Non -Reportable  

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 1701 of 2019 [ Arising out of S.L.P. (Civil) No. 30428 of 2018 ]

GWALIOR   DISTILLERIES  PVT.  LTD.        .... Appellant

Versus

THE STATE OF MADHYA PRADESH & ORS.

   ….Respondents

J U D G M E N T

L. NAGESWARA RAO, J.

Leave granted.  

1. The Appellant is a manufacturer of spirits and holds a

licence in the form of D-1 granted in the year 2017.   A

tender  notice  was  issued  for  supply  of  country  spirit  in

sealed bottles, in the State of Madhya Pradesh for the year

2018-2019.  The condition imposed for participating in the

tender  was  that  the  tenderer  must  have  a  licence  for

manufacturing,  bottling and wholesale supply  of  country

spirit in the State of Madhya Pradesh, issued in the form of

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CS-1  licence.   Clause  2(i)  of  the  tender  notice  dated

03.02.2018 was challenged by the Appellant on the ground

that  the  stipulation  pertaining  to  possession  of

CS-1 licence was contrary to Rule 3 of the Madhya Pradesh

Country Spirit Rules, 1995 (hereinafter referred to as ‘the

Rules’) since such licence could not be granted unless the

distiller  has  participated  in  the  tender  process.   That

according to Rule 3,  a successful tenderer is granted an

area for supply of country spirit which would enable him to

claim a CS-1 licence and CS-1-1B licence.  The Writ Petition

filed by the Appellant was dismissed.  However, the High

Court observed that the contention of the Appellant that

he could not be granted a licence under the Rules unless

an area was allotted to him was not borne out from Section

18 of the Excise Act, 1915 (hereinafter referred to as ‘the

Act’) or the Rules.   2. Thereafter, the Appellant submitted an application for

grant of CS-1 licence on 09.04.2018.  By an order dated

26.07.2018, the application filed by the Appellant for grant

of    CS-1  licence  was  rejected.   Aggrieved  by  the  said

rejection,  the  Appellant  filed  a  Writ  Petition  which  was

dismissed by the High Court.  Hence, this appeal.    

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3. The order by which the request for issuance of CS-1

licence  was  rejected  by  the  Respondent  No.2  was

challenged by the Appellant as being in violation of Articles

14 and 19 (1) (g)      of the Constitution of India.  The

Appellant alleged discrimination since eight other distillers

in the State of Madhya Pradesh who were similarly situated

to the Appellant, not possessing CS-1 and CS-1-1B licence

were allowed to participate in the tender process.   The

Appellant relied upon the observations of the High Court in

its judgment dated 21.03.2018, in Writ Petition No.6525 of

2018 filed by the Appellant, that neither the Act nor the

Rules made thereunder required allotment of an area for

grant of CS-1 licence.

4. The  High  Court  dismissed  the  Writ  Petition  by

observing that allotment of an area was an imperative pre-

condition for grant of CS-1 licence. The High Court further

held that there was no fundamental right to trade in liquor

and  opined  that  the  Appellant  was  not  entitled  to  any

relief.   Clause 2 (i) of the tender notice dated 03.02.2018

issued by the Respondents provides that a distiller having

a proper licence for manufacturing, bottling and wholesale

supply of country spirit shall  be eligible to participate in

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the tender process.  The validity of the said condition was

challenged  by  the  Appellant  in  Writ  Petition  No.6525  of

2018 in the High Court of Madhya Pradesh.   The Appellant

contended  in  said  Writ  Petition  that  according  to  the

scheme of the Rules,  a CS-1 licence will  not be granted

unless the area is allotted.    A Division Bench of the High

Court dismissed the Writ Petition finding no substance in

the challenge to Clause 2 (i) of the tender notice.  While

dismissing the Writ Petition, the High Court observed that

the allotment of an area was not a pre-requisite for grant

of CS-1 licence.   Subsequently, the Appellant submitted an

application  to  the  Excise  Commissioner,  Gwalior  on

09.04.2018,  requesting issuance of  a  CS-1 licence.   The

application  for  granting  CS-1  licence  was  rejected  on

26.07.2018  on  the  ground  that  the  Appellant  did  not

participate in the tender process, published on 20.02.2018

for the year 2018-19.  There is no doubt that the Appellant

has a D-1 licence.  A perusal of Rule 3 would show that

manufacturing,  bottling and wholesale supply  of  country

spirit can be only undertaken by persons who possess a

CS-1  licence.    CS-1  licence  is  granted  by  the  Excise

Commissioner after the approval of the State Government.

