasion for the Commissioner to have recorded the statement of Ramabadran over again unless this was to give him an opportunity to explain the substance of the report of the Collector or other information gathered by him irrespective of the source. The learned Judges repelled the contention of Messrs Chingleput Bottlers that the Commissioner acted in breach of the rules of natural justice by his failure to furnish them with a copy of the 209 report of Collector on the ground that there is no fundamental right in a citizen to carry on any trade in liquor. According to them	 the Commissioner under the Rules performs an administrative function and having regard to the requirements 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 privilege all that was required was that the Commissioner should act fairly in dealing with the application and not in a capricious or arbitrary manner. On the material an record	 the Learned Judges held that they were satisfied that the Commissioner acted fairly and reasonably and not arbitrarily or capriciously in coming to the conclusion that Messrs Chingleput Bottlers had not made the application on their own behalf	 but benami for others and in rejecting their application for the privilege for setting up a blending unit 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 must be taken which will affect the rights of any person without first giving him an opportunity of putting forward his case. There has ever since the judgment of Lord Reid in Ridge v Baldwin	 supra	 been considerable fluctuation of judicial opinion in England as to the degree of strictness with which the rules of natural justice should be extended	 and there is growing awareness of the problems created by the extended application of principles of natural justice	 or the duty to act fairly	 which tends to sacrifice the administrative efficiency and despatch	 or frustrates the object of the law in question. Since this Court had held that Lord Reid 's judgment in Ridge vs Baldwin would be of assistance in deciding questions 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 Commissioner acted in breach of the rules of natural justice or fairplay in passing the impugned 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 licence ' In a number of recent decisions	 the Courts have	 while extending 210 the protection of natural justice in the former category of claims	 denied such protection to the latter category. All that is emphasized in such cases is that the applications must be considered fairly. In R.V. Gaming Board for Great Britain ex parte Bneaim & Khaida 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 the 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 against them	 even though they had not revealed the sources of their information or given their reasons. 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 in 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 ought 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 keep that confidential information and relied on some words of his in R. Surinder Singh Kanda vs Government of the Federation of Malayaa where he had said: "That the Judge or whoever has to adjudicate must not hear evidence or receive representation from one side behind the back of the other." Lord Denning rejected the contention by observing that 'the counsel had put his case too high '. The learned Master of Rolls then observed: "It is an error to regard Crockford 's as having any right of which they are being deprived. They have not had in the past	 and they have not now	 any right to play these games of chance roulette	 cheminde fer	 baccarat 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 211 for profit	 a thing never hitherto allowed in this country. It is for them to show that they are fit to be trusted with it." In Brren vs Amalgameted 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 he 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 fairly and this may involve a hearing. although 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 vs Onslow Fane & Anr.2 Megarry	 V.C. has drawn a distinction between initial applications for grant of licence and the revocation	 suspension or refusal to renew licences already granted. The learned Vice Chancellor says that there is a substantial distinction between 'application cases ' and 'forfeiture cases '. He observes that while an applicant for grant of licence has neither a right to such a grant nor a reasonable expectation that such grant would be made in his favour	 but cancellation or forfeiture of an existing licence or refusal 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 Board of Control is subject 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: "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 212 of the organization	 or a licence to do certain acts. Third	 there is an intermediate category	 which may be called the expectation cases	 which differ from the application cases only in that the applicant has some 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 elected or appointed to some position seeks confirmation from some confirming authority. The learned Vice Chancellor went on to say that there was a substantial distinction between forfeiture cases and application cases. In forfeiture cases	 there is a threat to take something away for some reason. In such cases	 the right to an unbiased tribunal	 the right to notice of the charges and 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 land	 nothing is being taken away	 and in 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 the Courts will require natural justice to be observed for expulsion from a social club	 built not on an application for admission to it. The intermediate category i.e. Of the expectation cases	 may at least in some respects be