BHAGWATI - (1.) THESE appeals by special leave are directed against a judgment of the Madhya Pradesh High Court in what has come to be known as, M. P. Liquor case, brought before the High Court by way of three writ petitions under Art. 226 of the Constitution. Writ Petn. No. 3718 of 1985 was filed by one Nandlal Jaiswal on 28/11/1985 while Writ Petn. No. 335 of 1986 was filed by one Sagar Agarwal on 24/01/1986. Both these writ petitions were directed against the policy decision of the State of Madhya Pradesh contained in the Cabinet decision dated 30/12/1984. The third writ petition, viz., Writ Petition No. 785 of 1986 was also filed challenging the same policy decision of the State of Madhya Pradesh by a firm called M/s. Doongaji and Co. but it was filed much later at a time when arguments were actually going on in Court in the first two writ petitions. The respondents in the first two writ petitions were not aware at that time that it was a writ petition which was filed by M/s. Doongaji and Co. They thought that it was merely an intervention application since no notice was served upon them and they had also no opportunity of filing an affidavit in reply to that writ petition. All these three writ petitions were disposed of by a common judgment delivered by a Division Bench of the High Court consisting of Acting Chief Justice J. S. Verma and Justice B. M. Lal. Both the learned Judges, by separate judgments, substantially set aside the policy decision dated 30/12/1984. Since the decision of the High Court for all practical purposes went against the respondents, they preferred Civil Appeals Nos. 1622 to 1639 of 1986 before this Court by special leave. M/s. Doongaji and Co. and Nand Lal Jaiswal also, to the limited extent that they did not succeed, filed special leave petitions Nos. 6206 and 7440 of 1986. That is how the present appeals and special leave petitions have come up before us. The facts giving rise to these appeals and special leave petitions are material and need to be stated in some detail.
(2.) BUT, before we advert to the facts, it is necessary to set out the relevant provisions of Madhya Pradesh Excise Act, 1915 which is the statute regulating manufacture, sale and possession of intoxicating liquor in the State of Madhya Pradesh. originally, this Act was enacted for the former Province of C.P. and Berar but subsequently, after the coming into force of the Constitution, it was extended to the State of Madhya Pradesh by M.P. Extension of Laws Act, 1958 and it was rechristened as M.P. Excise Act 1915. Section 2(13) of the Act defines liquor' to mean 'intoxicating liquor' and to include "spirits or wine, tari, beer, all liquid consisting of or containing alcohol, and any substance which the State Government may, by notification, declare to be liquor for the purpose" of the Act. The term "manufacture" is defined in Section 2(14) to include "every process, whether natural or artificial, by which any intoxicant is produced or prepared, and also redistillation and every process for the rectification, flavouring, blending or colouring of liquor". There is also the definition of ,spirit' in Section 2(17) which provides that "spirit" means any liquor containing alcohol obtained by distillation whether it is denatured or not. Chapter IV of the Act is headed 'Manufacture, Possession and Sale' and that is the chapter with which we are concerned in the present appeals. Section 13 provides, inter alia, that no distillery or brewery shall be constructed or worked and no person shall use, keep or have in his possession any material, still, utensil, implement or apparatus whatsoever for the purpose of manufacturing any intoxicant other than tari, except under the authority and subject to the terms and conditions of a licence granted in that behalf. It is also obligatory under this section to have a licence for manufacture of intoxicant and for bottling liquor for sale and no intoxicant can be manufactured and no liquor can be bottled for sale without such licence. Section 14 is a material section and it may, therefore, be reproduced in extenso : 14. Establishment or licensing of distilleries and warehouses The Excise Commissioner may - a) establish a distillery in which spirit may be manufactured under a licence granted under Section 13 on such conditions as the State Government may impose, b) discontinue any such distillery, c) licence, on such conditions as the State Government may impose, the construction and working of a distillery or brewery, d) establish or licence a warehouse, wherein any intoxicant may be deposited and kept without payment of duty, but subject to payment of such fees as the State Government may direct; and e) discontinue any such warehouse." We may then refer to Section 17 which provides inter alia that no intoxicant shall be sold except under the authority and subject to the terms and conditions of a licence granted in that behalf. The State Government obviously has the monopoly in regard to manufacture, possession and sale of liquor as held in several decisions of this Court. Section 18 recognises the power of the State Government to "lease to any person, on such conditions