{"id":250153,"date":"1986-10-24T00:00:00","date_gmt":"1986-10-23T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-of-madhya-pradesh-ors-vs-nandlal-jaiswal-ors-on-24-october-1986"},"modified":"2018-06-18T17:04:03","modified_gmt":"2018-06-18T11:34:03","slug":"state-of-madhya-pradesh-ors-vs-nandlal-jaiswal-ors-on-24-october-1986","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-of-madhya-pradesh-ors-vs-nandlal-jaiswal-ors-on-24-october-1986","title":{"rendered":"State Of Madhya Pradesh & Ors vs Nandlal Jaiswal & Ors on 24 October, 1986"},"content":{"rendered":"
Supreme Court of India<\/div>\n
State Of Madhya Pradesh & Ors vs Nandlal Jaiswal & Ors on 24 October, 1986<\/div>\n
Equivalent citations: 1987 AIR 251, 1987 SCR (1)\t 1<\/div>\n
Author: P Bhagwati<\/div>\n
Bench: Bhagwati, P.N. (Cj)<\/div>\n
           PETITIONER:\nSTATE OF MADHYA PRADESH & ORS.\n\n\tVs.\n\nRESPONDENT:\nNANDLAL JAISWAL & ORS.\n\nDATE OF JUDGMENT24\/10\/1986\n\nBENCH:\nBHAGWATI, P.N. (CJ)\nBENCH:\nBHAGWATI, P.N. (CJ)\nKHALID, V. (J)\n\nCITATION:\n 1987 AIR  251\t\t  1987 SCR  (1)\t  1\n 1986 SCC  (4) 566\t  JT 1986   701\n 1986 SCALE  (2)638\n CITATOR INFO :\n RF\t    1988 SC 268\t (30)\n RF\t    1990 SC 772\t (26,32)\n E&R\t    1990 SC1737\t (6)\n RF\t    1991 SC1420\t (52)\n D\t    1991 SC1676\t (72)\n R\t    1991 SC1947\t (13)\n RF\t    1992 SC 188\t (8)\n RF\t    1992 SC 488\t (2,4)\n\n\nACT:\n    Madhya  Pradesh  Excise Act, 1915, sections 13,  14\t and\n62(2)(h)  read with Rule XXII of the Madhya  Pradesh  Excise\nRules  and  Rules III to V of  Distillery  Warehouse  Rules,\nScope  of--Disposal  of licences of manufacture or  sale  of\nintoxicants--Whether  it was obligatory on the part  of\t the\ncompetent  authority  to adopt the \"tender  method\"  failing\nwhich  the \"auction\", failing which again by  fixed  licence\nfee method and so on as prescribed in Rule XXII.\n    Licences--Grant of D-2 licences as per the policy  deci-\nsion  of the Government of Madhya Pradesh--Whether  the\t li-\ncence granted create a monopoly in favour of the licencees.\n    Policy  decision  of the State to privitise\t the  liquor\ndistilleries  after careful consideration of all  the  facts\nemanating  from the application of the Madhya  Pradesh\tDis-\ntilleries  Association--Whether the High Court could  bifur-\ncate  it into two and strike down one part of the policy  as\nbad.\n    Industries\t(Development  and  Regulation)\tAct<\/a>,   1951,\nSection 11 Whether non-obtaining a licence from the  Central\nGovernment  disentitled the setting up distilleries--Such  a\nplea  not  taken in the High Court--Supreme Court  will\t not\nconsider  a new plea in an appeal under Article 136<\/a>  of\t the\nConstitution.\n    Constitution of India,  1950, Article  14--<\/a>Applicability\nof--Whether will apply to grant of liquor licences.\n    Laches in filing writ petition after the  implementation\nof the policy decision dated 30.12.84--Seven licences  acted\nupon  and  spent at least 1 to 5 crores\t and  altered  their\nposition--Whether a writ could be granted.\n    Practice  and Procedure--Judgment  writing-Objectionable\nremarks should be avoided--If any, be expunged.\n\n\n\nHEADNOTE:\n    Madhya  Pradesh Excise Act, 1915 regulates the  manufac-\nture,  sale  and possession of intoxicating  liquor  in\t the\nState of Madhya Pradesh.\n 2\nSection\t 14<\/a>  deals with the establishment  or  licensing  of\ndistilleries  and warehouses. The State Government  has,  in\nexercise of the power conferre under section 62<\/a>, made sever-\nal  sets of Rules. Rule II of the Rules of General  Applica-\ntion  made inter alia under sub-section 2(h)<\/a> of\t section  62<\/a>\nlays  down  \"five  years\" as the maximum  period  for  which\nwholesale  licences for the manufacture supply and  sale  of\nliquor could be granted Rule XXII provides for the manner in\nwhich  licences for the manufacture or sale  of\t intoxicants\nshall be disposed.\n    There were at all material times in the State of  Madhya\nPradesh\t nine  distilleries for the  manufacture  of  spirit\nwhich  were  established long hack by the  State  Government\nunder  a  licence issued by the Excise\tCommissioner.  These\nnine  distilleries  were located at  Gwalior,  Ujjain,\tDhar\nBadwaha,  Chhatisgarh,\tBhopal,\t Seoni,\t Nowgaon  (owned  by\nprivate\t individuals always) and Ratlure (owned by the\tGov-\nernment).  So far as the first seven distilleries  are\tcon-\ncerned,\t the  land and buildings in which they\twere  housed\nbelonged  to the State Government and originally  the  plant\nand  machinery also belonged to the State Government but  in\ncourse\tof  time successive holders of the D-2\tlicences  in\nrespect of these distilleries replaced the plant and machin-\nery.  The  practice  followed by the  Excise  Department  in\nregard\tto the working of these distilleries was  to  invite\ntenders\t for  the wholesale supply of  country\tliquor\tfrom\nthese distilleries and the tenderers were requested to quote\ntheir  rates for the wholesale supply of country  liquor  to\nthe  State  Government.\t Normally the  lowest  tenders\twere\naccepted  but at times the State Government used  to  accept\neven  higher  tenders taking various relevant  factors\tinto\naccount. The State of Madhya Pradesh was divided in  several\nareas and a particular area was attached to each  distillery\nfor the wholesale supply of country liquor in that area. The\nperson whose tender was accepted for any particular distill-\nery  was given a D-2 licence for working the distillery\t and\nalso  a D-1 licence for wholesale supply of  country  liquor\nmanufactured  in  that distillery to retail vendors  in\t the\narea attached to the distillery. These licences in Forms D-1\nand  D-2 were ordinarily issued for a period of five  years.\nRespondent  Nos.  5 to 11 in the writ  petition\t of  Nandial\nJaiswal were the holders of D-1 and D-2 licences in  respect\nof  these  distilleries for the period\tending\t31st  March,\n1986.  There  were two districts, however,  which  were\t not\nattached  to any distillery, namely, Jabalpur and Betul\t and\nso  far as these two districts were concerned, a licence  in\nForm  D-1(s) to make wholesale supply of country  liquor  to\nretail\tvendors in these two districts was being  given\t and\nfor  the  period ending 31st March, 1986 it  was  issued  in\nfavour\tof  Sagar Aggarwal. The country liquor\trequired  by\nSagar  Agarwal for supply to retail vendors in Jabalpur\t and\nBetul Dis-\n 3\ntricts\twas  being obtained by him from the  Ratlam  Alcohol\nPlant at the rate of Rs.1.80 per proof litre but, the supply\nof  country  liquor  from Ratlam Alcohol  Plant\t was  wholly\ninadequate  and\t Sagar Agarwal was constrained\tto  purchase\ncountry\t liquor from other sources at higher price in  order\nto fulfil his commitment under D-1 (s) licence.\n    Since  the land and buildings in which the\tdistilleries\nwere  housed belonged to the State Government the holder  of\nD-2  licence in respect of any particular distillery had  to\npay rent for the land and buildings to the State  Government\nat a rate agreed upon from time to time. So far as the plant\nand machinery of the distillery was concerned, originally it\nwas installed by the State Government at its own cost but in\ncourse\tof time it had to be replaced and  such\t replacement\nwas allowed to be made by the holder of the D-2 licence\t for\nthe  time being. It was however a condition of\tD-2  licence\nthat  on the expiry of the period of licence, if  fresh\t D-2\nlicence\t was  not issued in favour of the  existing  licence\nholder, he would be bound to transfer the plant and  machin-\nery  in\t favour of the new licence holder at a price  to  be\ndetermined  by a Valuation Committee. Therefore, during\t the\nperiod\tof D-2 licence, the plant and machinery belonged  to\nthe  licence holder for the time being. The  licence  holder\nwas  bound to manufacture country liquor in  the  distillery\nfor  which he was given D-2 licence and on the\tstrength  of\nD-2 licence supply country liquor so manufactured to  retail\nvendors\t in the area attached to the distillery at the\trate\nquoted\tin the tender and accepted by the State\t Government.\nThe  bottling  and sealing charges were also  fixed  by\t the\nState Government from time to time and they were payable  to\nthe licence holder by the retail vendors.\n    The\t total\tcapacity of all the nine  distilleries\twere\nonly  203 lakhs proof litres but even this capacity of\tpro-\nduction\t was  not realised and the  actual  production\tfell\nshort of this capacity. The result was short supply on\tmany\noccasions  leading to loss of licence fee as well as  excise\nduty by the State Government.\n    The State Government in order to meet the requirement of\nthe  consuming public had actually to purchase\tliquor\tfrom\nother States as a higher price. Moreover, the consumption of\nliquor\twas growing from year to year and it  was  estimated\nthat  by  the year 1991, the total  consumption\t of  country\nliquor would be likely to be in the neighbourhood of  482.36\nlakhs of proof litres and by the turn of the century it\t was\nexpected  to be in the neighbourhood of 1696.80 lakhs  proof\nlitres.\t The existing nine distilleries were  inadequate  to\nmeet  this growing demand for country liquor.  Further\tmore\nthe buildings in which these distil-\n 4\nleries\twere  housed has become old and were in a  state  of\ndisrepair  and it was not easy for the State  Government  to\nmaintain  them\tin good condition  without  incurring  heavy\nexpenditure  every year. The plant and machinery  were\talso\nold  and antiquated and it was necessary to instal  new\t and\nmodern\tplant  and machinery having  increased\tcapacity  to\nmanufacture  country liquor. Moreover, of seems that  though\nthe time of construction, these distilleries were away\tfrom\nthe city or town, what had happened was that with the growth\nof population and haphazard and unplanned urban development,\nthese  distilleries had now come to be in the heart  of\t the\ncity  or own and they created health hazards  and  pollution\nproblems. There was a demand from all sections of the public\nliving in surrounding area to move the distilleries away  in\norder to avoid water and environmental pollution. It was  in\nthese  circumstances, when the mind of the State  Government\nwas  already exercised in respect of these matters  that  an\napplication was made by M.P. Distillers' Association in July\n1983  for transferring these distilleries to private  owner-\nship.  The members of the M.P. Distillers'  Association\t who\nwere old distillers holding D-2 licence in respect of  these\ndistilleries  offered to invest their own funds in the\tcon-\nstruction of new buildings and installation of latest  plant\nand  machinery with capacity to produce more country  liquor\nin conformity with the standards laid down by M.P.  Eradica-\ntion  of  Pollution Board for Removal of Polluted  water  by\nconstructing  lagoons, etc., provided they were assured\t D-1\nlicence for the area attached to their respective distiller-\nies.\n    This  application of M.P. Distilleries  Association\t was\nexamined by the State Government at different levels,  cabi-\nnet sub-committees, special committee headed by Shri Vijaya-\nvargi, spot inspections. The Cabinet, sub committee  invited\nrepresentatives of the M.P. Distilleries Association,  heard\nthem  before taking filial decision in the  matter.  Finance\ndepartment'S objections and suggestions were taken note\t of.\nAt  the\t cabinet  meeting held an 30th\tDecember  1984,\t the\npolicy decision was taken to privitise liquor distilleries.\n    Pursuant  to  the policy decision dated  30th  December,\n1984  a Letter of Intent dated 1st February 1985 was  issued\nby the State Government in favour of each of respondent Nos.\n5  to 11 for grant of D-2 licence for the construction of  a\ndistillery  at a new site for the purpose  of  manufacturing\ncountry\t liquor with effect from 1st April 1986 in  lieu  of\nthe existing distillery in respect of which such  respondent\nheld D-2 and D- 1 licences for the period ending 31st  March\n1986.  The Letter of Intent set out various conditions\tsub-\nject  to  which D-2 licence was to be granted in  favour  of\neach of respondent Nos. 5 to 11 in W.P. No. 3718\/85 before\n5\nthe  High Court. The licencee to whom the Letter  of  Intent\nwas issued was required under cl. 2 of the Letter of  Intent\nto  construct  the distillery on the land  approved  by\t the\nState  Government and the M.P. Pollution Board. It was\tpro-\nvided  by cl. 12 of the Letter of Intent that  the  licensee\nshall  make proper arrangements for treatment  of  effluents\ndischarge under a scheme duly approved by the M.P. Pollution\nBoard and that any direction issued by the excise Commission\nin  this regard shall be binding on the licensee. Clause  14\nof  the Letter of Intent stipulated that the licensee  shall\nhe bound to complete construction of distillery and  instal-\nlation\tof  plant and machinery as required  by\t the  Excise\nCommissioner well before 1st April 1986.\n    The Letter of Intent was followed by a Deed of Agreement\ndated 2nd February 1985 executed by and between the Governor\nof Madhya Pradesh acting through the Excise Commissioner and\neach  of  respondent  Nos. 5 to 11. The\t Deed  of  Agreement\nrecited\t that  the Letter of Intent has been issued  by\t the\nState  Government for grant of D-2 licence for\tconstruction\nof distillery for manufacture of spirit with effect from 1st\nApril 1986. CI. 1 of the Deed of Agreement provided that the\nlicensee  shall he bound to take land on lease for a  period\nof  30 years from the State Government, but this  clause  is\nnot material because ultimately none of respondent Nos. 5 to\n11 took land on lease from the State Government and each  of\nthem  purchased his own land, the site of course  being\t ap-\nproved by the State Government.\n    Pursuant to the Letter of Intent and the Deed of  Agree-\nment  each  of\trespondent Nos. 5 to 11\t selected  with\t the\napproval  of the State Government the new site at which\t the\ndistillery  should  be located, purchased land at  such\t new\nsite,  started constructing buildings for housing  the\tdis-\ntillery and placed orders for purchase of plant and  machin-\nery to be installed in the distillery.\n    This  policy decision was challenged by Nandial  Jaiswal\nby  filing W.P. No. 3718\/85, by Sagar Agarwal by filing\t his\nW.P.  No.  335\/86 and by a firm called M\/s  Doongaji  &\t Co.\nduring\tthe  course of the arguments in the two\t writ  peti-\ntions.\tAll the three writ petitions were disposed of  by  a\ncommon\tjudgment delivered by a Division Bench of the  High,\nCourt  consisting  of Acting Chief Justice  J.S.  Verma\t and\nJustice\t B.M.  Lal.  