Breaking: Delhi High Court Refuses To Stay Govt Order Prohibiting Discounts On Liqour MRP

Justice V Kameswar Rao pronounced the order today on interim applications filed by L7Z liqour licensees in the city.

Yesterday, the Single Judge heard at length Senior Advocates Mukul Rohatgi and Sajan Poovayya for the Petitioners. Senior Advocates Abhishek Manu Singhvi and Rahul Mehra appeared for the Delhi government on advance notice.

The petition is filed in the backdrop of the new Delhi Excise Policy approved in June last year by the Delhi government for the year 2021-2022. This policy sets out the framework for various aspects pertaining to the liquor business.

Rohatgi and Poovayya broadly argued that the new policy and the tender, both permit discounting by retail licensees.

"Once a tender is called for based on extant legal regime and licenses are issued pursuant to such tender, it is not open to the Department to make any changes qua those tenders, unless by interdiction of a law.

The tender specifically permitted discount, irrespective of quantum and nature of discount, so long as wholesale prices are met and statutory levies are paid. The ground on which today interdiction is made, those are not germane in terms of the legal regime," Poovayya argued.

He added that the very definition of MRP is "maximum" price at which liquor may be sold to the ultimate consumer, and it includes all taxes, transportation charges, etc.

Hence, he argued that by prohibiting discounts, the government cannot equate MRP with "retail price" (which was prevalent in the previous regime) having the characteristics of MSP (minimum support price).

It was further contended that once the Cabinet has cleared the Excise Policy, it was not open for the Commissioner to pass an executive order overriding the legislative policy, which has not been amended till date.

The Delhi Government has claimed that the licensees were misusing the discount provision to offer over 50% discounts, which would distort the market forces, promote monopoly and promote alcoholism.

It contended that the Excise Commissioner is empowered under Section 4 of the Delhi Excise Act, 2009, to regulate the sale of liquor.

Singhvi added that the government may in some time come out with its own discounting policy to ensure free-market space qua sale of liquor.

"What we meant was you give 5-20% discount, not 100%, not buy 1 get 2…government can't be a mute spectator to bootlegging, un-scanned products being sold in the market, predatory pricing, monopolistic market by sharks of the industry against not so well-placed people."

It stated that in three months (from December 2021 to February 2022) there has been a five-fold increase in liquor sales. There have been increased instances of hoarding, export to other states, etc.

Can't Permit Sales Practices That Lure People Into Hoarding Liquor, Illicit Trafficking: Delhi Govt to High Court On 'No-Discount' Policy

At this juncture, Poovayya argued that it is an admitted case that discounts can be given. Hence, the government could have passed a GO regulating discounts. However, the impugned GO places a knee-jerk prohibition which is patently violative of proportionality argument under Article 14. It also affects right to trade under Article 19(1)(g) of the Constitution.

The counsel for State continued that objective of the Excise Policy is to not allow formation of any monopoly or cartel; ensure accountability on part of the licensee in terms of revenue enhancement; systemic measures to check smuggling and bootlegging, etc.

Hence, the impugned GO is germane to the objectives sought to be achieved.