Har Shankar & Ors Vs. The Dy. Excise & Taxation Commr. & Ors [1975] INSC 8 (21 January 1975)

CHANDRACHUD, Y.V.

RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN ALAGIRISWAMI, A.

GUPTA, A.C.

CITATION: 1975 AIR 1121 1975 SCR (3) 254 1975 SCC (1) 737

CITATOR INFO :

F 1975 SC2008 (20) RF 1976 SC 633 (5) RF 1976 SC1913 (15,19) R 1976 SC2045 (14,19) RF 1976 SC2243 (28) D 1977 SC 509 (6) R 1977 SC 722 (17,18,29,32) RF 1977 SC1496 (19) R 1977 SC1717 (2) RF 1978 SC1457 (39) R 1979 SC1550 (16,17) F 1980 SC 614 (6,7,8,15,16,18,35) F 1980 SC 738 (8) E 1980 SC1008 (15) F 1980 SC2018 (13) R 1981 SC 479 (10) R 1981 SC1368 (9) R 1981 SC1374 (3,56) F 1983 SC 743 (9) APL 1983 SC1207 (3,14) C 1984 SC1326 (8,9) E&D 1987 SC 251 (32) RF 1987 SC 993 (14) R 1988 SC 771 (5) RF 1990 SC1927 (27,29,60,73) R 1991 SC1947 (13) RF 1992 SC1256 (14)

ACT:

Constitution of India, 1950, Art. 226--Petition under reciprocal rights and obligations arising out of contract, if could be enforced.

Constitution of India, 1950, Art. 226 and Punjab Excise Act, 1914 and Punjab Liquor Licence Rules, 1956--Appellants applying for and accepting licences to vend foreign liquor Appellants, if could question the validity of Rules while attempting to exploit licences.

Constitution of India, 1950, Art. 19(1)(g)--Business in intoxicants--Citizen, if has a fundamental right to trade in intoxicants--State, if has power to prohibit absolutely every form of activity relating to intoxicants.

The Punjab Act. 1 of 1914, Sections 27 and 34--Levv of 'licence fee' and 'fixed fee' on traders in liquor--'fee', if fee in technical sense of the expression, Punjab Excise Act, 1 of 1914, S. 34 and Punjab Liquor Licence Rules, 1956, Rules 35 and 59(d)--Grant of licence to the sale of liquor--Fee, if can be fixed by auction.

Punjab Excise Act, 1 of 1914, Ss. 3(9), 34, 59(d) and 60 and Punjab Liquor Licence Rules, 1956, Rules 11, 12 and 31--Levy of 'fixed fee' and additional fee on persons holding licences for sale of foreign liquor, if illegal.

HEADNOTE:

The appellants are retail vendors of country liquor holding licences for the sale of liquor in specified vends. Those licences were granted to them on acceptance of their bids-, in the auctions held by the Excise Department, Government of Punjab. The appellants in Civil Appeals Nos. 485 and 2205 of 1969 held licences for the retail sale of foreign liquor for consumption on the premises of their respective establishments.

Facts in Civil Appeal No. 365 of 1971 are as follows :

Consequent on the judgment dated March 12, 1968 of the High Court of Punjab and Haryana in Civil Writ No. 1376 of 1967 (Jage Ram and Ors. v. State of Haryana & Ors.), holding that the auctions for granting the right to sell country liquor for the year 1968-69 had become ineffective, the first respondent held on March 23, 1968 an auction for granting the right to sell country liquor at the 'Town Hall Vend' and 'Kailash Cinema Chowk Vend', Ludhiana. The appellants gave bids in the sum of Rs. 34,01,000 and Rs. 12,02,000 respectively for two vends, and those bids were duly accepted by the first respondent. The appellants were then granted licences in Form IS. 14-A of the Punjab Liquor Licence Rules, 1956. 'The appellants deposited Rs. 1,41,708 for the Town Hall Vend and Rs. 50,091 for the Kailash Cinema Chowk Vend being 1/24th of the licence fee required to be deposited by way of security. They were, however, unable to meet their obligations under the conditions of auction and fell in arrears. The State Government demanded the payment, threatened to cancel the licences granted to the appellants and declared its intention to resell the vends at the risk of the appellants. On August 22, 1968, the appellants filed their writ petition in the High Court of Punjab and Haryana.

They prayed for a direction quashing the auction held on March 23, 1968 and secondly, they asked that the respondents be restrained from enforcing the obligations arising under the terms and conditions of the auction.

The High Court held that the State Legislature was competent to regulate the business of vending intoxicating liquors, that various provisions of the Act showed that the State Government had the exclusive right to manufacture or sell intoxicants, that the Financial Commissioner held the jurisdiction to determine the method of disposal of country liquor vends, that the rules under which the 255 impugned auctions were held are substantially different from those under which the auctions challenged in Jage Ram's case were held, that s. 34 of the Act is not an instance of delegated legislation and that the fixation of the maximum price of country liquor was a part of the power to regulate the trade in liquor. On the main contention that the levy in the shape of licence fee was unconstitutional, the High Court held that licences granted for regulating trade in intoxicating liquors stand in a class by themselves and that the consideration which governs licence fees charged in return for services rendered cannot apply to licences issued to the successful bidders at auctions of liquor vends. The High Court further held that Entry 66 in the State List is not confined to fees levied for services rendered but extends to all kinds of fees and therefore the imposition of the licence fee was within the ambit of that Entry.

in these appeals founded on certificates of fitness granted by the High Court of Punjab and Haryana under Arts. 132(1) and 133(1) (a) and (c) of the Constitution, it was contended on behalf of the appellants that (1) the Financial Commissioner has no power to frame rules so as to authorise the grant of liquor licences by holding auctions; (2) under s.

34 of the Punjab Excise Act, 1914, the Financial Commissioner has no right to authorise the levy or collection of any amount which, strictly, is not a fee; an auction bid for fixing 'fees' is a contradiction in terms;

(3) The licence fee bears no relationship with the services rendered to the licensees and is therefore not 'fee' in the true sense. Nor can the licence fee be justified as an 'excise duty' as it is not levied on the manufacture or production of liquor; (4)The real character of the levy imposed on licensees through the medium of auctions is that it is in the nature of a tax; and the Financial Commissioner who is an independent statutory authority having powers which are distinct and different from those of the Government, has no authority to impose the tax; nor indeed, has the State Government the power to impose such a tax; (5) The Government cannot under a contract impose a levy which it has no power to impose by law; (6) The new terms and conditions of auctions are, basically and in substance, similar to those which were struck down, by the Punjab High Court in Jage Ram's case which decision was affirmed in appeal by the Supreme Court-. and (7) The demand made by the Government for payment of large sums of money by hoteliers and bar-keepers who supply foreign liquor for consumption on their premises is arbitrary, without the authority of law and otherwise illegal. The respondents raised a preliminary objection to the maintainability of the writ petitions filed by the appellants and tothe grant of reliefs claimed by them on the ground that such of the appellants who offered their bids in the auctions did so with a full knowledge of the terms and conditions attaching to the auctions and they cannot by their writ petitions, be permitted to wriggle out of the contractual obligations arising out of the acceptance of their bids.

