ORDER
U.L. Bhat, C.J.
1. Petitioners in some of these writ petitions challenge notification dated 17-1-1990 amending condition 2-C in Form FL-1 in the Foreign Liquor Rules (for short the FL Rules) framed by the State Government under the provisions of the M. P. Excise Act, 1915 (hereinafter called ‘the Act of 1915’). What is challenged in other writ petitions is a similar notification dated 31-3-1978 amending Condition 2-C in Form-CS-3 of” the Country Spirit Rules (for short ‘the C.S. Rules’) framed by the Government under the provisions of the Act of 1915. The petitioners have, in public auction under the provisions of the Act and the respective rules, become the successful bidders in regard to foreign liquor shops or country liquor shops, as the case may be, and have bean granted licences under the appropriate rules. Condition 2-C in the two sets of rules requires the licensee to take for sale from the warehouse the minimum quantity of liquor (referred to hereinafter as ‘Quota’) which is to be stipulated by the Licensing Authority in the licence. Condition-2-C of licence under the two sets of rules contemplates fixation of quota for lifting liquor and for levy of penalty on failure to lift the quota. The prescription of quota and the provision for penalty are challenged as ultra vires the provisions of the Act and the Constitution.
2. Originally, the Rules did not provide any condition of quota. Such a condition was introduced in the two sets of rules for the first time in 1964. Condition-2-C introduced in 1964 prescribed that the licensee shall be liable to make good the deficit of the monthly average of the total minimum excise duty. This condition was challenged by a licensee under Country Liquor Rules, in Bimal Chandra Banerjee’s, M. P. No. 426 of 1964 = AIR 1971 SC 517 on the ground that the condition provided for imposition of excise duty on unlifted liquor which is unsustainable. The writ petition was dismissed by the order short-noted in Paliwal Trading Co. v. Bhairon Prasad, 1965 MPLJNOC 43. The Supreme Court reversed this decision by its judgment reported in B. C. Banerjee v. State of M. P., M. P. No. 426 of 1964 = AIR 1971 SC 517, holding that the Act did not empower the Rule making authority to levy excise duty on excisable articles which have not been imported, exported, transported or manufactured in any distillery established or licensed under the Act. The two sets of Rules were amended in 1970 altering Condition-2-C as one requiring payment of “Pratikar at the rate fixed by the Government for…….Spirit…….to the extent to which it would be less than the fixed monthly minimum quantity”. The High Court relying on the above decision of the Supreme Court quashed the condition in Gappulal v. State of M. P. and another, 1971 MPLJ 547. The appeal filed by the State Government was dismissed in the decision in Gappulal’s case, AIR 1976 SC 633 taking the view that the provision amounted to imposition of excise duty in respect of short-lifted liquor. The Court distinguished the decision in Pannalal’s case, AIR 1975 SC 2008, which had to consider the parallel provisions of the Rules in force in Rajasthan, stating that in the latter case the contractual obligation to pay the guaranteed sum mentioned in the licence was not dependent on the quantum of liquor sold by them and no excise duty was charged or chargeable on the undrawn liquor and excise duty was collected only in relation to the quantity and quality of the country liquor that was drawn. Condition 2-C was again amended to provide for payment of “compensation” in case of failure to lift the quota of liquor. This condition was also held to be invalid in Suresh Chandra’s case, M. P. No. 579 of 1990 and State v. Sunderlal, 1976 MPLJ 254 holding that the provision for compensation was nothing but a provision for payment of duty on unlifted liquor.
3. The two sets of Rules were subsequently amended by the notifications impugned in these cases, amending Condition No. 2-C and introducing Conditions 11 and 12. The challenge to the amended condition relating to country liquor was repelled by the Court in Sharma and Co. v. State of M. P., 1981 MPLJ 423. The Court held that the provision for levy of penalty for failure to lift the quota is not a cloak to realise excise duty and does not amount to imposition of excise duty and does not amount to imposition of excise duty on unlifted quantity. Such a condition would fall within the words ‘amongst other matters’ in Section 62(2)(h) of the Act and within the power of the Rule making authority. It was also held that though such a condition may not be in consonance with Article 47 of the Constitution, that is not sufficient to invalidate the statutory Rule. This decision has been followed in Ratanlal and Anr. v. State of M. P., M.P. No. 1269 of 1987 (since reported in 1988 MPLJ 52) and other cases. It is the contention of the petitioners that these decisions upholding the validity of impugned conditions require reconsideration.
4. Learned counsel for the various petitioners have urged the following contentions :
(i) The provision for quota and penalty is really a provision for payment of excise duty on unlifted liquor and such a provision does not have statutory support.
(ii) The decision in Pannalal’s case, AIR 1975 SC 2008 has been distinguished in the decision in M/s Laisons Brewery Pvt. Ltd. v. State of M. P. and ors., AIR 1992 SC 1393 and cannot be followed.
(iii) The decision in Sharma and Co. v. State of M. P., 1981 MPLJ 423 is per incuriam since it does not follow the decision in B. C. Banerjee v. State of M. P., AIR 1971 SC 517.
