JUDGMENT
B. Sudershan Reddy, J.
1. This batch of writ petitions is being disposed of by common order since the subject-matter that arises for consideration in all of them is one and the same.
2. The writ petitioners invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, with a prayer to issue a writ of mandamus declaring that the petitioners are not liable to pay the rentals for the period commencing from 17-9-2002 to 5-3-2003 during which period the licence granted to them under the provisions of A.P. Excise (Arrack and Toddy Licences General Conditions) Rules, 1969, (for short “Toddy Licences Rules”) was kept under suspension on account of which the petitioners could not carry on the business in sale of toddy. The constitutional validity of Sub-rule (2) of Rule 28 of the Toddy Licences Rules, whereunder liability has been imposed to pay the rentals even for that period during which the licences are kept under suspension pending enquiry is also impugned.
Chronology of Events:
3. We shall briefly notice the chronology of events, which are almost similar in all cases and about which there is no dispute.
4. The petitioner in W.P. No. 3465 of 2004 is the Toddy Tappers Co-operative Society, Pulekona Group, Pulekona, Hyderabad District, represented by its President. Toddy Tappers Co-operative Society, Pulekona, consists of six shops namely (1) Pulekona, (2) Kulsumpura, (3) Begumbazar, (4) Shainayath Gunj, (5) Natrajnagar and (6) Feelkhana.
5. The licences that were issued under the provisions of Andhra Pradesh Excise Act, 1968, (for short ‘the Act’) on 2-4-2002 to all the six shops are valid up to 31-3-2007. That a criminal case has been registered against the petitioner-society on 26-8-2002 in Cr.No. 69/2002-03 inter, alia alleging that on a surprise inspection of toddy shop, Pulekona, a constituent shop of T.C.S. Group of Pulekona, by the Special Task Force, found that the toddy was adulterated with alprazolam. That the Prohibition and Excise Superintendent, Hyderabad District, vide his order dated 17-9-2002 in purported exercise of the power vested under Section 31(1)(b) of the Act, suspended the licence of TCS Group, Pulekona, with immediate effect pending enquiry (so as to safeguard the health and life of the people consuming toddy) in public interest. The order dated 17-9-2002 is self-explanatory in its nature, in which it is inter alia stated that as per the chemical analysis report received from the Indian Institute of Chemical Technology, Tamak a, it has been opined that the sample seized under the cover of panchanama on 26-8-2002 from the petitioner’s shop, and sent to chemical analysis contains alprazolam, a prohibited substance. That as per Rule-5 of the A.P. Excise (Tapping of Trees and Toddy Shops Special Conditions of Licences) Rules, 1969, the licensee shall not adulterate toddy by mixing the Chloral hydrate/Diazepam/ Alprazolam ingredients. Further as per Rule 11 of the Toddy Licences Rules, the arrack or toddy which is sold or offered for sale in the shop shall be unadulterated and the licensee shall not vary the intoxicating quality or strength of the arrack or toddy by mixing any foreign ingredient or otherwise. It is unnecessary to notice further details in this regard.
6. The writ petitioners promptly filed a writ petition in W.P. No. 19186 of 2002 and batch in this Court challenging the orders of suspension of the licence dated 17-9-2002. They have obtained interim orders to their advantage prohibiting the respondents from taking any coercive steps as against them and not to give effect to the order of suspension. This Court vide its judgment dated 10-1-2003 allowed the writ petitions and accordingly set aside the order of suspension dated 17-9-2003. That on 21-1-2003, the petitioner has opened the shop on its own accord pursuant to the directions of this Court and commenced its business.
7. The respondents herein carried the matter by way of a special leave petition against the judgment of this Court and accordingly filed Special Leave Petitions on 24-2-2003. The Supreme Court of India vide its order dated 7-7-2003 granted stay of operation of the judgment of this Court in W.P. No. 19186 of 2002 and batch to the extent of suspension of licence and issue of show-cause notice. But, however, directed the respondents herein not to pass final orders during the pendency of the Special Leave Petitions preferred by the respondents.