Dismissing the appeals,

HELD : (On the preliminary objection raised by the respondents). The bids given by the appellants constitute offers and upon their acceptance by the Government a binding agreement came into existence between the parties. The conditions of auction became the terms of the contract and it is on those terms that licences are granted to the successful bidders in Form L 14-A of the Rules. The licensees exploited the respective licences for a portion of the period of their currency, presumably in expectation of a profit. Commercial considerations may have revealed an error of judgment in the initial assessment of profitability of the adventure but that is a normal incident of all trading transactions. Those who contract with open eyes must accept the burdens of the contract along with its 'benefits. The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim.

Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds if prudent to abide by the terms of the contract. By such a test no contract could ever have a.

binding force. [265B; 263D-E] Lekhrai Sairamdas Lalvani v. Deputy Custodian-cum-Managing Officer & Ors., [1966] 1 S.C.R. 120, relied on.

256 Basheshar Nath v. The Commissioner of Income-tax, Delhi, and Rajasthan & Anr. [1959] Supp. 1 S.C.R. 528, referred to.

Just as country liquor contractors offered bids voluntarily on terms and conditions governing the auctions, the appellants in Civil Appeals Nos. 485 and 2205 of 1969 who hold licences in Form Nos. L-3, L-4 and L-5 for the retail vend of foreign liquor, voluntarily applied for and accepted the licences knowing fully well that the Financial Commissioner had the power to frame rules governing the licences. The licences, in a large measure, owe their existence and validity to the rule-making power of the Financial Commissioner. One of the reliefs which the appellants ask for is that Rules 27A, 30 and 31 be declared ultra vires and unconstitutional and consequently the respondents be directed to refund the assessed fees already recovered. By attempting to exploit the licences without the burden of assessed fees originally attaching to them under the rules framed by the Financial Commissioner, the appellants are seeking to work the licences on such terms as they find convenient. The writ jurisdiction of High Courts under Art. 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred.

[265 H; 266 A-B] Held further, (i) The true position governing dealings in intoxicants is as stated and reflected in the Constitution Bench decisions of this Court in The State of Bombay and Anr. v. F. N. Balsara, [1951] S.C.R. 682, Cooverjee B. Bhavasha v. The Excise Commissioner and the Chief Commissioner, Ajmer & Ors. [1954] S.C.R. 875, State of Assam v. A. N. Kidwai, Commissioner of Hills Division and Appeals, Shillong [1957] S.C.R. 295, Nagendra Nath Bara & Anr. v. The Commissioner of Hills Division and Appeals, Assam and Ors.

[1958] S.C.R. 1240, Amar. Chandra Chakrabarty v. Collector of Excise, Government of Tripura & Ors. [1973] 1 S.C.R. 633 and State of Bombay v. R. M. D. Chamarbaugwala, [1957] S.C.R. 874 as interpreted in State of Orissa and Om v. Harinarayan Jaiswal and Ors. [1972] S.C.R. 784 and Nashirwar etc. v. State of Madhya Pradesh & Ors. Civil Appeals Nos.

1711-1721 and 1723 of 1974 decided on November 27, 1974.

There is no fundamental right to do trade or business in intoxicants. The State, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to intoxicants-its manufacture, storage, export, import, sale and possession. In all their manifestations, these rights are vested in the State and indeed without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants. [277 F-G] Krishna Kumar Narula etc. v. The State of Jammu and Kashmir

Crowley v. Christansen, 54 Law, Ed. 620, 623 and Russel v. The Queen 7 A.C. 829, referred to.

(ii)The distinction which the Constitution makes for legislative purposes between a 'tax' and a 'fee' and the characteristics of these two as also of 'excise duty' are well known. The amounts charged to the licensees in the instant case are, evidently, neither in the nature of a tax nor of excise duty. But then, the 'licence fee' which the State Government charged to the licensees through the medium of auctions or the 'fixed fee' which it charged to the vendors of foreign liquor holding licensees in Forms. L-3, 1-4 and L-5 need bear no quid pro quo to the services rendered to the licensees. The word 'fee' is not used in the Act or the Rules in the technical sense of the expression. By 'licence fee' or 'fixed fee' is meant the or consideration which the Government charges to the licensees for parting price privileges and granting them to the licensees. As the State can carry on a trade or business, such a charge is the normal incident of a trading or business transaction. [278 H, 279 B-C] Mathews v. Chickory, Marketing Board, 60 C.L.R. 263, 276, The Commissioner, Hindu Religious Endowment$, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt; [1954] S.C.

1005, 1041 and M/s. Guruswamy & Co. Etc.v. State of Mysore & Ors., [1967] 1 S.C.R. 548, referred to.

Gundbing v. Chicago, 44 L.ed. 725, Phillips v. Mobile, 52, L.ed. 578 and Richard v. Mobile, 52 L.ed 581, referred to.

(iii)The position obtaining under the Rules as amended on March 22, 1969 is in principle different as the stillhead duty is now only 0.64 Paise as against 257 Is. 17-60 per liter which was in force under the old rules and excise duty as such s no longer payable on unlifted quota. The principles governing the decisions in Bhajan Lal's case C.A. Nos. 1642 and 1643 of 1968 decided on August 21, 1972) and Jage Ram's case cannot, therefore, apply any longer. [281 B-F] (iv)As the amount payable by the licensees on the basis of the bids offered by them in auction and on the basis of 'Fixed and Assessed Fees' is neither a fee in the technical sense nor a tax but is in the nature of the price of a privilege, there is no question of the Financial Commissioner lacking power to organize auctions so as to authorize the recovery of any amount which is not a fee properly so-called. The Financial Commissioner, under s. 34 of the Act read with rule 59(d), has the power to direct that licences may be granted on payment of such fees, that is, such consideration as he may by rules prescribe. It is open to him to frame a rule, as he has in fact framed Rule 35, directing that any class of licences may be granted on payment of fees fixed by auction. Once it is appreciated that auctions are only a mode or medium for ascertaining the best price obtainable for the grant of privilege to sell liquor, there would be no 'contradiction in terms' in directing, as r. 35 does, that a class of "licences may be granted on the fee fixed by auction. [281 F-H] (v)It is true that the amendments under which the appellants (holding licenses for sale of Foreign liquor) have been called upon to pay fixed fees were made after the licences were renewed. But the licences, though renewed in January 1968, were to be effective from April 1, 1968. The amendments having come into force before April 1, would govern the appellants' licences and they are, therefore, liable to pay the fixed fees under the amended rules.

