Nashirwar v. The State of Madhya Pradesh

A B ## _c_ D E F ·G ff 861 NASHIRW AR ETC. ETC. _v._ THE STATE OF MADHYA PRADESH _November_ 27, 1974 [A. N. RAY, C.J., K. K. MATHEW AND N. L. UNTWALIA JJ.] _Central Provinces Excise Act;_ 1915--S. _IS-Whether_ _the_ _State_ _has_ _the power_ _to_ _gram_ _liquor licences_ _by_ _public auction-Whether. violates fundamental right_ _under Art._ !9(1)(g) _of_ _the Constitution._ _Constit111wn_ _of_ _India,_ _1950-Art._ _19(1)(g)-Entry_ 8, _List U._ Under the Central Provinces Excise Act, 1915 (which was the .Act applicable to the State of Madhya Pradesh) the excise 1111thorities granted licences for selling foreign liquor under a system of fee per bottle. From the year 1964-65 the State Government decided that licences for foreign liquor should be disposed of by public auction. The appellants unsuccessfully challenged before the High Court the authority of the State to hold public auctions for grant of. licences for foreign liquor. In 1964 th'e Act woo amended, as a result of which the State could grant leases in respect of both country and foreign liquor. By a notification the State Government declared that it would grant ·foreign liquor licences by public auction. Similarly the impugned Act of Kerala State places restrictions on the manufacture, sale, import and export of liquor. The appellants in the Madhya Pradesh case and the petitioners in the Kerala case have questioned the constitutional validity of the restrictions on the ground that they deprive them of the fundamental right to carry on trade in· liquor. It was,contended that the right to trade in liquor was not declared by the legislature to be a monopoly of the. State to exclude trade in liquor from the operation of Art.19(1 )(g) as a fundamental right to trade. Dismissing the appeals and. writ petitions : HELD : 1 (a) The State has exclusive right or privilege of manufacturing and selling liquor. The State grants such right or privilege in the shape of ·a licence or a lease. The State has power to hold public auction for grant of such right or privilege and accept payment of. money in consideration of grant of lease. [872-B] (b) The State legislatme is authorised to make a provision for public au;tion by reason of the power contained in Entry 8, List II of the Constitution. That entry empowers the State Governm.ent to legislate with regard to intoxicating liquor, that is to say, oroduction, manufacture, possession .. transport, purchase and sale of intoxicating liquor. [865-F] (2) (a) There are three principal reasons to bold that there is no fundamental right of citizens to carry on trade or to do business in liquor. First, ·there. is the police power of the State to enforce public morality, to orob.ibit trades in noxious or dangerous got>ds. Second, there is power of the State· to enforce an absolute probibitio!l of manufacture or sale of intoxicating liquors. Article 47 s~tes that. the State shall. endeavour to bri.ip ll·. about prohibition of the consumption; ~tept for medical {lurposes, of into~l1lting drinks and df'\lis which arc injurious to health. Third" the history of excis.i law in India shOws that the State has . the exclll'Sive right 'Qr privilege of manufacture or sale of liquor. [8~J.il - ' (b) Trild(lh'~.quor.has historically .. ~~ ori,a difte)'e~':f9oting.from .1· ·· trades; Itestr1oflo11S which are nol ip6rnuss1ble with btlttr !les are lawful reasonable 10 .far : **.** as the trade' in· .liquor is .::oru:ei'iiell)) -hat Is why e'i> prohibition Q~.~·tradp ln liquor•·is·~ .only permissib\e. ~~.is also.reasonable. T.be reasons are" 'pubhc morality, public interest andr harniful and danger11111 character of the liquor. The State p<>ssesses. the · right' Of complete · corifrol over all aspects of intoxicants viz.,,maqufacture, colle~tion, sale and consumption. The State• Ms exclusive· rlSh'f [1] tol1ilanufact11re ad/1 [1] 4lel! liquor and. Ii> ~ the said right in ·order to raise revenue. [8710-EJ - (. 862 SUPREME COURT REPORTS [1975J 2.