Liquor Licence; Amarjit Singh Sidhu Vs. State [Punjab-Haryana High Court, 09-06-2016]

Punjab Excise Act, 1914 – Punjab Liquor Licence Rules, 1956 – Category licence L-1A in the Punjab Liquor Licence Rules 1956 in the modified form is legal and valid.



CWP No.5593 of 2016 (O&M)

Date of decision: June 09, 2016

Amarjit Singh Sidhu……Petitioner


State of Punjab and others…..Respondents

Argued by: Present: Mr. Mohan Jain, Sr. Advocate with Mr. Vikram Jain, Mr. Arastu Chopra, Mr. Fateh Saini, Advocates for the petitioner in CWP No.5593 of 2016. Mr. Ashish Aggarwal, Sr. Advocate with Ms. Ritu Pathak, Advocate for the petitioner in CWP No.5740 of 2016. Mr. Sandeep Goyal, Advocate for the petitioner in CWP No.7668 of 2016. Mr. Ashok Aggarwal, Advocate General, Punjab with Mr. Kamal Sehgal, Addl. A.G.Punjab and Mr. Harsimran Singh Sethi, Addl.A.G. Punjab.

Ajay Kumar Mittal,J.

1. This order shall dispose of CWP Nos.5593, 5740 and 7668 of 2016 as learned counsel for the parties are agreed that the issues involved in these petitions are identical. However, the facts are being extracted from CWP No.5593 of 2016.

2. In CWP No.5593 of 2016, the petitioner prays for quashing the newly created/added Clause 2.14 of L-1A licence in the Excise Policy dated 13.3.2016 for the year 2016-17, Annexure P.1 being arbitrary, illegal and against the provisions of the

Punjab Excise Act, 1914

(in short, “the Act”) and the

Punjab Liquor Licence Rules, 1956

(for brevity, “the Rules”) as Excise department has no power/authority to add, delete or cancel any kind of category of licence in the Excise policy without amending the relevant Acts and the Rules where there is a chart of liquor licences. Further prayer has been made for a direction to the respondents to bring clear cut transparency in the procedure for allotment of L-1A licence by holding draw of lots. Direction has also been sought to the respondents to decide the legal notice dated 17.2.2016, Annexure P.2 submitted by the petitioner and to stay operation of issuance of L-1A licence till the pendency of the present writ petition.

3. A few facts relevant for the decision of the controversy involved as narrated in CWP No.5593 of 2016. The petitioner is engaged in the business of liquor trade for the past so many years in the State of Punjab. In the month of March 2016, the State of Punjab announced its Excise policy for the year 2016-17 under the Act and the Rules. In the previous excise policy for the last year, there were different classes of licences mentioned in the Rules. The controversy arose when the State Government announced its excise policy for the year 2016-17 in which excise department has added a new dimension to the category namely L-1A licence which is above the category of L-1 licence which is a wholesale licence for the sale of Indian made foreign liquor (IMFL). The relevant portion of the terms and conditions for the allotment of new category of L-1A licence as stipulated in Clause 2.14 of the excise policy for the State of Punjab for the year 2016-17 reads as under:-

“Clause 2.14
i) It is necessary for the applicant for this licence to have an authority/consent letter from the manufacturing unit.

ii) Any manufacturing company cannot issue the authority/consent letter to more than one person/company/firm/organization.

iii) The manufacturing company will give this consent letter to that person/company/firm/organization who is at Arms Length Distance from the manufacturing company provided there is no promoter, director, partner in the manufacturing company or there is no holding, subsidiary, closely held company, fully/partially owned/financed/managed firm/company.

iv) L-1A licensee will purchase IMFL (except Beer) wine, RTD from the State or the manufacturing companies situated outside the State and will sell it to only L-1 licensees.

v) It is proposed that the licence fees for the L-1A (IMFL) for the year 2016-17 is fixed at 2.50 crores and it is proposed to have the security amount of this licence fixed at 25 lacs.”