Both the learned  Judges,\tby  separate\njudgments, substantially set aside the policy decision dated\n30th  December, 1984. Since the decision of the\t High  Court\nfor  all  practical purposes sent against  the\trespondents,\nthey preferred Civil Appeals No. 1622 to 1639 of 1986 before\nthe  Supreme Court by special leave. M\/s Doongaji & Co.\t and\nNand Lal\n 6\nJaiswal\t also, to the limited extent that they are not\tsuc-\nceed,  filed  special leave petitions Nos.6206 and  7440  of\n1986.\n    Allowing  CA  Nos. 1622 to 1639\/86\tand  dismissing\t the\nspecial leave petitions, the Court,\n    HELD:  I. I On a plain reading of Rule XXII that  a\t li-\ncence  for  manufacture\t or sale of country  liquor  may  be\ndisposed  of in any one of four different modes, viz.,\tten-\nder,  auction fixed licence fee or such other manner as\t the\nState  Government  may by general or special  order  direct.\nThese  four different modes are alternative to\tone  another\nand  anyone  of them may be resorted to for the\t purpose  of\ndisposing of a licence. It is not necessary that the mode of\ndisposal  by  tender must first be resorted to and  if\tthat\ncannot\tbe  acted upon, then only the mode  of\tdisposal  by\nauction\t and falling that and not otherwise, the third\tmode\nof disposal by fixed licence fee and only in the event of it\nnot being possible to adopt the first three modes of dispos-\nal,  the last mode namely, \"such other manner as  the  State\nGovernment may by general or special order direct\" should be\nadopted. This is plain and incontrovertible. [17B-D]\n    1.2 On a plain grammatical construction of Rule XXII, it\nis  obvious that the Collector or an Officer  authorised  by\nhim  in that behalf can choose anyone of the four modes\t set\nout  in that Rule. There is nothing in the language of\tRule\nXXII  to justify the interpretation that an earlier mode  of\ndisposal set out in the Rule excludes a latter mode or\tthat\n-reasons must be specified where a latter mode is adopted in\npreference  to an earlier one. The language of Rule XXII  in\nfact  militates against such construction. It is  impossible\nto  subscribe  to the proposition that it is  only  when  an\nearlier mode is not possible to be adopted for reasons to be\nspecified, that a latter one can be followed. The  Collector\nor an Officer authorised by him can adopt anyone of the four\nmodes  of disposal of licence set out in Rule XXII, but,  of\ncourse,\t whichever mode be adopted, the equality  clause  of\nthe Constitution should not be violated in its\tapplication.\n[17F-H]\n    1.3 It is also clear from Rules III, IV and V that there\nare  two purposes for which a licence in Form D-2  for\tcon-\nstruction and working of a distillery may be granted. It may\nbe  granted as an adjunct to the licence in Form  D-1  under\nRule IV or it may be granted as an independent licence under\nRule  V\t irrespective whether the grantee  holds  a  licence\nunder  Rule V irrespective whether the grantee holds  a\t li-\ncence  in Form D-1 or not. There are also two types  of\t li-\ncences for wholesale\n 7\nsupply of country liquor to retail vendors, namely,  licence\nin Form D-1 and licence in Form D-1 (s). The licence in Form\nD-1 in clause 5 clearly contemplated that the holder of such\nlicence\t must  also have a licence in Form D-2. No  one\t can\nhave  a\t licence in Form D-2. He must have a  distillery  in\nwhich  he distils country spirit in order that he should  be\nable  to make wholesale supply of country liquor  to  retail\nvendors. If for any reason he is unable to obtain licence in\nForm D-2 for working a distiller, no licence in Form D-1 can\nbe given to him and if he has such licence, it would  become\nineffective.  It  is for this reason that when a  person  is\ngranted a licence in Form D-1 by the Excise Commission under\nRule-III,  he  is also simultaneously granted a\t licence  in\nForm  D-2 under Rule IV and the period of both the  licences\nis  co-terminus.  But, though a person cannot be  granted  a\nlicence\t in Form D-1 unless he also obtains licence in\tForm\nD-2  the converse does not hold true. A licence in Form\t D-2\ncan be granted to a person under Rule V even though he\tdoes\nnot hold a licence in Form D-1. Where a person is granted  a\nlicence\t in Form D-2 for working a distillery under Rule  V,\nwithout having a licence in Form D-1 for wholesale supply of\ncountry\t liquor to retail vendors, he cannot make  wholesale\nsupply\tof  country  liquor manufactured by  him  to  retail\nvendors\t but he can supply such country liquor to  a  person\nholding licence in Form D-1(s) or he can manufacture  recti-\nfied  spirit, denatured spirit or foreign liquor as  contem-\nplated in condition 3 of the licence in Form D-2. It is\t not\nnecessary  that\t a person a licence in Form  D-2  must\talso\nsimultaneously have a.licence in Form D-1. [18A-F]\n    2.\tIt is undoubtedly true that the\t recommendations  of\nthe Cabinet Sub-Committee which were accepted by the Cabinet\nin  the\t policy decision dated 30th December  1984  provided\nthat  in the beginning, D-2 licence shall be granted  for  a\nperiod of 5 years and thereafter there shall be a  provision\nfor its renewal and for this purpose, necessary amendment in\nthe  M.P. Excise Act, 1915 or the Rules made under  the\t Act\nshall be made. But, in fact no such amendment in the Act  or\nthe  Rules  was made by the State Government  and  when\t the\nLetter\tof Intent was issued and the Deed of  Agreement\t was\nexecuted  and  even thereafter, the provisions\tof  the\t Act\nremained  unamended  and  Rule II of the  Rules\t of  General\nApplication  also continued to stand in its unamended  form.\nIt  is obvious that without an amendment of Rule II  of\t the\nRules  of General Application the maximum period  for  which\nD-2  licence  could be granted to respondent Nos.  5-11\t was\nonly  5 years and there could be no provision for  automatic\nrenewal thereafter from year to year. It is therefore  clear\nthat whatever might have been the original intention. it was\nnot  effectuated by carrying out necessary amendment in\t the\nprovi-\n8\nsions  of  the\tAct or in Rule II of the  Rules\t of  General\nApplication  and the ultimate decision of the State  Govern-\nment  was  to grant D-2 licence for a limited  period  of  5\nyears.\tThe provision of renewal every year was\t to  operate\nwithin\tthe span of 5 years itself and every year,  the\t li-\ncence  would  be  renewable on payment\tof  licence  fee  of\nRs.5,000 and due fulfilment of the conditions of the licence\nand  the  provisions  of the Act and the Rules.\t It  is\t not\npossible to spell out from clause that the licence was to be\ngranted\t for an initial period of 5 years and thereafter  it\nwas  liable to be renewed from year to year. The  so  called\nconcession  made on behalf of the State Government  and\t re-\nspondent  Nos. 5 to 11 was, therefore, really not a  conces-\nsion  at all but it was a stand taken in recognition of\t the\ncorrect position in regard to the grant of D-2 licence.\t The\nHigh  Court, was in the circumstances, right in holding\t the\ngrant  of  D-2\tlicence to respondent Nos. 5-11\t was  for  a\nmaximum\t period of 5 years and it did not operate to  create\nmonopoly  in their favour for an indefinite period of  time.\n[37A-H]\n    3.1 The High Court was not at all justified in splitting\nthe policy decision dated 30th December 1984 into two  parts\nand  in striking down the second part, while sustaining\t the\nfirst.\tThe policy decision dated 30th December 1984  was  a\nsingle\tintegrated decision arrived at by the State  Govern-\nment  taking a holistic view of all the aspects involved  in\nthe decision and it is difficult to appreciate how the\tHigh\nCourt  could  sustaining one part of the policy\t and  strike\ndown  the other. Either the policy as a whole could be\tsus-\ntained\tor as a whole, it could be declared to\tbe  invalid,\nbut  certainly one part could not be sustained, whatever  be\nthe  ground and the other pronounced invalid. That would  be\nmaking\ta new policy for the State Government which  it\t was\nnot competent for the High Court to do. Once the High  Court\ncame to the conclusion that on account of delay or laches in\nthe  filing of the writ petitions or the creation  of  third\nparty rights in the meanwhile, the Court would not interfere\nwith  one part of the policy decision, the court  could\t not\ninterfere  with\t the second part of the policy\tdecision  as\nwell.  The consequence of sustaining one part of the  policy\ndecision  and striking down the other would not only  be  to\ncreate\ta new policy for the State Government but  it  would\nalso cause considerable hardship and injustice to the licen-\nsees  and also result in public mischief  and  inconvenience\ndetrimental  to the interest of the State. Since  the  peti-\ntioners\t were  guilty of enormous delay in filing  the\twrit\npetitions  and\tin  the intervening period,  the  rights  of\nrespondents  Nos. 5-11 were created in that they spent\tcon-\nsiderable amount of time, energy and resources and  incurred\nhuge  expenditure in setting up the new\t distilleries,\tsus-\ntaining one part of the policy decision while striking\tdown\nthe other would amount to\n9\ncreating  a  new policy for the State Government  and  would\nalso  entail  considerable  hardship  and  inconvenience  to\nrespondent  Nos. 5-11 and would also be detrimental  to\t the\ninterest of the State. [48H, 45F-46D]\n\t  4.  The policy decision dated 30th  December\t1984\ncan  be given effect to without any new Rules being made  by\nthe  State Government. There is nothing in the policy  deci-\nsion  dated  30th December 1984 which is  contrary  to\ttime\nRules  made  under the Act. It is true that D-2\t licence  in\nits  existing  form does not contemplate construction  of  a\ndistillery and that the Rules do not seem to have prescribed\nthe  form for a licence for constructing a distillery.\tBut,\nmerely\tbecause\t the form of a licence\tfor  constructing  a\ndistillery is not prescribed by the Rules, it does not\tmean\nthat such licence cannot be granted by the Excise  Authoriti\nes. If the form of a licence is prescribed, then, of course,\nsuch form has to be followed, but if no form is\t prescribed,\nthe  only consequence is that the licence to be\t granted  by\nthe Excise Authorities need not conform to any\t    particu-\nlar  form. Section 14<\/a> (c) of the Act clearly  provides\tthat\nthe  Excise  Commissioner may license the  construction\t and\nworking\t of  a distillery and there was,  therefore  nothing\ncontrary to the Act or the Rules in the\t Excise Commissioner\nissuing\t  Letter  of  Intent  in  favour  of  each  of\t res\npondent Nos. 5-11 granting licence for construction of a new\ndistillery.  Rule  XXII\t permits any one of  four  modes  of\ndisposal of licence to be adopted by the Excise\t Authorities\nand  it does not prescribe that the fourth mode\t denoted  by\nthe words \"such other manner as the State Government may  by\ngeneral\t or  special  order  direct\"  can  be  resorted\t  to\nonly  if  the first three modes fail. Here  in\tthe  present\ncase, the policy  decision dated 30th December 1984 provided\nthat respondent Nos. 5-11 who were the existing contractors,\nshould be granted licence to construct new distilleries\t and\nD-1  and D-2 licences should be given to them  for a  period\nof  five years. for manufacturing liquor in such new  distil\nleries\tand making wholesale supply of it to retail  vendors\nin the areas  attached to those distilleries. This manner of\ndisposal of licences was clearly covered by the fourth\tmode\nof disposal set out in Rule XXII. [50B-F]\n      State of Orissa & Ors. v. Harinarayan Jaiswal &  Ors<\/a>.,\n[1972] 3 SCR 784; L.G. Chaudhari v. Secretary, L.S.G. Deptt<\/a>.\nGovt. of Bihar & Ors., AIR 1980 SC 383, referred to.\n      5. Supreme Court cannot permit any new plea as in this\ncase,  that  non-obtaining a licence  under  the  Industries\n(Development  and  Regulation) Act<\/a>, disentitles\t setting  up\ndistilleries. The foundation for this contention should have\nbeen  laid  in the writ petitions and  the  necessary  facts\nshould\thave  been pleaded in support of it.  No  such\tplea\nhaving\n10\nbeen  raised  and no such facts having been pleades  in\t the\nwrit petitions, the court cannot allow this contention to he\nraised.\t Moreover,  it\tis clear from s. 11<\/a>  read  with\t the\ndefinitions  of \"factory\" and \"industrial undertaking\"\tcon-\ntained\tin sub-sections (c) and (d) of s.3 of this Act\tthat\nlicence\t from  the  Central Government for  setting  up\t new\ndistilleries  would be necessary only if 50 or more  workers\nwere  petitions.  There is nothing to show that 30  or\tmore\nworkers\t were going to he employed in the new  distilleries.\nIn  fact  old  distilleries were also  working\twithout\t any\nlicence from the Central Government, presumably because less\nthan 50 workers were employed in such distilleries. [52E-G]\n    6.\tIt is well settled that the power of the High  Court\nto issue an appropriate writ under Art. 226<\/a> of the Constitu-\ntion is discretionary and the High Court in the exercise  of\nits discretion does not ordinarily assist the tardy and\t the\nindolent  or the acquiescent and the lethargic. If there  is\ninordinate  delay on the part of the petitioner in filing  a\nwrit petition and such delay is not satisfactory  explained,\nthe High Court may decline to intervene and grant relief  in\nthe exercise of its writ jurisdiction. The evolution of this\nrule  of laches or delay is premised upon a number  of\tfac-\ntors.  The High Court does not ordinarily permit  a  belated\nresort to the extra ordinary remedy under the writ jurisdic-\ntion  became  it  is likely to cause  confusion\t and  public\ninconvenience  and brings in its train new  injustices.\t The\nlights of third parties my intervene and if the writ  juris-\ndiction\t is exercised on a writ petition filed after  unrea-\nsonable delay, it may have the effect of inflicting not only\nhardship  and  inconvenience  but also\tinjustice  on  third\nparties.  When\tthe writ jurisdiction of the High  Court  is\ninvoked,  unexplained  delay coupled with  the\tcreation  of\nthird  party rights in the meanwhile is an important  factor\nwhich always weighs with the High Court in deciding  whether\nor not to exercise such jurisdiction. However, this rule  of\nlaches\tor delay is not a rigid rule which can be cast in  a\nstraight  jacket formula, for there may he cases  where\t de-\nspite  delay  and creation of third party  rights  the\tHigh\nCourt may still in the exercise of its discretion  interfere\nand grant relief to the petitioner. But such cases where the\ndemand of justice is so compelling that the High Court would\nhe  inclined  to interfere inspire of delay or\tcreation  of\nthird party rights would by their very nature he few and far\nbetween. Ultimately, it would he a matter within the discre-\ntion  of  the Court. Ex-hypothese every discretion  must  he\nexercised fairly and justly so as to promote justice and not\nto defeat it. [41H-42C, F-G]\n    Here,  the petitioners were guilty of enormous delay  in\nfiling the writ petitions inasmuch as during the intervening\nperiod\tthe rights of third parties had intervened  and\t re-\nspondent Nos. 5-11 acting on the\n11\nbasis of the policy decision dated 30th December, 1984,\t had\nincurred to expenditure towards setting up the distilleries.