[Cites 53, Cited by 0]
Madhya Pradesh High Court
Som Distilleries Pvt. Ltd. vs The State Of Madhya Pradesh on 23 March, 2026
Author: Vivek Agarwal
Bench: Vivek Agarwal
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IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK AGARWAL
ON THE 23rd OF MARCH, 2026
WRIT PETITION No. 4915 of 2026
SOM DISTILLERIES PVT. LTD. AND OTHERS
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri Naman Nagrath - Senior Advocate assisted by Shri Rahul Diwakar - Advocate
for the petitioners.
Shri Harpreet Singh Ruprah - Additional Advocate General assisted by Shri Manas
Mani Verma - Government Advocate for the respondents-State.
Shri Sanjay K. Agrawal - Senior Advocate assisted by Shri Nitesh Kumar Barman
- Advocate for the intervener.
ORDER
Shri Harpreet Singh Ruprah, learned Additional Advocate General,
submits that there is an alternative remedy of revision provided under
Section 62 of the Madhya Pradesh Excise Act, 1915, and the Rules made
thereunder specifically in this regard against the impugned action of
suspension, but instead of relegating the petitioners to avail the said statutory
remedy of revision, with the consent of the learned counsel for the parties,
the matter is heard finally.
2. This writ petition under Article 226 of the Constitution of India is filed
by the petitioners challenging the order dated 04.02.2026 (Annexure P-8),
whereby the licences of the petitioners were suspended.
3. On 20.03.2026, arguments were heard in part, as due to paucity of time,
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arguments could not be completed by all the concerned parties. To
recapitulate what transpire on 20.03.2026, it will be appropriate to reproduce
the submissions made by Shri Naman Nagrath, learned Senior counsel for
the petitioners and Shri Harpreet Singh Ruprah, learned Additional Advocate
General.
4. Shri Naman Nagrath, learned Senior counsel submits that the petitioners
are calling in question the order dated 04.02.2026 (Annexure P-8) passed by
the Excise Commissioner, Madhya Pradesh, Gwalior, whereby 8 licences
held by two distinct entities, namely, petitioner No.1 Som Distilleries Pvt.
Ltd. and petitioner No.2 Som Distilleries and Breweries Pvt. Ltd. have been
placed under suspension on the strength of show notice notice dated
26.02.2024, contained in Annexure P-3. It is submitted that in fact when
show cause notice Annexure P-3 was issued, at that time the licences which
were valid had their validity upto 31.03.2024. Therefore, it is submitted that
since the period of licence came to an end on 31.03.2024, therefore, show
cause notice should have come to an end automatically.
3. It is submitted that in criminal appeals suspension of sentence was
granted by the High Court of Madhya Pradesh at Indore and since the
suspension was granted, therefore, show cause notice lost its efficacy.
4. It is submitted that vide Annexure P-6, all the licences were granted
afresh for the year 2024-25 and 2025-26, but since show cause notice relates
to the period 2023-24, it could not have been extended for the licences which
were granted for the year 2024-25 and thereafter, for the year 2025-26. Thus,
it is submitted that the action taken vide Annexure P-8 placing these licences
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under suspension for the year 2025-26 being not relatable to the show cause
notice dated 26.02.2024 (Annexure P-3), which was for the year 2023-24, no
action could have been taken.
5. It is further submitted that the first reply to the show cause notice was
furnished on 04.03.2024 and in continuation to the same, second reply was
furnished on 18.07.2024 as is contained in Annexure P-5. It is also submitted
that since these 8 licences deal with distilling, brewing, filtration of distilled
and brewed material, so also distilling of country liquor and their respective
bottling, cancellation of all these 8 licences at one go, is contrary to the
principles of natural justice and the law.
6. It is further submitted that combined show cause notice to different
entities without referring to which of the entities were guilty of violation, is
unheard of.
7. It is also submitted that show cause notices, with the efflux of time and
with grant of fresh licences, resulted in the SCN coming to an end.
8. It is further submitted that show cause notice is based on conviction of
certain employees. Reliance is placed on the judgment of the Hon'ble
Supreme Court in N.S. Shethna and others Vs. Vinubhai Harilal
Panchal, reference to which is uploaded from 1966 SCC OnLine SC 239 .
Reading from paragraphs 2 and 3 of the said judgment, it is submitted that
with the issuance of fresh licences, the matter had come to an end. Paragraph
2 and 3 of the said judgment reads as under:-
"2. At all material times the respondent was carrying on and
still carries on the business of exhibiting cinematographic pictures
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at Lakshmi Talkies in Ahmedabad and had obtained for that
purpose a licence for sale of tickets which was valid upto
December 31, 1960. On an allegation that through his manager
and other employees he was indulging in sale of tickets contrary to
the Bombay Cinema Rules, 1954, framed under the Bombay
Cinema (Regulation) Act, 11 of 1953 a notice dated June 14, 1960
was served upon him to show cause why the said licence should
not be suspended. On an inquiry having been held by the first
appellant, that officer passed the impeached order suspending the
said licence for a period of two months from the date of service of
the order. But before the inquiry was completed and the said order
passed, the period for which the licence was issued expired and an
order renewing it for the next year, that is 1961, was passed on
December 31, 1960. The impugned order was served on the
respondent on March 5, 1961.
3. Aggrieved by the said order the licensee took out a writ
petition in the High Court for setting aside the said order. The plea
urged in the petition was that the show cause notice related to the
licence for the year 1960 which expired on December 31, 1960
and therefore did not affect the renewed licence for 1961 sought to
be suspended by the impugned order. The High Court took the
view that the renewed licence was a separate licence and not in
continuation of the licence for the year 1960 and a fresh show
cause notice ought to have been served for suspending the
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renewed licence and that not having been done the inquiry was not
in consonance with the rules and quashed the order."