~.C.lt. Cc) The nature of the trade is such that the State confers right to vend liquor by farming ou.t either in auction or on private treaty. Rental is the consideration for the privilege granted by tile Government for manufacturing or vending liquor. Rental is neither a tax nor an excise dllty. Rental is the consideration for the agreement for grant of privilege by the Government. [87 lF] . (d) The grant of a lease either by public auction or for a sum is,a regulation pertainin~ to liquor. . One of the purposes of regulation is to raise revenue. Revenue 1s collected by the grant of contract>s to carry on trade in liquor. . These contracts are sold by auction. The grantee is given - licence o~ payment· of auctio~ price. [872A] '· _Kri.rlma_ _Kumar_ _Nar!'la_ _etc._ v. _The_ _State_ _of_ _Jammu_ _.and_ _Kqshmir .and_ _Ors._ [1967].3. S.C.R.. _50;_ _Coovarjee_ _B._ _Bharucha_ v. _The_ _Excise_ _CommisSio1w_ _'ind_ _the_ _Chief_ _Com'11pssiore·r,_ _Ajmer,_ [19541 S.C.R. 873; _Crowley_ v. _Christensen_ 34 L.Ed. 620; _Jta. te_ _of_ At~an1. v. _A. N._ _Kiilwai,_ _Commi!.:rioner_ _of Hills_ _Division_ _'ind_ ~ppea/s, _Shi/lpng_ [19~71' ;5.C.R. 295; _fitate_ _of_ _Bombay_ cl _Anr._ v. _F._ _N._ _Bal&2ra_ [1951] S.C.R. 682;· _Ml1,\0uru8)tlamy_ cl _Co.,_ _etc._ v. _State_ _of_ _Mysore_ cl _Ors._ [1967] I S.C.R. _548;_ _State_ _of· "ris.ra_ cl _Ors._ v. _Harl_ _Narayan_ _)a/swat_ cl _Ors._ [1972] 3 S.C.R. 748; _Amar_ _Chandra_ _Chakraborty_ v. _Collector_ _of_ _'Exdse_ _Government_ _of_ _Tripura_ _and_ _Ors._ [1973] . 1 S.C.R. _533;_ _State_ _of_ _Bombay_ v. _R._ _M._ _D._ _Clwmarbaugwalla_ [1957] S.C.R. 874 and _·A. B._ _Abdulkadlr_ v. _•State of_ _&ra/11_ [1962] 2 Supp. S.C.R. 741 referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1711 to 17'.Zl, 7123, 1699, 1706 & 1744 of 1974. From the Judgment and Order dated the 24th April, 1.974 of 1tlte Madhya Pradesh High· Court in Misc. Petitions Nos. 391, 392, 395, 394, 412, 401, 405, 430, 400, 399, 403, 390, 409, 417 and 407 of 1970 respectively. _Civil_ _Appeal_ _No._ 1267 _of_ _1910._ From the judgment and Order dated the 8th April, 1970 of 1thr. Kerala High Court in O.P. No. _995_ of 1970. _Writ_ _Petitions_ _Nos._ 436 _of_ 1911 _and_ 26 _and_ 133 _oi_ 1912. Petitions under Art. 32 of the Constitution of India. **A** **B** ## **c** E _B._ _Sen,_ S. _Balakrish11a11_ and _N._ _M._ _Ghatate,_ for the appellants (In **F** CAs. Nos. 1711-1721, 1_723/74), for the appellants. . . S. S. _Khanduia_ and S. _K._ _Jain_ (In CAs. Nos. 1699, 1706, 1744 and 1715/74), for the appellants. S. _N._ _Al'Ulley_ (In CA. 1723/70) _R: P._ _Kapur_ and _I._ _N._ _Shroff,_ for the respondents in all the appeals. - **C** _.D._ _V._ _Pat,el_ (In CA 1267/70) 1 _[Y. ]_ _[S. ]_ _[Chitalt, ]_ [(WP. ] [436/71), ] _[N. ]_ _[K. ]_ _Shreedharan_ (In WPNo. 133/72), _V._ B~askarat:i _Nambuar_ . (CA. 1267170 and WP. 436/71) _P._ _K._ Sr1~edharan (lq **WP.** 133/72). _**P.**_ _Sankaran_ _Kutty_ (In WP. 436171 and 133172) 'and _**A..**_ _S._ _Nambiar,_ _.D._ _V._ _Pat,el_ (In CA 1267/70) for the appellants (In CA No. 1267/70) and petitioners,(In Wl's. Nos. 436171 :and 133172). **B** _D._ _V._ Pa;~/ and _S._ _Gopalakrishrian,_ for the petitioner (In **WP** 26172). A 8 ### c 0 E F appellants then challanged in the Madhya Pradesh High Court the authority of the State Government to hold public auction for grant of licences for foreign liquor. The appellants did not succeed because the Act was amended in 1964. The result of the amendment was that whereas formerly the State Government could grant lease only in respect of country liquor, the Amending Act empowered the Government to grant leas<: ip. respect of any liquor which meant bOth foreign and. country liquor., fifter the amendment, public auctions were held under section~l8 .. of 1tl\e~ ... adhya Pradesh Act in respect of foreign liquor as well. In 1956-6tl ublic auctions were held in respect of foreign liquor, The leases ~· newed up to 1969-70. In 1967-68 prohibition was ~ithdrawn in dettaiqi a~eas of Madhya Pr~desh and new for~ign lictuor vends were opep.cd : These vends were dis~ed of by public auction. NASHIRWAR _v._ M. P •. S1',ATE. _(Ray,_ C.J.) 863 _K._ _T;_ _Harindernath_ (In CA No. 1267170 and WP. 436171) and _K._ _M._ _K._ _Nair,_ for the respondents (In CA. No. 1267 /70) and WPs. Nos. 436171 and 26172. - _Lily Thomas,_ for the Intervener (K. J. Joseph). The Judgment of the Coiirt was d~livered by__: R.Av, _C.J._ The principal question in these civil appeals and writ petitions is whether it is permissible for .the Sta'e Government _to_ auction licences for carrying on the business of sellint foreign liquor whi<!h is neither mimufactured nor imported by the State Government. Some of these appeals re\ate to State of Madhya Pradesh and .others relate to State of Kerala., The M:at!hya Pradesh appeals are governed by' the Ceritial Provinces and Berar Excise Act 1915 which became applicable to Madhya Pradesh as the Central Provinces Excise Act, 1915. This will be referred t(J as the Madhya Pradesh Act. . . ., I The Kerala Appeals are governed by the Abkan Act ·(Act No. I 1700). This will be referred to as the Abkari Act. Prior to 1 April, 1964 licences for sale of foreign liquor in M9:c1hya Pradesh were &ranted by the excise authorities under the fee per. bottle system. In 1964-65 the State decided that licences for foreign liquor would be . disposed of by public auction to the highest biddor. The '. In 1968 the Sta~ Government by a notification date<l 29 March, 1968 ordered that.With ~lfeclj from 1 April, 1965 foreign liquor licen~ shall be disposed C!