\nIf the policy decision dated 30th December 1984 were now  be\nset  aside at the instance of the petitioners it would\twork\nimmense\t hardship  on the seven licensees  and\tcause  grave\ninjustice to them, since enormous amount of time, money\t and\nenergy spent by them in setting up the distilleries would be\ntotally wasted. [41F-G, 45B]\n    Ramanna Daygram Shetty v. International Airport Authori<\/a>-\nty of India & Ors., [1979] 3 SCR 1014; Ashok Kumar Mishra  &\nAnr. v. Collector Raipur & Ors<\/a>., [1980] 1 SCR 491,  referred\nto.\n    7.\tThere is no fundamental right in a citizen to  carry\non trade or business in liquor. The State under its  regula-\ntory  power has the power to prohibit absolutely every\tform\nof  activity  in relation  to  intoxicants-its\tmanufacture,\nstorage,  export,  import, sale and possession. No  one\t can\nclaim  as against the State the right to carry on  trade  or\nbusiness in liquor and the State cannot be compelled to part\nwith  its exclusive right or privilege of manufacturing\t and\nselling\t liquor.  But when the State decided to\t grant\tsuch\nright  or  privilege to others the State cannot\t escape\t the\nrigour of Art. 14.<\/a> It cannot set arbitrarily or at its sweet\nwill. It must comply with the equality clause while granting\nthe exclusive right or privilege of manufacturing or selling\nliquor. It is, therefore, not possible to uphold the conten-\ntion  of the State Government and respondent Nos. 5-11\tthat\nArt. 14<\/a> can have not application in a case where the licence\nto manufacture or sell liquor is being granted by the  State\nGovernment.  The  State cannot ride roughshod over  the\t re-\nquirement of that Article. [53G-54B]\n    7.2\t But while considering the applicability of Art.  14<\/a>\nin  such  a case, the court must bear in mind,\tthat  having\nregard\tto  the nature of the trade-or\tbusiness  the  court\nwould be slow to interfere with the policy laid down by\t the\nState  Government for grant of licences for manufacture\t and\nsale  of liquor. The Court would in view of  the  inherently\npernicious nature of the commodity allow a large measure  of\nlatitude  to the State Government in determining its  policy\nof regulating manufacture and trade in liquor. Moreover, the\ngrant  of licences for manufacture and sale of liquor  would\nessentially  be a matter of economic policy where the  court\nwould  hesitate to intervene and strike down that the  State\nGovernment has done, unless it appears to be plaintly  arbi-\ntrary, irrational or mala fide. In complex economic  matters\nevery  decision\t is necessarily empiric and it is  based  on\nexperimentation or what one may call \"trial and error  meth-\nod\" and therefore, .its validity\n 12\ncannot\tbe vested on any rigid a \"priori\" considerations  or\non the application of any straight jacket formula. The Court\nmust  while  adjudging\tthe constitutional  validity  of  an\nexecutive  decision  relating to economic  matters  grant  a\ncertain\t measure of freedom or \"play in the joints\"  to\t the\nexecutive. [54C-55C]\n    7.3\t It is clear from c1.2 of the policy  decision\tthat\nthe  State  Government envisaged the  possibility  of  other\nliquor contractors making similar applications for  licences\nto construct new distilleries and to manufacture and  supply\nliquor from such new distilleries and hence provided that if\nany  such applications are made, they should be disposed  of\nby  the\t Excise\t Department on merits on the  basis  of\t the\nprinciples  \"recommended by the sub-committee\", that  is  on\nthe basis of the same principles on which the licences\twere\ndecided\t to be granted to the existing contractors.  If\t any\nliquor\tcontractor  makes an application for  a\t licence  to\nconstruct  a new distillery on the same terms on  which\t li-\ncences\tare granted to the existing contractor his  applica-\ntion  would  have to be considered on merits by\t the  Excise\nAuthorities and the Excise Authorities may, if they find the\nproposal  suitable, grant to such liquor contractor  licence\nto construct a new distillery along with D-2 licence on\t the\nsame  basis.  The  Excise Authorities may,  in\tsuch  event,\neither\t(i)  direct such liquor\t contractor  to\t manufacture\nractified spirit, denatured spirit or foreign liquor in\t the\nnew distillery for the remaining period of the D- 1 and\t D-2\nlicences of the existing contractors and thereafter consider\nhim along with other liquor contractors for grant of D-1 and\nD-2 licences in respect of the new distillery or (ii) reduce\nand\/or\talter  the  area of supply of any  of  the  existing\ncontractors and grant D- 1 license to such liquor contractor\nin  respect of the carved out area. If the Cabinet  decision\ndated  30th  December 1984 while granting  licences  to\t the\nexisting contractors leave it open to other liquor contracts\nto.come in and apply for similar licences, it cannot be said\nthat Art. 14<\/a> is violated. [56C-G]\n    7.4\t When the State Government is granting\tlicence\t for\nputting\t up a new industry, it is not at all necessary\tthat\nit  should advertise and invite offers for putting  up\tsuch\nindustry. The State Government is entitled to negotiate with\nthose  who have come up with an offer to set up such  indus-\ntry. [60C]\n    Har\t Shankar  & Ors. etc. v. Deputy\t Excise\t &  Taxation\nCommissioner  &\t Ors., [1975] 3 SCR 254; R.K. Garg  etc.  v.\nUnion of India & Ors. etc. [1982] 1 SCR 1947, referred to.\n    Kasturi  Lal Lakshmi Reddv v. State of J & K<\/a>,  [1980]  3\nSCR 1338, followed.\n13\n    Metropolis\tTheatre\t Company  v. State  of\tChicago,  57\nLawyers Edition 730, quoted with approval.\n    8.\tJudges\tshould not use strong and  carping  language\nwhile criticising the conduct of parties or their witnesses.\nThey must act with sobriety, moderation and restraint.\tThey\nmust have the humility to recognise that they are not infal-\nlible  and  any harsh and disparaging strictures  passed  by\nthem  against any party may be mistaken and unjustified\t and\nif so, they may do considerable harm and mischief and result\nin  injustice. Here, in the present case,  the\tobservations\nmade  and  strictures  passed by B.M. Lal  J.  were  totally\nunjustified and unwarranted and they ought not to have\tbeen\nmade. [66G-H]\n    In the instant case, the words used in paras 1,9, 17  to\n19  and 34 of Lal J.'s judgment are undoubtedly\t strong\t and\nhighly\tdisparaging remarks attributing mala fides,  corrup-\ntion  and underheard dealing of the State  Government  which\nare not justified by the record. [62B]\n\n\n\nJUDGMENT:\n<\/pre>\n
    CIVIL  APPELLATE JURISDICTION: Civil  Appeal Nos.  1622-
\n39 of 1986
\n    From  the Judgment and Order dated 28.3.86 of  the\tHigh
\nCourt of M.R. at Jabalpur in Misc. Petition Nos. 3718\/85,335
\n& 785 of 1986.\n<\/p>\n
    K.\tParasaran,  Attorney General, A.M. Mathur  and\tS.L.
\nSaxena, Adv. Genl\/Dy. Adv. Gent. of the State of M.P.,\tG.L.
\nSanghi, F.S. Nariman, N.A. Modi, V.M. Tarkunde, A.B.  Divan,
\nDr. L.M.Singhvi, Soli J.  Sorabji, L.N. Sinha, S.N.  Kacker,
\nNarayan\t Nittar, G.S. Narayan,\t   Pramod Swarup, D.P.\tSri-
\nvastava, V. Ravindra Srivastava, S.L.  Athley, R.F.  Nanman,
\nA. Subba Rao, V.K. Munshi, I.B. Dadachanji, D.N. Misra, Shri
\nNarain, S. Salve, L.S. Diwani, Mrs. A.K. Verma, K.K-  Sinha,
\nA.  Mishra,  A.\t Sapre, R.S. Singh and S.K.  Singh  for\t the
\nappearing parties.\n<\/p>\n
C.L. Sahu and Bharat Brewris for the Intervenor.
\nThe judgment of the Court was delivered by
\n     BHAGWATI,\tC  J:  These appeals by\t special  leave\t are
\ndirected against a judgment of the Madhya Pradesh High Court
\nin  what has come to be known as, M.P. Liquor case,  brought
\nbefore\tthe High Court by way of three writ petitions  under
\narticle\t 226<\/a> of the Constitution. Writ Petition\t No.3718  of
\n1985 was filed by one Nandial Jaiswal
\n 14<\/span>
\non  28the November 1985 while writ petition No.335 of  1986-
\nwas  filed by one Sagar Agarwal on 24th-January\t 1986.\tBoth
\nthese writ petitions were directed against the policy  deci-
\nsion of the State of Madhya Pradesh contained in the Cabinet
\ndecision dated 30th December, 1984. The third writ petition,
\nviz., writ petition No. 785 of 1986 was also filed challeng-
\ning the same policy decision of the State of Madhya  Pradesh
\nby  a firm called M\/s Doongaji & Co. but it was\t filed\tmuch
\nlater  at  a time when arguments were actually going  on  in
\ncourt  in the first two writ petitions. The  respondents  in
\nthe  first  two writ petitions were not aware at  that\ttime
\nthat it was a writ petition which was filed by M\/s  Doongaji
\n& Co. They thought that it was merely an intervention appli-
\ncation\tsince  no notice was served upon them and  they\t had
\nalso no opportunity of filing an affidavit in reply to\tthat
\nwrit petition. All these three writ petitions were  disposed
\nof by a common judgment delivered by a Division Bench of the
\nHigh Court consisting of Acting Chief Justice J.S. Verma and
\nJustice\t B.M.  Lal.  Both the learned  Judges,\tby  separate
\njudgments, substantially set aside the policy decision dated
\n30th  December, 1984. Since the decision of the\t High  Court
\nfor  all  practical purposes went against  the\trespondents,
\nthey  preferred\t Civil\tAppeals Nos. 1622 to  1639  of\t1986
\nbefore\tthis Court by special leave. M\/s Doongaji & Co.\t and
\nNand  Lal Jaiswal also, to the limited extent that they\t did
\nnot  succeed,  filed special leave petitions Nos.  6206\t and
\n7440  of 1986. That is how the present appeals\tand  special
\nleave  petitions  have come up before us. The  facts  giving
\nrise to these appeals and special leave petitions are  mate-
\nrial and need to be stated in some detail.\n<\/p>\n
    But,  before we advert to the facts, it is necessary  to
\nset  out  the relevant provisions of Madhya  Pradesh  Excise
\nAct, 1915 which is the statute regulating manufacture,\tsale
\nand  possession\t of  intoxicating’ liquor in  the  State  of
\nMadhya\tPradesh.  Originally, this Act was enacted  for\t the
\nformer\tProvince of C.P. and Berar but\tsubsequently,  after
\nthe  coming into force of the Constitution, it was  extended
\nto  the\t State of Madhya Pradesh by M.P. Extension  of\tLaws
\nAct,  1958 and it was rechristened as M.P. Excise Act  1915.
\nSection\t 2(13)<\/a> of the Act defines ‘liquor’ to mean  ‘intoxi-
\ncating liquor’ and to include “spirits or wine, taft,  beer,
\nall  liquid  consisting of or containing  alcohol,  and\t any
\nsubstance  which the State Government may, by  notification,
\ndeclare\t to be liquor for the purpose” of the Act. The\tterm
\n“manufacture” is defined in Section 2(14)<\/a> to include  “every
\nprocess, whether natural or artificial, by which any intoxi-
\ncant  is  produced or prepared and also\t redistillation\t and
\nevery process for the rectification, flavouring, blending or
\ncoloring  of liquor”. There is also the definition of  ‘spi-
\nrit’ in section
\n15<\/span><\/a>
\n2(17)<\/a> which provides that “spirit” means any liquor contain-
\ning alcohol obtained by distillation whether it is denatured
\nor  not. Chapter IV of the Act is headed ‘Manufacture,\tPos-
\nsession and Sale’ and that is the chapter with which we\t the
\nconcerned in the present appeals. Section 13<\/a> provides, inter
\nalia, that no distillery or brewery shall be constructed  or
\nworked and no person shall use, keep or have in his  posses-
\nsion  any  material, still utensil, implement  or  apparatus
\nwhatsoever  for the purpose of manufacturing any  intoxicant
\nother  than taft, except under the authority and subject  to
\nthe  terms and conditions of a licence granted in  that\t be-
\nhalf.  It  is also obligatory under this section to  have  a
\nlicence\t for  manufacture  of intoxicant  and  for  bottling
\nliquor for sale and no intoxicant can be manufactured and no
\nliquor can be bottled for sale without such licence. Section
\n14<\/a>  is a material section and it may, therefore,  be  repro-
\nduced in extenso:\n<\/p>\n
\t      14. Establishment or licensing of distilleries
\n\t      and warehouses\n<\/p><\/blockquote>\n
\t      (a) establish a distillery in which spirit may
\n\t      be manufactured under a licence granted  under
\n\t      section  13<\/a>  on such conditions as  the  State
\n\t      Government may impose;\n<\/p><\/blockquote>\n
\t      (b) discontinue any such distillery;\n<\/p><\/blockquote>\n
\t      (c)  licence, on such conditions as the  State
\n\t      Government  may impose, the  construction\t and
\n\t      working of a distillery or brewery;\n<\/p><\/blockquote>\n
\t      (d) establish or licence a warehouse,  wherein
\n\t      any  intoxicant  may  be\tdeposited  and\tkept
\n\t      without  payment of duty, but subject to\tpay-
\n\t      ment of such fees as the State Government\t may
\n\t      direct; and\n<\/p><\/blockquote>\n
\t      (e) discontinue any such warehouse
\n\t      We may then refer to section 17<\/a> which provides
\n\t      inter  alia that no intoxicant shall  be\tsold
\n\t      except under the authority and subject to\t the
\n\t      terms  and conditions of a licence granted  in
\n\t      that  behalf. The State  Government  obviously
\n\t      has  the\tmonopoly in regard  to\tmanufacture,
\n\t      possession  and  sale  of liquor\tas  held  in
\n\t      several  decisions of this Court.\t Section  18<\/a>
\n\t      recognises  the power of the State  Government
\n\t      to  “lease to any person, on  such  conditions
\n\t      and  for such period as it may think  fit\t the
\n\t      right–(a) of manufacturing or of supplying by
\n\t      wholesale,  or of both, or (b) of\t selling  by
\n\t      wholesale or by retail, or (c) of\t manufactur-
\n\t      ing or of supplying by wholesale, or of  both,
\n\t      and selling by retail, any
\n\t       16<\/span>
\n\t      liquor or intoxicating drug within any  speci-
\n\t      fied area.” There are no other sections in the
\n\t      Act material for our purpose until we come  to
\n\t      section 62<\/a> which confers on the State  Govern-
\n\t      ment  the power to make Rules for the  purpose
\n\t      of  carrying  out the provisions of  the\tAct.
