Jammu And Kashmir High Court Strikes Down Clauses In State Excise Policies, Grants Liberty To Frame New Policy For 2021-22

FACTUAL BACKGROUND AND CHALLENGE

Various writ petitions were filed in the High Court challenging a common judgment passed by a single judge of the High Court. The case arises out of the trade in liquor business with the grievance of non transparency in the process of renewal of liquor vend licenses in the State. As a general rule, these allotments can only be made on the recommendation of State Finance Minister but the present licenses granted in the State liquor vends are mostly facilitated without any formal advertisement to benefit the favourites.

Under the Rule 30(8) of Jammu and Kashmir Liquor License and Sales Rules, 1984 the competent authority grants a temporary license for a period of 4 months after a process of draw of lots is successfully conducted. The temporary license becomes permanent after the allottee fulfils the formalities, failure to which leads to expiry of the said license. Various complaints were made to the State Government indicating manipulation in the draw of lots process which was referred to the State Vigilance Organization. The Organization referred the matter to CBI for an investigation of the devise which was used in the process. The government, on a report by CBI, ordered cancellation of 57 temporary licenses granted to the allottees. Show cause notices were issued to these allottees, also the appellants in the case.

When the matter reached the High Court, a single bench held that the entire process of issuance of show cause notices was meaningless. The grievance of the appellants is that the issue of validity of such notices were not dealt by the single judge. Another issue raised by appellants is on the non application of mind by the Government in framing the State Excise Policies which provides that the grant or renewal of licenses for a period of 5 years whereas the Rules suggests the time period to be 1 year only.

ISSUES OF THE CASE

1. Whether Right to Trade in Liquor a Fundamental Right?
2. Challenge to the relevant provisions of Jammu and Kashmir Excise Act, svt. 1958 (1901 AD) and Jammu and Kashmir Liquor License and Sales Rules, 1984.
3. Challenge to Excise Policies for the year 2017-18, 2018-19 and 2019-2020.
4. Whether Renewal of Licenses for trade in liquor a fundamental right?

I. No Fundamental Right to Trade in Liquor

The bench while referring to a bunch of judgments of the Apex Court reiterated that there is no fundamental right of a person to do trade or business in intoxicants or liquor. The bench relied on the judgments of Har Shanker & Ors. v. Deputy Excise Commissioner & Ors. AIR 1975 SCC 1121; State of M.P. & Ors. v. Nandlal Jaiswal & Ors. 1987 AIR 251 and M/s Khoday Distilleries Ltd. & Ors. v. State of Karnataka & Ors. 1951 (1) SCC 574 held that No one can claim as against the State the right to carry on trade or business in liquor and the State cannot be compelled to part with its exclusive right or privilege of manufacturing and selling liquor.

II. Challenge to the relevant provisions of Excise Act and Rules

The Bench adjudicated upon 5 relevant provisions of the Act: Sec. 14A (Regulation of Sale of Liquor in State), Sec. 16 (Duty on Liquor), Sec. 16A (Approval to the Label), Sec. 17 (Duty how imposed) and Sec. 20 (Conditions of Licenses).

The Court held that under the scheme of Sec. 14A of the Act, grant of license can be obtained either by auction or operation of departmental vends. The Rules provide a set of procedure and formalities to be completed before a license becomes permanent. The Court specifically relied on Rule 30(8) which was inserted in the year 2004 providing for the temporary period of 4 months.

The court while noting the year of enactment of the said Act and Rules, expressed its astonishment on the fact that since the Rules were enacted in 1984, more than 8 decades after the enactment of Act in svt. 1958 (1901 AD), the process of allotment of funds operated without any rules and with no clauses of repeal and savings.

III. Challenge to Excise Policies

The Court struck down clause 3.2.7 of the Excise Policy 2017-18 providing for the grant of new licenses for a period of 5 years as being contrary to Clause 3.2.1 which states that the grant of licenses shall be operated strictly within the terms of Act and Rules. Similarly, the Bench struck down Clause 3.2.4 and and clause 3.2.7 for the policies of 2018-19 and 2019-20 respectively.

"There was no change in the License fee for any of the categories though liquor trade is said to be one, which though is prohibited but is a major source of revenue for the government but no application of mind was there by any authority in that direction." The bench held.

IV. Renewal of Licenses for trade in liquor is not a Fundamental Right

The bench while noting that there is no fundamental right of a person to do trade or business in liquor noted that the licenses were being renewed in Jammu and Kashmir for decades and that a practice which is contrary to law, is sought to be enforced in court. The court was of the view that Rule 14 is only an enabling provision which does not confer any right on the licensees to enforce it in the court of law.

"Temporary licenses granted to them could at the most be valid up to 31.03.2006 and thereafter they could only seek renewal thereof, which in terms of the Rules and the law laid down by the Supreme Court is not a matter of right. It is only that parity is sought to be claimed with the licensees who are operating for the last 50-60 years with renewal of their licenses, which again cannot be said to be strictly in accordance with law and will not confer any right on the appellants." The bench noted.

The Court also held that the State Government must frame new Excise Policy for the year 2021-22 in accordance with the provisions of Act and Rules and the liquor vends already operating in the State shall be allowed to continue till 31^st March 2021. It also gave liberty to the government to strike down any other provision of these policies which deals with grant and automatic renewal of licenses for a period of 5 years.

Case Name: Balbir Singh & Ors. v. State of J&K & Ors.

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