>f om l13pncnt of extra fee of Rs. 1000 in additjon to the paynient of a fee per bottle at specified rates. The notification #### o· further directed tqat' wher~ new shops were required to be opened licences wolild be disposea of by public auction in addition tQ a fee per bottle. Iii 1970 there was a notification dated 14 August, 1970 where the State Government wpuld dispose of foreign liquor licences bv public auction. 'fbit.notification is the subject matter of the Madhva Pradesh appeals. . H The Mlldhya Pradesh Act by sections 8 and 9 confers power on the State to prOhibit import, export Qr transport of any intoxicant. ulntoxicant1~ Wider ·the. Act ·means any liquor or intoxicating dru~. The State. Government has power to. imp(>se .restrictions on import, export ulntoxicant 864 SUPREME COURT REPORTS [l975j 2 s.C.R~ or transport of intoxicant in the shape of payment of duty and compli ance with other conditions. Chapter IV of the Madhya Pradesh Act consisting ot sections 13 to 24 deal with manufacture, possession and sale 6f intoxicants. Section 13 requires licence for manufacture, collection, possession of 'intoxicants and materials for manufacturing intoxican•s. se,c;tions 17 and 18 of the Madhya Pradesh Act are important for the purposes of \ttese appeals. Section 17 deals with licences for sale of intoxicants. Se·~tion 18 states that the State Government may 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 re•ail, or (c) of manufacturing or of supplying by wholesale, or of both, and sdling by retail any liqw:ir intoxicating drug withi.n any specified area. The Abkari Act which governs the Kerala Appe,«s in sections. 6 to 11 deal with import, export and .transp?rt of liq~or or intoxicating ~rugs. Permission of .the Government 1s reqmred for import, export of liquor. Section 9 of the Abkari Act confers power on the Governinent to prohibit, .transport of liquor from any local area to any other lcx:al area. Sections 12 to 15C of the Abkari Act deal with manufacture, possession and sale of liquor or intoxicating drug. Manufacture is prohibited except under the provisions of the Act, _viz.,_ licence granted by the Commissioner. The establishl]lent and control of distilleril:s, breweries, warehouse etc. is by grant of a licence. Sections 17 to '.23 of the Abkari Act deal with duties taxes and rentals. Section 17 of the. Abkari Ac:t speaks of duty on liquor or intoxicating drugs. Section 18A of the Abkari Act confers p0wer on the Government to grant, on such conditions and for such period! as the Government may dee:m fit the exclusive or other privilege '(i) of manufacturing or supplying by whole-sale; or (ii) of selling by retail; or (iii) of manufacturing or supplying by wholesale and selling by retail any liquor or intoxicati1ng drugs within any local area on. his _oi:_ their payment to the Government of an amount as rental jn:consideration of the grant of such privilege. The. Act furth.er. states -that the amount of rental .may be' settled by auction, negotiation or by any other method as may be determim:d by the Government, from time to time, and may be collected to the exclusion of, or in addition to, the duty or tax leviable under sectio:ns 17 and 18. No grantee of any privilege under section 18A of the Act shall exercise the same until he has reeeived a licence in that behalf from the Commissioner. Rule 13(1) under the Abkari Act states that the privil~~e under the licence .will .be sold io puQ.Iic auction subject to ~he cond~tions of the sale notificatio~ published by Government from time to time. - A B ## c D E F G H The .contention _o!1._ behalf of the appellants is that it _is_ the fund:a ment~l nght of the. c1ti.zens t? carry on trade in liquor. It s said th:at the right to trade m liquor 1s not declared by . the legislature to be a mono~oly of the State to. exclude trade in liquor from the operatio1n of Article 19(.ll(~) as a fundamental right to trade. The. appellants A B ## c D E F G H NASHIRWAK _v._ M. P. STATE _(Ray,_ C.J.) S {i 5 challenge tnat the State has any right or privilege in the matter of ~~nu­ facture or sale of liquor which can be granted as a right or pr1v1lege to the citizens. On beha!f of the State it is said that the State is not claiming mono;ioly. in foreign liquor. The State does not contend that the a~ction of liceoces is either a fee or a tax. The State contends that the highest bid represents the consideration for the lease under section 