9. It is submitted that in paragraph 9 of the said judgment of N.S. Shethna
(supra), it is held that current licences could not have been suspended as new
licences cannot be suspended in the light of old show cause notice.
10. It is also submitted that in terms of the Section 28 of the Excise Act,
since licence during currency of which SCN was issued, was only upto
31.03.2024, therefore, there was no justification in continuing the show
cause notice, which ultimately culminated in the order of suspension
contained in Annexure P-8.
11. Reading from the provisions contained in Section 31(1-A) of the
Madhya Pradesh Excise Act, 1915, it is submitted that "Before making an
order cancelling or suspending a licence permit or pass under sub-section (1),
the authority aforesaid shall record in writing the reasons for the proposed
action, furnish to the holder thereof a brief statement of the same and afford
him a reasonable opportunity of being heard." Thus, it is submitted that in
fact the requirements which are ingrained in sub-section (1-A) of Section 31
of the Excise Act are that the authorities should record in writing the reasons
for the proposed action.
12. Reading the second clause of this sub-section, it is submitted that in
fact a draft order should have been provided by the Commissioner to the
licencee. Thirdly, that reasonable opportunity of being heard should have
been provided.
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13. It is submitted that common show cause notice for two different legal
entities, will give rise to a question as to which of the entities convicted
persons belong to i.e. whether they belong to one entity or both. Though it is
submitted that there is no mention of this fact in the SCN, however, at this
stage, Shri Harpreet Singh Ruprah, learned Additional Advocate General,
interrupts and submits that even in the reply to the show cause notice, the
petitioners have not come clean as to which of the entities i.e. the petitioners,
the convicted employees belong to.
14. It is also submitted that judgment of conviction was passed by the
concerned Additional Sessions Judge, vide judgment dated 23.12.2023 in
S.T. No.21/2021. Reading from paragraph 111, it is submitted that persons
mentioned therein at S.No.1, 2 and 3, namely, Umashankar, Dinkar and
Mohansingh, were convicted under Sections 420, 467, 468, 471, 120-B of of
the Indian Penal Code, 1860, along with persons mentioned at S.No.8, 9, 10
and 11, namely, Deenanath Singh, Shailendra Singh, Gurudarshan and
Surjeet Lal.
15. It is admitted that persons namely, Umashankar, Dinkar and
Mohansingh were working as Supervisors in the petitioners company,
whereas Deenanath Singh, Shailendra Singh, Gurudarshan and Surjeet Lal
were working as Directors. It is submitted that the show cause notice makes a
mention of only names of the aforesaid persons and admitted they were not
convicted under any of the provisions contained in the Excise Act.
16. It is submitted that those who are convicted under the provisions of the
Section 34(2) of the Excise Act are Santosh and Omprakash, whose names
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are not mentioned in the show cause notice. Thus, it is submitted that since
they have been convicted under Sections 420, 467, 468, 471, 120-B of of the
Indian Penal Code, 1860, therefore, they will be outside the purview of the
provisions contained in Sections 31(1)(b) and 31(1)(c) of he Excise Act
because none of the persons mentioned in the show cause notice, namely,
Umashankar, Dinkar, Mohansingh, Deenanath Singh, Shailendra Singh,
Gurudarshan and Surjeet Lal, have been convicted either under the
provisions of the Excise Act or under the provisions of the Dangerous Drugs
Act, 1930 or under the provisions of the Indian Merchandise Marks Act,
1889, or under any Section which have been introduced into the Indian Penal
Code (XLV of 1860) in Section 3 of that Act; and, therefore, it is submitted
that since names of Santosh and Omprakash, who were convicted under
Section 34(2) of the Excise Act, do not find mention in the show cause
notice and even their identification with the two entities is not shown,
therefore, action under Sections 44 / 31(1)(b)(c), is wholly vitiated.
Therefore, it is submitted that the impugned order deserves to be set aside or
at least stayed in terms of the directions of the Hon'ble Supreme Court.
17. It is also submitted that Section 3 of the Indian Merchandise Marks
Act, 1889, has introduced/incorporated by way of amendment in the IPC
Sections 478 to 489 and since conviction is not under any of these Sections,
starting from Section 478 to Section 489 of the IPC, which have been
introduced in the IPC through the Act of 1889, the act of the respondents
cannot be justified. Therefore, a prayer is made that order dated 04.02.2026
(Annexure P-8) be set aside.
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18. Shri Harpreet Singh Ruprah, learned Additional Advocate General, in
his turn, submits that Annexure P-3 is the show cause notice. It is submitted
that names of Santosh and Omprakash, who have been convicted by the
learned Additional Sessions Judge, finds mention in the second paragraph of
this show cause notice, wherein it is mentioned that Santosh and Omprakash
have been convicted under Section 34(2) of the Madhya Pradesh Excise Act,
whereas others have been convicted under Sections 420, 467, 468, 471, 120-
B of of the Indian Penal Code. It is also submitted that allegation on Santosh
and Omprakash is that they as an agent of a carrier, which was hired by the
licencee or his agents were involved in using forged permit books for
transportation of liquor from Raisen to Diu. Thus, it is submitted that
submissions made by Shri Naman Nagrath, learned Senior counsel, that their
names have not been mentioned in the show cause notice, is factually
incorrect.
19. Shri Harpreet Singh Ruprah, reading from his reply, submits that three
appeals have been filed, namely, Criminal Appeal No.1246/2024 (Annexure
R-1), Criminal Appeal No.1146/2024 (Annexure R-2) and Criminal Appeal
No.1249/2024 (Annexure R-3) by three different sets of persons, namely,
Supervisors, Directors or former Directors and the driver and cleaner of the
truck. It is submitted that the fact in regard to their status is an admitted fact,
which can be read into paragraph 5.2 of their respective appeals.