\n\t      Subsection  2(h)<\/a> of section 62<\/a>  provides\tthat
\n\t      the State Government may make Rules  prescrib-
\n\t      ing  the authority by, the form in which,\t and
\n\t      the  terms  and conditions on and\t subject  to
\n\t      which,  any licence, permit or pass  shall  be
\n\t      granted  and by such rules, among\t other\tmat-
\n\t      ters,  fix the period for which  any  licence,
\n\t      permit or pass shall continue in force.
\n\t\t  The  State Government has, in exercise  of
\n\t      the  power  conferred under section  62<\/a>,\tmade
\n\t      several sets of Rules. Rule II of the Rules of
\n\t      General  Application  made  inter\t aria  under
\n\t      sub-section 2(h)<\/a> of section 62<\/a>, lays down\t the
\n\t      period of licence and clause (2) of this\tRule
\n\t      provides: “Wholesale licences for the manufac-
\n\t      ture, supply and sale of liquor may be granted
\n\t      for any number of years not exceeding five, as
\n\t      the State Government may in each case decide.”
\n\t      Rule  XXII also framed under sub-section\t2(h)<\/a>
\n\t      of section 62<\/a> provides for the manner in which
\n\t      licences\tshall  be granted and  it  reads  as
\n\t      follows:\n<\/p><\/blockquote>\n
\t      “XXII. Disposal of licences– (1) Licence\t for
\n\t      the  manufacture or sale of intoxicants  shall
\n\t      be  disposed  of\tby  tender,  auction,  fixed
\n\t      licence  fee  or in such other manner  as\t the
\n\t      State  Government may, by general\t or  special
\n\t      order, direct.\n<\/p><\/blockquote>\n
\t\t\tExcept\twhere otherwise\t prescribed,
\n\t      licence  shall be granted by the Collector  or
\n\t      by  an Officer authorised by him in  that\t be-
\n\t      half.”\n<\/p><\/blockquote>\n
Rules  III to V of the Distillery and Warehouse\t Rules\talso
\nmade  inter alia under sub-section 2(h)<\/a> of section  62<\/a>\tdeal
\nwith  the  subject of grant of licence and provide,  in\t the
\nfollowing  terms, for different kinds of licences which\t may
\nbe issued, viz., licences in Forms D-1, D-1(s) and D-2:\n<\/p>\n
\t      “III.  Subject  to the sanction of  the  State
\n\t      Government, the Excise Commissioner may  grant
\n\t      a licence in Form D-1 and Form D-1(s) for\t the
\n\t      wholesale\t supply of country spirit to  retail
\n\t      vendors.\n<\/p><\/blockquote>\n
\t      IV.  The Collector may issue, on payment of  a
\n\t      fee of Rs. 1000 a licence in Form D-2 for\t the
\n\t      construction  and working of a  distillery  to
\n\t      any person to whom a wholesale supply  licence
\n\t      has been issued.\n<\/p><\/blockquote>\n
\t      17<\/span><\/p>\n
\t      V. Subject to sanction of the State Government
\n\t      the Excise Commissioner may issue a licence in
\n\t      Form D-2 for the construction and working of a
\n\t      distillery on payment of a fee of Rs. 1000.”<\/p><\/blockquote>\n
    It\tis  clear  on a plain reading of Rule  XXII  that  a
\nlicence\t for  manufacture or sale of country liquor  may  be
\ndisposed  of in any one of four different modes, viz.,\tten-
\nder, auction, fixed licence fee or such other manner as\t the
\nState  Government  may by general or special  order  direct.
\nThese  four different modes are alternative to\tone  another
\nand  any one of them may be resorted to for the\t purpose  of
\ndisposing of a licence. It is not necessary that the mode of
\ndisposal  by  tender must first be resorted to and  if\tthat
\ncannot\tbe  acted upon, then only the mode  of\tdisposal  by
\nauction\t and failing that and not otherwise, the third\tmode
\nof disposal by fixed licence fee and only in the event of it
\nnot being possible to adopt the first three modes of dispos-
\nal,  the last mode, namely, ‘such other manner as the  State
\nGovernment  may\t by general or special order  direct’.\tThis
\nwould seem to be plain and incontrovertible but Mr.  Justice
\nB.M.  Lal  has rather curiously in his\tjudgment  held\tthat
\nthese four modes of disposal are inter-related and  “failing
\nin one of the clauses, the next is to be acted upon and\t for
\napplying the fourth clause, it is incumbent for the State to
\nspecify the manner by general or special order and this also
\nincludes “specifying how and why the other three clauses are
\nnot  possible to be acted upon which compels to take  resort
\nto  the fourth clause”. This view taken by Mr. Justice\tB.M.
\nLal in regard to the interpretation of Rule XXII is obvious-
\nly  unsustainable. It is indeed surprising how such  a\tview
\ncould possibly be taken. On a plain grammatical construction
\nof Rule XXII it is obvious that the Collector or an  Officer
\nauthorised  by him in that behalf can choose any one of\t the
\nfour  modes  set out in that Rule. There is nothing  in\t the
\nlanguage of Rule XXII to justify the interpretation that  an
\nearlier\t mode  of disposal set out in the  Rule\t excludes  a
\nlatter mode or that reasons must be specified where a latter
\nmode  is adopted in preference to an earlier one.  The\tlan-
\nguage of Rule XXII in fact militates against such  construc-
\ntion. It is impossible to subscribe to the proposition\tthat
\nit is only when an earlier mode is not possible to be adopt-
\ned  for\t reasons to be specified, that a latter one  can  be
\nfollowed. The Collector or an Officer authorised by him\t can
\nadopt  any one of the four modes of disposal of licence\t set
\nout in Rule XXII, but, of course, whichever mode be adopted,
\nthe  equality clause of the Constitution should not be\tvio-
\nlated in its application.\n<\/p>\n
 18<\/span><\/p>\n
    It is also clear from Rules III, IV and V which we\thave
\nset  out  above,  that there are two purposes  for  which  a
\nlicence\t in Form D-2 for construction and working of a\tdis-
\ntillery\t may be granted. It may be granted as an adjunct  to
\nthe  licence in Form D-1 under Rule IV or it may be  granted
\nas an independent licence under Rule V irrespective  whether
\nthe  grantee holds a licence in Form D- 1 or not. There\t are
\nalso  two types of licences for wholesale supply of  country
\nliquor\tto retail vendors, namely, licence in Form  D-1\t and
\nlicence in Form D-1(s). The licence in Form D-1 in clause  5
\nclearly\t contemplates that the holder of such  licence\tmust
\nalso  have a licence in Form D-2. No one can have a  licence
\nin  Form D-1 unless he has simultaneously a licence in\tForm
\nD-2.  He must have a distillery in which he distils  country
\nspirit\tin  order that he should be able to  make  wholesale
\nsupply\tof  country  liquor to retail vendors.\tIf  for\t any
\nreason he is unable to obtain licence in Form D-2 for  work-
\ning a distillery, no licence in Form D-1 can be given to him
\nand if he has such licence, it would become ineffective.  It
\nis  for this reason that when a person is granted a  licence
\nin Form D-1 by the Excise Commissioner under Rule III, he is
\nalso simultaneously granted a licence in Form D-2 under Rule
\nIV and the period of both the licences is co-terminus.\tBut,
\nthough\ta  person cannot be granted a licence  in  Form\t D-1
\nunless\the  also obtains licence in Form D-2,  the  converse
\ndoes not hold true. A licence in Form D-2 can be granted  to
\na person under Rule V even though he does not hold a licence
\nin Form D-1. Where a person is granted a licence in Form D-2
\nfor  working  a distillery under Rule V,  without  having  a
\nlicence\t in Form D-1 for wholesale supply of country  liquor
\nto retail vendors, he cannot make wholesale supply of  coun-
\ntry  liquor manufactured by him to retail vendon but he\t can
\nsupply\tsuch country liquor to a person holding\t licence  in
\nForm  D-1(s) or he can manufacture ractified  spirit,  dena-
\ntured spirit or foreign liquor as contemplated in  condition
\n3  of  the licence in Form D-2. It is not necessary  that  a
\nperson holding a licence in Form D-2 must also simultaneous-
\nly have a licence in Form D- 1.\n<\/p>\n
    It is in the context of these provisions of the Act\t and
\nthe  Rules  that we must consider the facts  of\t this  case.
\nThere  were  at all material times in the  State  of  Madhya
\nPradesh\t nine  distilleries for the manufacture\t of  spirit,
\nwhich  were  established long back by the  State  Government
\nunder a licence issued by the Excise Commissioner. The names
\nand  other particulars of these distilleries are set out  in
\nthe following table:-\n<\/p>\n
 19<\/span><\/p>\n
Name of\t\t  Production\t Production\nDistillery\t  capacity in\t 81-82\t      82-83\n\t\t  proof litres\n1. Gwalior\t   15 lacs\t--\t     9 lacs\n2. Ujjain\t   13 lacs\t10 lacs\t     10 lacs\n3. Dhar\t\t   15 lacs\t9 lacs\t     12 lacs\n4. Badwaha\t   20 lacs\t12 lacs\t     14 lacs\n5. Chhatisgarh\t   30 lacs\t29 lacs\t     25 lacs\n6. Bhopal\t   12 lacs\t9 lacs\t     11 lacs\n7. Seoni\t   20 lacs\t18 lacs\t     19 lacs\n8. Nowgaon (owned  8 lacs\t3 lacs\t     4 lacs\nby private\nindividual)\nTotal:\t\t   133 lacs\t 90 lacs      104 lacs\n9. Ratlam Alcohol  70 lacs\t 39 lacs      67 lacs\nPlant (owned by\nGovt.\nTotal:\t\t   203 lacs\t 129 lacs     17 1 lacs\n<\/pre>\n
We are concerned in these appeals with only the first  seven
\ndistilleries  since the Nowgaon Distillery has\talways\tbeen
\nowned  and worked by a private firm and the  Ratlam  Alcohol
\nPlant is owned by the State Government and is managed by the
\nM.P.  State Industries Corporation and the  impugned  policy
\ndecision  dated 30th December, 1984 does not  concern  these
\nlast two distilleries. So far as the first seven  distiller-
\nies  are concerned, and hereafter whenever we refer to\tdis-
\ntilleries we shall be referring only to these seven distill-
\neries,\tthe  land and-buildings in which  they\twere  housed
\nbelonged  to the State Government and originally  the  plant
\nand  machinery also belonged to the State Government but  in
\ncourse\tof  time successive holders of the D-2\tlicences  in
\nrespect of these distilleries replaced the plant and machin-
\nery.  The  practice  followed by the  Excise  Department  in
\nregard\tto the working of these distilleries was  to  invite
\ntenders\t for  the wholesale supply of  country\tliquor\tfrom
\nthese distilleries and the tenderers were requested to quote
\ntheir  rates for the wholesale supply of country  liquor  to
\nthe  State  Government.\t Normally the  lowest  tenders\twere
\naccepted  but at times the State Government used  to  accept
\neven  higher  tenders taking various relevant  factors\tinto
\naccount. The State of Madhya Pradesh was divided in  several
\nareas and a particular area was attached to each
\n 20<\/span>
\ndistillery  for\t the wholesale supply of country  liquor  in
\nthat  area.  The person whose tender was  accepted  for\t any
\nparticular  distillery was given a D-2 licence\tfor  working
\nthe  distillery and also a D-1 licence for wholesale  supply
\nof country liquor manufactured in that distillery to  retail
\nvendors\t in the area attached to the distillery.  These\t li-
\ncences\tin  Forms D-1 and D-2 were ordinarily issued  for  a
\nperiod\tof  five years. Respondent Nos.5 to 11 in  the\twrit
\npetition of Nandlal Jaiswal were the holders of D-1 and\t D-2
\nlicences  in  respect of these distilleries for\t the  period
\nending 31st March, 1986. There were two districts,  however,
\nwhich were not attached to any distillery, namely,  Jabalpur
\nand Betul and so far as these two districts were  concerned,
\na licence in Form D-1(s) to make wholesale supply of country
\nliquor\tto retail vendors in these two districts  was  being
\ngiven  and  for the period ending 31st March,  1986  it\t was
\nissued\tin  favour  of Sagar Aggarwal.\tThe  country  liquor
\nrequired  by Sagar Agarwal for supply to retail\t vendors  in
\nJabalpur and Betul Districts was being obtained by him\tfrom
\nthe  Ratlam Alcohol plant at the rate of Rs. 1.80 per  proof
\nlitre but, as will be presently seen, the supply of  country
\nliquor\tfrom Ratlam Alcohol Plant was wholly inadequate\t and
\nSagar  Agarwal\twas constrained to purchase  country  liquor
\nfrom  other sources at higher price in order to\t fulfil\t his
\ncommitment under D-1(S) licence.\n<\/p>\n
    Since  the land and buildings in which the\tdistilleries
\nwere housed belonged to the State Government, the holder  of
\nD-2  licence in respect of any particular distillery had  to
\npay rent for the land and buildings to the State  Government
\nat a rate agreed upon from time to time. So far as the plant
\nand machinery of the distillery was concerned, originally it
\nwas installed by the State Government at its own cost but in
\ncourse\tof time it had to be replaced and  such\t replacement
\nwas allowed to be made by the holder of the D-2 licence\t for
\nthe  time being. It was however a condition of\tD-2  licence
\nthat  on the expiry of the period of licence, if  fresh\t D-2
\nlicence\t was  not issued in favour of the  existing  licence
\nholder, he would be bound to transfer the plant and  machin-
\nery  in favour of the new licence, holder at a price  to  be
\ndetermined  by a Valuation Committee. Therefore, during\t the
\nperiod\tof D-2 licence, the plant and machinery belonged  to
\nthe  licence holder for the time being. The  licence  holder
\nwas  bound to manufacture country liquor in  the  distillery
\nfor  which he was given D-2 licence and on the\tstrength  of
\nD-2 licence supply country liquor so manufactured to  retail
\nvendors\t in the area attached to the distillery at the\trate
\nquoted\tin the tender and accepted by the State\t Government.