18 . of the Madhya Pradesh Act or section .18A of the Abkari Act. It is ·said ·on behalf of the State that.the State has the exclusive.right or privilege to manufacture, possess and sell intoxicant liquor and these p_rovisions in the Act confer a right or privilege on ·the highest bidder at the auction to vend foreign liquor in specified .areas. The Madhya Pradesh Act as well as the A:bk~ri ... Act stat.es, that · citizens c;annot have the right to carry on trade m liquor except to t~e extent and subject to such conditions as may be imp~sed by the. le~1s­ lature under its regulatory powers. The Acts deal with four ptmc1pal forms of activities pertaining .to liquor. First, the import, export al).d transportation of liquor is regulated by providing for passes on, terms and conditions mentioned. in the Act. A fe€? is also prescribed for such passes. Second, the manufacture of liquor is dealt with by providing for licences from the State Government and fees are prescribed for such licences. · Third, the possession of liquor requires a permit from the Government and a fee therefor. Fourth, the sale of liquor is dealt with by sections 17 and 18 of the Madhya Pradesh Act i;ind section 18A of the Abkari Act. The Acts speak of the grant of privilege or right to sell liquor by lease. The Government can hold a public auction to grant lease. The State Government accepts payment. of a . sum in consideration of the grant of any lease. The amount of bid at a public auction represents the consideration for the grant of such right or privilege. Fhe State Legislature is authorised to make a provision for public 1uction by reason of power contained in Entry 8 of List II of the Cons titution. That Entry empowers the State Government to legislate with regard to intoxicating liquor, that is to say production, manufacture, possession, transport, purchase and sale of intoxicating liquor. Counsel on behalf of the appellants relied on '<the decision of this Court in _Krishna_ _Kumar_ _Narula_ _etc:_ v. _The_ _State_ _•of_ _lammu_ _and_ _Kashmir_ _and_ _OrS._ [1967] 3 S.C.R .. 50 as an authority fo~ the proposition that a citizen has a fundamental right to do basines~ to deal . ;n liquor. - ·· - . - - · r~!l'llati?n pert~iniilf to liquor. . It .was .contended on behalf of the citizen m _Bharucha s_ case (supra) that every person has an inherent right to carry ori frade in intoxicating J'iquors and ·that the State has no right to create a monopoly in them. In _Bhar:ucha's_ case ·(supra) the auc,tion sale .of country liquor shop un~er Excise Regulation 1 of This Court in _Cooverjee_ _B._ _Bharucha_ v. _The_ _Excise_ _Commissioner_ _and_ _of_ _Chief_ _Commissioner,_ _Ajmer_ [1954] S.C.R. 873 held that the grant . of a lease . either J>.y public auction or for a sum is a 1915. was. challenged on. the.ground .that the provisions 9f the Exoise S-66 SUPREME COURT REPORTS [1975) 2 s.c.a. Regulation and the auction rules were _ultra_ _vires_ because the srune purported to grant monopoly to trade to a f~w persons. The E_xcise Regulation 1915 in that case protjded that the Chief Commiss10~.er miglit lease to any person the right .of manufacturing or of supplying or of selling by wholesale or retail any country liquor or intoxicating drug within any special area. This Court said that laws prohibiting trades in noxious. or dangerous goods cannot be held to be illegal as enacting a pn)hibition and not a mere regulation. In _Bharucha's_ case (supra) this Court concurred with the obs€:rvations in _Crowely_ v. _Christensen_ 34 L.Ed. 620. Those observations indicate that the sale of liquor has been at all times considered as the proper subject of legislative regulation. A licence may be ex.acted apd restrictions may b~ imposed as to sale of liq11or. There may be absolute prohibition -of sale of liquor. fl.t the i:oot lies public expediency and public morality. The sanction is the police power of the State to regulate business and to mitigate evils. The observations in _Crowely's_ case (supra) which. were Ia.id down as a ruling of this Court in _Bharuchas_ case (supra) are these. "There is no inherent right in a citii.en to sell intoxicating liquors by # retail; it is not a privilege 'of a citizen .of the State or of a citizen of the United States. As it is a business attended with danger to the community, it may, as already said, b1~ entirelty prohibited, or be p1:rmitted under such conditions as will limit to the utmost its evil. The maimer and extent of regulation rest in the discretion of the governing authority". _Bharucha's_ case (supra) negatived the contention of inherent right of citizens to carry on trade in intoxicating liquors. Bharucha'.