8. That the respondents herein vide their proceedings dated 11-7-2003 directed the petitioners herein to close their shops in order to give effect to the orders passed by the Supreme Court. Finally the Supreme Court in Civil Appeal Nos. 3630 and 3631 of 2003 and batch preferred by the respondents herein vide its judgment dated 17-11-2003 set aside the judgment of this Court and directed the respondents herein to proceed further in accordance with law after affording opportunity to the petitioners; The authorities accordingly issued show-cause notice dated 27-11-2003 directing the petitioners to submit their explanation, if any, to the show-cause notice already issued and to the notice issued once again within 10 days from the date of receipt of the notice. In the show-cause notice, once again all the relevant facts are referred by duly stating that the petitioners indulged in adulteration of toddy and rendered themselves for being proceeded under Section 31 of the Act for cancellation of the licence earlier granted to them. That having considered the explanation, the licensing authority by order dated 8-12-2003 cancelled the licence of Pulekona shop, for having indulged in the prohibited activity of adulteration of toddy. On the same day, further show-cause notices were issued proposing cancellation of licences of the remaining five constituent shops of TCS Group, Pulekona. That by order dated 15-12-2003 the licences of remaining five shops of TCS Group, Pulekona, were also cancelled by the licensing authority in exercise of the power conferred under Section 31(2) of the Act.
9. Thereafter, the general body of the petitioner-society passed resolution on 31-12-2003 (1) removing the previous managing committee from the office; (2) Election/Formation of new managing committee; (3) Payment of rental balances including for the period during which the licence was under suspension in three installments; (4) Resolved to include new members; and (5) Resolved to authorize new managing committee to submit application for issue of fresh excise licence. These resolutions were obviously passed in order to enable them to make applications for grant of fresh licences in terms of the Excise (Toddy) Policy Guidelines issued by the State Government in G.O.Ms.No. 998 dated 1-10-2003, for the period from 1-10-2003 to 30-9-2004.
10. That according to the resolutions of the general body, the petitioner-society had even paid Rs. 15,70,000/- towards the first installment of arrears on 29-1-2004 and accordingly submitted application for issue of fresh licences. The licences were accordingly issued by the licensing authority on 30-1-2004.
11. That even before the licensing authority made any demand, the petitioners in anticipation that such a demand would be made by the licensing authority, moved this Court by way of these writ petitions seeking declaration that the licensing authority is not entitled to collect rentals for the period during which the petitioners could not carry on their business on account of order of suspension of the licences pending enquiry passed by the licensing authority. The total amount liable to be paid by the TCS Group of Pulekona (writ petitioner in W.P.No. 19186 of 2002) alone is stated to be Rs. 87,90,507/-.
12. Before we proceed further, we shall notice the conduct of the petitioners and the way in which, they have been conducting the affairs and enjoying the privilege granted by the State.
13. The President of the TCS Group of Pulekona, filed an affidavit before the licensing authority inter alia stating that the general body in its meeting held on 31-12-2003 resolved to remove the earlier managing committee members and formed a new managing committee and “also agreeing to pay the balance rentals for the year 2002-03 in 3 equal installments upto March, 2004, and we have paid first installment amount of Rs. 15,70,000/- today. We enclose herewith self certification. Counterpart Agreement and challans of EMD and HMD. In view of the above, we request you sir, kindly issue fresh licence to TCS Group Pulekona, as per the toddy policy guidelines for the year 2003-04.”
14. The petitioner-society having agreed to pay the amount and having paid the first installment and having obtained the fresh licence had chosen to file the present writ petition. The conduct speaks for itself. We are not impressed by the statement made in the affidavit filed in support of the writ petition that such an affidavit was given and the first installment was paid on account of threat and coercion from the 5th respondent herein who ,is impleaded as party-in-person. Such allegations are easily levelled but difficult to establish. The averments made in the affidavit filed in support of the writ petition do not inspire any confidence.
The question that arises for consideration:
15. The short question that falls for consideration is whether the respondents in law are entitled to collect the rentals from the petitioners even for the period during which the licences were kept under suspension pending enquiry on the allegations of adulteration of toddy.
