KHODAY DISTILLERIES LIMITED Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) C.A. Nos. 4708-12, 4718-47(2) of 1989. The Karnataka Excise Act, 1965 provides for the levy of duties on the manufacture, transport, purchase and sale, import and export of liquor and intoxicants. In exercise of the rule making power conferred on the State under the Karnataka Excise Act. 1965 various Rules have been framed by the State of Karnataka. We are concerned in these matters with the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968, the Karnataka Excise (Brewery) Rules, 1967, the Karnataka Excise (Distillery and Warehouse) Rules, 1967, and the Karnataka Excise (Manufacture of Wine from Grapes) Rules, 1968 as amended on 13-9-1989 by Notifications issued by the State of Karnataka.

(2.) By reason of the amendments carried out these Rules, a distributor licence is prescribed for the first time under Rule3(11) of the amended Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968. Under Rule 3(11) a distributor licence shall be granted by the Excise Commissioner for the whole of the State or any part thereof to deal in the products of all distilleries, breweries or wineries in the State or to import liquor from outside the State for the purpose of distribution or sale within the State or any part of it, as may be specified in the licence. The licensee is required to establish not less than one depot in each district within the State or within that part of the State where it proposes to distribute or sell such liquor. What is more important for our purpose, the rule provides that a distributor licence shall be issued only to such company owned or controlled by the State Government as the State Government may specify. The other rules mentioned above have also been correspondingly amended to provide that the licensees under those Rules shall sell the liquor only to a holder of a distributor licence under the Karnataka Excise (Sale of Indian and Foreign liquors) Rules, 1968, subject to certain exceptions specified in each of these Rules. In other words, as a result of these amendments, a licensee either for manufacture or sale of liquor is prohibited from selling liquor to anyone other than the holder of a distributor licence. And the holder of such a licence can only be company owned or controlled by the State Government, specified under the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968. The State Government has specified Mysore Sales International Ltd, (hereinafter referred to as 'MSIL') as a company so specified and has granted it the distributor licence.

(3.) The appellant challenged the validity of these amendments on varoius grounds. The challenge was repelled by the Karnataka High Court. Hence the present appeals and other matters have come before us. One of the main contentions raised by the appellants was:By compelling the appellants to sell liquor to MSIL and prohibiting them from selling liquor to anyone else, the State Government had violated their fundamental right under Article 19(1)(g) of the Constitution to carry on trade or business. They further contended that the restrictions placed by these amendments on their right to carry on trade were far from reasonable.