20. Reading from paragraph 5.2 of Annexure R-3, it is pointed out that
both Santosh and Omprakash admitted that they have been engaged by
Chanchal Goods Carrier, an independent contractor dealing in the business
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of transportation. Similarly, in Annexures R-1 and R-2, convicted accused
have admitted their status as Supervisors and Directors of the petitioners'
company. Som Distilleries Breweries Pvt. Ltd., a company incorporated
under the Companies Act, has taken the transport services of Chanchal
Goods Carrier for transport of liquor from Madhya Pradesh to Diu and the
appellants being the driver and helper were given the responsibility of the
same along with the necessary documents/licences/permits required for the
transportation of liquor. Thereafter, in paragraph 5.3, a vivid description is
given as to how their truck was intercepted by the SHO of the Police Station
Betma and then what followed.
21. Today, Shri Harpreet Singh Ruprah, learned Additional Advocate
General, submits that in the first reply to the show cause notice dated
26.02.2024, as was filed on 04.03.2024, it is mentioned that despite there
being stay on the judgment of the Sessions Court, issuance of show cause
notice falls in the category of contempt of the Court. It is submitted that
there was no stay on the judgment of the trial Court, but it was only the
suspension application, which was entertained by the High Court.
22. It is also submitted that the petitioners had filed two replies, one on
04.03.2024 and another on 18.07.2024 and in none of these replies, they
have raised any issue in regard to the propriety of the show cause notice. It
is submitted that in view of the judgment of the Division Bench of this High
Court in case of Rathore and Mehta Associated, Bhopal Vs. State of Madhya
Pradesh and others, 2023 SCC OnLine MP 1482 : 2023 (3) MPLJ 409 , in
paragraphs 10, 11 & 28, the position in regard to non-grant of opportunity of
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hearing has been dealt with.
23. It is also submitted that though the provisions as contained in Section
31(1)(d) of the Madhya Pradesh Excise Act, have not been mentioned, but in
view of the law laid down by the Hon'ble Supreme Court in N. Mani Vs.
Sangeetha Theatre and others, (2004) 12 SCC 278, wherein in paragraph 9, it
is held that "It is well settled that if an authority has a power under the law
merely because while exercising that power the source of power is not
specifically referred to or a reference is made to a wrong provision of law,
that by itself does not vitiate the exercise of power so long as the power does
exist and can be traced to a source available in law."
24. Reliance is also placed on the judgment of the Division Bench of this
High Court in Smt. Sandhya Sharma Vs. State of Madhya Pradesh and
others, in W.A.No.316/2023, wherein reference is made to paragraph 10,
where the Hon'ble Division Bench of this High Court apart from referring to
N. Mani (supra) also made a reference to paragraph 19 of the judgment of
the Hon'ble Supreme Court in Ramsunder Ram Vs. Union of India, (2007)
13 SCC 255, so also another judgment of the Supreme Court in P.K.
Palanisamy v. N. Arumugham, (2009) 9 SCC 173.
25. Shri Harpreet Ruprah, learned Additional Advocate General, submits
that both the entities are manned by the same Director namely Surjeet Lal,
who according to him was Managing Director in both the petitioner
companies. It is, thus, submitted that the distinction sought to be made
between the two identities i.e. the two petitioners is insignificant because
both the companies are manned by the same Managing Director, namely,
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Surjeet Lal.
26. At this stage, Shri Sanjay K. Agrawal, learned Senior Advocate, on my
query to the learned Additional Advocate General that as to why name of
Shri Surjeet Lal is not mentioned in the show cause notice, submits that this
is precisely the allegation of the intervener that the Excise Commissioner
was not acting bonafidely and had not mentioned name of Shri Surjeet Lal,
though he was the Managing Director of the petitioner companies. It is
submitted that undue advantage is sought to be given to the petitioner
companies. It is submitted that Shri Surjeet Lal was one of the accused
before the trial Court, judgment of which has generated the present litigation
and he was not only arrayed as accused No.6, but was also convicted.
27. To this Shri Harpreet Singh Ruprah, learned Additional Advocate
General, replies that in the show cause notice, after mentioning five names,
"and others" is mentioned.
28. Shri Harpreet Singh Ruprah, learned Additional Advocate General, has
drawn the attention of this Court to the provisions of Rule 3(11) of the
Madhya Pradesh Distillery Rules, 1995, to point out that it is not a fresh
grant as far as distillery license is concerned, but it is annual renewal, subject
to due observance of the provisions of the Act and the Rules made
thereunder and the conditions of the license.
29. It is beyond comprehension that when the Managing Director of a
limited and private limited company was convicted, then the Excise
Commissioner not mentioning his name in the show cause notice reflects
upon the intentions of the Excise Commissioner Shri Abhijit Agrawal.
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Prima facie it appears that he was not acting bonafidely, otherwise he would
not have left the Managing Director of the company.
30. To give an analogy which is cross-checked from the learned Additional
Advocate General, that the office of Advocate General is always referred to
as Advocate General and others and not as Panel Lawyer and others of the
Advocate General Office, to which Shri Ruprah, conceded that Advocate
General's Office will always be known in the name of Advocate General and
others and not Panel Lawyer and others. When same analogy is extended,
then it is evident that the conduct of the Excise Commissioner was not up to
the mark in not mentioning the name of the convicted Managing Director
Surjeet Lal.
31. Shri Sanjay K. Agrawal, learned Senior Advocate assisted by Shri
Nitesh Kumar Burman, Advocate, submits that petitioner No.1 was granted
primary licence D-1 i.e. Distillery License and then followed by licences CS-
1, CS-1B which are supply licences. Similarly, petitioner No.2 was given FL-
9 licence to manufacture foreign liquor and B-3 licence to manufacture beer
and, thereafter, other licenses were given for the purpose of warehousing and
bottling.