Submissions:
16. Sri C.V. Mohan Ready, learned Counsel for the petitioners, submitted that the respondents in law are not entitled to collect the rentals from the petitioners for the period during which the petitioners could not conduct their business on account of orders of suspension of licences passed by the licensing authority. That collection of rentals for the period for which the petitioners admittedly did not carry the business is arbitrary and unjust. The scheme of the Act and the Toddy Licences Rules do not justify any such imposition and collection of the rentals from the petitioners. Neither the provisions of the Act nor the Toddy Licences Rules provided for levy and collection of rentals for the period during which the licences have been kept under suspension until the amendments were made to Sub-rule (2) of Rule 28 of the Toddy Licences Rules. The learned Counsel for the petitioners contended that suspension of licence pending enquiry can be for any period left to the sweet will of the licensing authority and in the absence of any obligation to dispose of the proceedings after placing the licences under suspension, the power to collect the rentals, amounts to arbitrariness. In the absence of any guidelines in the matter of suspension of the licences pending enquiry, the power conferred under the amended rule to levy and collect the rentals becomes arbitrary. Sub-rule (2) of Rule 28 itself is arbitrary and is liable to be struck down on the ground of infringement of Article 14 of the Constitution of India.
17. The learned Government Pleader for Prohibition and Excise, inter alia submitted that the liability to pay the rentals even for the period during which the licences were kept under suspension pending enquiry is always available to the authorities. The amended rule, which is clarificatory in its nature merely clarifies that the authorities are entitled to collect the rentals even for the period during which the licences are kept under suspension as a measure of policy. The amended rule in no manner deals with the situations whereunder the licences are kept under suspension pending enquiry. The learned Government Pleader also contended that the conduct of the petitioners in the instant case disentitles them for grant of any discretionary relief by this Court in exercise of its jurisdiction under Article 226 of the Constitution of India. The learned Government Pleader further made an attempt to contend that the petitioners having been undertaken to pay the arrears of rents and having obtained the fresh licences are estopped from raising any objections as regards the payment of rentals.
18. Before we proceed to deal and analyse the submissions made during the course of hearing of this batch of writ petitions, we consider it appropriate to notice the relevant provisions of the Act as well as various rules which may have bearing upon the subject-matter that arise for consideration.
Legal Environment:
19. The Andhra Pradesh Excise Act, 1968, has been enacted to consolidate and amend the law relating to the production, manufacture, transport, purchase and sale of intoxicating liquor and drugs, the levy of duties of excise and countervailing duties on alcoholic liquors for human consumption and opium, Indian hemp and other narcotic drugs and narcotics and to provide for matters connected therewith in the State of Andhra Pradesh.
20. Section 17 of the Act deals with grant of exclusive privilege of manufacture etc. It provides that the Government may, subject to such conditions as they may deem fit, to impose, grant for a fixed period to any person at any place a lease or licence or both either jointly or severally for the exclusive privilege:
(i) of manufacturing or of supplying by wholesale or of both; or
(ii) of selling by wholesale, or by retail; or
(iii) of manufacturing or of supplying by wholesale, or of both, and of selling by retail, any liquor or other intoxicant within any such area in the State as may be specified in the said order.
21. A lease shall not take effect until the Collector or any other competent officer has issued a licence under the Act.
22. Section 23 of the Act provides that the Commissioner or any other competent officer may accept payment of a sum in consideration of the grant of lease or licence or both for the exclusive privilege in respect of liquor or any other intoxicant under Section 17.
23. Section 28 of the Act mandates that every permit issued or licence granted under this Act shall be issued or granted on payment of such fees, for such period, subject to such restrictions and conditions, and shall be in such form and shall contain such particulars, as may be prescribed.
24. Section 31 of the Act, which has a direct bearing on the question that falls for consideration reads as under:
“Power to cancel or suspend licence, etc :–
(1) Subject to such restrictions as may be prescribed, the authority granting any licence or permit under this Act may cancel or suspend it [irrespective of the period to which the licence or permit relates]
(a) if any duty or fee payable by the holder thereof is 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 and 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
(d) if the holder thereof is convicted of any cognizable and non-bailable offence or of any offence under [the Narcotics Drugs and Psychotropic Substances Act, 1985] or under the Medicinal and Toilet Preparations Excise Duties) Act, 1955, or under the Trade and Merchandise Marks Act, 1958, or under Section 481, Section 482, Section 483, Section 484, Section 485, Section 486, Section 487, Section 488, or Section 489, of the Indian Penal Code or any offences punishable under Section 112 or Section 114 of the Customs Act, 1962 [irrespective of the fact whether such conviction relates to the period earlier or subsequent to the grant of licence or permit; or]
(e) if the conditions of the licence or permit provide for such cancellation or suspension at will;
Provided that no licence or permit shall be cancelled or suspended unless the holder thereof is given an opportunity of making his representation against the action proposed.
