Case Note & Summary
The Supreme Court considered a group of civil appeals and writ petitions arising from Madhya Pradesh and Kerala challenging the power of State Governments to auction licences for the sale of foreign liquor. The Madhya Pradesh appeals were governed by the Central Provinces Excise Act, 1915, and the Kerala appeals by the Abkari Act. Prior to 1 April 1964, licences for sale of foreign liquor in Madhya Pradesh were granted under a fee per bottle system. In 1964-65, the State decided to dispose of such licences by public auction. The Act was amended in 1964 to empower the State Government to grant leases in respect of any liquor, including foreign liquor. Notifications in 1968 and 14 August 1970 provided for disposal of foreign liquor licences by public auction. The appellants unsuccessfully challenged the State's authority before the Madhya Pradesh High Court, and similar challenges in Kerala also failed. The central legal issue was whether auctioning licences for foreign liquor, which was neither manufactured nor imported by the State, violated the fundamental right to carry on trade under Article 19(1)(g) of the Constitution. The appellants contended that trade in liquor was not declared a State monopoly and therefore remained a fundamental right. The State relied on its police power, public morality, the harmful nature of liquor, Article 47, and the exclusive privilege historically vested in the State. The Supreme Court dismissed the appeals and writ petitions, holding that no citizen has a fundamental right to trade in liquor. The State has exclusive right to manufacture and sell liquor and may grant that privilege by licence or lease through public auction. Entry 8, List II of the Constitution empowers the State legislature to regulate intoxicating liquor, including production, manufacture, sale, and auction. Rental paid by the grantee is consideration for the privilege, not a tax or excise duty. The Court relied on precedents including Krishna Kumar Narula v. State of Jammu and Kashmir, Cooverjee B. Bharucha v. Excise Commissioner, and State of Orissa v. Hari Narayan Jaiswal. The decision affirmed the constitutionality of State auction systems for liquor licences and the revenue-raising purpose of such regulation.
Headnote
A) Constitutional Law - Fundamental Right to Trade - No Fundamental Right in Liquor - Constitution of India, 1950, Article 19(1)(g), Article 47 - The State has police power to enforce public morality and prohibit trades in noxious or dangerous goods; Article 47 directs the State to bring about prohibition of intoxicating drinks; history of excise law shows exclusive State privilege over manufacture and sale of liquor. Held that there is no fundamental right of citizens to carry on trade or business in liquor, and restrictions including prohibition are reasonable. (Paras not mentioned) B) Constitutional Law - Legislative Competence - Entry 8, List II - Constitution of India, 1950, Entry 8 List II - Entry 8 empowers the State legislature to legislate with regard to intoxicating liquor, including production, manufacture, possession, transport, purchase and sale. The provision for public auction of liquor licences is a regulation pertaining to liquor and is within State legislative competence. Held that the State legislature is authorised to make provision for public auction under Entry 8, List II. (Paras not mentioned) C) Excise Law - State Exclusive Privilege - Grant of Liquor Licence by Public Auction - Central Provinces Excise Act, 1915, Section 18, Sections 8 and 9 - The State has exclusive right or privilege of manufacturing and selling liquor and grants such right in the shape of a licence or lease. The State has power to hold public auction for grant of such right and accept payment of money as consideration. Held that the grant of a lease either by public auction or for a sum is a regulation pertaining to liquor, one of the purposes of which is to raise revenue. (Paras not mentioned) D) Excise Law - Nature of Rental - Consideration for Privilege, Not Tax - Central Provinces Excise Act, 1915, Section 18 - Rental is the consideration for the privilege granted by the Government for manufacturing or vending liquor. Rental is neither a tax nor an excise duty. The grantee is given licence on payment of auction price, and revenue is collected by the grant of contracts to carry on trade in liquor. Held that auction price is not a tax but consideration for the privilege. (Paras not mentioned)
Issue of Consideration
Whether the State Government can auction licences for carrying on the business of selling foreign liquor which is neither manufactured nor imported by the State; whether such auction violates the fundamental right under Article 19(1)(g) of the Constitution of India, 1950; whether the State has exclusive right or privilege to manufacture and sell liquor and to grant such privilege by public auction
Final Decision
Appeals and writ petitions dismissed. The Supreme Court held that the State has exclusive right or privilege to manufacture and sell liquor, can grant licences/leases by public auction, and such auction does not violate Article 19(1)(g) of the Constitution. The State legislature is competent under Entry 8, List II to enact provisions for auction. Rental paid is consideration for privilege, not tax or excise duty.
Law Points
- State has exclusive right to manufacture and sell liquor
- no fundamental right of citizens to carry on trade in liquor
- trade in liquor subject to police power
- Article 47 mandates prohibition of intoxicating drinks
- State legislature empowered under Entry 8 List II to regulate intoxicating liquor including auction
- public auction of liquor licences permissible
- rental is consideration for privilege not tax or excise duty
- restrictions on liquor trade are reasonable