32. Shri Sanjay K. Agrawal, learned Senior counsel, submits that B-1,
FL-9 and B-3 are perpetual licences. He refers to Sub-rule (11) of Rule 3 of
the Madhya Pradesh Distillery Rules, 1995, to point out that Sub- rule (11) in
itself provides for renewal of the licence every year, subject to due
observance of the provisions of the Act, the Rules made thereunder and the
conditions of the licence.
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33. It is submitted that similar provisions are contained in Rule 3(12) of
Madhya Pradesh Foreign Liquor Rules and similar provisions are also
contained in the Madhya Pradesh Brewery and Wine Rules, 2000. Thus, it is
submitted that as far as manufacturing licences are concerned, they are
perpetual in nature. Thus, the contention of the learned counsel for the
petitioner that his licences were not renewed, but were fresh grants for the
year 2024-25 and 2025-26, is incorrect.
34. At this stage, Shri Sanjay K. Agrawal, learned Senior counsel, also
submits that the judgment of Hon'ble Supreme Court in N.S. Sethna and
others (supra), is distinguishable on the ground that the licence which was
granted to the Laxmi Talkies in Ahmedabad was not a perpetual licence, but
was restricted to a period, validity of which was December 31, 1960. Thus,
it is submitted that a distinction is to be drawn between the perpetual licences
and grant of fresh licences and thus, in the present case, the licence being
perpetual, it will be a case of renewal only and not that of grant of fresh
licence.
35. It is also submitted that in terms of the provisions contained in Section
31(1)(d), if the holder thereof is convicted of any cognizable and non-
bailable offence, then also the power to cancel or suspend the licence can be
used, and the same will be applicable, inasmuch as, Surjeet Lal, Managing
Director of the petitioner companies from 21.03.2009 to 10.08.2016, was
also convicted. It is pointed out that date of the incident was 14.12.2011,
when Surjeet Lal was the Managing Director. Thus, it is submitted that, the
then Excise Commissioner, who issued the show cause notice, was extra
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lenient towards Surjeet Lal and the company.
36. It is also submitted that the doctrine of "alter ego" will be applicable
and in support of this contention places reliance on the judgment of the
Supreme Court in case of Iridium India Telecom Limited Vs. Motorola
Incorporated and others, (2011) 1 SCC 74 . Referring to paragraph 63, it is
pointed out that the doctrine of "alter ego" will be applicable as mens rea is
attributed to corporations on this very principle.
37. It is further submitted that Section 31(1)(c) of the Excise Act will also
be applicable, inasmuch as, loss of revenue was caused by the petitioner
companies, on account of charges of transferring finished excisable products
from Raisen to Diu on the strength of forged and fictitious transport permits.
38. It is also submitted that Gurudarshan Arora, one of the convicted
accused and whose name finds mention in the show cause notice, unlike that
of Surjeet Lal, who too was convicted, was a Director in petitioner
companies, the provisions of not only Sections 31(1)(b) and 31(1)(c) of the
Madhya Pradesh Excise Act will be applicable, but even Section 31(1)(d) of
the Excise Act will also be applicable.
39. It is also pointed out that in fact after issuing show cause notice in the
year 2024, the Excise Commissioner was sleeping over the matter for about
two years. When the intervener made a complaint to the Chief Secretary of
Madhya Pradesh as contained in Annexure I-3 on 03.07.2024, with copies to
other functionaries including the Chief Minister, etc., then only on his
persistence, the Excise Commissioner woke up from his slumber and passed
the impugned order (Annexure P-5). Thus, it is submitted that the Excise
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Commissioner was not acting bonafidely, inasmuch as, in the first place, he
failed to make a mention of name of Surjeet Lal, Managing Director of the
petitioner companies in his show cause notice and also in the final order.
Secondly, he slept over the matter for about two years, which shows his other
intentions rather than acting bonafidely.
40. Shri Naman Nagrath, learned Senior counsel in his rejoinder takes the
first objection to the locus of the intervener. He also raises an eyebrow about
the motives of the intervener. Thereafter, reading Section 28 of the Madhya
Pradesh Excise Act, it is pointed out that licences are not in perpetuity, but
for a fixed duration. It is submitted that when Section 28 is read with Rule
3(11) of the Madhya Pradesh Distillery Rules, 1995, then it will be clear that
licence was not in perpetuity. Therefore, the judgment of the Hon'ble
Supreme Court in case of N.S. Sethna (supra) in paragraphs 4 and 9 is
relevant. It is submitted that opportunity of hearing, though sought not once
but twice while giving reply to the show cause notice, was not afforded.
Thirdly, it is submitted that since the show cause notice confines only to five
persons, therefore, it cannot be extended beyond those five persons.
41. Reliance is placed on the judgment of the Hon'ble Supreme Court in
case of Mohinder Singh Gill and another Vs. Chief Election Commissioner,
New Delhi and others, (1978) 1 SCC 405. Reading paragraphs 8 and 9 of the
said judgment, it is submitted that the things which are not mentioned in the
show cause notice, cannot be incorporated by reference.
42. It is also submitted that the requirements to fulfill parameters of
Section 31(1)(c) of the Madhya Pradesh Excise Act are different from those
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which are required to be fulfilled to bring a case within the ambit of Section
31(1)(d) of the Madhya Pradesh Excise Act.
43. It is submitted that since the company is not an accused, though the
judgment of Iridium India Telecom Ltd (supra), in paragraphs 63 and 64 has
categorically held that a company can be arrayed as an accused and its
culpability can be examined and on being held guilty, persons who were at
the helm of the affairs can be sentenced, but in the present case, since the
company is not an accused, show cause notice cannot be extended to include
Section 31(1)(d) of the Madhya Pradesh Excise Act. Thus, it is submitted
that the principle of "alter ego" will not arise in the absence of conviction of
the company. Thus, it is prayed that it is a fit case to grant injunction when
petitioner companies are giving revenue of about Rs.700 to Rs.800 crores to
the State and the livelihood of about 3,000 persons is at stake.