(2) Where a licence or permit held by any person is cancelled under Clause (a), Clause (b), Clause (c) or Clause (d) of Sub-section (1), the authority aforesaid may cancel any other licence granted or permit issued to such persons under this Act or under the Opium Act, 1878.
(3) The holder of a licence or permit shall not be entitled to any compensation for its cancellation or suspension nor to the refund of any fee paid or deposit made in respect thereof.”
25. Section 32 of the Act enables the authority, which granted any licence under the Act to withdraw the same for any cause other than those specified in Section 31 of the Act. When a licence is so withdrawn, the licensing authority is under obligation to refund that part of the licence fee proportionately to the un-expired portion of the term of the licence and the deposit made by the licensee in respect thereof to the licensee.
26. The rule making authority in exercise of the power conferred under the provisions of the said Act, made the rules called the Andhra Pradesh Excise (Arrack and Toddy Licences General Conditions) Rules, 1969. These rules apply to all licences issued under the Act for sale of arrack and toddy and they shall be deemed to be general conditions on the subject to which the licence shall be granted under the Act.
27. Rule 11 of the Toddy Licences Rules in specific terms mandates that arrack or toddy, which is sold or offered for sale in the shop shall be unadulterated and duty paid. The licence fee shall not vary the intoxicant quality or strength of the arrack or toddy either by making any foreign ingredient or otherwise.
28. Rule 28 of the Toddy Licences Rules deals with payment of rentals which is to the following effect:
“(1) Lease amount of the shop shall be remitted by the licensee into the Government Treasury of the revenue unit/district in which the shop is situated and the receipted challan shall be submitted to the Prohibition and Excise Inspector concerned soon after the remittance. The lease amount shall be remitted by the licensee in two equal installments. The first installment equal to half of the lease amount having been paid on the date of auction immediately after the acceptance of the tender or bid, as the case may be, in terms of Rule 16 of the Andhra Pradesh Excise (Lease of Right to Sell Indian Liquor and Foreign Liquor in Retail) Rules, 1993. The remaining half of the lease amount shall be paid within three months from commencement of the lease period. Where the due date or the next date of the installment happens to be a holiday, the installment shall be remitted a day prior to such holiday(s). In case the second installment is not remitted by the due date, the licence shall be liable for suspension or cancellation after giving an opportunity to the licensee of making his representation within seven days against the action proposed.
(2) Notwithstanding the suspension or cancellation of a licence, arrears of rental shall bear interest at the rate prescribed in the Andhra Pradesh Excise (Levy of Interest on Government Dues) Rules, 1982 from the date on which the rental becomes due upto the period for which it remains unpaid. (unamended)
29. Sub-rule (2) of Rule 28 of the Toddy Licences Rules was amended in G.O. Ms. No. 8 (Revenue) (Ex-II) Department dated 4-1-2003.
30. The amended rule reads as follows:
“Notwithstanding the suspension of a licence, the licensee is liable to pay the rental along with the interest till the finalisation of the action initiated against the licensee or restoration of the licence whichever is earlier.
Similarly, notwithstanding the suspension or cancellation of licence arrears of rental shall bear interest at {the rate prescribed in the Andhra Pradesh Excise (Levy of Interest on Government Dues) Rules, 1982} from the date on which the rental becomes due up to the period for which it remains unpaid.”
31. That under Rule 28(1) every licensee is required to remit the monthly rental of the shop, payment of which ordinarily start from the month of October of every excise year. The monthly rental shall be remitted in two equal installments. In the case of licensee not remitting the first or second installments of the monthly rental, the licence shall be liable for suspension or cancellation. The unamended Sub-rule (2) of Rule 28 specifically made the licensee liable to pay interest on the rentals due notwithstanding the suspension or cancellation of the licence. That a plain reading of the even unamended Sub-rule (2) together with Sub-rule (1) of Rule 28 makes it abundantly clear that a licensee is liable to pay the rentals even when the licence is kept under suspension or cancellation. It is not, as if, only interest is liable to be paid by the licensee from the date on which the rental becomes due up to the period for which it remains unpaid.