Licences are granted under s. 34 of the Act subject to the payment of such fees as the Financial Commissioner may direct. The rules made under s. 59(d) authorize the imposition of additional fees and such authorization would operate on all licences to be effective thereafter. Such payments demanded from the appellants are "excise revenue' within the meaning of s. 3(9) and 60(1) (a) of the Act and it is, therefore, open to the Government to recover its dues in the manner authorised by s. 60 of the Act. [282 EF] & CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 365, 366, 485, 1102, 1260 to 1263, 1385, 1537, 1548 to 1551, 1553 to 1555, 1557 to 1560, 1566 to 1573, 1588, 1588, 1589, AND 2205 of 1969.

Appeals from the Judgment & Order dated the 18th November, 1968/6th/10th/24th January, 1969 of the Punjab & Haryana High Court in C.W. Nos. 37/69, 2646/68, 2582/68, 1818, 2343, 2875, 2754, 2254, 2256, 2629, 2630, 2753 & 29-11/68 91/69, 2706-2708, 3084, 2460, 2461, 2644, 2652, 2580, 2581, 2549, 2699, 2501, 2694, 1277 and 2514 of 1968, for the appellants (In C. As. Nos. 365, 366, 1102 1537, 1548-1551, 1553-1555, 1557-1560, 1566-1573, 1588 & 1589/69).

V.M. Tarkunde (In C.A. Nos. 1566, 485/69), A. K. Sen (In C.A. Nos. 1559 & 1588/69) Tirath Singh Mujral, (In all the 258 appeals) except C.As. Nos. 1537, 1554, 1557 and '1558/69) P.

C. Bhartari and 0. C. Mathur (In all the appeals and B. P.

Jha (In all the appeals except C.As. Nos. 1566, 485, 1559 & 1588/69).

S.K. Mehta, K. R. Nagaraja and M. Qamaruddin, for the appellants. In C.As. Nos. 1260-1263/693.

K.B. Rohtagi and Tarachand Sharma, for the appellants, (In C.A. No. 1385/69).

Tirath Singh Munjral and H. K. Puri, for the appellants (In C.A. No. 2205/69).

F.S. Narinan, Additional Solicitor General of India, C In C.A. No. 365/69) V. C. Mahajan (In C.A. No. 1102/69), H. S. Dhillon (In C.A. Nos. 1588-1589/69) K. S. Chawla (In C.A. No. 2205/69) S. S. Jauhar (In C.A. No. 1537/69), S. K. Gambhir (In C.As. Nos. 1548-1551/69) N. S. Das. Behl (In C.As. Nos. 1553-1555/69), Bishamber Lal, (In C. As. Nos. 1557-1560/69) Harbans, Singh, (In C. As. Nos. 15661573/69), N. N. Goswami (In C.A. Nos. 1588-1589/69) K. S. Chawla (In C.A. No. 2205/69) 0. P. Sharma, (In all the matters), for the respondents (In C.As. Nos. 366, 1260-1263, 1385, 1537, 1548-1551, 1553-1555, 15571560, 1566-1567 1573 & 2205/69) and respondent Nos. 1-3 (In C.As. Nos. 365, 1102, 1568-15721588 and 1589-/69).

0. P. Sharma, for respondents (In C-As. Nos, 485/69).

The Judgment of the Court was delivered by CHANDRACHUD, J.-This is a group of appeals founded on certificates of fitness granted by the High Court of Punjab and Haryana under Articles 132(1) and 133(1)(a) and (c) of the Constitution. The appeals arise out of a common judgment dated November 18, 1968 rendered by the High Court in a batch of 152 writ petitions under Article 226 of the Constitution. Those petitions were filed by liquor contractors and hoteliers to challenge the demands made upon them by the Department of Excise and Revenue, Government of Punjab.

The appellants are mostly retail vendors of country liquor holding licences for the sale of liquor in specified vends.

Those licences were granted to them on acceptance of their bids in the auctions held by the Excise Department, Government of Punjab. The 'licence fees' realised through bids made in the auction are said to be in the neighborhood of Rs. 29 crores.

In Civil Appeals Nos. 485 and 2205 of 1969, the appellants held licences for the retail sale of foreign liquor for consumption on the premises of their respective establishments.

Civil Writ No. 2645 of 1968 out of which Civil Appeal No. 365 of 1971 arises, may be taken to be typical of the petitions filed by retail vendors of country liquor. For understanding the points in controversy it would be enough to refer to the facts of that petition.

259 Auctions for granting the right to sell country liquor for the year 1968-69 were initially held in various districts of Punjab on or about March 8, 1968 in pursuance of conditions of auction framed on February 19, 1968. Those auctions became ineffective by reason of a judgment dated March 12, 1968 of a Division Bench of the High, Court of Punjab and Haryana in Civil Writ No. 1376 of 1967 (Jage Ram and Ors.

vs. State of Haryana & Ors.). Following an earlier judgment in Bhajan Lal vs. State of Punjab (Civil Writ No. 528 of 1966 decided on February 6, 1967), the High Court took the view that the licence fee realised through the medium of auctions was really in the nature of "still-head duty" and that licences could not be called upon by the Government to pay still-head duty on the liquor quota which, under the terms of auctions, they were bound to lift but which in fact was not lifted by them.

On March 21, 1969 a meeting of the, State Excise Officers was. held under the chairmanship of the Financial Commissioner to evolve a new formula for leasing the right to sell liquor so as to meet the judgment in Jage Ram's case. The new policy containing fresh terms and conditions of auction was announced on the 22nd and the impugned auctions in pursuance of that policy were held immediately thereafter.

On March 23, 1968 the first respondent-the Deputy Excise and Taxation Commissioner Jullundur-held an auction for granting the right to sell country liquor at the 'Town Hall Vend' and the Kailash Cinema Chowk Vend', Ludhiana. The appellants gave bids in the sum of Rs. 34,01,000 and Rs. 12,02,000 respectively for the two vends and those bids were duly accepted by the first respondent. The appellants were then granted licences in Form L. 14-A of the Punjab Liquor Licence Rules, 1956 (herein called "the Rules"), Forr L. 14A is prescribed under the Rules for the grant of licences for "retail vend of country spirit for consumption off the premises".