(iv) The decision in Sharma and Co. v. State of M. P., 1981 MPLJ 423 requires reconsideration in the light of decision in M/s Laisons Brewery Pvt. Ltd. v. State of M. P. and ors., AIR 1992 SC 1393.
(v) The decision in M. P. No. 48 of 1978 which has followed the decision in Pannalal’s case, AIR 1975 SC 2008 has been reversed in M/s Laisons Brewery Pvt. Ltd. v. State of M. P. and ors., AIR 1992 SC 1393 and, therefore, the decision in Sharma and Co. v. State of M. P., 1981 MPLJ 423 requires reconsideration.
(vi) Assuming the provision for quota is valid, since the Statute does not provide for penalty, the condition regarding penalty is ultra vires the Act.
(vii) The provision for penalty is mandatory and rate of penalty is inflexible and, therefore, arbitrary.
(viii) The Statute and the Rules do not lay down any norms regarding fixation of quota and, therefore, the provision is arbitrary.
(ix) The Statute and the Rules do not provide for delegation to the Collector of power to fix quota.
(x) The provision for quota and for levy of penalty are contrary to Article 47 of the Constitution and Section 23-A of the Statute.
POINTS (i) to (v) :
5. The Act does not contain a specific provision for minimum guarantee quantity or quota or for penalty on failure to lift the quota. The condition of quota was introduced in the licence forms in the two sets of rules for the first time in 1964. The condition stipulated that if the quota was not lifted, the licensee would be liable to pay excise duty on the unlifted liquor. The Supreme Court in Bimal Chandra’s case, AIR 1971 SC 517 struck down the provision as ultra vires the Act on the ground that the Act contemplates levy of excise duty only on the liquor which has been imported, exported, transported or manufactured in any distillery established or, licensed under the Act, payment being required to be made on the quantity issued from the warehouse and, therefore, duty cannot be imposed on liquor not lifted from warehouse by any bye-law or rule or regulation and the condition amounted to transgression of its statutory power by the Rule-Making Authority. Subsequently, the conditions in licence form in the Rules were amended substituting the provision for payment of excise duty on the unlifted liquor by the provision for payment of “Pratikar” equal to the excise duty. When this was struck down in Gappulal’s case, AIR 1976 SC 633 the condition was again amended substituting the word ‘compensation’ for the word ‘Pratikar’. In Suresh Chandra v. State of M. P. and others, M. P. No. 579 of 1970 this Court struck down the provision taking the view that it amounted to a provision for compensation for loss of excise duty for which there is no statutory support. Thereafter the condition was amended to provide for penalty. Conditions 2, 11 and 12 were the relevant conditions. Subsequently, Conditions 11 and 12 have been incorporated in Condition-2-C itself.
6. The relevant part of the amended Condition No. 2-C of Licence under the Foreign Liquor Rules in its present form reads as follows :
2-C
(i) The minimum quantity of spirit and Malt for sale shall be brought from any wholesale licensee as fixed below :-
Minimum quantity in P.L./B.L.
Annual Monthly
Spirit
Malt -
(to be filed in by the Licensing Authority)
(ii) Where the Licensee fails to lift the minimum quantity of spirit fixed for a month, the Collector may impose penalty on such quantity of spirit lifted short as follows :
(a) Where such short lifting Rs. 80.00 Per PL
does not exceed 500 P.L.
(b) Where such short lifting 85.00 Per PL
exceeds 500 but does not
exceed 1000 P.L.
(c) Where such short lifting 90.00 Per PL
exceeds 1000 PL
xxx xxx xxx xxx xxx
Provided that if at the end of the financial year :
(i) full amount of minimum quantity of spirit/malt fixed for a year has been lifted, the amount of penalty so recovered or deposited shall be refunded.
(ii) the licensee fails to lift the minimum quantity of spirit/malt fixed for a year the Collector shall fix the amount of penalty as above on the total quantity of spirit/malt short lifted and recover or refund the amount of penalty as the case may be.
7. The amended condition 2-C in the licence in regard to country spirit in its present form is as follows :-
2-C. The minimum quantity for taking issue from the warehouse for sale is fixed as follows :-
Minimum quantity in proof litre.
Annual Quarterly
Spiced spirit -
Plain spirit -
On your failure to lift in any quarter of the year the quarterly minimum quantity specified above, the Collector may impose a penalty at a rate not exceedingRs. (25.00) per proof litre for every litre of spirit so falling short:
Provided that any amount realised by way of such penalty shall be refunded if the annual minimum quantity specified above is lifted in full by the end of the year.