44. It is also submitted that Section 31 of the Madhya Pradesh Excise Act
cannot be read beyond the judgment of conviction passed by the trial Court.
It is submitted that the appeal memo or the evidence or the statements of the
accused under Section 313, Cr.P.C., cannot be read and the Court has to
confine itself to the finding of conviction and the substantive Sections under
which an accused has been convicted.
45. After hearing learned counsel for the parties, the issue which emerges
herein is whether the issuance of show cause notice, as contained in
Annexure P-3, on the strength of conviction passed by the learned Additional
Sessions Judge, Depalpur, District Indore, is within the four corners of
requirements of Section 31(1) of the Madhya Pradesh Excise Act, 1915, or
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whether the Excise Commissioner exceeded his authority while issuing the
show cause notice, as submitted by Shri Naman Nagrath, learned Senior
counsel.
46. Another aspect which is required to be examined is whether the
principles of natural justice were violated before taking the final decision, as
contained in Annexure P-8, whereby various licences held by the petitioners
have been suspended alleging violation of the provisions as contained in
Section 31(1) of the Madhya Pradesh Excise Act.
47. The third issue which emerges herein is to determine as to whether the
alleged acts of violation are covered under Clauses (b) and (c) of Section
31(1) of the Madhya Pradesh Excise Act, or there is inherent implication of
Section 31(1)(d) to which there is a reference in paragraph 6 of the impugned
order dated 04.02.2026 (Annexure P-8).
48. An ancillary issue which arises herein is whether the conviction of the
driver and cleaner of the truck in which confiscated material was being
transported, namely, Santosh and Omprakash under Section 34(2) of the
Madhya Pradesh Excise Act, will be covered in terms of the provisions
contained in Section 31 of the Madhya Pradesh Excise Act or it only relates
to the holders of the licence, as has been submitted by Shri Naman Nagrath.
49. Yet another issue which emerges is whether the licences are in
perpetuity, subject to renewal at prescribed periodic intervals or every time it
is a fresh grant.
50. Section 31 deals with "Power to cancel or suspend licence, etc." and
Sub-section (l) of Section 31 provides that "Subject to such restrictions as
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the State Government may prescribe, the authority granting any licence,
permit or pass under this Act may cancel or suspend it - (a) if any duty or fee
payable by the holder thereof be not duly paid; or, (b) in the event of any
breach by the holder thereof or by any of his servants, or by any one acting
on his behalf with his express or implied permission, of any of the terms or
conditions thereof; or, (c) if the holder thereof, or any of his servants, or any
one acting on his behalf with his express or implied permission, is convicted
of any offence under this Act or any other law for the time being in force
relating to revenue, or of any offence (under the Dangerous Drugs Act, 1930
(11 of 1930), or under the Indian Merchandise Marks Act, 1889 (IV of
1889), or under any section which has been introduced into the Indian Penal
Code (XLV of 1860), Section 3 of that Act; or, (d) if the holder thereof is
convicted of any cognizable and non -bailable offence; ...."
51. Section (1-A) of Section 31 of the Madhya Pradesh Excise Act
provides that "Before making an order cancelling or suspending a licence
permit or pass under sub -section (1), the authority aforesaid shall record in
writing the reasons for the proposed action, furnish to the holder thereof a
brief statement of the same and afford him a reasonable opportunity of being
heard."
52. When show cause notice (Annexure P-3) and the impugned order dated
04.02.2026 (Annexure P-8) are tested on the touchstone of the provisions
contained in Sub-section (1-A) of Section 31 of the Madhya Pradesh Excise
Act, 1915, then it is evident that show cause notice (Annexure P-3) prima
facie fulfills all the three requirements, namely, it makes a mention of
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conviction of two of the accused Santosh and Omprakash under Section
34(2) of the Madhya Pradesh Excise Act and conviction of other accused
persons under Sections 420, 467, 468, 471 and 120-B of the Indian Penal
Code, 1860. It also gives details of the incident which took place on
14.12.2011 at 20:15 hours on Mhow-Neemuch road, Ghatabillod, where
truck bearing registration No.MP09-HF-5185, containing 1200 boxes of
foreign liquor Bluechip whiskey, was found to be transported without valid
licence. It also makes a mention of the fact that permit books were forged and
there was a conspiracy. Different accused persons had prepared number of
forged permits as are mentioned in the show cause notice and, thereafter, it
made reference to Section 44 and Section 31 of the Madhya Pradesh Excise
Act and categorically stated that five of the persons employed with the
company were convicted. It also granted opportunity of hearing asking the
addressees to submit reply within 7 days of receipt of the notice.
53. It is evident from the record and not disputed by the parties that first
reply to the show cause notice was furnished on 04.03.2024, cumulatively
filed along with Annexure P-5. Interestingly, this reply only makes a
mention of the fact that criminal appeals were filed at the Indore Bench of
the High Court and interim application has been disposed of by the Indore
Bench of the High Court. In this regard, three criminal appeals, namely,
Criminal Appeal No.1146/2024 filed in relation to Surjeet Lal, Dina Nath
Singh, Shailendra Singh and Gurudarshan Arora; Criminal Appeal
No.1246/2024 was filed qua Dinkar Singh, Uma Shankar and Mohan Singh
Tomar; and Criminal Appeal No.1249/2024 is filed qua Santosh Gadariya
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and Omprakash Singh. Thus, the petitioners took cognizance of this fact as
mentioned in the show cause notice that even the driver, cleaner of the truck
were convicted and appeals have been filed on their behalf too.
54. A perusal of the memo of appeals, as have been filed on behalf of three
different sets of appellants will reveal that counsel for all the three sets of
appellants is common, namely Ms. Gunjan Chowkey.