32. What does the expression “rental shall bear interest mean ? Does it mean only interest, and if so, on what ?
33. It is clear from the plain language employed under unamended Sub-rule (2) of Rule 28 that notwithstanding the suspension or cancellation of a licence, the arrears of rentals together with interest is liable to be paid by the licensee. Sub-rule (2) of Rule 28 as amended is merely clarificatory in its nature. It provides that notwithstanding the suspension of a licence, the licensee is liable to pay the rental along with interest till the finalisation of the action initiated against the licensee or restoration of the licence whichever is earlier. The whole of the reading of Sub-rule (2) of Rule 28 as amended by way of substitution makes it clear that even in case of suspension of a licence, the licensee is liable to pay the rentals along with interest till finalisation of the action initiated against the licensee. It means that even in case of suspension of licence pending enquiry initiated against the licensee, the rentals are required to be paid together with interest.
34. Not only in terms of Rule 28 (2) but also in terms of the counterpart agreement for lease of right to sell toddy in retail as provided for under A.P. Excise (Lease of Right to Sell Liquor in Retail) Rules, 1969, every licensee is required to pay promptly in time the monthly rentals, excise duty in the form of Tree Tax, rent to owner of Excise Trees amount towards penalties or any other charges or other liabilities if imposed and any other dues if accrued in respect of the licensed shop.
35. The only exception that has been provided is under Rule 42 of the Toddy Licence Rules, 1969, wherein it is provided that whenever a licence is withdrawn or a shop is ordered to be closed by or under the provisions of the Act, otherwise than by cancellation or suspension, no demand of rental shall be made for the period during which it was withdrawn or the shop remained closed on account of the orders of the licensing authority. Even in such cases, licensee has no right to claim any damage or compensation on that account except the refund of the proportionate licence fee. The rule making authority wherever it has considered just and necessary not to collect the rentals made a clean provision and one such situation is whenever a licence is withdrawn or shop is ordered to be closed under the provisions of the Act by the licensing authority on its own and such withdrawal or closure of the shop may be for variety of reasons and circumstances which may include public interest. In such a situation the licensee has no role to play and such direction either to close or to withdraw the licence is not on account of commission of any irregularity or illegality on the part of the licensee. Precisely in such a situation, the rule making authority safeguarded the interest of the licensee. That except in such a situation, there is no provision either in the Act or in the Toddy Licences Rules, enabling the licensee to refuse to pay the rentals.
36. The submissions made by the learned Counsel for the petitioners relying upon Section 31 of the Act are without any merit.
37. That a bare reading of Section 31 of the Act makes it abundantly clear that the licensing authority is conferred with jurisdiction to cancel or suspend the licence so granted irrespective of the period to which the licence or permit relates on the ground that any duty or fee payable by the licensee is not duly paid or the licensee has violated the terms of the licence or the licensee or his servants or any one acting on his behalf is convicted for any offence under the Act. Sub-section (2) of Section 31 enables the licensing authority to cancel any other licence granted to a licensee, if one licence or permit held by such licensee is cancelled under Clauses (1) (a), (b), (c) and (d) of Sub-section (1) of the Act. In the event of cancellation of the licence or permit, the licensee is not entitled to any compensation for its cancellation or suspension nor to the refund of any fee paid or deposit made in respect thereof.
38. The power to cancel or suspend the licence includes the power to suspend the licence pending enquiry into charges/ allegations. The learned Counsel for the petitioners made an attempt to contend that in case of cancellation or suspension of the licence, the licensee may not be entitled to refund of fee paid or deposit made, but under no circumstances liability can be fastened upon such licensee to pay the rentals during the period for which the licence has been kept under suspension pending enquiry. Such power cannot be read into Section 31 of the Act is the submission. Sub-section (3) of Section 31, in our considered opinion, does not throw any light on the question that falls for consideration. On the other hand Sub-section (3) of Section 31 of the Act is clarificatory in its nature, which declares that no licensee shall be entitled to any compensation on account of cancellation or suspension nor to the refund of any fee paid or deposit made in respect thereof.