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A CS-1 licensee shall operate in such area or areas as may

be determined by the Excise Commissioner from time to

time.   The  apprehension  of  the  Appellant  that  a  CS-1

licence would not be granted unless an area was allotted

pursuant to a tender process was addressed by the High

Court in the earlier round of litigation.  The High Court held

that the Act and the Rules do not provide for allotment of

an area as a condition for issuance of  CS-1 licence.  The

application  filed  by  the  Appellant  for  issuance  of  CS-1

licence was rejected by the Respondents  on the ground

that  the  Appellant  did  not  participate  in  the  tender

process.                  5.   Section 18 of the Act which confers power on the

State Government to grant lease of right to manufacture,

etc.  and Rule 3 of the Rules read as follows: “18.  Power  to  grant  lease  of  right  to manufacture, etc. — (1) 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 retail; or  (c) of manufacturing or of supplying by wholesale, or of both,  and  selling  by  retail;  and  liquor  or  intoxicating within any specified area.”

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“3. Grant of Licence. - (1) (a) A licence in Form C.S.1 for  manufacture,  bottling  and  wholesale  supply  of country  spirit  may  be  granted  by  the  Excise Commissioner after approval of the State Government. It  shall  commence on such date as may be specified therein  and  be  in  force  for  such  period  as  the  State Government may decide and shall be for such area or areas  as  may  be  determined  by  the  Excise Commissioner from time to time.

(b) [Licence in Form C.S. 1 shall be granted by the Excise Commissioner as aforesaid on payment of fee in advance at the rate of one lakh rupees for a period of one year’s licence or such proportional amount of fees for the period of licence to be granted.] The  licensee  shall  be  required  to  deposit  additional amount of Rs.5 lacs as security in cash or in any other form as may be directed by the Excise Commissioner for the due observance of conditions of licence, provisions of the Act and the rules made thereunder and orders issued  by  State  Government  or  Excise  Commissioner. The Excise Commissioner may ask for additional sum as security amount not exceeding Rs.10 lacs as and when he  deems  it  necessary  in  circumstances  of  repeated breaches of conditions of increase in area of supply and the licencee shall comply with such order within 15 days of its communication to him.”  

6. There is no condition either in Section 18 or Rule 3

that  CS-1 licence will  be granted only to a person who

participated in the tender process.  The order passed by

the Respondent No.2 is arbitrary and contrary to Section

18 of the Act and Rule 3 of the Rules.  By the impugned

judgment the High Court held that allotment of an area is a

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pre-condition  for  issuance  of  the  CS-1  licence  without

examining the judgment in Writ Petition No.6525 of 2018.

Reference  made  to  Writ  Petition  No.  6525  of  2018  was

restricted to recording a finding that the said Writ Petition

was dismissed and the contentions raised by the Appellant

in  the  said  Writ  Petition  were  negatived.    To  our

understanding, Rule 3 (1) provides for allotment of an area

to a person who is given a CS-1 licence.  Participation in

the process of tender as a condition for applying for a CS-1

licence is not found in the Rules.  The High Court dismissed

the Writ Petition by holding that there is no fundamental

right  to  trade  of  liquor.  However,  the  other  contention

raised by the Appellant that there is hostile discrimination

against the Appellant as other similarly situated distillers

were permitted to participate in the tender, has not been

dealt with by the High Court.  This Court in State of M.P.

& others v. Nandlal Jaiswal & others1 has held that no

one can claim as against the State the right to carry on

trade  or  business  in  liquor  and  the  State  cannot  be

compelled to part  with its  exclusive right  or  privilege of

manufacturing  and  selling  liquor.   But  when  the  State

decides to grant such right or privilege to others the State 1 (1986) 4 SCC 566

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cannot  escape  the  rigour  of  Article  14.  It  cannot  act

arbitrarily  or  at  its  sweet will.   It  must  comply with the

equality  clause  while  granting  the  exclusive  right  or

privilege of manufacturing or selling liquor. The Appellant’s

request  for  grant  of  a  CS-1  license  requires  to  be

considered strictly in accordance with law.   

7. The  Respondents  are  directed  to  consider  the

application of the Appellant for issuance of CS-1 licence in

accordance with the Act and the Rules made thereunder.

It is needless to mention that the Respondents should not

insist  on  the  condition  that  the  Appellant  should  have

participated in a tender and should have been allotted an

area of operation.  

8. For the aforementioned reasons, the judgment of the

High Court is set aside and the appeal is allowed.            

               .................................J.                                                                  [L.

NAGESWARA RAO]

 ……..........................J.                                                             [M.R. SHAH]

New Delhi, February 15,  2019.

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