8. As per amended condition, the provision for lifting the quota from the wholesale licensee or warehouse for purposes of sale is retained but a new provision is introduced enabling the Collector, on the licensee’s failure to lift the quota (per year and quarter for country spirit and per year and month for foreign liquor) to impose penalty. Under the condition relating to country liquor, the penalty may be at a rate not exceeding Rs. 25/- per P. L. for every litre of spirit so falling short. If this annual quota is lifted in full by the end of the year, the amount realised by way of penalty shall be refunded. In case of foreign liquor, provision that the licensee shall lift quota is retained and a new provision is introduced enabling the Collector on the licensee’s failure to lift the quota, to levy penalty, depending on whether the quantity short lifted does not exceed 500 P.L. or exceeds 500 P.L. but does not exceed 1000 P.L. or exceeds 1000 P. L. If the annual quota is lifted in full by the end of the year, the amount realised by way of penalty shall be refunded. The provisions relating to country liquor were upheld by this Court in Sharma and Co. v. State of M. P., 1981 MPLJ 423. This decision was followed in Ratanlal and Anr. v. State, M. P. No. 1269/87 (1988 MPLJ 52). The Court took the view that the Rule Making Authority could validly make a provision for a quota and penalty by virtue of Section 62(2)(h) of the Act and the provision for penalty is not a disguised provision for payment of excise duty on unlifted liquor or for compensation for loss of excise duty on account of failure to lift the quota. G. P. Singh, C.J., speaking for the Bench in the case of Sharma and Co. v. State of M. P., 1981 MPLJ 423 observed :-
“It is true that in clause (h) of Section 62(2), five matters are specifically enumerated but the enumeration of these matters does not take away the general power conferred on the Government to prescribe the terms and conditions not covered by these five enumerated matters. The words ‘among other matters’ which precede the enumeration of five matters in clause (h) clearly postulate that the enumeration is not exhaustive and the general power of prescribing terms and conditions is not taken away. This was the view taken by the Division Bench of this Court in Suresh Chandra’s case (supra) and we respectfully agree with it.”
Dealing with the contention that penalty was another mode of realising excise duty on unlifted liquor, learned Chief Justice observed :
“The condition does not make it obligatory on the Collector to impose penalty in every case or to impose maximum penalty whenever he decides to impose penalty. The condition leaves it open to the Collector to decide having regard to the facts and circumstances of each case whether it is a fit case for imposition of penalty and if so as to what penalty should be imposed. Condition No. 11 provides a statutory deterrent for requiring the licensee to comply with the obligation to lift the minimum quantity of liquor mentioned in the licence.”
It may be noted that Condition No. 11 referred to in the above extract has since then been incorporated in Condition 2-C itself.
9. Section 17 of the Act states that no intoxicant shall be sold except under the authority and subject to the terms and conditions of licence granted in that behalf. Section 18 empowers the State Government to lease to any person on such conditions and for such period as it thinks fit, the right of manufacturing or of supplying by wholesale or of both, or of selling by wholesale or by retail, or of manufacturing or of supplying by wholesale, or of both and selling by retail, any liquor within any specified area. A licence in terms of the lease may be granted to the lessee by the licensing authority. Section 25 contemplates, if the State Government so directs, levy of excise duty or countervailing duty on all excisable articles other than those excepted which are imported, exported, transported or manufactured, cultivated or collected under any licence, or manufactured by any distillery established or licensed. Duty may be imposed at different rates according to criteria mentioned in sub-section (2). Section 26 states, inter alia, that duties shall be levied ratably on the quantity of excisable articles imported, exported, transported, collected or manufactured in or issued from a distillery, brewery or warehouse. Section 27 states that instead of or in addition to any duty leviable, the State Government may accept payment of a sum in consideration of the grant of any lease under Section 18. According to Section 28, every licence, permit or pass shall be granted on payment of such fees, if any, for such period subject to such restrictions, and on such conditions as the State Government may direct either generally or by rules under Section 62 or in any particular instance. Taking security from licensee is authorised under Section 29. Chapter VII of the Act deals with offences and penalties. Sub-section (1) of Section 62 confers power on the State Government to make rules for the purpose of carrying out the provisions of the Act. The matters on which the State Government may make Rules in particular and without prejudice to the generality of sub-section (1) are enumerated in sub-section (2). Under clause (h) of sub-section (2) of Section 62, the State Government may make rules in relation to the following :
“(h) Prescribing the authority by, the form in which, and terms and conditions on and subject to which any licence, permit or pass shall be granted, any by such rules, among other matters,
(i) fix the period for which any licence, permit or pass shall continue in force,
(ii) prescribe the scale of fees or the manner of fixing the fees payable in respect of any such licence, permit or pass,
(iii) prescribe the amount of security to be deposited by holders of any licence, permit or pass for the performance of the conditions of the same,
(iv) prescribe the account to be maintained and the returns to be submitted by licence-holders, and
(v) prohibit or regulate the partnership in, or the transfer of, licences;”
It is true that the five matters enumerated in clause (h) do not deal with prescription of quota or levy of penalty in case of failure to lift the quota. But the enumeration of five matters cannot take away the general power conferred on the State Government to prescribe the terms and conditions of licence not covered by the enumerated matters. The words ‘among other matters’ in Clause (h) clearly indicate that the enumeration is not exhaustive and the general power to prescribe terms and conditions of licence is not taken away. In Nagraj v. State of Mysore, AIR 1964 SC 269, the Supreme Court has held that the specific provisions as regards rule-making are merely illustrative and not exhaustive and cannot be read as restrictive of the generality of powers prescribed by the statute. With great respect, we agree with the view taken by this Court in Sharma and Co., 1981 MPLJ 422.