39. It in no manner prohibits the licensing authority from collecting the rentals payable by the licensee even for the period during which the licence has been kept under suspension pending enquiry. The licensee continues to hold the licence until the same is duly cancelled or suspended as a measure of punishment for any specific period.
40. For the aforesaid reasons, we find no merit in any of the contentions urged before us.
Challenge based on Article 14:
41. Whether the amended Sub-rule (2) of Rule 28 is arbitrary ?
42. In the affidavit filed in support of the writ petition, the petitioners stated the plea that Rules 28, 31, 38 and 42 of Toddy Licences Rules are violative of Articles 14, 19, 21 and 300-A of the Constitution of India. However, Sri C.V. Mohan Reddy, learned Counsel for the petitioners, confined his submission challenging the constitutional validity of Rule 28(2) alone and that too based on Article 14 of the Constitution of the India.
43. It is very well settled that needs no reiteration that there is no fundamental right to trade or business in any intoxicants. The State under its regulatory powers is entitled and has the right to regulate every form of activity in relation to intoxicants -its manufacture, storage, possession, sale, etc. The State has the power to regulate trade or business in intoxicants, which is injurious to the health and welfare of the public and elimination and exclusion from business is inherent in the nature of liquor business. The business in liquor has been treated as a class by itself by civilized communities.
44. Faced with the stated position, the learned Counsel for the petitioners rightly confined the attack based on Article 14 only. Learned Counsel contended that Sub-rule (2) of Rule 28 being “arbitrary” and is liable to be struck down on this ground alone.
45. That if a rule is challenged as violative of Article 14, it can be struck down by the Courts on two grounds viz.,(1) violation of any of the fundamental rights guaranteed in Part – III of the Constitution or any of the Constitutional provision; and (2) Ultra vires the parent Act.
46. The first ground is pressed into service and the whole of the attack on the amending rule was mounted based on Article 14. It is neither pleaded nor demonstrated as to in what matter the rule is violative of the equality clause/equal protection clause enshrined in Article 14. Mere characterization of a rule as arbitrary is not enough to strike down a rule validly made by the rule making authority in exercise of the power conferred by the parent Act. No rule can be struck down by just characterising it as arbitrary or unreasonable. Substantial constitutional infirmity has to be found before invalidating the rule made by a rule making authority. No rule can be struck down on the ground that the Court thinks it as unjustified.
47. In order considered opinion, Sub-rule (2) of Rule 28 as amended and notified in the Official Gazette vide G.O. Ms. No. 8 dated 4-1-2003 and which has came into operation with effect from 4-1-2003 is merely clarificatory in its nature. Neither it is ultra vires the provisions of the Act nor can it be characterized as arbitrary so as to be struck down based on Article 14 of the Constitution of India.”
48. The respondents are entitled to collect rentals even for the period during which the licence has been kept under suspension pending enquiry.
49. For the sake of completeness, we may also note that the order of suspension passed by the licensing authority has been upheld by the Supreme Court. The order of suspension has been followed by cancellation of the licences. It is not a case of any direction to close or withdrawal of the licence by the licensing authority within the meaning of Rule 42 of the Toddy Licences Rules which alone provides not only for the refund of proportionate rentals for the period but also prohibits any demand of rental for the period during which the licence was withdrawn or shop was closed by order of the licensing authority under the provisions of the Act and Rules.
50. No other point is urged.
51. We have noticed the conduct of the petitioners who on their own accord applied for and obtained fresh licences after the cancellation of the licences followed by the order of suspension of the licence pending enquiry. They have voluntarily undertaken to pay the arrears in this regard and in fact one of the writ petitioners paid substantial amounts towards one installment. Instead of paying the remaining two installments had chosen to file the present writ petition in which we find no merit.
52. There are no bona fides on the part of the petitioners in invoking the equity jurisdiction of this Court under Article 226 of the Constitution of India.
53. Viewed from any angle, we find no merit and substance in the writ petitions.
54. The writ petitions are accordingly dismissed with costs.