regarded as being more akin to forfeiture cases than application cases; for although in form there is no forfeiture but merely an attempt at acquisition that fails	 the legitimate expectation of a renewal of the licence or con formation of the membership is one which raises the question of what it is that has happened to make the applicant unsuitable for the membership or licence for which he was previously thought suitable. In such cases	 Megarry	 V.C. felt that much help cannot be had from discussing whether 'natural justice ' or 'fairness ' was the more appropriate term. He observes that if one expects that natural justice is a flexible term which impose	 different requirement in different cases	 it is capable of applying appropriately to the whole range of situations indicated by the terms such as 'judicial	 ' 'quasi 	 judicial ' and 'administrative '. The content of the "duty to act fairly ' did not impose on the Board to give either oral hearing to the 213 applicant or to disclose the case against him nor was . it under any obligation to give reasons 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 application	 or proposed to do so	 and added. The concepts of natural justice and the duty to be fair must not be allowed to discredit themselves while ranking unreasonable requirements and imposing undue burdens. " In such cases; the right to hearing has been denied on the ground that the claim or interest or legitimate expectation is a more 'privilege or 'licence '. This is in consonance with the decision of a Constitution Bench of this Court in Kishan Chand Arora vs Commissioner of Police	 Calcutta following the judgment of the Privy Council in Nakkuda Ali vs M.F.De section Jayaratne 's case. It is beyond the scope of the present judgment to enter into a discussion on the apparent conflict between the decision . Of the Privy Council in Nakkuda Ali 's case and the observation of Lord Reid in Baldwin 's case. It would appear that the long line of cases beginning with Baldwin 's case and ending with D 'arcy Ryan 's case are cases dealing with interference with property rights	 deprivation of membership 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 adherence to the rules of natural justice where a public authority or body has to deal with rights. But the principle that there was a duly to observe the audi alteram partem rule may not apply to cases which relate not to rights or legal expectations but to mere privilege or licence. lt 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 inflexible rules of natural justice of universal application. Each case depends on its own circumstances. Rules of natural justice vary with the varying constitutions of statutory bodies and the rules prescribed by the legislature under which they have to act. 214 There is nothing 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 lis between the Commissioner and the person who is refused such privilege. The power of refusal of licence unlike the power to grant is not subject to any pre condition. It must 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 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 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 under the into their respective merits and 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 article 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 finding reached by the Commissioner that the application made by Messrs Chingleput Bottlers was not made bona fide on their own 215 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 Collector 's 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 Chingleput Bottlers. In the result	 the appeal preferred by the State Government must succeed and is allowed. The judgment and order passed by the High Court for the issue of a writ or mandamus directing the Commissioner of Prohibition & Excise	 Madras is set aside and the case is demanded to the Commissioner for a decision afresh according to law. For the reasons stated	 the appeal filed by Messrs Chingleput Bottlers must fail and is dismissed. There shall be no order as to costs.

Summary:
On the surrender of the licence for the manufacture and supply of bottled arrack for the Chingleput District for the financial year ]982 83 by the then existing licensee	 the Commissioner of Prohibition and Excise called for fresh applications 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 Chingleput Bottlers	 filed there applications and an enquiry with regard to them was held by the Assistant Commissioner. The Commissioner considered the report of enquiry	 gave separate oral hearing to the two applicants and passed an order rejecting both the applications. As regards Majestic Bottling Company the Commissioner held that they did not satisfy the requirements of rr. 5(a) and 5(e). In the case of Chingleput Bottlers	 he held that they did not satisfy the requirements of rr. 5(a)	 5(c) and 5(e). While recording the finding in respect of Chingleput Bottlers	 the Commissioner relied on a report of the Collector and other material gathered by him during the course of the enquiry	 which included a representation from. Majestic Bottling Company against the application of Chingleput Bottlers. Both the applicants filed petitions under Article 226 of the Constitution questioning the orders passed by the Commissioner. A Single Judge of the High Court issued a writ of certiorari quashing the order of the Commissioner insofar as he rejected the application of Majestic Bottling Company and also issued a writ of mandamus ordaining the Commissioner to grant the licence to Majestic Bottling Company. As regards Chingleput Bottlers	 the Single Judge rejected their contention that the 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 precluded them from seeking perusal of the records or from making a demand for a