The conditions governing auctions were notified through announcements made at the time of auctions. Condition No. 1 provides that all licences for sale of country spirit, foreign liquor, Beer, etc. shall be granted subject to the provisions of the Punjab Excise Act, 1 of 1914, (hereinafter called "the Act") and the rules framed thereunder. By Condition 14(1), licences for retail vend of country spirit are granted on the basis of "licence fee" fixed by auction.

Condition 14(ii) requires that the quota of country liquor fixed for each vend must be announced before the vend is put to auction. Under Condition 15(i) the successful bidder has to deposit security equivalent to 1/24th of the amount of the annual licence fee within the stated period. The security is refundable to the licensee at the end of the year unless it is liable to be forfeited or adjusted against any amount due from him in respect of the licence. Clause (ii) of condition 15 requires the successful bidder to pay the whole amount of licence fee in 24 equal installments spread over the year. Clause (iii) of Condition 15 authorises the Collector to resell the vend if the successful bidder fails to deposit the security or refuses to accept the licence, 260 In the event of such resale, any deficiency in the licence fee is recoverable from the defaulter in the manner laid down in section 60 of the Act which provides by clauses (a) and (c) that an "excise revenue" and all amounts due to the Government on account of any contract relating to the excise revenue may be recovered from the person liable to pay the same by any process for the recovery of arrears of land revenue. By Condition 15(iv), a similar right is conferred on the Collector to resell vend in the event of the cancellation of a licence. By Condition 17, the still-head duty on ordinary spiced country spirit is leviable at the rate of Rs. 0.64 per proof liter. Condition 18(i) entitles the licensee to the refund of the proportionate part of the licence fee if there is a shortfall in the supply of liquor to him but he is not entitled to any compensation or damages for the short supply. By Condition No. 24, the maximum price at which the spiced country liquor may be sold by the licensee is fixed at Rs. 10.00 per Quart, Rs. 5.25 per Pint and Rs. 2.75 per Nip.

The Town Hall Vend was auctioned on the basis of the fixed quota of 1,50,560 proof liters which is equivalent to 4,01,000 bottles per year. The Kailash Cinema Chowk Vend was auctioned on the basis of the fixed quota of 50,506 proof liters which is equivalent to 1,34,685 bottles per year.

The appellants deposited Rs. 1,41,708 for the Town Hall Vend and Rs. 50,091 for the Kailash Cinema Chowk Vend being 1/24th of the licence fee required to be deposited by way of security. They were, however, unable to meet their obligations under the conditions of auction and fell in arrears. The State Government demanded the payment, threatened to cancel the licences granted to the appellants and declared its intention to resell the vends a the risk of the appellants.

On August 22, 1968 the appellants filed their writ petition in the High Court of Punjab and Haryana. They prayed for three reliefs out of which only two were pressed at the hearing. They asked for a direction quashing the auctions held on March 23, 1968 and secondly they asked that the respondents be restrained from enforcing the obligations arising under the terms and conditions of the auctions. The Deputy Excise and Taxation Commissioner, Jullundar, is the first respondent to the petition; the Excise and Taxation Commissioner Punjab, Patiala, is the second respondent; and the State of Punjab is the third respondent. The relief sought against the fourth respondents private firm-was not pressed.

Though several contentions-factual and legal were raised in the petitions, the appellants restricted their challenge, in the High Court, to the following points :(1) The Excise and Taxation Commissioner (who in the Punjab exercised the powers of a Financial Commissioner under the Act) had no jurisdiction to determine 'the method of disposal of the country liquor vends;

261 (2) The power conferred on the Financial Commissioner under section 34 of the Act to grant a license, permit or pass on payment of such fees, if any, as he may direct did not extend to disposing of the country liquor vends by-auction;

(3) The impugned auctions conducted under the amended Rule 36 on the basis of estimated quota in proof litres was in substance, founded on the same system which had been struck down by the High Court in Jage Ram's case where it was held that the levy imposed through the medium of auctions was a tax and not a licence fee;

(4) The State Government alone was competent to impose a tax or an excise duty under the Act; that power could not be delegated to the, Financial Commissioner or any other officer.

(5) Section 34 of the Act which empowered the Financial Commissioner to levy fees was not a charging section; but if it is construed as containing a delegation to him of the power of the state to levy taxes, no guidelines were laid down and thus the delegation was excessive.

(6) The fee which could be imposed by the Financial Commissioner under Section 34 of the Act could only be justified if it had a reasonable relation to the services rendered to the licensees. If it was imposed solely or mainly for the purpose of collecting revenue, it was outside the ambit of Item 66 of List II of the Seventh Schedule of the Constitution.

The amounts realised in the auctions in the guise of licence fees were so exorbitant that they could not possibly be justified under item 66.

(7) The rule fixing the maximum price at which a licence could sell a bottle of liquor was ultra vires of the rule,-making powers of the Financial Commissioner under Section 59 of the Act.

The High Court negatived all of these contentions. It held that the State Legislature was competent to regulate the business of vending intoxicating liquors, that various provisions of the Act showed that the State Government had the exclusive right to manufacture or sell intoxicants, that the Financial Commissioner had the jurisdiction to determine the method of disposal of country liquor vends, that the rules under which the impugned auctions were held are substantially different from those under which the auctions challenged in Jage Ram's case were held, that section 34 of the Act is not an instance of delegated legislation and that the fixation of the maximum price of country liquor was a part of the power to regulate the trade in liquor. On the main contention that the levy in the shape of licence fee was unconstitutional, the High Court held that licences granted for regulating 262 trade in intoxicating liquors stand in a class by themselves and that the consideration which governs licence fees charged 'in return for services rendered cannot apply to licences issued to the successful bidders at auctions of liquor vends. The High Court further held that Entry 66 in the State List is not confined to fees levied for services rendered but extends to all kinds of fees and therefore the imposition of the licence fee was within the ambit of that Entry.

Before us, the controversy was limited to the following contentions

1. The Financial Commissioner has no power to frame rules so as to authorise the grant of liquor licences by holding auctions;

2. Under section 34 of the Punjab Excise Act, 1914, the Financial Commissioner has no right to authorise the levy or collection of any amount which, strictly, is not a fee; an auction bid for fixing 'fees, is a contradiction in terms;

3. The licence fee bears no relationship with the services rendered to the licensees and is therefore not a 'fee' in the true sense'. Nor can the licence fee be justified as an 'excise duty' as it is not levied on the manufacture or production of liquor;

4. The real character of the levy imposed on licensees through the medium of auctions is that it is in the nature of a tax; and the Financial Commissioner who is an independent statutory authority having powers which are distinct and different from those of the Government, has no authority to impose the tax; nor, indeed, has the State Government the power to impose such a tax.