10. The provision for quota and penalty consequential to failure to lift the quota is quite different from a provision for payment of excise duty on unlifted quantity of liquor for which, of course, there is no statutory support. In Bimal Chandra Banerjee’s case, AIR 1971 SC 517 the Supreme Court held the then existing condition 2-C which provided that the licensee is liable to make good every month the deficit of monthly average of the total minimum duty to be clearly a provision for payment of excise duty on unlifted liquor. The Supreme Court pointed out that Sections 25, 26, 27, 62(1) or 62(2) (h) did not empower the State Government to levy tax on excisable articles which have not been imported, exported, transported, manufactured, cultivated or collected under any licence granted under Section 13 or manufactured in any distillery established or any distillery or brewery licensed under the Act. The Legislature has levied excise duty only on those articles which attract Section 25. SectiQn 25 did not authorise the Government to levy duty on articles which do not fall within the scope of Section 25 such as quantity of unlifted liquor. The scheme of the amended condition 2-C presently under consideration is quite different in nature and content from the condition which was considered by the Supreme Court in Bimal Chandra Banerjee’s case, AIR 1971 SC 571. The condition in its present form does not in form, substance or content levy excise duty at all. It only prescribes quota and penalty for failure to lift the quota. The penalty prescribed is not in quantum identical to the quantum of excise duty calculated on the quantity of unlifted liquor. Therefore, the contention that the decision in Shartna and Co. is per incuriam as it does not advert to or follow the decision of the Supreme Court in Bimal Chandra Banerjee’s case, AIR 1971 SC 517 is unsustainable.
11. In Pannalal v. State of Rajasthan, AIR 1975 SC 2008, the Supreme Court considered the provisions of Rajasthan Excise Act, 1950 and the provision requiring licensee to make certain payments during the years 1967-68 and 68-69. Under the conditions of the licence for the earlier period, the licensee guaranteed that during the period in question he shall receive from the Government and shall sell such quantity of wine of which issue price shall not be less than the guaranteed price mentioned in the licence. The licensee was also required to pay the shortfall, if any, between the price of the liquor obtained by him and the amount of guarantee multiplied by the months which have passed and divided by 11. Under the terms of the licence for the later period, the licensee was obliged to deposit licence fee for his exclusive privilege as fixed by the Excise Commissioner. From it, the amount of excise duty would be adjusted towards the payment of the amount for the exclusive privilege. The Court considered the provisions of the Rajasthan Act and held that the licence fee stipulated to be paid is the price or consideration or rental which the Government charges from the licensee for parting with its privilege in stipulated lump sum payment and it is a normal incident of a trading or business transaction and the licence is a contract voluntarily accepted by the licensee who fully exploited to his advantage the contracts to the exclusion of others. The Court also pointed the lump sum amount agreed to by the licensee is not levy of excise duty but is in the nature of lease money or rental or lump sum amount for the exclusive privilege of retail sales. Licence was granted after offer and acceptance or by accepting the tender or auction bid. The licensee agreed to pay lump sum amount as the price for the privilege. That is what the licensees considered to be equivalent to the value of the right. The stipulated payment had no relation to the production or manufacture of country liquor except that it enables the licensee to sell it. The taxable event was not the sale of liquor to the contractor but the manufacture of the liquor. The stipulated payment has relation only to what the licensee foresaw he could recoup by the sale of liquor from the shops licensed to him. The Court also pointed out that contractual obligation to pay the stipulated amount was not dependent on the quantum of liquor sold which was relevant only for the purpose of remission to be earned under the licence and no excise duty was chargeable on the undrawn liquor under the licence. The Court distinguished the decision in Bimalchandra Banerjee’s case, AIR 1971 SC 517 pointing out that that was a case of levy of excise duty on undrawn liquor which was not sanctioned by the statute. Gappulal’s case, AIR 1976 SC 633 which considered the condition for payment of “Pratikar” distinguished the decision in Pannalal’s case, AIR 1975 SC 2008. In State of A. P. v. Y. Prabhakara Reddy, AIR 1987 SC 933, the Supreme Court distinguished Gappulal’s case, AIR 1987 SC 633 as one in which undisputedly the demand was in respect of duty on unlifted liquor.