~ case . (supra) lays down three propositions. First, that there is no inherent right of citizens to carry on trade in intoxicating liquors. Second, the auction sale of liquor shop is a method by whicb carrying on particular trade in liquor is regulated and one of the purposes of reaUJ.ating is to raise revenue. · Third, there can be a monopoly only when a trade which could .be carried on by all perso·ns is entrusted to one or more persons to the exclusion of the geneiral public. That is not the case with. the business of li9uor. This Court in _Narulas_ case (supra) referred to the decision in _Bharucha's_ Cl)Se (supra) and the concurrence of this Court in _Bharucha's_ c;ise (supra) with _Crowley's_ case (~upra) that the:re is no inlier~t right in a citizen to. sell intoxicating liquor. In _Narula's_ case (supra) _this_ Court read the obsetvatioos of this Court in _Bharuchas_ case (supra) to have conceded the1 inherent a:nd fundamental rieht of a citizen to carry on business. in sale of intoxicating liquor. _Bharucha's_ case. (supra) in no uncertain ·terins reoelled the ·citizens contention of inherent ri11ht to sell intoxicating liq11JJr. _Bharucluls_ case (supra) is a Constitution Bench decisicln. _Narultls_ case is also a Cons.titution Bench decision .. · · _Naru£ts_ case (supra) ·.cannot be saii:t to have overruled - _Bharuchas_ caise (supra). . / ' - There is an earlier decision of tllis Court in _State_ _•Of_ _Assam_ v. _A._ _N._ _Kidwaf,_ _Commisiioner· of_ _Hills_ _Division_ _and_ _Appeals,_ _'Shillong_ B ## c D E F G H ' ' NASHIRWAR _v._ M. P. STATE _(Ray,_ _C.J.)_ 867 A f1957] S.C.R. 295 where it is said that no person has any absolute: 1:ight to sell liquor. In _Kidwai's_ case (supra) this Court said that the purpose of the Act and the Rules. is to control and restrict the consumption of intoxicating liquor. Such control and restriction is said by this Court to be necessary for the preservation of public health. and morals and to raise revenue. B In _Narula's_ case (supra) it was held that dealing in liquor is business and a citizen has a right to do tiu~iness and that a State can make ### a law imposing restrictions on the rights in public interest. In _Narulrls_ case. (supra) it was also said that unless dealing in liquor is not trade or busmess a citizen has a fundamental right to deal in: t.hat commodity. It is not correct to read the decision in _Narula's_ case (stipra) that there is a fundamental right to do business in liquor. C · 'The decisibn is tliat dealing in liquor is business and a citizen has a. right to do business in that commodity and the State can impos~ reasonable restrictions on. the right in public interest. If the State can' prohibit business in liquor as is held in _State_ _of_ _Bombay_ _and_ _Anr._ v. _F,_ _N._ _Balsara_ [1951] S.C.R. 682 this establishes that the State has exclusive right of privilege of manufacture, possession, sale of intoxica D .E F G H quate prices had been offered because of collusion between the bidders. Fresh tenders were called for. The State. accepted the tender in respect of one shop and rejected the others. The remaining seven shops were sold by pr~vate negotiation for substantially higher prices. The respondent whose highest bid was rejected applied to the HiJ?h Court for a direction to the Government to confirm his bid. Section 22 of the Orissa Excise Act which governed that case stated that "the State Government may grant to any person, on such conditions and for such period as it may thinkfit, the exclusive privilege (e) of manufacturing and supplying wholesale and selling retail, any country liquor or intoxicating drug within any specified local area". Section 29(2) of the - Orissa Excise Act dealt with the payment for grap.t of exehisive privi ting liquor and therefore the State grants such a right of privilege to persons in the· shape of licence or lease. The auction of the. privilege of selling liquor was upheld by this· Court in _M/s._ _'Guruswamv'_ & _Co._ _etc._ v. _State_ _of_ _Mvsore_ _and_ _Ors._ [1957] 1 S.C.R. · 548. This Court. said that the licensee pays for the exclusive privilege of selling toddy from certain shops. The licensee pays what he considers to be equivalent to the value of the right. It has no relation to the production or manufacture of toddy. The only relation it has to the production or manufacture of toddy, is that it enables the licensee to sell it. The privilege of selling is auctioned· welt before the goods come into existence. The levy is in respect of the business of carrying on the sale of toddy. _Naruk{s_ case (supra) was explained by this Court in a Bench decision in _State_ _of_ _Orissa_ & _Ors._ v. _Hari_ _Narayan_ _Jaiswal_ _and_ _Ors._ [1972] 3 S.C.R. 7841 with considered whether the .sale by public auction of the exclusive privilege of selling by retail country liquor in 8 shops was valid. The respondent was the highest bidder there. His bid was rejected, The Government was of the view that inade• lege. Section 29(2> of the Act stated that the sum payable shall be· .8 68 SUPREME COURT REPORTS (1975] 2 S C.R, .determined by calling . ti~nders or by auction or otherwise. I~ _Htrri_ _A_ _Naryana's_ case (supra) this Court held that the right to trade in intoxicating liquor is subject to regulations and restrictions and upheld the pub)i~ au~tion of the right or privilege of selling liquor as an attri.bu'e <if co11ectioh of State revenue. ln the recent decision in _Amar_ _Chandra_ _Chakraborty_ v. _Collector_ . 8 _of Excise,_ _Government_ _of_ _Tripura_ & _Ors._ [1973] 1 S.C.R. 533 .under the Tripura Excise Rules fees for licence for the wholesale vend of country spirit were required 'to b:. fixed- by tender.c:wp;-auction. Section 22 of the Bengal Excise Act l 909 conferred power on tbe Chief Commissioner to grant exclusive privilege of manufacturing and supplying country liquor. No grantee of any privilege_ could exercise ## the same without a licence. The Constitution Bench in Chakrn- c _.borty' s_ case (supra) held that trad~ or business in country liquor has from its inherent nature been treat1:d by the State and the socielty ## c as a special category requiring legislative control. This trade or busi· ness is treated as a class by itself and cannot 'be treated on the saine basis as other trades while considering Article 14. A contention was rai>:ed in _Chakraborty's_ case (supra) that the business of selling liquor is protected under Article 19 as a fundamental right and Jeli.ance ·was placed on the decision in _Narula's_ case (supra). This Court 'held that the State can make a law imposing reasonable restrictions in public ir-:-erest on the right to deal in liquor by public auction of the right of selling liquor. There are three principal reasons to hold that there is no fundamen.tal right of citizens to caFry on trade or to do business in liquor. First, there is tqe police power of the State to enforce public morality to prohibit trade!; in noxious or dangerous goods. Second, there is power of the State to enforce an absolute prohibition of manufacture or sale of intoxicating liquor. Article 4 7 states that the State sha111 endeavour to bring about prohibition of the consumption. except for medicinal purpose of intoxicating drink:; and of drugs which are iniu:rious to health. Third, the history of excise laws shows thatt!)e State has the. exclusive right or privilege of manufacture or sale of liquor. There are three principal reasons to hold that there is no fundamen.tal right of citizens to caFry on trade or to do business in liquor. First, there is tqe police power of the State to enforce public morality to prohibit trade!; in noxious or dangerous goods. Second, there is power of the State to enforce an absolute prohibition of manufacture or sale of intoxicating liquor. Article 4 7 states that the State sha111 In _Balsara's_ case (supra) this Court referred to Article 47. and said that the idea of prohibition was connected with public health. The challeng~ to a prohibition law under our Constitution was maqe under Article 14 and 19 in _Balsara's_ case. This Court held that absoMe prohibition . _of_ mam,1facture _or sale of liquor: i~ . permissible iind th1~ only excepti?n can be for ·in¢icinal ·preparations. The con1;1:pt of 1nhennt ·tight of citizens. fo .do business in liquC>t is antithetica1 to th1e power ot the State to enforce prohibition laws in respect of liquor. Da,~. (:. l in _State_ _of' Bombay_ v. _R._ _M._ _D._ _Chamarbaugliiql/a_ Tl 957] S.CR 874 said that gambling could not .be regarded adtacfo or biJsines~ withie,the m¢anin~ of Article 19(1 )'(f) and (1?) ahd Atti-cle .3QL Ttihereritly vicious 'activities c<illliot be treatCd .!IS entitlim~ ·citizens to do business or ti:!!de in such ;icdvities. No one cart' <ldi .iii D -E F .G H A B ## c D E F G H NASHIRWAR _V,_ M. P. STATE _(Ray,_ C.J.) 8 6!