5. The Government cannot under a contract impose a levy which it has no power to impose by law;

6. The new terms and conditions of auctions are, basically and in substance, similar to those which were struck down by the Punjab High Court in Jage Ram's case and which decision was affirmed in appeal by the Supreme Court; and

7. The demand made by the Government for payment of large sums of money by hoteliers and bar-keepers who supply foreign liquor for consumption on their premises is arbitrary, without the authority of law and otherwise illegal.

Learned counsel for the respondents raised a preliminary objection to the maintainability of the writ petitions filed by the appellants and to the grant of reliefs claimed by them. He contends that such of the appellants who offered their bids in the auctions did so with a full knowledge of the terms and conditions attaching to the auctions and 263 they cannot by their writ petitions, be permitted to wriggle. out of the contractual obligations arising out of the acceptance of their bids. This objection is wellfounded and must be accepted.

Those interested in running the country liquor vends offered their bids voluntarily in the auctions held for granting licences for the sale; of country liquor. The terms and conditions of auctions were announced before the auctions were held and the bidders participated in the auctions without a demur and with full knowledge of the commitments which the bids involved. The announcement of conditions governing the auctions were in the nature of an invitation to an offer to those who were interested in the sale of country liquor. The bids given in the auctions were offers made by prospective vendors to the Government. The Government's acceptance of those bids was the acceptance of willing offers made to it. On such acceptance, the contract between ,,he bidders and the Government became concluded and a. binding agreement came into existence between them. The successful bidders were then granted licences evidencing the terms of contract between them and the Government, under which they became entitled to, sell liquor. The licensees exploited the respective licences for a portion of the period of their currency, presumably in expectation of a profit. Commercial considerations may have revealed an error of judgment in the initial assessment of profitability of the adventure but that is a normal incident of the trading transactions. Those who contract With open eyes must accept the burdens of the contract along With its benefits. The powers of the FinancialCommissioner to grant liquor licensees by auction and to collect licence fees through the medium of auctions cannot by writ petitions be, questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations.. arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force.

In Lekhraj Satramdas Lalvani v. Deputy Custodian-cumManaging Officer & Ors.(1), the appellant who was removed from the manager-ship of certain evacuee properties filed a petition in the Kerala High Court under Article 226 of the Constitution praying for a writ of mandamus against the Deputy Custodian and others. This Court held that the appellant's appointment was contractual in its nature and the duties or obligations arising out of contract could not be enforced by the machinery of a writ under Article 226.

There was some discussion before us as to whether Fundamental Rights could be waived and in answer to the preliminary contention of 'he respondents it was urged on behalf of the appellants that they are entitled to enforce their fundamental rights, no matter whether they agreed to waive those rights while entering into contracts with the Government. In support of the, contention that there can be no waver of fundamental rights, reliance was placed by the appellants on the well-known decision of this Court in Basheshar Nath v. The Commissioner of Income-Tax, Delhi & Rajasthan & Anr.(2).

(1) [1966] 1 S.C.R. 120.

(2) [1959] Supp. 1 S.C.R. 528..

264 The writ petitions filed by the appellants in the High Court are wholly directed to showing that the Financial Commissioner lacked the power to grant liquor licences through auctions and to levy through the medium of auctions a sum which was not a 'fee' in the strict sense of the term.

The two reliefs which the appellants asked for in the writ petitions are that the auctions held by the Government for granting liquor licences and the bids offered therein by the prospective licensees should be quashed and secondly that a direction should be issued to the respondents restraining them from enforcing the obligations arising under the bids.

It is interesting that except in the title of the petition showing that it was filed "Under Article 226 of the Constitution of India", the representative Writ Petition (No. 2646 of 1968) does not even refer to so much as, any provision of the Constitution, much less to the infringement of any Constitutional rights. Apart from this, in the view which we are disposed to take on the main contention, no question of the waiver of a "fundamental right" can arise.

The appellants objected to the preliminary contention of the respondents on the ground that in their counter affidavit filed in the 'High Court, respondents had not pleaded that there was any contract 'between the parties or that the writ jurisdiction of the High Court was inappropriate _for the enforcement of contractual rights. This submission overlooks the material averments contained in the respondents' counter affidavit. This is what the respondent say "The allegations with respect to the policy are not relevant inasmuch as the petitioner's liability arises from the terms and conditions of the Excise contract granted in his favour.

"I further submit that the petitioners' voluntarily and of their own free volition offered themselves as bidders at the time of auction. The petitioners were aware of the business that they were likely to do as a result of grant of licence in their favour.

Since theirs was the highest bid they were also aware of the cost that they were likely to incur for obtaining a bottle of country liquor." "I submit that the conditions regarding the sale price of ,country liquor were duly announced before the commencement of the auction of the vend. The petitioners gave bid of their own accord knowing all the, implications thereof. The petitioners having, taken the licence with open eyes .and understanding the law on the subject have no cause of action. No constitutional provision has been infringed." Towards the end of the counter affidavit it is stated that the appellants had made contradictory allegations "with a view to confusing the real issue in an attempt to wriggle out of their contractual obligations." It is thus clear that in the High Court, the respondents had raised the contention which is taken before us by their counsel in the form of a preliminary objection.

On the preliminary objection it was fin-ally urged by the appellants that the objection was misconceived because there was, in fact, no 265 contract between the parties and therefore they were not attempting to enforce any contractual rights or to wriggle out of contractual obligations. The short answer to this contention is that the bids given by the appellants constitute offers and upon their acceptance by the Government a binding agreement came into existence between the parties. The conditions of auction become the terms of the contract and it is on those terms that licences are granted to the successful bidders in Form L. 14-A of the Rules. As stated in Chesbire and Fifoot's 'Law of Contract' (Eighth Ed., 1972; P. 24), "In order to determine whether, in any given case, it is reasonable to infer the existence of an agreement, it has long been usual to employ the language of offer and acceptance.

in other words, the court examines all the circumstances to see if the one party may be assumed to have made a firm ,,offer" and if the other may likewise be taken to have 'accepted" that offer. These complementary ideas present a convenient method of analysing a situation, provided that they are not applied too literally and that facts are not sacrificed to phrases." Analysing the situation here, a concluded contract must be held to have come into existence between the parties. The appellants have displayed ingenuity in their search for invalidating circumstances but a writ petition is not an appropriate remedy for impeaching contractual obligations.

