Case Note & Summary
The appellant, International Spirits and Wines Association of India, challenged Rule 24(i-eeee) of the Haryana Liquor License Rules, 1970 (as amended in 2017) and clause 9.5.1.2 of the State Excise Policy for 2017-2018, which provided for a single L-1BF license for the entire State to deal in imported foreign liquor bottled outside India and imported in bottled form. The license was to be granted through e-bidding with a reserve price of Rs. 50 crores. The appellant contended that the rule was ultra vires the Punjab Excise Act, 1914, and that the creation of a monopoly in favour of a private entity violated Articles 14 and 19(6) of the Constitution. The respondents argued that the appellant had not participated in the bidding process, that the amendment aimed to increase revenue and curb illicit trade, and that the Financial Commissioner was competent under Section 59(a) read with Section 13 to amend the rules. The Supreme Court examined the scheme of the Act, particularly Sections 13, 58, and 59, and the Rules. It held that under Section 58(2)(e), the State Government alone has the power to regulate the number of licenses which may be granted in any local area. Section 13(a) prohibits the delegation of this power to the Financial Commissioner. Therefore, the Financial Commissioner could not delegate such power to the Excise Commissioner, and the Excise Commissioner could not issue a license for the entire State. The Court found that the amended Rule 24(i-eeee) was ultra vires the Act. The Court did not rule on the constitutional arguments under Articles 14 and 19(6) as the appeal was allowed on the ground of ultra vires. The appeal was allowed, and the impugned rule and policy clause were set aside.
Headnote
A) Excise Law - Delegation of Powers - Ultra Vires - Section 13(a), 58(2)(e), Punjab Excise Act, 1914 - Rule 24(i-eeee) of Haryana Liquor License Rules, 1970 providing for a single L-1BF license for the entire State was held ultra vires the Act because the power to determine the number of licenses in any local area is exclusively vested in the State Government under Section 58(2)(e) and cannot be delegated to the Financial Commissioner under Section 13(a). The Excise Commissioner, as a sub-delegate of the Financial Commissioner, could not issue a license for the entire State. (Paras 5-12)
B) Excise Law - Local Area - License - Sections 58(2)(e), 13(a), Punjab Excise Act, 1914 - The Act maintains a clear distinction between a local area as the unit for grant of license and the entire State for other purposes. The State Government alone has the power to regulate the number of licenses which may be granted in any local area. The delegation of this power is prohibited by Section 13(a). (Paras 10-12)
C) Excise Law - Monopoly - Article 14, 19(6) - The Court did not decide the constitutional validity of the single license on merits as the appeal was allowed on the ground of ultra vires. However, the Court noted that the creation of a monopoly by the State in favour of a private entity may raise issues under Article 19(6) and Article 14, but did not rule on them. (Paras 2, 5)
Issue of Consideration
Whether Rule 24(i-eeee) of the Haryana Liquor License Rules, 1970 providing for a single L-1BF license for the entire State is ultra vires the Punjab Excise Act, 1914, and whether the Financial Commissioner could delegate such power to the Excise Commissioner despite the prohibition in Section 13(a) of the Act.
Final Decision
The Supreme Court allowed the appeal, holding that Rule 24(i-eeee) of the Haryana Liquor License Rules, 1970 and clause 9.5.1.2 of the State Excise Policy for 2017-2018 are ultra vires the Punjab Excise Act, 1914. The Court set aside the impugned rule and policy clause.
Law Points
- Ultra vires
- Delegation of powers
- Local area
- Monopoly
- Article 14
- Article 19(6)
- Punjab Excise Act
- 1914
- Haryana Liquor License Rules
- 1970
Case Details
2019 LawText (SC) (2) 117
Civil Appeal No. 9533 of 2018
Gopal Subramanium (for appellant), Pinky Anand (ASG for respondents), M.K. Dutta (for sole L-1BF licensee)
International Spirits and Wines Association of India
State of Haryana and Others
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Nature of Litigation
Civil appeal challenging the validity of Rule 24(i-eeee) of the Haryana Liquor License Rules, 1970 and clause 9.5.1.2 of the State Excise Policy for 2017-2018 providing for a single L-1BF license for the entire State for dealing in imported foreign liquor.
Remedy Sought
The appellant sought to declare the amended Rule and policy clause as ultra vires the Punjab Excise Act, 1914 and unconstitutional.
Filing Reason
The appellant, an association of spirits and wines, challenged the single license regime as being ultra vires the Act and violative of Articles 14 and 19(6) of the Constitution.
Previous Decisions
The High Court had upheld the validity of the Rule and policy, against which the appellant appealed to the Supreme Court.
Issues
Whether Rule 24(i-eeee) of the Haryana Liquor License Rules, 1970 providing for a single L-1BF license for the entire State is ultra vires the Punjab Excise Act, 1914.
Whether the Financial Commissioner could delegate the power to issue such a license to the Excise Commissioner despite the prohibition in Section 13(a) of the Act.
Whether the creation of a monopoly in favour of a private entity violates Articles 14 and 19(6) of the Constitution.
Submissions/Arguments
Appellant: The single license creates a monopoly in favour of a private entity, contrary to Article 19(6). The absence of checks and balances gives untrammeled powers to the sole licensee. The rule is ultra vires the Act as the State Government alone can regulate licenses for a local area under Section 58(2)(e), and delegation is prohibited by Section 13(a). The rule is discriminatory under Article 14 as no such single license is required for Indian made foreign liquor or country liquor.
Respondents: The appellant did not participate in the bidding process. The amendment aims to increase revenue and curb illicit trade. The Financial Commissioner is competent under Section 59(a) read with Section 13 to amend the rules. The process is through public auction and not tailored to any particular person.
Ratio Decidendi
Under Section 58(2)(e) of the Punjab Excise Act, 1914, the State Government alone has the power to regulate the number of licenses which may be granted in any local area. Section 13(a) prohibits the delegation of this power to the Financial Commissioner. Therefore, the Financial Commissioner cannot delegate such power to the Excise Commissioner, and the Excise Commissioner cannot issue a license for the entire State. Rule 24(i-eeee) providing for a single L-1BF license for the entire State is ultra vires the Act.
Judgment Excerpts
Under Section 58(2)(e) of the Act, the State Government alone has the power to regulate the number of licenses which may be granted in any local area for wholesale or retail sale.
The delegation of this power by the State Government to the Financial Commissioner is prohibited by Section 13(a).
The Act maintains a clear distinction between a local area as the unit for grant of licence, and the entire State for other purposes.
Procedural History
The appellant challenged Rule 24(i-eeee) of the Haryana Liquor License Rules, 1970 and clause 9.5.1.2 of the State Excise Policy for 2017-2018 before the High Court, which upheld the validity. The appellant then appealed to the Supreme Court by way of Civil Appeal No. 9533 of 2018.
Acts & Sections
- Punjab Excise Act, 1914: Sections 5, 6, 8, 9, 13, 13(a), 13(b), 58, 58(2)(e), 59, 59(a)
- Haryana Liquor License Rules, 1970: Rules 3, 4, 24(i-eeee)
- Punjab Intoxicants License and Sales Order, 1956: Chapter D, Rule 6
- Constitution of India: Articles 14, 19(6)