55. Another interesting facet of the first reply to the show cause notice is
audacity of the petitioners in threatening the Excise Commissioner, as can be
seen from paragraph 4 that since judgment of the trial Court has been stayed,
therefore, issuance of show cause notice falls under the purview of contempt
of the High Court.
56. Second reply was filed on 18.07.2024 in which it is mentioned that on
six of the persons, namely, Uma Shankar Sharma, Dinkar Singh, Mohan
Singh Tomar, Dina Nath Singh, Shailendra Singh and Gurudarsh Arora, the
provisions of Section 44 of the Madhya Pradesh Excise Act will not be
applicable.
57. It is also mentioned in paragraph 2 that the accused, who have been
convicted under Section 34(2) of the Excise Act, namely, Santosh Gadariya
and Omprakash Lodhi, were not employees of the company and, therefore,
there is no justification to make mention of their conviction in the show
cause notice.
58. Interestingly, neither first reply dated 04.03.2024 nor the second reply
dated 18.07.2024, makes a mention of the fact that how petitioners are
innocent or are not guilty of using forged transit permits to transport liquor
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from Raisen to Diu. There is no explanation to the said allegation. Thus, by
implication, there is an admission of guilt that the company and its agents
were involved in transportation of foreign liquor on the strength of forged
permits.
59. Another interesting aspect is that in the first reply, a threat which has
been handed down in paragraph 4, prima facie reflects guilty mind of the
petitioners.
60. Though Shri Naman Nagrath, learned Senior counsel submits that they
are company having turnover of Rs.700 to Rs.800 crores, but it is necessary
to note that an authorized signatory of the company, who furnished the reply
did not even understood the meaning of suspension of sentence granted
under Section 389 of the Cr.P.C. vis-a-vis stay on the judgment of
conviction. No document has been produced before this Court at any stage to
point out that High Court of Madhya Pradesh at Indore Bench ever stayed the
operation of the judgment of the trial Court.
61. Thus, reliance on the judgment of the Hon'ble Supreme Court in case
of Gwalior Distilleries Private Ltd. v. State of Madhya Pradesh and others,
(2020) 12 SCC 690, to suggest that there is a violation of Article 14 of the
Constitution besides that of Sub-section (1-A) of Section 31 of the Madhya
Pradesh Excise Act, is not made out. The petitioners have not brought any
case where any other licencee has been dealt with in any different manner on
proved allegation of transportation of foreign liquor on the basis of forged
permits, resulting in conviction of the Managing Director, Director,
agents/servants of the licencee by the competent Court. No case of hostile
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discrimination is also made out as put forth before this Court.
62. Thus, when three aspects of Sub-section (1-A) of Section 31 are taken
into consideration, namely, recording of reasons in writing for the proposed
action, furnishing a brief statement to the licencee and that afford him a
reasonable opportunity of being heard, then all three requirements having
been fulfilled, it cannot be said that there is any violation of Article 14 of the
Constitution or Sub-section (1-A) of Section 31 of the Madhya Pradesh
Excise Act, 1915.
63. Second submission put forth by the learned Senior counsel for the
petitioners that Clause (c) of Sub-section (1) of Section 31 of the Excise Act
applies only to the licencee and not to the servants, is not correct in my
opinion. The opening words of Clause (c) of Sub-section (1) of Section 31 of
the Excise Act are that "if the holder thereof, or any of his servants, or any
one acting on his behalf with his express or implied permission, is convicted
of any offence under this Act ..."
64. Thus, the expression 'anyone acting on his behalf with his express or
implied permission', will include the driver and cleaner of the truck in which
material was transported. Therefore, their conviction under Section 34(2) of
the Madhya Pradesh Excise Act, will bind the licencee in terms of the
language of Clause (c) of Sub-section (1) of Section 31 of the Excise Act.
65. Transporting liquor without permit means to cause loss of revenue and,
therefore, even the second part of Clause (c), namely "is convicted of any
offence under this Act or any other law for the time being in force relating to
revenue", shall also be attracted.
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66. It is true that the provisions of the Indian Merchandise Marks Act,
1889, incorporates certain offences in the Indian Penal Code from Section
478 to Section 489 by way of amendment in the Indian Penal Code, but the
Indian Merchandise Marks Act deals with "trade mark" and "trade
description". It also deals with "false trade description". By means of
amendment in the Indian Penal Code, Section 3 substituted Chapter XVIII of
the Indian Penal Code on the subject of "Trade, Property and Other marks."
67. Trade is different from trade mark. Meaning of trade is to be
understood in terms of the provisions contained in the Excise Act and also in
terms of the terms and conditions incorporated in the licence besides the
relevant Rules framed under the Excise Act.
68. Sub-section (8) of Section 2 of the Excise Act deals with excise
revenue and provides that "excise revenue" means revenue derived or
derivable from any duty, fee, tax, penalty, payment (other than a fine
imposed by a Court of Law) or confiscation imposed or ordered or agreed to
under the provisions of this Act, or of any law for the time being in force
relating to liquor or intoxicating drugs.
69. Sub-section (16) of Section 2 of the Madhya Pradesh Excise Act, 1915,
defines "sale" to mean any transfer otherwise than by way of gift.
70. The Madhya Pradesh Excise Act, 1915 was enacted for the purpose of
control and to regulate import, export, transport, manufacture, sale and
possession of intoxicating liquor and of intoxicating drugs and various
provisions are made for the said purpose in the Act.
71. Section 9 of the Madhya Pradesh Excise Act, 1915, deals
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with 'Restriction on import, export or transport' and provides that without the
sanction of the State Government no intoxicant shall be imported, exported
or transported, except - (a) after payment of any duty to which it may be
liable under this Act, or execution of a bond for such payment; and (b) on
compliance with such conditions as the State Government may impose.