12. Learned counsel for the petitioners strongly relied on the decision in M/s Lilasons Breweries Pvt. Ltd. v. State of M. P. and ors., AIR 1992 SC 1393 which distinguished the decision in Pannalal’s case, AIR 1975 SC 2008. The case did not involve any provision for quota or penalty. The decision considered Rule 22 of the M. P. Brewery Rules, 1970. Under the Scheme of the Rules, an Excise Inspector designated as officer-in-charge of brewery was to be placed in charge of every brewery. Such other officers of the excise department may also be appointed. Rule 22 required that the pay of all such officers shall be met by the Government and further required that when the annual charges exceed 5 per cent of the duty leviable on the issue made from the brewery to districts within the State, the excess shall be realised from the brewer. It was pointed out that the Act contemplated levy of only excise duty or further duty or licence fee or consideration for lease. The Supreme Court followed the dicta in Bimal Chandra Banerjee’s case, AIR 1975 SC 517 and Gappulal’s case, AIR 1976 SC 633 that exaction not authorised under Section 25 or 26 or 27 or 62 cannot be levied. The Court distinguished the ratio in Pannalal’s case, AIR 1975 SC 2008 by indicating that in that case there was a stipulation for a lump sum payment in the licence which was absent in Rule 22 of the Rules under consideration. It was pointed out that the licensee is not concerned as to how the excise duty would be appropriated but he would be affected in the case of a shortfall and the excess is sought to be realised from him. The excess is the sum which falls short of the duty leviable. Therefore, the shortfall partakes the same colour and content as excise duty and, therefore it cannot be sustained. We have carefully considered the provisions of Rule 22 of the M. P. Brewery Rules as well as the ratio in M/s Lilasons Breweries case, AIR 1992 SC 1393. Rule 22 was intended to make up the shortfall in collection of excise duty on account of failure of the licensee to lift enough quantity of beer and send it to the districts which resulted in the State being unable to earn excise duty resulting in shortfall in its 5%.
13. The position is quite different in regard to the condition impugned in these writ petitions. As amended, Condition 2-C has no nexus, direct or indirect, with excise duty or any shortfall in collection of excise duty. It prescribes that the licensee should lift stipulated quota and if he fails to do so, he is liable for penalty levied by the Collector. This is merely a contractual obligation created by the statutory Rule and accepted by the licensee voluntarily. This condition is announced and brought to the notice of the intending bidders before every auction and Sahmat Patra is taken from the bidders. Prescription of such a condition is a normal trade practice.
14. The decision in M/s Lilasons Breweries case, AIR 1992 SC 1393 the order of this Court in M. P. No. 48178, the Court took the view that Rule 22 of the Brewery Rules has statutory support in Section 62(2)(h) of the Act. This view has not been accepted by the Supreme Court which held that payment of salary to Excise Officers is a matter between the Government and the officers and attempt to make up the excess of charges beyond 5% of the Excise Duty gives it the colour and content of deficit excise duty for which there is no statutory support. We have already indicated that the scheme of quota and penalty cannot be regarded as an attempt to collect excise duty on unlifted liquor. The decision in M/s Lilasons Breweries case, AIR 1992 SC 1393 is not helpful to the petitioners. Points 1 to 4 answered against the petitioners.
POINT NO. 6.
15. It is contended by the petitioners that Chapter VII dealing with offences and penalty does not contemplate levy of penalty as provided in the impugned Condition 2-C, that there is no other statutory provision which enables the State Government to make a rule or condition for imposition of penalty of the nature under consideration and, therefore, this provision is ultra vires the Act. Reliance is placed on observations of the Supreme Court in In re Article 143, Constitution of India and Delhi Laws Act, 1912 etc., AIR 1951 SC 332. In paragraph 11, the Supreme Court observed that when a legislative body passes an Act, it has exercised its legislative function the essentials of which are the determination of the legislative policy and its formulation as a rule of conduct. The Legislature having thus made its laws, every detail for working it out and carrying out the enactment into operation and effect may be done by the legislature or may be left to a subordinate agency. Though this is sometimes described as a delegation of legislative power, in essence it is different from delegation of legislative power which means a determination of the legislative policy and formulation of the same as a rule of conduct. Reliance is also placed on the decisions in M/s Lohia Machines Ltd. v. Union of India, AIR 1985 SC 421 and D. K. Trivedi and Sons and Ors. v. State of Gujarat and others, AIR 1986 SC 1323 for the proposition that the Rule-making authority cannot, under the guise of making a Rule add something new to the scheme of the Act.