and for such period as it may think fit the right- (a) of manufacturing or of supplying by wholesale, or of both, or (b) of selling by wholesale or by retail, or (c) of manufacturing or of supplying by wholesale, or of both, and selling by retail, any liquor or intoxicating drug within any specified area." There are no other sections in the Act material for our purpose until we come to Section 62 which confers on the State Government the power to make Rules for the purpose of carrying out the provisions of the Act. Sub-section (2)(h) of Section 62 provides that the State Govermnent may make Rules prescribing the authority by, the form in which, and the terms and conditions on and subject to which, any licence, permit or pass shall be granted and by such rules, among other matters, fix the period for which any licence, permit or pass shall continue in force. The State Government has, in exercise of the power conferred under Section 62, made several sets of Rules. Rule II of the Rules of General Application made inter alia under sub-section (2)(h) of Section 62, lays down the period of licence and Clause (2) of this Rule provides: "Wholesale licences for the manufacture, supply and sale of liquor may be granted for any number of years not exceeding five, as the State Government may in each case decide." Rule XXII also framed under sub-section (2)(h) of Section 62 provides for the manner in which licences shall be granted and it reads as follows:- "XXII. Disposal of licences - (1) Licence for the manufacture or sale of intoxicants shall be disposed of by tender, auction, fixed licence fee or in such other manner as the State Government may, by general or special order, direct. Except where otherwise prescribed, licence shall be granted by the Collector or by an officer authorised by him in that behalf." Rules III to V of the Distillery and Warehouse Rules also made inter alia under sub-section (2)(h) of Section 62 deal with the subject of grant of licence and provides, in the following terms, for different kinds of licences which may be issued, viz., licences in Forms D. 1, D.1(s) and D. 2: "III. Subject to the sanction of the State Government, the Excise Commissioner may grant a licence in Form D. 1 and Form D. 1(s) for the wholesale supply of country spirit to retail vendors. IV. The Collector may issue, on payment of a fee of Rs. 1000 a licence in Form D. 2 for the construction and working of a distillery to any person to whom a wholesale supply licence has been issued. V. Subject to sanction of the State Government the Excise Commissioner may issue a licence in Form D.2 for the construction and working of a distillery on payment of a fee of Rs. 1000." It is clear on a plain reading of Rule XXII that a licence for manufacture or sale of country liquor may be disposed of in any one of four different modes, viz; tender, auction, fixed licence fee or such other manner as the State Government may by general or special order direct. These four different modes are alternative to one another and any one of them may be resorted to for the purpose of disposing of a licence. It is not necessary that the mode of disposal by tender must first be resorted to and if that cannot be acted upon, then only the mode of disposal by auction and failing that and not otherwise, the third mode of disposal by fixed licence fee and only in the event of it not being possible to adopt the first three modes of disposal, the last mode, namely, 'such other manner as the State Government may by general or special order direct'. This would seem to be plain and incontrovertible but Mr. Justice B.M. Lal has rather curiously in his judgment held that these four modes of disposal are inter-related and "failing in one of the clauses, the next is to be acted upon and for applying the fourth clause, it is incumbent for the State to specify the manner by general or special order" and this also includes "specifying how and why the other three clauses are not possible to be acted upon which compels to take resort to the fourth clause". This view taken by Mr. Justice B.M. Lai in regard to the interpretation of Rule XXII is obviously unsustainable. It is indeed surprising how such a view could possibly be taken. On a plain grammatical construction of Rule XXII it is obvious that the Collector or an Officer authorised by him in that behalf can choose any one of the four modes set out in that Rule. There is nothing in the language of Rule XXII to justify the interpretation that an earlier mode of disposal set out in the Rule excludes a latter mode or that reasons must be specified where a latter mode is adopted in preference to an earlier one. The language of Rule XXII in fact militates against such construction. It is impossible to subscribe to the proposition that it is only when an earlier mode is not possible to be adopted for reasons to be specified, that a latter one can be followed. The Collector or an Officer authorised by him can adopt any one of the four modes of disposal of licence set out in Rule XXII, but, of course, whichever mode be adopted, the equality clause of the Constitution should not be violated in its application.