\nThe  bottling  and sealing charges were also  fixed  by\t the
\nState Government from time to time and they were payable  to
\nthe licence holder by the retail vendors. It may be
\n21<\/span>
\npointed\t out  that  at the material time  the  bottling\t and
\nsealing charges were fixed at 80 paise per bottle which came
\nto Rs.3.40 per proof litre.\n<\/p>\n
    Now,  the total capacity of all the 9  distilleries\t in-
\ncluding Nowgaon Distillery and Ratlam Alcohol Plant was only
\n203  lacs proof litres but even this capacity of  production
\nwas not realised and the actual production fell for short of
\nthis  capacity. The total production of country liquor\tfrom
\nall  the 9 distilleries in the year 81-82 came to  only\t 129
\nlacs  proof litres and though in the year 1982-83 there\t was
\nsome improvement, the total production did not go beyond 171
\nlacs  proof  litres.  The result was short  supply  on\tmany
\noccasions  leading to loss of licence fee as well as  excise
\nduty by the State Government. The State Government, in order
\nto meet the requirement of the consuming public, had actual-
\nly  to purchase liquor from other States at a higher  price.
\nMoreover, the consumption of liquor was growing from year to
\nyear  and it was estimated that by the year 1991, the  total
\nconsumption  to country liquor would be likely to be in\t the
\nneighbourhood of 482.36 lacs proof litres and by the turn of
\nthe  century it was expected to be in the  neighbourhood  of
\n1696.80\t lacs proof litres. Obviously, the existing  9\tdis-
\ntilleries  were\t totally  inadequate to\t meet  this  growing
\ndemand\tfor  country liquor. Furthermore, the  buildings  in
\nwhich these distilleries were housed had become old and were
\nin  a state of disrepair and it was not easy for  the  State
\nGovernment to maintain them in good condition without incur-
\nring  heavy expenditure every year. The plant and  machinery
\nwere also old and antiquated and it was necessary to  instal
\nnew and modern plant and machinery having increased capacity
\n‘to  manufacture  country liquor. Moreover,  it\t seems\tthat
\nthough at the time of construction, these distilleries\twere
\naway from the city or town, what had happened was that\twith
\nthe  growth of population and haphazard and unplanned  urban
\ndevelopment,  these distilleries had now come to be  in\t the
\nheart of the city or own and they created health hazards and
\npollution problems. There was a demand from all sections  of
\nthe public living in surrounding area to move the distiller-
\nies  away in order to avoid water and  environmental  pollu-
\ntion.  It was in these circumstances, when the mind  of\t the
\nState  Government was already exercised in respect of  these
\nmatters\t that  an application was made by  M.P.\t Distillers’
\nAssociation in July 1983 for transferring these distilleries
\nto  private ownership. The members of the  M.P.\t Distillers’
\nAssociation  who were old distillers holding D-2 licence  in
\nrespect\t of these distilleries offered to invest  their\t own
\nfunds in the construction of new buildings and\tinstallation
\nof latest plant and machinery with capacity to produce\tmore
\ncountry liquor in conformity with the standards laid down by
\nM.P. Eradication of Pollution Board for
\n 22<\/span>
\nRemoval\t of  Polluted water by constructing  lagoons,  etc.,
\nprovided they were assured D-1 licence for the area attached
\nto their respective distilleries.\n<\/p>\n
    This  application  of M.P.\tDistillers  Association\t was
\nexamined  by the State Government at different\tlevels.\t The
\nExcise\tCommissioner submitted his opinion to  the  Separate
\nRevenue Department stating that “it would be more  appropri-
\nate  to\t hand over the Government  distilleries\t to  private
\nownership because thereby the Government will get additional
\nincome\tfrom the sale of buildings, land, etc., of the\tdis-
\ntilleries and at the same time the distillers will pay\tmore
\nheed to the distilleries buildings, etc., due to transfer of
\nthe  distilleries to private ownership and they will  instal
\nthe  latest  machinery and implements as a result  of  which
\nthere will be an increase in liquor production and supply of
\nliquor as per requirement of the State Government and at the
\nsame  time  they will be liable for solving the\t problem  of
\npollution.”  The  Revenue Department,  after  obtaining\t the
\nReport\tfrom  the Excise Commissioner  examined\t the  matter
\ncarefully  from\t various aspect. But  since  several  points
\nrequired  consideration\t such as  whether  the\tdistilleries
\nshould be transferred to private ownership during the period
\nof  the subsisting contracts, and if so, what would  be\t the
\nlegal  consequences and whether the distilleries  should  be
\nallowed\t to continue at the same place or should  be  trans-
\nferred to new sites in view of the problem of pollution\t and
\nthe  question of transfer of distilleries to private  owner-
\nship  was  itself an important policy  issue,  the  Separate
\nRevenue Department referred the matter to the Chief Minister
\nwith  a\t suggestion that a high level  committee  should  be
\nappointed  for the purpose of examining the various  issues.
\nThe  State  Government accordingly under the orders  of\t the
\nChief Minister constituted a Cabinet SubCommittee consisting
\nof Ministers of Separate Revenue Department, Major and Minor
\nIrrigation Department, Commerce and Industry Department\t and
\nRehabilitation\tand Environment Department and\tfour  highly
\nplaced\tofficers, namely, Chief Secretary, Secretary,  Sepa-
\nrate  Revenue Department, Secretary Finance  Department\t and
\nExcise\tCommissioner  were directed to\tassist\tthe  Cabinet
\nSubCommittee.  The Separate Revenue Department\tsubmitted  a
\nnote for the consideration of the Cabinet Sub-Committee\t and
\nthis  note formulated various issues arising for  considera-
\ntion and set-out various aspects relating to these issues so
\nas  to form the basis for. discussion. These issues  may  be
\nsummarised as follows:\n<\/p>\n
\t      (1)  Whether  the\t transfer  of  ownership  of
\n\t      Government distilleries should be made  during
\n\t      the  present  contract period only or  on\t the
\n\t      commencement of new contract?\n<\/p><\/blockquote>\n
\t       23<\/span><\/p>\n
\t      (2) Necessity of spot inspection of distiller-
\n\t      ies  and\tsurvey of buildings  and  change  of
\n\t      their place?\n<\/p><\/blockquote>\n
\t      (3)  Policy  to  be adopted  for\ttransfer  of
\n\t      buildings and lands of distilleries?
\n\t      (4) Establishment of proper machine and imple-
\n\t      ments  for manufacture of liquor in  the\tdis-
\n\t      tilleries\t for  use of Mahuwa product  in\t the
\n\t      State?\n<\/p><\/blockquote>\n
\t      (5)  Determination  and  question\t of   fixing
\n\t      prices of liquor under the new management?\n<\/p><\/blockquote>\n
The  Cabinet Sub-Committee at its meeting held on 27th\tJune
\n1984  considered these issues and after discussion  came  to
\nthe conclusion that in view of the problem of pollution,  it
\nshould\tfirst of all be examined “as to which distillery  is
\nto be transferred from the existing site and which  distill-
\nery is to be maintained at the present site” and in order to
\ndetermine  this question, the Cabinet Sub-Committee  consti-
\ntuted  a Committee headed by Shri Vijayvargi Special  Secre-
\ntary, Separate Revenue Department. The Vijayvargi  Committee
\nwas also authorised to select new sites for the distilleries
\nwhich in its opinion required to be removed from the  exist-
\ning sites on account of the problem of pollution. The Vijay-
\nvargi Committee thereafter made spot inspection of all the 9
\ndistilleries  in the State and submitted its report  to\t the
\nCabinet\t Sub-Committee on 18th July 1984. This Report was  a
\ndetailed  and  exhaustive Report and it was pointed  out  in
\nthis  Report  that 5 distilleries, namely,  Bhopal,  Ujjain,
\nBadwaha, Seoni and Bhilai were required to be removed to new
\nsites on account of the problem of pollution, but so far  as
\nthe  remaming  two  distilleries at Gwalior  and  Dhar\twere
\nconcerned,  it was not necessary to remove them\t from  their
\npresent\t sites, though in regard to Dhar Distillery, it\t was
\nnecessary  to fix lagoon plant for removing  pollution.\t The
\nVijayvargi  Committee also stated in its Report that it\t was
\nnecessary  to make arrangement in regard to  polluted  water
\nthrown out from Nowgaon and Ratlam Distilleries.
\n    The\t Cabinet Sub-Committee at its meeting held  on\t21st
\nJuly 1984 considered the Report of the Vijayvargi  Committee
\nand  decided to accept it wholly. The Cabinet  Sub-Committee
\ndirected that an estimate of the cost involved in setting up
\nthe  Bhopal, Ujjain, Badwaha, Seoni and Bhilai\tdistilleries
\nat the new sites should be worked out by the Excise  Commis-
\nsioner as also by the M.P. Consultancy Organisa-\n<\/p>\n
24<\/span><\/p>\n
tion and the valuation of the lands and buildings of Gwalior
\nand  Dhar  distilleries, which according to  the  Vijayvargi
\nReport,\t were  not  necessary to be shifted  to\t new  sites,
\nshould\talso be got done by the Collectors concerned on\t the
\nbasis  of prevailing market rates. It was also\tdirected  by
\nthe  Cabinet  Sub-Committee  that an estimate  of  sales  of
\ncountry liquor projected in the next 20 years should be\t got
\nmade  and  it should also be examined  whether\tsuch  future
\ndemand could be met by the present distilleries and on\tthis
\nbasis  how many’ distilleries in the public cooperative\t and
\nprivate sectors would be necessary to be established. Pursu-
\nant to this direction, an estimate of the cost likely to  be
\nincurred in establishment of Bhopal, Ujjain, Badwaha,  Seoni
\nand Bhilai distilleries at the new sites including  purchase
\nof  land,  construction of buildings, setting up  of  modern
\nplant and machinery and arrangement for lagoon for  polluted
\nwater  thrown out by the distilleries, was prepared  by\t the
\nExcise\tCommissioner and the Report made by the Excise\tCom-
\nmissioner  showed  that,  according to\tthis  estimate,\t the
\nlikely cost would be in the neighbourhood of Rs.20 crores 60
\nlakhs.\tThe  Excise Commissioner also estimated\t the  likely
\nincrease  in consumption of liquor in the next 20 years\t and
\nin  his\t Report gave figures showing that at the end  of  20
\nyears the annual requirement of liquor in the State would be
\n2967 lacs proof litres and that the total established capac-
\nity  of all the 9 distilleries taken together would  not  be
\nsufficient  to meet this growing requirement of liquor\tcon-
\nsumption. So far as the valuation of the land and  buildings
\nof  Gwalior and Dhar distilleries was concerned,  no  report
\nwas  submitted\tby the concerned Collectors until  the\tnext
\nmeeting of the Cabinet Sub-Committee.\n<\/p>\n
    The Cabinet Sub-Committee thereafter met on 10th  August
\n1984  and at this meeting the Cabinet Sub-Committee  consid-
\nered the report of the Excise Commissioner in regard to\t the
\nestimated  cost\t of establishing  Bhopal,  Ujjain,  Badwaha,
\nSeoni  and  Bhilai  distilleries at new sites  as  also\t the
\nestimated  increase in consumption ,of liquor over the\tnext
\n20  years  and\tafter discussing  all  the  various  related
\nissues,\t the Cabinet Sub-Committee arrived at certain  deci-
\nsions which are set out in paragraph 3 of the proceeding  of
\nthis meeting which form part of the record. It is not neces-
\nsary  here  to set out these decisions,\t because  ultimately
\nthey  culminated in the recommendations made by the  Cabinet
\nSub-Committee  to which we shall presently  make  reference.