72. Section 10 of the Madhya Pradesh Excise Act, 1915, provides for
'Requirement of pass for import, export or transport. This pass is to be issued
under the provisions of the Act and allegation is that liquor was being
transported without the authorized pass that means to cause loss of revenue,
which will be clearly covered under second part of Clause (c) of Sub-section
(1) of Section 31 of the Excise Act. It is true that the provisions of the Indian
Merchandise Marks Act, 1889, will not be applicable to the present case, but
at the same time, the provisions of the Excise Act are applicable.
73. It is interesting to note, as has been submitted by Shri Sanjay K.
Agrawal, learned Senior counsel, that the Excise Commissioner while giving
the show cause notice omitted name of Surjeet Lal, who was admittedly
Managing Director of the petitioner companies from 2009 to 2016 i.e. he
was at the helm of affairs in 2011 when the incident took place, but this
omission will not come in the way of the State, inasmuch as, it is admitted by
the parties and not disputed before this Court that Surjeet Lal was also
convicted vide Annexure P-4, judgment of conviction passed by the trial
Court.
74. As far as use of Clause (d) of Sub-section (1) of Section 31 is
concerned, it is an admitted fact that the conviction of other persons under
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Sections 420, 467, 468, 471 and 120-B of the Indian Penal Code, will be
covered by this clause as they are cognizable and non-bailable offence.
Therefore, on this touchstone also, the impugned order cannot be
questioned.
75. Sub-section (2) of Section 31 of the Excise Act provides that "Where a
licence, permit or pass held by any person is cancelled under clause (a),
clause (b), clause (c) or clause (e) of sub -section (1), the authority aforesaid
may cancel any other licence, permit or pass granted to such person under
this Act or under any other law for the time being in force relating to excise
revenue, or under the Opium Act, 1878 (1 of 1878).
76. Law in regard to requirements to be fulfilled before cancellation or
suspension of licence is summarized in case of Bishnu Ram Borah v. Parag
Saikia, AIR 1984 SC 989: (1984) 2 SCC 488 , and, therefore, I am satisfied
that the requirements of Sub-section (1) of Section 31 of the Excise Act are
fulfilled, therefore, impugned order (Annexure P-8) cannot be faulted with. It
can also be not faulted with for an additional reason that no where in the
reply to the show cause notice, transportation of liquor on the basis of forged
permit has been disputed.
77. Section 44 of the Excise Act categorically provides for Criminal
liability of licensee for acts of servants. This is in addition to the provisions
contained in Clause (c) of Section 31(1) of the Excise Act. Section 44
provides that "Where any offence under Section 34, Section 35, Section 36,
Section 36-A, Section 38, Section 38-A or Section 39 is committed by any
person in the employ and acting on behalf of the holder of a licence, permit
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or pass granted under this Act such holder shall also be punishable as if he
had himself committed the same, unless he establishes that al l due and
reasonable precaution were exercised by him to prevent the commission of
such offence". Therefore, when Clause (c) of Sub-section (1) of Section 31 is
read with Section 44, then it is not open to the petitioners to say that they had
not committed any offence under Section 34(2) of the Excise Act, and,
therefore, their acts will not be covered.
78. Thus, the judgment of the Hon'ble Supreme Court in case of Iridium
India Telecom Limited (supra), though it is submitted by Shri Naman
Nagrath that since petitioner companies have not been prosecuted and
punished for criminal offence, therefore, doctrine of "alter ego" will not be
effective, in my opinion, has no application, inasmuch as, what Supreme
Court has held is that a corporation is virtually in the same position as any
individual and may be convicted of common law as well as statutory offence
including those requiring mens rea. The criminal lability of corporation
arises when an offence is committed in relation to the business of the
corporation by a person or the body of persons in control of its affairs. In
such circumstances, it would be necessary to ascertain that the degree and
control of the person or body of persons is so intense that a corporation may
be said to think and act through the person or the body of persons. Mens rea
is attributed to corporations on the principle of "alter ego" of the company.
While ascertaining the applicability of the judgment of Hon'ble Supreme
Court in Iridium India Telecom Limited (supra), it is submitted that
principles of proportionately is required to be applied by the Court.
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79. It is observed in case of Belfast City Council v. Miss Behavin' Ltd,
(2007) 3 All ER 1007 , para 24 HL, wherein it is held that proportionately
must be objective. The court must make a value judgment or evaluation by
reference to the circumstances prevaling at the relevant time. The principles
of proportionately require the Court to apply a three stage test, (1) Whether
the objective sought to be achieved is relevant and sufficiently important to
justify limiting the fundamental rights; (2) Whether the means chosen to
limit that right are rational, fair and not arbitrary; and, (3) Whether the means
used impaired the right as minimally as reasonably possible.
80. In case of Huang Vs. Secretary of State for the Home Department,
(2007) 4 ALL ER 15 , HL, in paragraph 19 has held that the judgment on
proportionately must always involve the striking of a fair balance between
the rights of the individual and the interests of the community.
81. Similarly, it is well settled principle of law that when the question is of
pressing social needs and it is to be decided as to whether measures adopted
by the legislature is proportionate to the legitimate aim persued, the Court
may have also to show due respect to the judgment of democratically elected
representatives. In Tweed Vs. Parades Commission for Norther Ireland,
(2007) 2 ALL ER 273, (H.L.) , it is held that properitory principles is a
concept of 'latitude', which recognizes that the Court does not become the
primary decision maker on matters of policy, judgment and discretion, so
that public authorities are left with room to make legitimate choices.
'Latitute' denotes a particular degree of deference by the Court to public
body.
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In case of Ajay Hasia Vs. Khalid Mujib Sehravardi, (1981) 1 SCC
722 , it is held that the fundamental right of equality in Article 14 has also
been so construed as to make the concept of reasonableness and non-
arbitrariness pervade the entire constitutional scheme and is a golden thread
which runs through the whole of the fabric of the Constitution.