In Civil Appeals Nos. 485 and 2205 of 1969, filed respectively by Northern India Caterers (P) Ltd., and M/s.

Green Hotel, Bar and Restaurant and Others, the appellants hold licences in Form Nos. L-3 L-4 and L-5 for the retail vend of foreign liquor in a hotel, restaurant and in a bar attached to a restaurant. No auctions were held for granting these licences and therefore the reasoning that acceptance of bids brought into existence a concluded contract between the successful bidders and the Government will not apply to the cases of these appellants. But. they also accepted the licences subject to the provisions of the Punjab Excise Act, 1914 and the Punjab Liquor Licence Rules, 1956. By section 34 of the Act a licence under the Act has to be granted, inter alia, on payment of such fees and subject to such restrictions and on such conditions as the Financial Commissioner may direct. Section 59(d) of the Act confers power on the Financial Commissioner to make rules prescribing the scale of fees in respect of any licence.

Rule 24 provides that the fees payable in respect of licences shall be either (a) fixed fees or (b) assessed fees or (c) auction fees. By amendments made on February 22, 1968 wad March 30, 1968, the fixed fees were substantially enhanced and the, appellants were called upon to pay those fees. Just as country liquor contractors offered bids voluntarily on terms and conditions governing the auctions, so in these two appeals the appellants voluntarily applied for and accepted the licences knowing full well that the Financial Commissioner had the power to frame rules governing the licences. Whether the amendments made to the Rules after the appellants' licences were renewed are applicable is another matter but the appellants cannot question the power of the Financial Commissioner to frame266 those rules. The licences, in a large measure, owe their existence and ,validity to the rule-making power of the Financial Commissioner. One of the reliefs which the appellants ask for is that Rules 27A, 30 and 31 be declared ultra vires and unconstitutional and consequently the respondents be directed to refund the assessed fees already recovered. By attempting to exploit the licences without the burden of assessed less originally attaching to them under the rules framed by the Financial Commissioner, the appellants are seeking to work the licences on such terms as they find convenient. The writ jurisdiction of High Courts under Article 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred.

That, however will not estop the appellants from contending that the amended Rules are not applicable as their licences were renewed before the amendments were made.

Though this is the true position, we do not propose to dismiss the appeals on the narrow ground that the reliefs, or some of them, sought by the appellants cannot be awarded in the writ petitions brought by them. We have heard the appeals fully and since the points involved are of general public importance, we would like to deal with the appeals on merits.

The main and the real focus of controversy is the power, of the Government to levy and realise large licence fees either through the medium of auctions or on scales fixed under the rules. The country liquor contractors offered incredibly high bids in the auctions which on the whole netted a revenue of rupees twentynine odd crores to the 'State Government. Licensees like the Northern India Caterers and M/s. Green Hotel who run hotels, restaurants or bars were asked under the amended rules to pay, besides assessed fees, fixed fees varying between Rs. 7500 and Rs. 20,000 for the year. Apprehending 'that it was fruitless to do business on these terms and fearing the resort 'by the Government to coercive measures for the recovery of the amounts due to it, the appellants filed writ petitions in the High Court soon after 'the commencement of the term of their respective licences.

Liquor licensing has a long history. Prior to the passing of the Indian Constitution, the licensees mostly restricted their challenge to the demands of the Government as being in excess of the conditions of the licence or on the ground that the rules in pursuance of which such conditions were framed were themselves beyond the rule-making power of the authority concerned. This conflict took a new shape after the enactment of the Constitution. The challenge now is generally based on the ground that there is no quid pro quo between the fees imposed ,on the licensees and the services rendered to them; that the fees are in the nature of a tax which there is no authority to impose; that the 'levy is beyond the legislative competence of the State Government;

or that the terms and conditions of the licence constitute an unreasonable restriction on the fundamental right of the citizen to carry on business 'for the sale of liquor. The appeals before us require consideration .of both sets of points.

The provisions of the Punjab Excise Act 1914, like the provisions ,of similar Acts in force in other States, reflect the nature and the 267 A width of the power which the State Governments are empowered to exercise in the matter of liquor licensing. We will notice first the relevant provisions of the Act under consideration.

Section 5 of the Act empowers the State Government to regulate the maximum or minimum quantity of any intoxicant which may be sold by retail or wholesale. Section 8(a) vests the general superintendence and administration of all matters relating to excise in the Financial Commissioner, subject to the control of the State Government. Section 16 provides that no intoxicant shall be imported, exported or transported except after payment of the necessary duty or execution of a bond for such payment and in compliance with such conditions as the State Government may impose. Section 17 confers upon the State Government the power to prohibit the import or export of any C intoxicant into or from Punjab or any part thereof and to prohibit the transport of any intoxicant. By section 20(1) no intoxicant can be manufactured or collected, no hemp plant can be cultivated, no tari-producing tree can be tapped, no tari can be drawn from any tree and no person can possess any material or apparatus for manufacturing an intoxicant other than tari except under the authority and subject to the terms and conditions of a licence granted by the Collector. By subsection (2) of section 20 no distillery or brewery can be constructed or worked except under the, authority and subject to the terms and conditions of a licence granted by the Financial Commissioner. Section 24 provides that no person shall have in his possession any intoxicant in excess of such quantity as the State Government declares to be the limit of retail sale, except under the authority and in accordance with the terms and conditions of a licence or permit. Sub-section (4) of section 24 empowers the State Government to prohibit the possession of any intoxicant or restrict its possession by imposing such conditions as it may prescribe. Section 26 prohibits the sale of liquor except under the authority and subject to the terms and conditions of a licence granted in that behalf.

Section 27 of the Act empowers the State Government to "lease" on such conditions and for such period as it may deem fit or retail, any country liquor or intoxicating drug within any specified local area. On such lease being granted the Collector, under sub-section (2), has to grant to the lessee a licence in the form of his lease.

Section 34(1) of the Act provides that every licence, permit or pass under the Act shall be granted (a) on payment of such fees, if any, (b) subject to such restrictions and on such conditions, (c) in such form and containing such particulars, and (d) for such period as the Financial Commissioner may direct. By section 35(2), before any licence is granted for the retail sale of liquor for consumption on any premises the Collector has to ascertain local public opinion in regard to the licensing of such premises. Section 36 confers power on the authority granting any licence to cancel or suspend it if, inter alia, any duty or fee payable thereon has not been duly paid.