\nBut  at\t this meeting the Cabinet Sub-Committee\t decided  to
\ninvite representatives of the M.P.Distillers Association and
\nto  give them a hearing before taking final decision in\t the
\nmatter.\n<\/p>\n
The  representatives of the M.P. Distillers Association\t met
\nthe
\n25<\/span>
\nmembers of the Cabinet Sub-Committee at the meeting held  on
\n31st August 1984. These representatives made various sugges-
\ntions  to  the Cabinet Sub-Committee and  these\t suggestions
\nincluded  inter\t alia the suggestion that even\tGwalior\t and
\nDhar  distilleries should be transferred to new sites  since
\nthe problem of pollution, though not pressing at the present
\nmoment,\t was bound to arise after 5 or 7 years, but  if\t the
\nexisting lands and buildings of these two distilleries\twere
\nto be transferred, such transfer should be made on the basis
\nof their book value and not at the market price. It was also
\npleaded\t by these representatives that if  the\tdistilleries
\nwere  going  to be transferred to private  ownership,\tsuch
\ntransfers  should  be  effected\t in  favour  of the existing
\ncontractors and not outsiders. Some suggestion was also made
\non behalf of these representatives that compensation  should
\nbe paid by the State Government, to the existing contractors
\nfor  the  expenditure incurred by them\tin  construction  of
\nroads,\tmolasses  collection pits,  wharehouses\t etc.  These
\nsuggestions  were  considered and examined  by\tthe  Cabinet
\nSub–Committee.\n<\/p>\n
    Before the next meeting of the Cabinet Sub-Committee was
\nheld on 20th September 1984, a letter dated 10th Sept.\t1984
\nwas submitted by the Finance Department in which two  points
\nwere raised by the Finance Department. One was that  “trans-
\nfer  of distilleries should be made by getting the  compara-
\ntive  bids  offered and it should be given  to\tthe  highest
\nbidder”\t and  the other was whether on transfer\t to  private
\nownership  the distillers “would be required to\t obtain\t any
\npermission  under the Industries Development and  Regulation
\nAct<\/a>  and if permission is not granted, whether\tany  problem
\nwould  arise  out of it.” The Cabinet Sub-Committee  at\t the
\nmeeting\t held  on 20th September 1984  discussed  these\t two
\npoints\tand  so’far as the first point\twas  concerned,\t the
\nCabinet\t Sub-Committee\tcame  to the  conclusion  that\t“the
\ntransfer of distilleries should be made only to the  present
\ncontractors and their present supply area should be attached
\nwith them” and with regard to the second point, the  Cabinet
\nSub-Committee  felt that since the distilleries\t which\twere
\ngoing to be established at the new sites were in lieu of the
\npresent\t distilleries,\tit may not be  necessary  to  obtain
\nfresh  licence under the Industries Development and  Regula-
\ntion Act but if fresh licence was required, it should be the
\nresponsibility\tof  the distillers to obtain the  same.\t The
\nCabinet\t Sub-Committee\talso took  various  other  decisions
\nwhich are set out in paragraph 4 of the proceedings of\tthis
\nmeeting held on 20th September 1984. It is not necessary  to
\nreproduce  these decisions, but it may be pointed  out\tthat
\nthe  request of the representatives of the  M.P.  Distillers
\nAssociation  that the land and buildings of the Gwalior\t and
\nDhar distilleries may be transferred at
\n 26<\/span>
\nbook  value  and not at market value was  rejected  and\t the
\nCabinet Sub-Committee decided that the transfer should be at
\nthe  prevailing\t market price.\tThe  Cabinet  Sub-Committee,
\nhowever,  agreed  that “if any distiller wants a  change  of
\nplace in the future, the decision about it would be taken by
\nthe Separate Revenue Department”. The Cabinet  Sub-Committee
\nalso  recommended  that an agreement should be\texecuted  in
\nwriting between the distillers and the Excise Department  in
\nwhich it should be provided that on the construction of\t the
\ndistillery and the installation of the plant and  machinery,
\nthe  distiller\tshall be entitled to obtain D-2\t licence  in
\nrespect\t of the distillery. It was decided at  this  meeting
\nthat the draft Report of the Cabinet Sub-Committee shall  be
\nfinalised  in  accordance with the decisions  taken  at\t the
\nvarious meetings of the Cabinet Sub Committee.\n<\/p>\n
     The Report of the Cabinet Sub-Committee was  thereafter
\nfinalised  and after setting out the history of the  discus-
\nsions  that preceded the preparation of the Report, it\tpro-
\nceeded\tin  paragraph 17 to make the  following\t recommenda-
\ntions:\n<\/p>\n
\t      A. Transfer of ownership of distilleries
\n\t      (1) All the Government distilleries should  be
\n\t      transferred to the contractors concerned whose
\n\t      contracts\t are  current for the  periods\tfrom
\n\t      1.7.1981 to 31.3.1986.\n<\/p><\/blockquote>\n
\t      (2)  The present buildings, lands\t of  Gwalior
\n\t      and Dhar Distilleries should be transferred as
\n\t      per  the\tprice of the  present  market  rates
\n\t      reported\tby the Committees formed  under\t the
\n\t      Chairmanship  of\tthe  Regional  Commissioners
\n\t      after receiving the same from the distilleries
\n\t      and no concession should be given therein.
\n\t      (3)  There  should be an\tagreement  with\t the
\n\t      Distillers  who are allotted lands for  estab-
\n\t      lishing  distilleries at the new sites to\t the
\n\t      effect  that the Government will be  bound  to
\n\t      ‘issue them D-2 licence after the construction
\n\t      of buildings and fitting of plant, on fulfill-
\n\t      ing all terms and conditions.\n<\/p><\/blockquote>\n
\t      B.  Allotment  of lands  for  construction  of
\n\t      distilleries at the new places
\n\t\t\t(4) Generally a principle should  be
\n\t      accepted in connection with the price of\tland
\n\t      to be allotted to the distillers at those
\n\t      27<\/span>
\n\t      five  places  whose  distilleries\t are  to  be
\n\t      transferred  at  any other place that  if\t the
\n\t      land to be allotted is a Government land,\t its
\n\t      market value plus 20% of its market price\t and
\n\t      the amount so arrived at should be treated  as
\n\t      the  premium  of that land and on\t that  basis
\n\t      ground rent should be fixed as per rules.\t The
\n\t      land should be given on 30 years’ lease.
\n\t      (5)  If the land to be allotted is a  non-Gov-
\n\t      ernment land and if it is to be allotted after
\n\t      acquisition,  then as a result of\t acquisition
\n\t      the  compensation to be paid plus 20% and\t the
\n\t      amount  that  would be arrived  at  should  be
\n\t      treated  as  premium of that  land  and  after
\n\t      taking  ground  rent  as per  rules  the\tland
\n\t      should be given on 30 years’ lease.
\n\t      (6)  The directions of the Industries  Depart-
\n\t      ment  in\tconnection with\t allotment  of\tland
\n\t      should also be kept in view.\n<\/p><\/blockquote>\n
\t      (7)  No financial aid should be given  by\t the
\n\t      Government  to the distillers for\t payment  of
\n\t      premium, etc., of the land.\n<\/p><\/blockquote>\n
\t      (8) If the land allotted is used for any other
\n\t      purpose  than  the  purpose for  which  it  is
\n\t      allotted, the land would auto matically  stand
\n\t      diverted\tto  the\t State\tGovernment.  Such  a
\n\t      provision\t should\t be made in  the  terms\t and
\n\t      conditions of the lease deed.\n<\/p><\/blockquote>\n
\t      C.  Letter  of Intent, for grant of D.  2\t Li-
\n\t      cences
\n\t      (1)  D-2 licences should be granted  alongwith
\n\t      letter  of intent only to those distillers  to
\n\t      whom  land  is allotted  for  construction  of
\n\t      distilleries.  The  Sub-Committee\t also  feels
\n\t      that the distilleries to be constructed at the
\n\t      new  sites  shall be in lieu  of\tthe  present
\n\t      distillery. Therefore, this will not be neces-
\n\t      sary  to\tobtain\tlicences  from\tthe  Central
\n\t      Government. But, for any other reason, if\t any
\n\t      licence is compulsory under the rules, Acts of
\n\t      the  Government of India or the State  Govern-
\n\t      ment, the distiller shall be liable to  obtain
\n\t      it.  The\tState  Government  will\t send  their
\n\t      applications   with  recommendations  to\t the
\n\t      Government of India.\n<\/p><\/blockquote>\n
\t      D.  Construction of Lagoon, etc.,\t for  making
\n\t      arrangement for passing water from  distiller-
\n\t      ies
\n\t       28<\/span>
\n\t      (11) It will be obligatory for the  distillers
\n\t      while constructing the distilleries to observe
\n\t      the standards fixed by the M.P. Eradication of
\n\t      Pollution\t Board\tfor  removing  the  polluted
\n\t      water  and the environment clean and  to\tcon-
\n\t      struct Lagoon, etc. for the same.
\n\t      (12) It should also be mentioned in the letter
\n\t      of  intent  that\tthe  distillers\t shall\tmake
\n\t      similar  arrangement in the distilleries\tthat
\n\t      would  be\t transferred to\t the  distillers  at
\n\t      their present site only. Without such arrange-
\n\t      ment  D-2 licence should not be given  to\t the
\n\t      distillers.\n<\/p><\/blockquote>\n
\t      E.  Construction\tof Laboratories\t for  Liquor
\n\t      test
\n\t      (13)  The\t distillers  shall  be\tcompulsorily
\n\t      required to construct- a laboratory for exami-
\n\t      nation  of liquor in the distillery.  It\twill
\n\t      also  be compulsorily required to construct  a
\n\t      laboratory  for examination of liquor  in\t the
\n\t      distillery. It will be compulsory to construct
\n\t      laboratory for liquor test in the distilleries
\n\t      which are to be transferred to the  distillers
\n\t      at the existing spot only.\n<\/p><\/blockquote>\n
\t      F.  Arrangement for manufacturing liquor\tfrom
\n\t      Mahuwa
\n\t      (14) The plants for manufacturing liquor\tfrom
\n\t      Mahuwa  also  should  be\testablished  by\t the
\n\t      distillers   for\tmanufacturing  liquor\tfrom
\n\t      Mahuwa in all the distilleries in the State so
\n\t      that,  if\t it is necessary, liquor  should  be
\n\t      manufactured  from Mahuwa and the Mahuwa\tpro-
\n\t      duced  in\t the State should be  properly\tused
\n\t      within  the  state only and  they\t should\t get
\n\t      reasonable ,price for the Mahuwa purchased  by
\n\t      them  at the support price of MARPED  or\tVano
\n\t      Upaj  Vyaper Sangh. For each distillery  71\/2%
\n\t      liquor  should be manufactured from Mahuwa  of
\n\t      its total productive capacity and it should be
\n\t      mentioned in D-2 licence.\n<\/p><\/blockquote>\n
\t      G. Period of D-2 licences
\n\t      (15) In the beginning D-2 licence\t (Distillery
\n\t      Licence) should be granted for five years\t and
\n\t      thereafter there should be a provision for its
\n\t      renewal. Necessary amendment in the Excise Act<\/a>
\n\t      or Rules for the same should be made.\n<\/p><\/blockquote>\n
\t      29<\/span><\/p>\n
\t      H. Fixation of liquor price
\n\t       (16)   The Sub-Committee was apprised of\t the
\n\t      system  of fixation of cost of liquor  in\t the
\n\t      State  of\t U.P., West Bengal  and\t Maharashtra
\n\t      States.  Prices  fixed  in  Uttar\t Pradesh  by
\n\t      calling  tenders whereas in Maharashtra  under
\n\t      Eythule  Alcohol\tPrice Control Order  on\t the
\n\t      recommendation  of the State  Government,\t the
\n\t      prices  of liquor are fixed by the  Government
\n\t      of  India.  In West Bengal,  for\tfixation  of
\n\t      prices  a Committee is formed consisting of  a
\n\t      Chartered\t Accountant a cost Accountant and  a
\n\t      Senior  Officer of the Excise  Department.  In
\n\t      the opinion of the committee, prima facie, the
\n\t      system  being adopted in the West\t Bengal\t was
\n\t      found  more scientific and appropriate and  it
\n\t      was  recommended to adopt this method.  Action
\n\t      be taken after obtaining necessary details  in
\n\t      connection  with\tthis system  and  after\t the
\n\t      distilleries are transferred to private owner-
\n\t      ship, the prices should be fixed every year.”
\n\t      (17)  On\ttransfer to private  ownership,\t the
\n\t      rates proposed by the Committee to be  brought
\n\t      into  effect  from 1.4. 1986 should  be  fixed
\n\t      finally after discussing the same between\t the
\n\t      State Government and the distillers. Till\t the
\n\t      final rates are not fixed the present rates of
\n\t      the  distilleries shall be maintained as\tthey
\n\t      are and after that only it should be  adjusted
\n\t      against the new rates.\n<\/p><\/blockquote>\n
\t      (18) The present system of connecting the area
\n\t      of  supply for each distillery shall be  main-
\n\t      tained  in future also as it is. It  would  be
\n\t      proper to maintain the present right of reduc-
\n\t      tion or increase in the supply regions of\t any
\n\t      distillery    which   is\t with\tthe    State
\n\t      Government\/Excise Commissioner, as it is.
\n\t      I.  Control of Excise Department on  the\tDis-
\n\t      tilleries
\n\t      (12)  Even after the transfer of\tdistillaries
\n\t      to private ownership, there should be  control
\n\t      of the Excise Department over them as per\t the
\n\t      present  system  and for this purpose  if\t any
\n\t      amendment\t is  found necessary, it  should  be
\n\t      made in the Excise Act<\/a>\/Rules.\n<\/p><\/blockquote>\n
The Finance Department, however, submitted a Report  raising
\n5<\/span>
\n30<\/span>
\n points\t against the recommendations made in the  Report  of
\nthe Cabinet Sub-Committee. These points were answered by the
\nGeneral Administration Department in the summary prepared by
\nit for submission to the Cabinet. These points together with
\nthe  answers given by the General Administration  Department
\nmay be reproduced as follows:\n<\/p>\n
“Point No.1
\n\t\t\tThe  distilleries  which are  to  be
\n\t      transferred  to  the private  distilleries  on
\n\t      account of the problem of pollution, it is not
\n\t      proper to transfer to them the land and build-
\n\t      ings.\n<\/p>\n
Answer
\n\t\t\tIn  this connection it is  pertinent
\n\t      to  note\tthat the Cabinet  Sub-Committee\t has
\n\t      only  reommended transfer of Gwalior and\tDhar
\n\t      distilleries   to\t the  existing\t distillers.\n<\/p>\n
\t      Looking  to  the problem of  pollution,  other
\n\t      five distilleries have been recommended to  be
\n\t      transferred  at the new sites and\t their\tcon-\n<\/p>\n
\t      struction\t and  establishment in\tthe  private
\n\t      ownership. Hence, the question of transfer  of
\n\t      land and buildings of these distilleries\tdoes
\n\t      not  arise.  It is clear that  the  lands\t and
\n\t      buildings\t of  the present  five\tdistilleries
\n\t      will  be of the State Government and they\t can
\n\t      be used for Government purposes. So far as the
\n\t      transfer of Gwalior and Dhar distilleries\t and
\n\t      their  lands and buildings are concerned,\t the
\n\t      said distillers have made applications to\t the
\n\t      State  Government\t that they  also  intend  to
\n\t      establish\t distilleries at the new  sites.  If
\n\t      the  State  Government  decides  to  establish
\n\t      these distilleries at other places, the  ques-
\n\t      tion  of\ttransfer of lands and  buildings  of
\n\t      these distilleries does not arise.\n<\/p>\n
Point No. 2<\/span><\/p>\n
\t      A\t serious  thought  should be  given  to\t the
\n\t      question that the State Government should give
\n\t      an  undertaking  to the  distillers  that\t the
\n\t      State  Government shall purchase\tliquor\tfrom
\n\t      them  for ever and for that purpose no  tender
\n\t      will be invited.\n<\/p>\n
Answer
\n\t      With regard to this point, it would be  proper
\n\t      to make
\n\t      31<\/span>
\n\t      mention  of the fact that the distillers\twhom
\n\t      the land will be allotted for the construction
\n\t      of new distilleries, they will only be granted
\n\t      D-2  licence  and letters of  intent  will  be
\n\t      issued in that regard. D-2 licence is  granted
\n\t      for  the manufacture of liquor. D-  1  licence
\n\t      relates  to the supply and rates of the  same.\n<\/p>\n
\t      According\t to  the  present  arrangement,\t the
\n\t      State  Government purchase liquor\t from  those
\n\t      contractors  who are granted licences for\t the
\n\t      same  and in case of any short supply  on\t ac-\n<\/p>\n
\t      count of some reason, liquor is imported\tfrom
\n\t      other States. This arrangement should also  be
\n\t      made for future also. As far as the ceiling of
\n\t      tender  is  concerned, it is  with  regard  to
\n\t      rates  of\t liquor. On this point, a  note\t has
\n\t      been given against point Nos.4 and 5.\n<\/p>\n
Point No. 3<\/span><\/p>\n
\t      As  there\t is a possibility  of  increases  of
\n\t      consumption  of  liquor  in  future,  and\t the
\n\t      increased\t quantity of liquor will have to  be
\n\t      purchased\t by  the State Government  from\t the
\n\t      present  contractors,  that  will\t amount\t  to
\n\t      monopoly\tsystem and the contractors  may\t put
\n\t      the State Government into trouble at any time.