16. There is no fundamental right in a citizen to carry on trade or business in liquor. The State under its regulatory power can prohibit absolutely every form of activity in relation to intoxicants. The State may decide to grant the privilege of carrying on manufacture, storing, importing, exporting, selling and possessing liquor to others. Of course, if the State decides to do so, it can regulate the same consistently with Article 14 of the Constitution of India. These aspects are inherent in the various provisions of the Act prescribing the power to prohibit the import, export or transport of any intoxicant, the interdiction against import, export or transport without sanction, prohibition of sale except under authority and subject to terms and conditions of licence, provision for licensing distilleries and warehouses, payment of duty, conditions for possession of intoxicants, power to grant lease or right to manufacture, supply, sale of liquor, prohibition of employment of male persons under 21 years of age and women in sale of liquor, prohibition of sale of liquor to persons under the age of 21 years. Prohibition of advertisement relating to liquor, closure of shop for the sake of public peace etcetera. The Act also provides for power to cancel or suspend licence in certain contingencies. Chapter VII deals with offences and penalties. Considering the dangerous nature of the subject matter of the Act in _regard to which no citizen has a fundamental right, the Act has conferred on the State Government substantial regulatory powers. There is no price control for retail sale of liquor. There is tendency on the part of licensees to purchase illicit liquor of doubtful quality at a rate cheaper than that of liquor supplied by the State or bring such illicit liquor from outside the District or State. The legislature wanted to ensure that manufacture and trade in liquor is under State control with a view to ensure quality of liquor made available to consumers, to prevent manufacture or sale of illicit liquor which may effect the revenues of the State, health of the consumers and public interest. Bearing in mind these aspects and the provisions of Section 18 which refer to lease of the right to manufacture, sale etc. on such conditions as State Government thinks fit and the care taken by the Legislature while enumerating five matters in Section 62(2)(h) to insert the words AMONG OTHER MATTERS’ and the power granted under these provisions to the State Government to prescribe terms and conditions, it must follow that Section 62(2)(h) enables the State Government to make a provision for condition of quota for licensees and to enforce the quota by prescribing penalty for not fulfilling the condition. Provisions of Chapter VII of the Act dealing with penal offences and penalties for such offences is of no significance in this context. We, therefore, hold that the power to frame rules for stipulating quota and penalty flows from Section 62(2)(h) of the Act. Point answered accordingly.
POINT NO. 7.
17. Condition 2-C of Licence under the Country Liquor Rules states that Collector “may impose” a penalty at a rate not exceeding Rs. 25/- per P. L. for every litre of spirit so falling short. But Condition 2-C of the licence under the EL. Rules does not purport to prescribe the maximum limit; on the other hand, it fixes the quantum of penalty which may be imposed depending upon the quality short lifted, dividing the same into three categories-below 500 PL., exceeding 500 PL. but not exceeding 1000 EL. and exceeding 1000 PL.
18. It is contended by the learned counsel for the petitioners that though the word ‘may’ has been used in both the conditions, penalty is not discretionary but mandatory. There may be variety of circumstances which may lead to failure on the part of licensee to lift the quota, the failure may relate to insignificant quantity or a substantial quantity. Prescription of a mandatory penalty regardless of the circumstances surrounding the act or omission is said to be unreasonable and arbitrary.
19. This aspect of the matter in relation to Condition No. 2-C under Country Liquor Rules came up for consideration in Sharma and Co. ‘s case, 1981 MPLJ 422. The Court observed :
“It is well settled that whenever a statute or Statutory rules provide far imposition of penalty it is not obligatory on the authority concerned to impose penalty in every case even though a minimum penalty be prescribed. (See Hindustan Steel Limited v. State of Orissa, AIR 1979 SC 253 and Universal Cables Ltd. v. Union of India, 1977 MPLJ 394.) The power to impose penalty is quasi-judicial power and the Collector must exercise this power after complying with the rules of natural justice………The licensee can show that he committed no breach of Condition No. 2-C or that the breach was technical or trivial or that the circumstances were such which made it impossible for him to comply with the conditions. The licensee can also show that even if a case for imposition of penalty is made out, he should not be visited with a heavy penalty and that the circumstances are such that only a nominal penalty should be imposed.”
Approving these observations, this Court in Ratanlal v. State of M. P., 1988 MPLJ 52, observed :
“The word ‘penalty’ clearly indicates that the person on whom penalty is to be imposed is sought to be penalised. A person can be penalised only for some act or omission for which he can be blamed which attracts the provision of imposition of penalty. In other words, penalty can be imposed or a person can be penalised only if he is found to be blameworthy on account of some act or omission on his part. On the other hand, if he is able to establish that he was not blameworthy and the shortfall was due to some reason for which he could not be blamed or that the breach was technical or trivial as contemplated in the case of Sharma and Co. (supra), it would be a case where either no penalty or only a nominal penalty could be imposed, as the case may be. In order to come to the conclusion as to whether the licensee in a particular case has or has not succeeded in establishing that he was not blameworthy, all relevant facts and circumstances of that case would have to be taken into consideration before recording a finding that a penalty deserved to be imposed on him and also for determining the quantum of penalty to be imposed.”
In Hindustan Steel Ltd. v. State of Orissa,83 I.T.R. 26, the Supreme Court has laid down similar criteria. The penalty contemplated by Condition vNo. 2-C cannot be equated with the minimum punishment prescribed for a criminal offence, in which case, as held by the Supreme Court in State of Andhra Pradesh v. S. R. Rangadamappa, AIR 1982 SC 1492, the Court cannot impose punishment less than a minimum punishment. We, therefore, hold that the provision for penalty under the two sets of rules is not mandatory but is only discretionary.