> counterfeit coins or currency notes. Das, C. J. held that activities. which are criminal, or dealing in articles or goods which are _res_ _extra._ _commercium_ could· not have been intended to be permitted by Article _19_ ( 1) ( f) and (g) relating to fundamental rights to trade or business .. In our country the history of excise shows that the regulations issued between 1790-1800 prohibited manufacture or sale of liquors without a licence from a Collector. In 1808 a regulation was introduced in the Madras Presidency which provided that the exclusive• privilege of manufacturing and selling attack · should be farmed in each district. In 1820 the law was amended to authorise the treatment of toddy and other fermented liquors in the same way as spirits biy allowing Collectors to retain the manufacture and sale under direct maIJagement if deemed preferable to farming. In 1884 a Committee was appointed to investigate the excise system. The recommendations of the Committee were adopted. Under the new system the monopoly of manufacture was le( separately from that of sale. The former was granted on condition of payment of a fixed duty per gallon. The right of sale was given on payment _o{_ a fee per shop or a number of,.shops, or on payment of a fee determined by auction. In the Bombay Presidency tile monopoly of the retail sale of spirits and the right to purchase spirits was farmed. In 1857 the Government declared its future policy to be the. letting by auction of each shop, with its still, separately. In 1870-71 a change was made .. The rule at that time was that the .Collector would fix the. number and locality of the different shops, and determine· their Jetting value according to the advantages possessed by each. It was not intended that they should, as a rule, be put up_ tci public competition; but competition might be resorted tO by the Collector and taken into account in determining the sum at which each would be leased. This rule remained in force for many years. The practice of putting the shops up to auction was, thereafter followed. The history of excise administration in our country before th~ Independence shows that there was originally the farming system and thereafter the central distillery system for manufacture, The retail sale was by auction of the right and privilege of sale. The Government of India appointed an Excise Committee in 1905.- The measures recommended by lhe Committee were the advances· of taxation, the concentration of distillation, the extended aqoption of the contract distillery system. The Committee suggested among other things the replacement of the then existing excise Jaw by fresh legislation on the lines of the Madras Abkari Act. '5,ee Dr. Pramatha Nath Banerjee: History of Indian Taxation p. 470 seq:). Reference may, be made to the Taxation Enquiry Commissioner Report 1953-54 Vol. 3. At page 130 following there is a discussion of State excises. . Among the major sources of revenue which are available to the State Government there is a duty on 'alcoholic liquors fer. human consumption. At page 132 of the Report!t is stated that in additi0n to the excise duties, licence fees are charged for manu facture or sal.e of liquor or for tapping toddy trees etc. Similarly 8 70 SUPREM!:. COURT REPORTS [1975] 2 s.c.R. several fees like permit fees, vend fees, outstill duties are also levied. Manufacture or sale of liquor is forbidden except under licences whfoh .are generally granted b.y auction to the highest bidders. The manu· facture of country spirit is done in Government distilleries or under the direct supervision of the .'excise staff. All supplies are drawn from Govermnent warehouses which ensures that the liquor is" not more than of the prescribed strength. The licensed sellers have to .sell the country spirit between fixed hours and at fixed sell~ng rau:s. As in the case of country spirit, the rir,ht of tapping and selling toddy is also auctioned. In addition to the licence, in some States the Jicensee has to pay a tree tax to Govc:rnment. Traditionally tobacco, opium and intoxicating liquors have be1:n. <the subject matter of State monopoly. (See section. IV of the Madras .Regulation XXV of 1802 relating to permanent settlement of land ;revenue). Section IV states that the Government having rescrvc:d to itself the entire exercise of its discretion in continuing or abolishing, . ·temporarily 01· permanently, the articles of revenue included, according <to the custom and practice of the country, under the several heads _.inter_ _alia_ of the abkary, or tax on the sale of spirituous liquors and :intoxicating .drugs, of the excise on articles of consumption, of all taxes personal and professic>nal, as well as those derived from markets, fairs, or 1Jaza1s, of lakhiraj lands (or lands exempt from the payme:nt .of pub'.ic rev¢nue), and of all other land~ paying only favourable •quit rents, th1: permanent assessment of the fand-tax shall be made .exclu$iVely of the said articles now recited. A B ## c D This was followed by section XXXII of Regulation II of 1803 'in the Madras Presidency. That section provided that Collectors shi11l ~ 1 collect the re\·enue arising from sayer, salt, spirituous