\n\t      For this purpose. the State Government  should
\n\t      possess a right of granting D-2 licence to any
\n\t      other distiller.\n<\/p>\n
Answer
\n\t\t\tIn  this  connection, it  should  be
\n\t      mentioned\t that  during the existence  of\t the
\n\t      contract.\t if  there  is an  increase  in\t the
\n\t      consumption  of liquor the supply of the\tsame
\n\t      is done by the
\n\t      contractors or from outside. This\t arrangement
\n\t      shall  be continued in future also. As for  as
\n\t      grant  of D-2 licence to other  distillers  is
\n\t      concerned, it will be given to them  according
\n\t      to the requirement. The Sub-Committee has\t not
\n\t      made such a recommendation that apart from the
\n\t      existing distillers, no other person should be
\n\t      granted D-2 licence.\n<\/p>\n
\t\t\tHere  a question may arise  that  on
\n\t      the  conferral of private rights on  the\tdis-\n<\/p>\n
\t      tilleries and in case of absence of favourable
\n\t      conditions or difference of opinion about\t the
\n\t      fixation\tof prices of liquor. the  distillers
\n\t      taking  advantage of their proprietory  rights
\n\t      may not close the distilleries? Ordinarily, no
\n\t      such imagination can be made because after
\n\t\t32<\/span>
\n\t      investing such a huge amount the intention  of
\n\t      the  distillers is to gain profits.  For\tthat
\n\t      purpose,\ttheir effort would be to  constantly
\n\t      run  the distilleries and for meeting such  an
\n\t      eventuality some arrangement should be made in
\n\t      the  agreement that could be entered with\t the
\n\t      distillers  so  that the distilleries  can  be
\n\t      taken over the State Government.\n<\/p>\n
Point No. 4<\/span><\/p>\n
\t      The Sub-Committee has recommended that for the
\n\t      supply of liquor the rates of the same may  be
\n\t      fixed by a Committee consisting of a Chartered
\n\t      Accountant,  a  cost accountant and  a  senior
\n\t      Officer of the Excise Department. The  Finance
\n\t      Department has suggested that in this  Commit-
\n\t      tee, representatives of the Finance Department
\n\t      and  the Separate Revenue Department  and\t the
\n\t      representative  of  the  Separate\t  Department
\n\t      should  be  its Chairman which would  fix\t the
\n\t      rates on the basis of principles.\n<\/p>\n
Answer
\n\t\t\tThis suggestion is capable of  being
\n\t      accepted. It may be pertinent to mention\there
\n\t      that  the\t Sub-Committee was apprised  of\t the
\n\t      different systems adopted by different  States
\n\t      with regard to supply rates. The Sub-Committee
\n\t      has  recommended the system prevalent in\tWest
\n\t      Bengal  because  the Sub Committee  felt\tthat
\n\t      this  system is more scientific and  fit.\t The
\n\t      Sub  Committee has also mentioned\t that  after
\n\t      obtaining\t  further  information\tabout\tthis
\n\t      system,  action  should  be  taken  and  after
\n\t      transfer\tof  the\t distilleries  into  private
\n\t      ownership\t the  prices should be\tfixed  every
\n\t      year.  Presently,\t the prices  of\t liquor\t are
\n\t      fixed for a period of five years.\n<\/p>\n
Point No. 5<\/span><\/p>\n
\t\t\tThere  should be  competition  which
\n\t      can be achieved through tender system.  Hence,
\n\t      for  fixing  prices, tender system  should  be
\n\t      adopted and nobody should be given to say that
\n\t      the rates have been fixed arbitrarily.\n<\/p>\n
Answer
\n\t      As  mentioned  in\t recommendation\t No.  17  of
\n\t      the”Sub
\n\t      33<\/span>
\n\t      Committee\t dated 1.4.86, the rates to be\tmade
\n\t      effective\t from 1.4.86 will be proposed  by  a
\n\t      Committee which will be given effect to  after
\n\t      discussion   (negotiations)  with\t the   State
\n\t      Government and the distillers. The Sub Commit-
\n\t      tee  has also made a recommendation that\ttill
\n\t      the  time the final rates are not fixed,\ttill
\n\t      that  period the respective distilleries\twill
\n\t      maintain\ttheir existing rates and after\tthat
\n\t      they will adjust against the new rates. Hence,
\n\t      it  will\tbe clear that according to  the\t new
\n\t      system  fixation\tof prices will be  fixed  by
\n\t      calling tenders. For the present supply rates,
\n\t      tenders  are invited and on that\tbasis  after
\n\t      negotiations  with  the distillers  the  final
\n\t      rates are fixed.”\n<\/p>\n
    The\t summary  alongwith the Report of  the\tCabinet\t Sub
\nCommittee and all other papers and proceedings leading\tupto
\nthe making of the Report were all placed before the  Cabinet
\nat the meeting held on 30th December 1984 when the following
\ndecision was taken:\n<\/p>\n
\t      “1.  Looking to different angles of  the\tsub-
\n\t      ject, the recommendations of the Cabinet\tSub-
\n\t      Committee should be endorsed.\n<\/p><\/blockquote>\n
\t      2.  If some such similar matters are  put\t up,
\n\t      the department on the basis of the  principles
\n\t      should take decisions.”<\/p><\/blockquote>\n
    Pursuant  to  this policy decision dated  30th  December
\n1984  a Letter of Intent dated 1st February 1985 was  issued
\nby the State Government in favour of each of respondent Nos.
\n5 to 11 for grant of D-2 lincence for the construction of  a
\ndistillery  at a new site for the purpose  of  manufacturing
\ncountry\t liquor with effect from 1st April 1986 in  lieu  of
\nthe existing distillery in respect of which such  respondent
\nheld D-2 and D- 1 licences for the period ending 3 1st March
\n1986.  The Letter of Intent set out various conditions\tsub-
\nject  to  which D-2 licence was to be granted in  favour  of
\neach of respondent Nos. 5 to 11. Clause (1) of the Letter of
\nIntent prescribed the following condition:\n<\/p>\n
\t\t    1. (a) The licence shall be granted\t for
\n\t      a\t period of five years commencing  from\t1-4-
\n\t      1986,  subject to the payment of licence\tfees
\n\t      of Rupees Twenty Five thousand in advance\t and
\n\t      such  security  as may be\t prescribed  by\t the
\n\t      Excise  Commissioner  for\t due  observance  of
\n\t      rules, and conditions of licence.\n<\/p><\/blockquote>\n
\t      (b)  It  will  be the  responsibility  of\t the
\n\t      licensee to obtain
\n\t       34<\/span>
\n\t      a\t licence\/permission, if any required by\t the
\n\t      State Government or Government of India.\n<\/p><\/blockquote>\n
\t\t     (c)  The licence shall be further\tsub-
\n\t      ject  to renewal every year’ on payment  of  a
\n\t      licence  fees of Rs. Five thousand in  advance
\n\t      and  subject to due observance of\t the  provi-
\n\t      sions of the Excise Act<\/a> and rules made  there-
\n\t      under and conditions of the licence.\n<\/p><\/blockquote>\n
The  licensee  to whom the Letter of Intent was\t issued\t was
\nrequired under Clause 2 of the Letter of Intent to construct
\nthe distillery on the land approved by the State  Government
\nand  the M.P. Pollution Board. It was provided by Clause  12
\nof the Letter of Intent that the licensee shall make  proper
\narrangements  for treatment of effluents discharge  under  a
\nscheme\tduly approved by the M.P. Pollution Board  and\tthat
\nany  direction\tissued by the Excise  Commissioner  in\tthis
\nregard\tshall be binding on the licensee. Clause 14  of\t the
\nLetter of Intent stipulated that the licensee shall be bound
\nto  complete construction of distillery and installation  of
\nplant  and machinery as required by the Excise\tCommissioner
\nwell before 1st April 1986.\n<\/p>\n
    The Letter of Intent was followed by a Deed of Agreement
\ndated 2nd February 1985 executed by and between the Governor
\nof Madhya Pradesh acting through the Excise Commissioner and
\neach  of  respondent  Nos. 5 to 11. The\t Deed  of  Agreement
\nrecited\t that  the Letter of Intent has been issued  by\t the
\nState  Government for grant of D-2 licence for\tconstruction
\nof distillery for manufacture of spirit with effect from 1st
\nApril 1986. Clause 1 of the Deed of Agreement provided\tthat
\nthe  licensee  shall be bound to take land on  lease  for  a
\nperiod\tof  30\tyears from the State  Government,  but\tthis
\nclause is not material because ultimately none of respondent
\nNos.  5 to 11 took land on lease from the  State  Government
\nand each of them purchased his own land, the site of  course
\nbeing approved by the State Government. Clause 2 of the Deed
\nof Agreement is rather material and it may be reproduced  in
\nfull:–\n<\/p>\n
\t\t\t“The  Govt. shall be bound to  sanc-
\n\t      tion D-2 licence in favour of the Licensee who
\n\t      has been granted letter of intent to  manufac-
\n\t      ture  spirit w.e.f.  1-4-86 in lieu of  CHHAT-
\n\t      TISGARH  DISTILLERY  situated  at\t  INDUSTRIAL
\n\t      ESTATE BHILAI for a period of 5 years  subject
\n\t      to  renewal every year on payment\t of  Licence
\n\t      Fee  Rs.5,000  and on due\t fulfilment  of\t the
\n\t      conditions  of the licence and the  provisions
\n\t      of  M.P.\tExcise Act 1915 and the\t Rules\tmade
\n\t      thereunder.”\n<\/p><\/blockquote>\n
\t       35<\/span><\/p>\n
It  was provided by Clause 4 of the Deed of  Agreement\tthat
\nthe licensee shall be bound to manufacture country spirit in
\nthe distillery from mahuwa also and the country spirit\tmade
\nfrom mahuwa shall not be less than 7.5% of the total produc-
\ntion  in  the distillery. So far as the pricing\t of  country
\nliquor made from mahuwa, khandsari molasses or mill molasses
\nwas concerned, Clause 6 of the Deed of Agreement provided as
\nfollows:–\n<\/p>\n
\t      “The rate of country spirit made from  Mahuwa,
\n\t      Khandsari\t molasses or mill Molasses shall  be
\n\t      determined  every year by the State  Govt.  on
\n\t      the basis of the recommendation of the commit-
\n\t      tee  constituted\tby the State Govt.  in\tthis
\n\t      behalf. The cost price so determined shall  be
\n\t      final and binding on the Licensee.”\n<\/p><\/blockquote>\n
The other clauses of the Deed of Agreement are not  material
\nand we need not refer to them in detail beyond merely  stat-
\ning  that they were introduced in the Deed of  Agreement  in
\nconformity  with  the policy decision  dated  30th  December
\n1984.\n<\/p>\n
    Pursuant to the Letter of Intent and the Deed of  Agree-
\nment  each Of respondent Nos.5 to 11 selected with  the\t ap-
\nproval\tof  the State Government the new site at  which\t the
\ndistillery  should  be located, purchased land at  such\t new
\nsite,  started constructing buildings for housing  the\tdis-
\ntillery and placed orders for purchase the plant and machin-
\nery to be installed in the distillery. Some of the plant and
\nmachinery  started arriving and it began to be installed  in
\nthe  distillery. There was some dispute between the  parties
\nas  to how much amount each of respondent Nos. 5 to  11\t had
\nexpended  by  the time the first writ petition\tcame  to  be
\nfiled  by  Nand Lal Jaiswal but it could  not  be  seriously
\ncontested that considerable amount of money had already been
\nspent  by  respondent Nos. 5 to 11 in acquiring\t land,\tcon-
\nstructing  buildings. placing orders for purchase  of  plant
\nand  machinery and taking other necessary steps before\t28th
\nNovember  1985\twhen Nand Lal Jaiswal filed the\t first\twrit
\npetition.  There is evidence to draw that considerable\tmore
\nprogress  had been made by respondent Nos. 5 to 11  in\tthis
\ndirection  by the time the second writ petition came  to  be
\nfiled by Sagar Agarwal. Each of them had, on a\tconservative
\nestimate, spent over one or two crores of rupees by the time
\nNand  Lal Jaiswal and Sagar Agarwal filed these\t writ  peti-
\ntions  challenging the policy decision dated  30th  December
\n1984. On the filing of these writ petitions, an\t application
\nfor stay was made but it was rejected by the High Court with
\nthe  result  that the work of  setting\tup  the.distilleries
\ncontinued
\n36<\/span>
\nspace and the distilleries were almost complete by the\ttime
\ndecision  came\tto be given by the High Court  disposing  of
\nthese writ petitions.\n<\/p>\n
    When  the  writ petitions were argued  before  the\tHigh
\nCourt,\tone of the questions seriously debated\twas  whether
\nunder  the  policy decision dated 30th\tDecember  1984,\t D-2
\nlicence was to be granted to each of respondent Nos.5 to  11
\nonly  for  a limited period of 5 years commencing  from\t 1st
\nApril  1986 or it was to be granted for a minimum period  of
\nfive years with a clause for automatic renewal from year  to
\nyear  after  the expiration of the period of five  years  so
\nthat all other persons would be totally excluded from enter-
\ning  the field and a monopoly would be created in favour  of
\nrespondent  Nos.5 to 11 for all time to come so far  as\t D-2
\nlicence\t for  manufacturing  liquor in\tthe  distillery\t was
\nconcerned. The petitioners relied on clause 1 of the  Letter
\nof Intent in support of their contention that a monopoly was
\nsought to be created in favour of respondent Nos.5 to 11 for
\nmaufacturing liquor in the distilleries respectively set  up
\nby  them by granting D-2 licence which was  renewable  every
\nyear  after the expiration of the initial period of 5  years
\nwithout\t any limitation of time and this was  clearly  arbi-
\ntrary and irrational so as to be violative of Article 14<\/a>  of
\nthe  Constitution.  This  contention was  negatived  by\t the
\nDivision  Bench\t and particularly by Acting  Chief  justice,