20. Condition No. 2-C in the licence under the Country Liquor Rules provides for maximum rate of penalty, while the condition in the licence under the EL. Rules provides a fixed penalty depending on the quantity of liquor short-lifted. The prescription of such a fixed rate of penalty would go against the dictum laid down by this Court in Sharma and Company’s case, 1981 MPLJ 422 and Ratanlal v. State, 1988 MPLJ 52. The prescription of a fixed penalty which is liable to be imposed irrespective of the facts and circumstances of the case, nature and a degree of culpability or responsibility of the licensee in regard to failure complained of, would amount to treating unequals equally. The provision in the EL. Rules if understood as prescribing an inflexible quantum of penalty would be unreasonable and arbitrary. Having regard to the parallel condition in the Country Liquor Rules, the intention of the rule-making authority can be said to be to prescribe the maximum rate of penalty, though the intention has not been correctly reflected in the drafting. It would, therefore, be appropriate to read down the quantum of penalty prescribed in Condition No. 2-C of the licence under the EL. Rules as the maximum penalty which may be imposed by the Collector.
21. We, therefore, hold that levy of penalty is discretionary and not mandatory and there is nothing inflexible in the provisions since the Country Liquor Rules prescribe only maximum rate of penalty and that the rate of penalty prescribed in the EL. Rules shall be regarded as the maximum rate. The provisions are not arbitrary. Point answered accordingly.
POINT NO. 8 –
22. It is contended that there are no norms regarding fixation of quota required to be lifted and therefore, the provision is arbitrary. It is true that the Act and the Rules do not contain express norms regarding fixation of quota. The return indicates that provision is made to stop illicit trade in liquor, to indirectly control selling rate in shops, to ensure that illicit liquor is not obtained by the licensee and sold in the shop, to ensure that no attempt is made to under-sell liquor and thereby encourage consumption and to ensure that the quality of liquor is wholesome. These factors are inherent in the exercise of power of fixation of quota required to be lifted. The Collector cannot fix a quantity in an individual case arbitrarily or without reference to the facts and circumstances relating to each area or each shop and the stock lifted in the previous years in respect of each shop. These are the broad guidelines which are inherent in the provision. The quota is announced before the public auction and the intending bidders are made aware of it. We reject the contention that there are no norms prescribed and therefore, the provision is arbitrary.
POINT NO. 9.
23. It is contented by the petitioners that the Act and the Rules do not provide for delegation on the Collector of the power to fix quota. Section 62(2)(h) of the Act enables the State Government to prescribe the authority by whom licence is to be granted, the form in which the licence is to be granted and the terms and conditions on which licence is to be granted. One of the conditions prescribed by the Rules relates to fixation of quota. The quota is announced before holding the public auction. In the very nature of things the quota would vary from one area .to another and from one shop to another. It may also vary from year to year. It is explained by the learned Government Advocate appearing for the respondents that the quota is fixed by the Collector based on the quantity of liquor lifted during the preceding three years. The quota is incorporated in the licence issued to the licensee. Licence is issued by the Licensing Authority who is the Collector. Necessarily the quota has to be determined by the Collector. The Rules clearly spell out delegation of such power to the Collector. Rules cannot lay down the quota in respect of each area or shop. Section 62(2)(h) of the Act contemplates conditions and the licensing authority to be prescribed by the Rules. Therefore, vesting of the power of fixing the quota in the Collector is not illegal or ultra vires.
POINT NO. 10.
24. It is contended that the impugned provisions are contrary to Section 23-A of the Act. Section 23-A aims at prohibition of advertisement relating to liquor. Any publication or advertisement commenting or soliciting the use of offering or purporting to comment or solicit the use of or commenting any liquor shall be punishable with imprisonment which may extend to six months or with fine which may extend to two thousand rupees or with both. The underlying purpose of the provision is to ensure that consumption of liquor is not sought to be encouraged. The purpose of the impugned provision is to ensure that the minimum stipulated quantity of liquor is lifted from the warehouse for sale and to penalise licensees who fail to do so. The purpose of the scheme of quota penalty is to prevent manufacture of and trade in illicit liquor, control retail selling rate and maintain the quality of the liquor and to ensure that only liquor supplied by the government is sold in the shops. The provision in no way violates the letter or spirit of Section 23-A of the Act.
25. Article 47 of the Constitution which occurs in Part-IV of the Constitution relating to Directive Principles of State Policy ‘requires the State to regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and in particular to endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and of drugs which are injurious to health. It is contended that the impugned provisions are contrary to the provisions of Article 14. This contention was considered and rejected in Suresh Chandra’s case, M. P. No. 579 of 1990 and Sharma and Co., 1981 MPLJ 423. In the latter case, the Division Bench drew attention of the State Government to the observations of Krishna Iyer, J. In P. N. Kaushal v. Union of India, AIR 1978 SC 1457 explaining why alcohol business is dangerous and its injurious character and mischief potential legitimates active policing of the trade by any welfare State. It is true that in the process of interpretation, the principles enshrined in Part-IV of the Constitution may enter the soul of fundamental rights. As observed in M/s Kasturilal Laxmi Reddy v. State of Jammu and Kashmir and others, AIR 1980 SC 1992, the Directive Principles of State policy concretise and give shape to the Constitutional concept of public interest. In considering the reasonableness of any action, regard may be had to the Directive Principles of State Policy. However, these criteria cannot help the petitioners to get over the impugned provisions. There is no room for enforcing doctrine of reasonableness or fairness in the realm of contract, even contracts which are statutory. Scheme of quota is a well recognised trade practice as observed in Pannalal v. State, AIR 1975 SC 2008 and Assistant Excise Commissioner and Ors. v. Issac Peter and others, J.T. 1994 (2) SC 140. The petitioners were aware of the impugned conditions before they offered their bids. The necessary information was announced also before the auction. They offered the bids with their eyes open, and they were fully conscious of the impugned conditions and their responsibilities in the matter. They cannot now seek to go back on their commitment.