Section 56 of the Act empowers the State Government to exempt any intoxicant from the provisions of the Act. By section 58 the State Government may make rules for the purpose of carrying out 268 the provisions of this Act. Section 59 empowers the Financial Commissioner by clause (a) to regulate the manufacture, supply, storage or sale of any intoxicant. By clause (d) of section 59 the Financial Commissioner is authorised to make rules "prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass or in respect of the storing of any intoxicant." Section 60(1) provides that "all excise revenue", any loss that may accrue, by reason of the resale of a grant and all amounts due to the Government on account of any contract relating to the excise revenue may be recovered by any process for the recovery of arrears of land revenue.

In pursuance of section 59(d) the Excise and Taxation Commissioner on whom the powers of the Financial Commissioner are conferred by the State Government framed the Punjab Liquor Licence Rules, 1956. Since the appellants have challenged the legality of some of these rules and as the rules also indicate the large powers which are attempted to be exercised under the Act, it is essential to set out the relevant rules.

Rule I contains a Table which. is divided into six parts, the first two of which are called "Foreign Liquor" and "Country Spirit". The classes of licences, their mode of grant and the authorities who can grant and renew the licences are specified in the Table. Part I of the Table dealing with Foreign Liquor refers, inter alia, to licences in Form L-3, 1,4 and L-5 which relate respectively to (i) retail vend of foreign liquor in a hotel or dak bungalow, (ii) retail valid of foreign liquor in a restaurant and (iii) retail vend of foreign liquor in a bar attached to a restaurant. Northern India Caterers (P) Ltd., and M/s.

Green Hotel, Bar and Restaurant, who are appellants in Civil Appeals No. 485 and 2205 of 1969 respectively hold licences in Form Nos. L-3, L-4 and L-5. The Collector is designated as the authority to grant and renew these licences.

Prior to March 22, 1968 licences in Forms L-3, L-4 and L-5 used to be granted on assessed fees only as provided in Rule

28. The assessed fees were quantified in accordance with scale of fees prescribed under Rules 30 and 31. The scale of fees was raised in 1965 by a Notification dated April 15, 1965. Under the revised rates the following fixed fees were prescribed.

"Indian made spirit -Rs. 25 .00 Imported spirit -Rs. 31 .25 per bulk Wine -Rs. 6.25 litre Indian Beer -Rs. 0 .63 Imported Beer Rs. 1 /25" On March 22, 1968 the second respondent (the Excise and Taxation Commissioner) issued a notification in the exercise of powers conferred by section 59 of the Act whereby a new Rule 30 was substituted for the old Rule 30. By this notification, the Table under Rule I was amended so as to provide for the levy of both 'Fixed Fee' and 269 Assessed Fee' on those licences. Under the new Rule 30 the licensees in Forms L-3, L-4 and L-5 became liable to pay, in addition to assessed fees, fixed annual fees at the following rates :

"(a) For a licence in a town with population not exceeding 50,000 Rs. 5,000/(b) For a licence in a town with population exceeding 50,000 but not exceeding one lacs; Rs. 7,500 (c) For a licence in a town with population exceeding one lac but not exceeding two lacs; Rs. 10,000 (d) For a licence in a town with population exceeding 2 lacs. Rs. 15,000" .lm0 The amendments made by this notification are called "'the Punjab Liquor Licence (First Amendment) Rules, 1968." On March 30, 1968 another notification was issued by the second respondent introducing the Punjab Liquor Licence Second Amendment) Rules, 1968. Under these rules a new rule-rule 27A was introduced whereby licensees in Forms L-3, L-4 and L-5 became liable to pay a fixed annual fee of Rs.

10,000.

The second part of the Table under Rule 1. which deals with country spirit, refers, inter alia, to licences in Form L-14-A for "Retail vend of country spirit for consumption off the premises". Barring the two appellants referred to above the other appellants hold licences in Form L-14-A.

The Table describes the mode of grant of the licence as by "Auction".

Rule 36 prescribes the procedure for the grant of licences by auction. Before the annual auctions are held the Collector is required to determine the quantum of probable sales during the period for which the licence is to be auctioned. The quota of country liquor thus fixed for each vend is then to be announced by the Collector before the vend is put to auction. The notice of auction has to specify, among other things, the conditions to which the auction is subject and the prices for retail vend of country Liquor. Rule 23 provides for the payment of security deposit and Rule 24 for the resale of licence on the cancellation of an existing licence. The conditions of auction which we have set out at the beginning of our judgment are in fact in terms of the rules framed under section 59(d) of the Act.

The Prohibition and Excise laws in force in other States contain provisions substantially similar to those contained in the Punjab Excise Act. Several Acts passed by State Legislatures contain provisions rendering it unlawful to manufacture export, import, transport or sell intoxicating liquor except in accordance with a licence. permit or pass granted in that behalf. The Bombay Abkari Act 1878: the Bombay Prohibition Act 1949; the Bengal Excise Act-, of 1878 and 1909; the Madras Abkari Act 1886; the Laws and Rules contained in the Excise Manual United Province, the Eastern Bengal and Assam Excise Act 1910; the Bihar and Orissa Excise Act 1'915; the 3-423SCI/75 270 Cochin Abkari Act as amended by the Kerala Abkari Laws Act 1964; and the Madhya Pradesh Excise Act 1915, are instances of State legislations by which extensive powers are conferred on the State Government in the matter of liquor licensing.

The power of the State Government under section 17 of the Act to prohibit absolutely the import, export or transport of any intoxicant; its power under section 20 to prohibit the manufacture or collection of an intoxicant or the construction or working of a distillery or a brewery except under the authority and subject to the terms and conditions of a licence granted in that behalf, its power under section 24(4) to prohibit the possession of any intoxicant; and its power under section 27 to lease on such conditions and for such period as it may deem fit, the right of manufacturing, supplying or selling an intoxicant are only in conformity with the ancient and hoary rights which all governments in all countries have exercised in, matters concerning intoxicants. The rationale of such rights has been explained in several cases to some of which we many now refer.

In Cooverjee B. Bharucha vs. The Excise Commissioner and the Chief Commissioner, Ajmer & Ors.,(1) it was contended that the citizen had an unfettered right to carry on trade and business in liquor under Article 19(1)(g) of the Constitution and therefore the provisions of the Ajmer Excise Regulation I of 1915 which conferred discretion on the Excise Commissioner to restrict the number of liquor shops and to licence them by auction to the highest bidder were void as creating a monopoly in liquor trade. The recovery of large licence fees through public auctions was also attacked on the ground that the amount was not a fee but was in the nature of a tax and the same could not be recovered by recording to legislative powers saved by Article 19(6) of the Constitution.