According to the petitioner, the L-1A licence has been added/created just to monopolize the trade of liquor in the State of Punjab. Earlier, there was procedure in the excise policy that the person who was licensee of L-1 wholesale licence shall take the liquor directly from the manufacturing company. After adding L-1A licence, it has been specified that a person who is holder of L-1 licence will now have to take the liquor for sale from the L- 1A licensee i.e. newly created category of licence in the excise policy for the year 2016-17. It has been further claimed that the new licence has been created to monopolize the liquor trade and extend the same to the particular group of persons namely Chadha group, Malhotra group, Doda group and AD group who are at present major stake holders in the liquor business in the State of Punjab and are instrumental in influencing the excise department for creation of new category i.e. L-1A licence for their own economic interest. The petitioner avers that there is no power with the excise department to add or cancel any classification of the licensees in the excise policy without amending the Act and the Rules. Further, it is also not specified who is the competent authority to grant the L-1A licence and who is responsible to legally monitor or scrutinize the application for grant of L- 1A licence. No criteria has been prescribed for the manufacturer to give letter of consent if more than one person shows interest for its L-1A licence. The projected number of IMFL L-1A licensees in the State of Punjab is fixed at three and there will be just two L-1A liquor licence for Beer in the entire State of Punjab which would lead to monopolization of liquor trade in the State of Punjab. Still further, the term Arms Length Distance for grant of L-1A licence only to the persons who are in any way not related to the manufacturing company is a very subjective term. The petitioner also sent a legal notice cum representation dated 17.3.2016, Annexure P.2 to the respondents but no reply has been received from the department. Hence the instant writ petition.

4. A written statement has been filed by Additional Excise and Taxation Commissioner, Punjab for and on behalf of respondents No.1 to 3, wherein it has been inter alia stated that L-1A licence is in existence since the year 2011 and is part of the 1956 rules. The only amendment which has been done for the year 2016-17 is that earlier L-1 licencee could purchase the liquor from manufacturer also but it was matter of practice that L-1 licencee used to purchase liquor from L-1A licensee. This practice has been made as a rule now and the manufacturer is not eligible for the grant of L-1A licence and L-1A licensees who have consent from the manufacturer will sell the liquor to the other licence holders for the wholesale. The petitioner, a L-1 licensee has not stated anywhere that he wants L-1A licence or that he has been debarred from applying for L-1A licence. Further, nothing has been shown as to what prejudice will be caused to the petitioner if he gets the liquor from the L-1A licencee. Under the Act and the Rules, the State Government has power to frame rules to regulate the liquor business. Thus, the policy in question is in consonance with the Act and the Rules. On these premises, prayer for dismissal of the writ petition has been made.

5. A short affidavit by Additional Excise and Taxation Commissioner, Punjab dated 5.4.2016 has also been filed justifying the addition of L-1A licence in the excise policy for the year 2016-17.

6. We have heard learned counsel for the parties.

7. The controversy in these petitions relates to the following contentions:-

a) Whether citizen has any fundamental right to trade or business in liquor as beverage?

b) Whether the State can discriminate between the citizens where the trade or business in the potable liquor is permitted by the State and the scope of judicial review in the matter of liquor trade?

c) Whether the newly added Clause 2.14 in the Excise Policy for the year 2016-17 by the State Government creating L-1A category of licence is legally valid, fair and does not suffer from the vice of arbitrariness?

8. The marathon submissions made with vehemence by learned counsel for both the parties requires issue (c) to be sub-categorized as under:-

(i) Whether the action of the respondents in creating Licence L-1A category in the Excise Policy for the year 2016-17 is legal and valid as the policy was issued on 13.3.2016 whereas Punjab Liquor Excise Rules, 1956 were amended incorporating Licence 1-A in modified form on 23.3.2016?

ii) Whether the sub clause (ii) of Clause 2.14 of the Excise Policy 2016-17 is justified and sustainable in law or not?

9. No debate is required on Issue No.1 as the matter is no longer res integra. The unanimous view of five Constitution Bench decisions in