In case of Bharat Petroleum Corpn. Ltd. v. Maddula Ratnavalli, (2007)
6 SCC 81, it is held that the "State" acting whether as a "landlord" or a
"tenant" is required to act bona fide and not arbitrarily and every executive
action must be informed by reason.
82. Firstly, liquor business is not a fundamental right and secondly, when
the test of proportionately is applied, then on that touchstone also, decision of
the authority being within the framework of the Excise Act and the Rules
framed thereunder, cannot be faulted with.
83. In fact, Sub-section (2) of Section 31 clearly authorises the authority to
cancel any other licence, therefore, the submission made by Shri Naman
Nagrath that the show cause notice will relate only to the period when it was
issued and not further, is not at all justified because even if that yardstick is
applied, then cause of action for the show cause notice is for the year 2011,
that being so, in the light of the judgment of Hon'ble Supreme Court in case
of N.S. Sethna (supra), even show cause notice could not have been issued in
the year 2023, but that is not the position, inasmuch as, to fulfill the
requirements of Section 31(1), authorizes the State to take action when
judgment of conviction was passed by the competent Court.
84. Therefore, when these facts are taken into consideration, then Section
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31(2) read with Section 44, so also read with Rule 3(11) of the M.P.
Distillery Rules and analogous provisions in other rules, leaves no iota of
doubt that the words used in Rule 3(11) of the M.P. Distillery Rules, 1995,
which deals with licence D-1 for manufacturing of spirit is to be renewed
every year, subject to observance of the Act and the Rules framed thereunder
and the condition of the licence. Even Clause V of the Licence provides for
cancellation of licence for violation of the terms, therefore, on this
touchstone also, act of the Excise Commissioner, cannot be faulted with. In
fact in N.S. Sethna (supra), the Supreme Court has clearly noted that there is
no separate rule or provision conferring power of renewal. There is also no
provision in these rules laying down procedure for renewal or fee for such
renewal or the condition on which it may be granted, except the insertion in
Clause 4 of the word "renewal which only suggests that the renewal is
competent."
85. However, in the present case, Rule 3(11) of the M.P. Distillary Rules,
1995, so also Rule 3(12) of the M.P. Foreign liquor Rules, 1996, clearly uses
an expression "the licence shall be renewed every year subject to due
observance of the provisions of the Act and the Rules framed thereunder and
the conditions of the licence" and the Foreign liquor Rules uses the
expression that the licence may be renewed on payment of the prescribed
fees as aforesaid, subject to the due observance of the provisions of the Act
and the Rules made thereunder and the conditions of the licence.
86. Thus, the judgment of N.S. Sethna (supra) is distinguishable, inasmuch
as, relevant Rules incorporate in specific terms the provisions of renewal,
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unlike the Bombay Cinema Rules, which were the subject matter in N.S.
Sethna (supra). Thus, the judgment of N.S. Sethna (supra) is distinguishable
on its own facts.
87. As far as reference to the judgment in case of N. Mani (supra) is
concerned, though it is submitted that if a wrong provision is mentioned, it
will not vitiate the exercise of power, but in my opinion, there is no mention
of wrong provision in the impugned order of suspension or in the show cause
notice, which preceded it. The show cause notice clearly make a mention of
conviction of two of the accused persons, namely, Santosh and Omprakash,
under Section 34(2) of the Excise Act and also of others under the provisions
of the Indian Penal Code for cognizable and non-bailable offences. The
impugned order also clearly makes a mention of violation of the provisions
contained in Section 31(1)(d), so also that of Section 44 of the Excise Act.
Thus, when explicitly the show cause notice dealt with the ambit of Sections
31(1)(c) and (d) of the Excise Act, pointing out the acts of various persons
being convicted under Section 34(2) of the Excise Act or under various
Sections of the Indian Penal Code and then gave vivid description of some of
the acts, leaves no iota of doubt that there are no grey areas of mentioning
the incorrect provisions, requiring to filling of gaps in the light of judgment
of the Hon'ble Supreme Court in case of N. Mani (supra).
88. As far as law laid down in case of Mohinder Singh Gill and another
(supra) is concerned, it is held that statutory functionaries makes an order
passed on certain grounds. Its validity must he judged by the reason so
mentioned and cannot be supplemented by fresh reasons in the shape of
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affidavit or otherwise. Otherwise, an order bad in the beginning, by the time
it comes to the Court on account of challenge, gets validated by additional
grounds later brought on.
89. In my opinion, the facts in the present case are different. The decision
of the statutory authority is neither supplemented by fresh reasons in the
shape of an affidavit or otherwise, nor is there any intention apparent from
the record to cure an order bad in the beginning, inasmuch as the show cause
notice and the order of suspension are clear in themselves and contain
reasons in the fullest breadth. Therefore, the ratio of law laid down in the
case of Mohinder Singh Gill and another (supra) too is not applicable to the
facts and circumstances of the present case.
90. The Division Bench of this High Court in case of Rathore and Mehta
Associated, Bhopal (supra) held that fraud vitiates all solemn acts. Fraud
means an intention to deceive, whether it is from any expectation of
advantage to party himself or from ill-will towards other is immaterial, as
held by Hon'ble Supreme Court in case of Commissioner of
Customs(Preventive) Vs. M/S. Aafloat Textiles (I) P.Ltd.& Others, 2009
(11) SCC 18 . Therefore, in terms of the fraud perpetuated in using forged
permits to transport foreign liquor, the impugned acts of the respondents,
when tested on the touchstone of doctrine of proportionality, cannot be
faulted with.
91. In view of above, writ petition fails and is dismissed. Pending
application(s), if any, also stands disposed of.
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(VIVEK AGARWAL)
JUDGE
pp