26. An almost identical contention was raised by a person interested in the sale of liquor and grant of licence who, however, did not want licence to be granted for more number of liquor shops before the Andhra Pradesh High Court in the case decided in Re : M. Mohan Goud case, AIR 1980 A. P. 84. The contention was rejected by the Court on the ground that the question of prohibition did not arise for consideration in the case.
27. Petitioners in these cases are not persons who desire prohibition of manufacture and consumption of liquor to be introduced in the State. They are persons who deliberately and knowingly participated in public auction of the right to sell liquor being fully aware of the provisions of the licence conditions and their responsibilities and duties and the risk thereby they undertake. They offered the highest bids and thereby persuaded the State to grant them the exclusive privilege of vending liquor in certain areas. They cannot now be permitted to get out of the liability incurred by them under Condition No. 2-C of the licence by putting forward the Directive Principles of State Policy enshrined under Article 47 of the Constitution. Learned counsel tried to rely on the observations of Supreme Court in Synthetics and Chemicals Ltd. v. State of U.P., AIR 1990 SC 1927 to the effect that it is contradictory to move away from prohibition to obtain huge revenue for the State. We have referred earlier to the purposes sought to be achieved by the Scheme of quota and penalty. The purposes are legitimate. Accrual of revenue for the State is only incidental. Petitioners cannot wriggle out of the , contractual obligation by reliance on Article 47 of the Constitution, challenging the impugned condition.
28. Learned Government Advocate submitted that the issue is concluded by res judicala and the Court must also act on the principle of stare decisis. In the light of our conclusions referred to above, we find it unnecessary to consider these questions.
29. The learned counsel for the petitioner in M. P. No. 2605 of 1992 contended that the shortfall in lifting liquor by the petitioners occurred on account of the failure of the State to supply liquor for which requisition was given. Learned counsel relied on Ex. P.-5 for this purpose. Ex. P-5 consists of copies of four requisitions with endorsement that liquor was not available. Two of them are dated 29-7-1990 and other two are dated 30-8-1990. The petitioner has not placed before the Court the material to show the supply position before or after Ex. P.5. If he has really a grievance that there was failure on the part of the State to supply quantity of liquor sought by him, it is certainly open to him to bring it to the notice of the Collector and request that penalty should not be imposed or it should be imposed at a lesser rate, if it has not been imposed or seek remission of penalty if it has already been imposed. The petitioner is given the liberty to make a representation in this behalf to the Collector.
30. The petitioner in M.P. No. 1645 of 1992 complains that during the years 1988-91, there was no increase in the minimum quantity prescribed for the shop in question, but in the year 1991-92, there was increase by 4.5% and for the year 1992-93, there was further increase of 6% and this is arbitrary. We have already indicated the procedure adopted at the public auction. Before the auction of the right of privilege of vending liquor in a particular area or shop is held the quota required to be lifted is announced and the bidders offer bids after taking into consideration the quantity announced. The petitioner, before he participated in the auction, was fully aware of the quota fixed. He participated in the auction and offered the highest bid with full consciousness of the responsibility and risk that he was undertaking. He cannot now turn round and say that the minimum quantity fixed is arbitrary. The petitioner is not entitled to any relief in this behalf.
31. Penalty has been imposed on the petitioner in M. P. No. 4397 of 1993 after notice requiring him to appear before the officer concerned on the date prescribed to show cause why penalty should not be levied. He did not appear before the officer concerned on the prescribed date and made no attempt to place the facts before him. On the basis of materials available before the Collector, penalty was levied. The contention that there was violation of principles of natural justice, that no enquiry was made and there was no application of mind is without substance and is rejected.
32. Writ petitions are disposed of as follows :
(a) Challenge against Condition 2-C prescribed in the Country Liquor Rules and Foreign Liquor Rules is rejected.
(b) Rates of penalty prescribed in Condition 2-C of the Foreign Liquor Rules are declared to be the maximum rate of penalty which could be levied.
(c) Petitioner in M. P. No. 2605 of 1992 shall be at liberty to make a representation to the Collector for relief on the ground of failure of supply of liquor to him within one month from today. Collector shall dispose of the representation after giving an opportunity of hearing to the petitioner within two months of date of making of the representation.
(d) In other respect, writ petitions are dismissed with cost. Advocate’s fee Rs. 500/- in each petition.