liquors or from -other sources, in the manner prescribed by the regulations. Regulatio!l I of 1813 in the Madras Presidency provided that the llicensed retail dealer shall be supplied exclusively by the . Collector of Madras with the quantity of liquor which they may require, at such price as may be from time to time determined. Regulation I of 1820 of the Madras Presidency _inter_ _alia_ pro,vidc:d that the Board of Revenue was authorised to empower the Collecto;rs either to retain the exclusive privil'ege of manufacturing country atrack, toddy, and other fermented ligu~rs, as well as the retail sale ·of foreign or country manufactured spudts, toddy and other fermente:d liquors in th~ir respective districts, under their own immediate management, on account of Government; or to rent out those privileges, jointly or separately, for such periods as may be deeme:d eligible. The Boa1d of Revenue as aforesaid was also authorised to alter, amend and enlarge rules for regulating the exclusive manu· facture and sa~e of country arrack, toddy and other fermented liquors, and the exclusive sale of foreign spirits. The other provisions were that licences for renting out the exclusive privilege of manufacturing of country, arrack, toddy or other fermented liquor, and of retailfo1g ,;,pirituous liquors would be prepared by the Board of Revem1e. }!' G H A B ## c D F H NASHIRWAR _v._ M. P. STATE _(Ray, C.J.)_ 871 Act :XXIII of 1841 of the Madras Presidency, Act :XXXII of 1845 of the Madras Presidenqy, Sections XLIII to XLVII of Regulation VII Of 1932 of the Madras Presidency all indicate that it is the right and privitege of the State Government to manufacture, sell intoxicant liquors and the State grants lease of such rights by public auction on rental in consideration of the grant of such right. The excise revenue arising out of manufacture and sale of intoxicating liquors is one of the sources of the State Exchequer. One of the principal sources of State revenQe is customs and excise. In England sale of intoxicating liquors although perfectly laWful at common Jaw is subject to certain statutory restrictions. These restricti;ons are primarily of t\\'.O kinds; those designed for the orderly conduct of the retail trade and those desiined to obtain revenue from the trade whether wholesale or. retail. - Trade in liquor has historically stood on a different fooling from other trades. Restrictions which are not permissible with other trades are lawful and reasonable so far as the trade in liquor is concerned. That is why even prohibition of the trade in liquor is not only permissible. but is. also reasonable. The reasons are public morality, public interest and harmful and dangerous character of the liquor. T~e State possesses the right of complete ~trol over all aspects of intoxicants, _viz.,_ manufacture, colleption, sale and consumption. The State has exclusive right to manufacture and sell liquor and to sell the said right in order to raise revenue. That is the view of this Court in _Bharucha' s_ case (supra) and _J_ _aiswa/' s_ case (supra). The nature of the trade is such that the State confers the right to vend liquor by farming out either in auction or on private treaty. 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. Rental. is the consideration for the agreement for grant of privilege by the Government. This Court in _A._ _B._ _Abdulkadir_ v. _State_ _of_ _Kera/a_ [1962] 2 ~upp. S~C.R. 7 41 said that in British India there us~d to be public auction of the right to possess .and sell exciseable goods like country liquor, ganja and bhang and the amount realised was excise revenue. The auction system which was in force ',\'.as said by this Court-~ _A bdulkadir' s_ case (supra) to be only a method of realising duty from the grant of licences to those who made the highest bid at The auctions. The grant of a lease· either by public auction or for a sum is a regulation pertaining to liquor. - ·one of the purposes of regulation SUPREME COURT REPORTS [1975] 2 S.C.R. ' is to raise revenue. Revenue is collected by the grant of contracts to carry on trade in liquor. These contracts . are sold by auction. The . grantee :is given a licence on payment of auction price. [S1ee _Blzarucha's_ case (supra)]. For these reasons we hold that the State has the exclusive right or privilege of manufacturing and selling liquor. The State grants such right or privilege in the shape of a licence or a lease. The State has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant. of lease. The appeals and the writ petitions are, therefore, dismissed. Parties will pay and bear their own cost.s. P.B.R. _Appeals_ _and_ _petitions_ _dismissed._ A B ### c