copy of the same. 191 Both the applicants preferred appeals to the Division Bench. The State Government which was in possession of material adverse to the two partners of Majestic Bottling Company did not initially file a separate counter affidavit but only did so at the conclusion of the hearing. The Division Bench ruled that the order passed by the Commissioner must be adjudged by the reasons stated by him and those reasons cannot be supplemented by fresh reasons provided by the State Government in its belated affidavit and upheld the judgment of the Single Judge. The State Government and Chingleput Traders filed appeals against the judgment 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 Court was satisfied that the impugned order of the Commissioner was liable to be quashed on the ground 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 to re determine the question of grant of such privilege and that the High Court had no power to issue a writ of mandamus directing the Commissioner to grant the licence in favour of Majestic Bottling Company. It was contended on behalf of Chingleput Bottlers that the Commissioner had acted in breach of rules of natural justice in not furnishing them a copy of the report submitted by the Collector and other material gathered by him during the course of the enquiry. Allowing the appeal of the State Government and dismissing the appeal of Chingleput Bottlers. ^ HELD: 1. 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 a public body or authority of an act contrary to law. [198H 199A] (a) In the instant case the Commissioner was under no legal duty to grant a licence to 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	 tho 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 Majestic Bottling Company contrary to the provisions of r. 7. [199 A C] de Smith: Judicial Review of Administrative Action	 4th Ed. 341 and 544: H.W.R. Wade: Administrative Law. 5th ed. p. 638; referred to. (b) Absence of a specific plea in the nature of demurrer would not invest the High Court with jurisdiction to issue a writ of mandamus ordaining the Commissioner to grant a licence under r. 7 without the prior approval of the 192 State Government which is a condition pre requisite for the grant of such privilege. The High Court was unduly technical in applying the rules of pleading and short circuited the whole procedure upon a wrongful assumption of its own powers. The view taken by it is manifestly erroneous; otherwise	 the statutory requirements of such prior approval of the State Government under r. 7 would be rendered wholly otiose. [201 C E] K.N. Guruswamy vs Stare of Mysore	[1955] 1 S.C.R. 305; and P. Bhooma Reddy vs State of Mysore	 ; ; distinguished. (c) It is not possible to accept the contention that no useful purpose would have been served by the High Court remitting the matter for the reconsideration of the Commissioner since it had 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 that 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 Bottling Company under r. 7. One of the relevant factors that the State Government had to take into consideration was whether the partners of that Company were persons who would abide by the provisions of the Act and the rules. The facts disclosed in the counter affidavit of the State Government lay a serious charge against the partners of that Company and it was 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 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 Majestic Bottling Company	 to refer the matter to the State Government for its prior approval. [206A B] M/s Hochtief Gammon vs State of Orissa	 [1976] 1 S.C.R. 667; Padfield vs Minister of Agriculture	 Fisheries and Food; 	 referred to. Gujarat State Financial Corpn. vs M/s. Lotus Hotels Pvt. Ltd.	 ; distinguished. State of Tamil Nadu vs C. Vadiappan	 [1982] 2 Mad. L.J. 30; and K. Ramaswamy vs Government of Tamil Nadu (Writ Appeal No. 368 of 1981); overruled. It is a fundamental rule of law that no decision must be taken which will affect the rights of any person without first giving him an opportunity of putting forward his case. Strict adherence to the rules of natural justice is required where 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 final	 relates not to a 'right ' but to a 'privilege ' or 'licence '. All that is emphasised in such 193 cases is that the applications 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 natural justice vary with the varying constitutions of statutory bodies and the rules prescribed by the legislature under which they have to act. [209C D G	 213D E G] 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	 in some cases it would be quite proper for the authority to employ confidential sources. [210B C] Ridge vs Baldwin: ; ; R. vs Gaming Board for Great Britain	 ; ; R. Surinder Singh Kanda vs Government of the Federation of Malaya	 L R. ; ; Breen vs Amalgamated	 Engineering Union	 ; Mac Innes vs Onslow Fane & Anr.	 Kishan Chand Arora vs Commissioner of Police	 ; ; and Nakkuda Ali vs M.F. De section Jayaratne referred to. In the instant case there is nothing in the language of r. 7 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 lis between the Commissioner and the person who is refused such privilege. The power of refusal of licence unlike the power to grant is not subject to any pre condition. The grant of a liquor licence under r. 7 does not involve any right or expectation but it is a matter of privilege. The Commissioner was 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. 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 enquiry. 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 Majestic Bottling Company. There is also no suggestion of any mala fides on the part of the Commissioner or the State Government. [213G H	 214A B	 C E	 G H]