(3.) IT is also clear from Rules III, IV and V which we have set out above, that there are two purposes for which a licence in Form D. 2 for construction and working of a distillery may be granted. IT may be granted as an adjunct to the licence in Form D. 1 under Rule IV or it may be granted as an independent licence under Rule V irrespective whether the grantee holds a licence in Form D. 1 or not. There are also two types of licences for wholesale supply of country liquor to retail vendors, namely, licence in Form D. 1 and licence in Form D. 1 (s). The licence in Form D. 1 in clause 5 clearly contemplates that the holder of such licence must also have a licence in Form D. 2. No one can have a licence in Form D. 1 unless he has simultaneously a licence in Form D. 2. He must have a distillery in which he distils country spirit in order that he should be able to make wholesale supply of country liquor to retail vendors. If for any reason he is unable to obtain licence in Form D. 2 for working a distillery, no licence in Form D. 1 can be given to him and if he has such licence, it would become ineffective. IT is for this reason that when a person is granted a licence in Form D.1 by the Excise Commissioner under Rule III, he is also simultaneously granted a licence in Form D. 2 under Rule IV and the period of both the licences is conterminous. But, though a person cannot be granted a licence in Form D. 1 unless he also obtains licence in Form D. 2, the converse does not hold true. A licence in Form D. 2 can be granted to a person under Rule V even though he does not hold a licence in Form D. 1. Where a person is granted a licence in Form D. 2 for working a distillery under Rule V, without having a licence in Form D. 1 for wholesale supply of country liquor to retail vendors, he cannot make wholesale supply of country liquor manufactured by him to retail vendors but he can supply such country liquor to a person holding licence in Form D. 1(s) or he can manufacture rectified spirit, denatured spirit or foreign liquor as contemplated in Condition 3 of the licence in Form D. 2. IT is not necessary that a person holding a licence in Form D. 2 must also simultaneously have a licence in Form D. 1. It is in the context of these provisions of the Act and the Rules that we must consider the facts of this case. There were at all material times in the State of Madhya Pradesh nine distilleries for the manufacture of spirit, which were established long back by the State Government under a licence issued by the Excise Commissioner. The names and other particulars of these distilleries are set out in the following table :- JUDGEMENT_566_4_1986Html1.htm We are concerned in these appeals with only the first seven distilleries since the Nowgaon Distillery has always been owned and worked by a private firm and the Ratlam Alcohol Plant is owned by the State Government and is managed by the M.P. State Industries Corporation and the impugned policy decision dated 30/12/1984 does not concern these last two distilleries. So far as the first seven distilleries are concerned, and hereafter whenever we refer to distilleries we shall be referring only to these seven distilleries, the land and buildings in which they were housed belonged to the State Government and originally the plant and machinery also belonged to the State Government but in course of time successive holders of the D. 2 licences in respect of these distilleries replaced the plant and machinery. The practice followed by the Excise Department in regard to the working of these distilleries was to invite tenders for the wholesale supply of country liquor from these distilleries and the tenderers were requested to quote their rates for the wholesale supply of country liquor to the State Government. Normally the lowest tenders were accepted but at -times the State Government used to accept even higher tenders taking various relevant, factors into account. The State of Madhya Pradesh was divided in several areas and a particular area was attached to. each distillery for the wholesale supply of country liquor in that area. The person whose tender was accepted for any particular distillery was given a D. 2 licence for working the distillery and also a D. I licence for wholesale supply of country liquor manufactured in that distillery to retail vendors in the area attached to the distillery. These licences in Forms D. 1 and D. 2 were ordinarily issued for a period of five years. Respondents Nos. 5 to 11 in the writ petition of Nandlal Jaiswal were the holders of D. 1 and D. 2 licences in respect of these distilleries for the period ending 31/03/1986. There were two districts, however, which were not attached to any distillery, namely, Jabalpur and Betul and so far as these two districts were concerned, a licence in Form D. 1(S) to make wholesale supply of country liquor to retail vendors in these two districts was being given and for the period ending 31/03/1986 it was issued in favour of Sagar Aggarwal. The country liquor required by Sagar Agarwal for supply to retail vendors in Jabalpur and Betul Districts was being obtained by him from the Ratlam Alcohol Plant at the rate of Rs. 1.80 per proof litre but, as will be presently seen, the supply of country liquor from Ratlam Alcohol Plant was wholly inadequate and Sagar Agarwal was constrained to purchase country liquor from other sources at higher price in order to fulfil his commitment under D-1(s) licence. ;