Mahajan C.J., delivering the unanimous judgment of a Constitution Bench observed.

"It can also not be denied that the State has the power to prohibit trades which are illegal or immoral or injurious to the health and welfare of the public. Laws prohibiting trades in noxious or dangerous goods or trafficking in women cannot be held to be illegal as enacting a prohibition and not a mere regulation." This position was not disputed but is was urged that the sale of intoxicating liquors by retail in small quantities should be without restriction because every person had a right which interred in him, that is, a natural right to carry on trade in intoxicating liquors and that the State had no right to create a monopoly in them. This contention was repelled on the reasoning contained in the judgment of Field J. in Crowley vs. Christensen(2) Field J. observed "There is in this position an assumption of a fact which does not exist, that when the liquors are taken in excess the (1) [1964] S.C.R.8 7 3.

(2) 3 4 Law. Ed. 620, 623.

271 injuries are confined to the party offending.

The injury, ,it is true, first falls upon him in his health,which the habit undermines; in his morals, which it weakens; and in the selfabasement which it creates.But as it leads to neglect of business and waste of property and general democratisation, it affects those who are immediately connected with and dependent upon him By the general concurrence of opinion of every civilized and Christian community, there are few sources of crime and misery to society equal to the drain shop, where intoxicating liquors, in small quantities, to be drunk at the time. are sold indiscriminately to all parties applying. The statistics of every State show a greater amount of crime and misery attributable to the use of ardent spirits obtained at these retail liquor saloons than to any other source. The sale Of such liquors in this way has, therefore, been, at all times, by the courts of every State, considered as the proper subject of legislative regulation. Not only may a licence be exacted from the keeper of the saloon before a glass of his liquors can be thus disposed of, but restrictions may be imposed as to the class of persons to whom they may be sold, and the his of the day, and the days of the week on which the saloons may be opened. Their sale in that form may be absolutely prohibited. It is a question of public expediency and public morality, and not of federal law. The police power of the State is fully competent to regulate the business-to mitigate its evils or to suppress it entirely.

Their is no inherent right in a citizen to thus 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 be entirely prohibited, or be permitted under such conditions as will limit to the utmost its evils. The manner and extent of regulation rest in the discretion of the governing authority. That authority may vest in such officers as it may deem proper the power of passing upon applications for permission to carry it on, and to issue licences for that purpose. It is a matter of legislative will only." After citing this passage the learned Chief Justice said :

"These observations have our entire concurrence and they completely negative tile contention raised on behalf of the petitioner. The provisions of the Regulations purport to regulate trade in liquor to all its the different spheres and are valid." The contention that the effect of some of the provisions of the Regulation was to enable Government to confer monopoly rights on One or more persons to the exclusion of others and that the creation of such monopoly rights could not be sustained under Article 19(6) was repelled on the ground that:

"Elimination and exclusion from business is inherent in the nature of liquor business and it will hardly be proper 272 to apply to such a business principles applicable to trades which all could carry.

The provisions of the regulation cannot be attacked merely on the ground that they create a monopoly. Properly speaking, there can be a 'monopoly only when a trade which could be.

carried on by all persons is entrusted by law to one or more persons to the exclusion of the general public. Such, however, is not the case with the business of liquor." Lastly, the argument that the fees recovered by public auction were excessive was rejected on the ground that one of the purposes ,of the Regulations was to raise revenue, that the licence fee though described as 'fee' was more in the nature of a tax, that revenue could be collected by the grant of contracts to carry on trade in liquors and that these contracts could be sold by auction.

In Stale of Assam v. N. Kidwai, Commissioner of Hills Division and Appeals, Shillong,(1) Das C.J., speaking for a Constitution Bench, observed while rejecting a challenge to some of the provisions of Assam Act No. 4 of 1948, that a perusal of the Act and the rules framed thereunder made it clear that "no person has any absolute right to sell liquor and that the purpose of the Act and the rules is to control and restrict the consumption of intoxicating liquors, such control and restriction being obviously necessary for the preservation of public health and morals, and to raise revenue." In The State of Bombay and Anr. v. F. N. Baisara,(2) the constitutional validity of the Bombay Prohibition Act, 1949 was challenged. On the question of legislative competence of the State legislature to enact the statute, reliance was placed upon entry I of List II which relates to "Public Order". Fazl Ali J., speaking for a Constitution Bench, observed that though at first sight it may appear to be farfetched to bring the subject of intoxicating liquor under "Public Order" yet it had to be noted that there was a tendency in Europe and America to regard alcoholism as a menace to public order. The learned Judge then referred to the decision in Russel vs. The Queen(3) in which the Canada Temperance Act, 1878, was held to be a law relating to the "peace, order, and good Government" of Canada. Reference was also invited to be a passage in The Encyclopedia Britannica, 14th Edition, Vol. 14, page 191, to the following effect :"'The dominant motive everywhere, however, has been a social one, to combat a menance to public order and the increasing evils of alcoholism in the interests of health and social welfare. The evils vary greatly from one country to another according to differences in climate, diet economic (1) [1957]S.C.R.295.

(3) 7 A.C. 829@ (2) [1951] S.C.R. 682.

273 conditions and even within the same country according to differences in habits, social customs and standards of 'public morality. A new factor of growing importance since the middle of the 19th century has been the rapid urbanisation, industrialization, and mechanization of our modern everyday life in the leading nations of the world, and the consequent wider recognition of the advantages of sobriety in safeguarding public order and physical efficiency.-, This passage was treated as lending some support to the contention of the State Government that the Prohibition Act fell within the subject of "Public Order" but the matter was not pursued further as the particular entry had a remote bearing on the object and scope of the Act In Nagendra Nath Bora & Anr. v. The Commissioner of Hills Division and Appeals, Assam, and Ors.(1) the decisions in Cooverjee case and Kidwai's case were cited by a Constitution Bench as laying down the proposition that there was no inherent right in a citizen to sell liquor and that the control and restriction over the consumption of intoxicating liquors was necessary for the preservation of public health and morals and to raise revenue.

In Amar Chandra Chakraborty v. Collector of Excise, Government of Tripura & Ors.,(2) a Constitution Bench of this Court had to consider the question whether section 43 of the Bengal Excise Act, 1909 under which the licence of a liquor contractor was withdrawn, violated Articles 14 and 19 (1) (g) of the Constitution. The contention in regard to the violation of Article 14 was repelled by this Court with the observation "Trade or business in country liquor has from its "inherent nature been treated by the State and the society as a special category requiring legislative co