\nJ.S.  Verma  in view of the categorical\t statement  made  on
\nbehalf\tof  the State Government by  the  learned  Advocate-
\nGeneral as also by the learned Advocates appearing on behalf
\nof  respondent\tNos.5 to 11 that under the  policy  decision
\ndated  30th  December, 1984, D-2 licence was to\t be  granted
\nonly for a maximum period of 5 years “subject to its renewal
\nwithin\tthe period of 5 years on the terms  and\t conditions”
\nmentioned  in the Letter of Intent and “there was no  under-
\ntaking on the part of the State Government” to grant, by way
\nof renewal or otherwise D-2 licence after the expiry of\t the
\nperiod\tof  5  years commencing from  1st  April  1986.\t The
\nlearned\t Attorney General, appearing on behalf of the  State
\nGovernment,  as\t also  the learned  advocates  appearing  on
\nbehalf\tof  respondent Nos.5-11, reiterated the\t same  stand
\nbefore\tus namely, that there was no commitment on the\tpart
\nof  the\t State Government to grant D-2\tlicence\t beyond\t the
\nmaximum\t period of 5 years and that the provision in  regard
\nto  renewal  from year to year was to  operate\twithin\tthis
\nperiod\tof 5 years. The learned counsel appearing on  behalf
\nof the petitioners, however, urged that this concession made
\non  behalf of the State Government and\trespondent  Nos.5-11
\nwas  of no avail, since it was contrary to the terms of\t the
\npolicy\tdecision dated 30th December 1984 and the  provision
\nin  the Letter of Intent and, in any event, the validity  of
\nthe policy decision dated 30th December 1984 could be tested
\nonly
\n 37<\/span>
\non  its own terms and if it was otherwise invalid, the\tcon-
\ncession made on behalf of the State Government and  respond-
\nent  Nos.5-11 could not save it. We do not think  that\tthis
\ncontention urged on behalf of the petitioners is well-found-
\ned.  It is undoubtedly true that the recommendations of\t the
\nCabinet Sub-Committee which were accepted by the Cabinet  in
\nthe  policy decision dated 30th December 1984 provided\tthat
\nin the beginning, D-2 licence shall be granted for a  period
\nof 5 years and thereafter there shall be a provision for its
\nrenewal\t and  for this purpose, necessary amendment  in\t the
\nM.P. Excise Act, 1915 or the Rules made under the Act  shall
\nbe made. But, it is significant to note that no such  amend-
\nment  in the Act or the Rules was made by the State  Govern-
\nment  and when the Letter of Intent was issued and the\tDeed
\nof  Agreement was executed and even thereafter,\t the  provi-
\nsions of the Act remained unamended and Rule II of the Rules
\nof  General Application also continued to stand in its\tuna-
\nmended form. It is obvious that without an amendment of Rule
\nII  of the Rules of General Application, the maximum  period
\nfor which D-2 licence could be granted to respondent  Nos.5-
\n11  was\t only 5 years and there could be  no  provision\t for
\nautomatic  renewal  thereafter\tfrom year to  year.  It\t is;
\ntherefore, clear that whatever might have been the  original
\nintention, it was not effectuated by carrying out  necessary
\namendment in the provisions of the Act or in Rule II of\t the
\nRules  of General Application and the ultimate\tdecision  of
\nthe State Government was to grant D.2 licence for a  limited
\nperiod\tof 5 years. This would also seem to be clear  beyond
\ndoubt  if we examine closely clause 2 of the Deed of  Agree-
\nment. This clause provided in terms clear and explicit\tthat
\nthe State Government shall be bound to grant D-2 licence  to
\nthe  licensee  “for a period of 5 years subject\t to  renewal
\nevery year on payment of licence fee of Rs.5,000 and on\t the
\nfulfilment  of the conditions of the licence,and the  provi-
\nsions  of  the\tM.P. Excise Act, 19 15 and  the\t rules\tmade
\nthereunder?,. Obviously the provision of renewal every\tyear
\nwas  to operate within the span of 5 years itself and  every
\nyear,  the licence would be renewable on payment of  licence
\nfee of Rs.5,000 and due fulfilment of the conditions of\t the
\nlicence\t and the provisions of the Act and the Rules. It  is
\nnot possible to spell out from this clause that the  licence
\nwas  to\t be  granted for an initial period of  5  years\t and
\nthereafter  it was liable to be renewed from year  to  year.
\nThis  so called concession made on behalf of the State\tGov-
\nernment and respondent Nos.5-11 was, therefore, really not a
\nconcession at all but it was a stand taken in recognition of
\nthe correct position in regard to the grant of D-2  licence.
\nThe  High Court was, in the circumstances, right in  holding
\nthat the grant of D-2 licence to respondent Nos.5-11 was for
\na maximum period of 5 years and it did not operate to create
\nmonopoly in their favour for an indefinite period of time.\n<\/p>\n
38<\/span><\/p>\n
    The\t High  Court and particularly the  Judgment  of\t the
\nActing Chief Justice J.S.Varma with Justice B.M. Lal divided
\nthe policy decision dated 30th December 1984 into two parts.
\nThe  first part according to the High Court related “to\t the
\ngrant for construction Of the new distilleries by the exist-
\ning contractors” and the other part related “to the grant of
\nlicence for manufacture and wholesale supply of liquor\twith
\neffect\tfrom 1st April 1986 to the existing  contractors  on
\nconstruction  of new distilleries by them”. The\t High  Court
\nfirst took up for consideration the question of validity the
\nfirst  part  and held that having regard to  the  inordinate
\ndelay  in the filing of the writ petitions  no\tinterference
\nwas  “called  for with the grant to this extent”.  The\tHigh
\nCourt observed and we are quoting here in full what the High
\nCourt  has said in regard to the first part since that\tcon-
\ntains  the  finding  of the High Court on  the\tquestion  of
\ndelay:–\n<\/p>\n
\t      “In  our opinion, the delay in bringing  these
\n\t      petitions\t to challenge the grant made to\t the
\n\t      existing\tcontractors who are  respondents  in
\n\t      these  petitions for construction of  the\t new
\n\t      distilleries, is not adequately explained and,
\n\t      therefore,  it  would not\t be  appropriate  to
\n\t      interfere with the grant to this extent  since
\n\t      at this stage, particularly when the construc-
\n\t      tions by the respondents are nearly  complete.
\n\t      We  have,\t therefore, reached  the  conclusion
\n\t      that without expressing any opinion about\t the
\n\t      validity\tof the scheme relating to the  grant
\n\t      only to the existing contractors for construc-
\n\t      tion of the new distilleries, no\tinterference
\n\t      with the grant to this extent alone should  be
\n\t      made  in these petitions on the  short  ground
\n\t      that there is unexplained delay in challenging
\n\t      the  grant to this extent in  these  petitions
\n\t      and  during  the intervening period,  the\t new
\n\t      distilleries  have almost been  completed,  if
\n\t      not wholly completed and any interference with
\n\t      the grant to this extent will result in  need-
\n\t      less complications. For this reason alone,  we
\n\t      decline to examine the validity of grant\tmade
\n\t      in  favour  of  the respondents  only  to\t the
\n\t      extent  it permits them to construct  the\t new
\n\t      distilleries.  In\t our opinion, the  facet  of
\n\t      promissory  estoppel  relied  on\tagainst\t the
\n\t      petitioners  on the basis of their conduct  is
\n\t      applicable only to this extent.”\n<\/p><\/blockquote>\n
The  High Court then proceeded to consider the\tquestion  of
\nvalidity  of  the second part relating to the grant  of\t li-
\ncences\tfor  manufacture  and wholesale\t supply\t of  country
\nliquor\tto the existing contractors and held that this\tpart
\nof the policy decision dated 30th December 1984 contra-\n<\/p>\n
 39<\/span><\/p>\n
vening\tArtide\t14  of the Constitution\t and  was  therefore
\nliable to be struck-down as invalid. The High Court took the
\nview that the existing contractors cannot be said to consti-
\ntute  a distinct class by themselves so that grant  of\tD-1,
\nD-2 licences to them for manufacture and wholesale supply of
\ncountry\t liquor to the exclusion of other persons  could  be
\njustified  under  the equality clause of  the  Constitution.
\nThough\tthe High Court did not say so in express  terms\t the
\nview  taken  by\t it seem to be that the grant  of  D-1,\t D-2
\nlicences given thrown open for all intending applicants\t and
\nno one should have been excluded from consideration for\t the
\ngrant  which means that the proposed grant of D-1,  D-2\t li-
\ncences should have been advertised so that one and all could
\ncompete for the grant by filing their tenders or by  bidding
\nat  an\tauction. The High Court in this view set  aside\t the
\ngrant  of  D-1, D-2 licences to respondent Nos.5 to  11\t but
\nsince  there  are  no other distilleries  apart\t from  those
\nconstructed  by\t respondent Nos.5 to 11 and  country  liquor
\nunder  D-1, D-2 licences could be manufactured and  supplied
\nonly  from those distilleries, the High Court evolved a\t new
\nformula\t namely, that the persons to whom D-1, D-2  licences
\nmay  be granted on the basis of tender or auction should  be
\nentitled  to take over the distilleries constructed  by\t re-
\nspondent  Nos.5\t to 11 at a proper value  assessed  by\tthe.
\nState  Government.  The High Court accordingly\tallowed\t the
\nwrit petitions to this limited extent and directed that each
\nparty  shall  bear and pay its own costs of the\t writ  peti-
\ntions. The questions is whether this view taken by the\tHigh
\nCourt is correct.\n<\/p>\n
    Before  we\tproceed to consider this  question,  we\t may
\npoint out that Acting Chief Justice, J.S. Verma, who  deliv-
\nered  the main judgment in the writ petitions, did not\tmake
\nany comments against the conduct of the State Government  in
\ngranting to the existing contractors the right to  construct
\ndistilleries  and manufacture and make wholesale  supply  of
\ncountry\t liquor from such distilleries but merely  proceeded
\nto  invalidate what he called the second part of the  policy
\ndecision  dated\t 30th December 1984 on the  ground  that  it
\nviolated  Article 14<\/a> of the Constitution. But  Justice\tB.M.
\nLal  delivered\ta separate concurring opinion  and  in\tthis
\nopinion,  he  made  certain  observations  which  have\tbeen
\nstrongly objected to by the learned Attorney General appear-
\ning  on behalf of the State of Madhya Pradesh. It is  neces-
\nsary  to set out in extenso what the learned Judge has\tsaid
\nin  this connection because an application has been made  to
\nus  by the learned Attorney General that  the  objectionable
\nremarks made by the learned Judge should be expunged:\n<\/p>\n
\t      “This  new mischievous device gives  scope  to
\n\t      respondents
\n\t       40<\/span>
\n\t      No.5  to 11 to monopolize the entire trade  of
\n\t      liquor  distillery in Madhya Pradesh and\talso
\n\t      make  the\t State\tdance at  their\t tips  while
\n\t      fixing the rates according to their wishes.
\n\t\t       However, it appears that the sinister
\n\t      of  under-hand  dealing of the  agreement\t has
\n\t      persuaded\t the  State Government to  make\t the
\n\t      statement before this court during the  course
\n\t      of  second  day of arguments, that  they\thave
\n\t      reduced  the  period of  the  agreement  dated
\n\t      2.2.1985\tfrom 30 years to a mere of  5  years
\n\t      period i.e. w.e.f. 1.4.86 to 31.3.1991 with no
\n\t      condition\t of renewing it\t thereafter  without
\n\t      adhering\tto  the\t provisions  of\t rule\tXXII
\n\t      (Supra). By making this statement at the\tbar,
\n\t      I\t presume that, the State is trying to  mini-
\n\t      mise  the extent of depletion of public  reve-
\n\t      nue,  but\t still\tthe loss of  56\t crores,  as
\n\t      argued by Shri Venugopal, continues if licence
\n\t      in  D-1  form is granted\tto  the\t respondents
\n\t      Nos.5 to 11 even for a period of five years.
\n\t\t\tMaking\tany relaxation in  contracts
\n\t      illegally\t arrived at by\tviolating  statutory
\n\t      provisions  of rule XXII (Supra)\twhich  gives
\n\t      abnoxious\t smell of malafide involving  public
\n\t      revenue  in crores, then, in my opinion,\teven
\n\t      for a moment it cannot be allowed to stand  in
\n\t      the eye of law.\n<\/p><\/blockquote>\n
\t\t\tIt  appears  that  by  reducing\t the
\n\t      period of 30 years to a mere five years  peri-
\n\t      od, the State still wants to extend benefit to
\n\t      respondents 5 to 11, so that the amount so far
\n\t      spent  by them in working out the contract  in
\n\t      approaching the concerning authorities of\t the
\n\t      State  may  be  compensated.  Why\t this  undue
\n\t      favour  is being tried to be extended  to\t the
\n\t      respodents  Nos.5 to 11, speaks in  itself  in
\n\t      volume and is really a matter of the domain of
\n\t      the State Government.\n<\/p><\/blockquote>\n
\t\t\tThe  facts  relating to\t under\thand
\n\t      dealing  brought\tto  our\t notice\t during\t the
\n\t      course  of arguments by pointing out from\t the
\n\t      record are so startling.”\n<\/p><\/blockquote>\n
These are undoubtedly strong and highly disparaging  remarks
\nattributing mala fides, corruption and underhand dealing  to
\nthe State Government. Are they justified by the record, is a
\nquestion which we have to consider.\n<\/p>\n
We  may\t first consider the question of laches or  delay  in
\nfilling the
\n41<\/span>
\nwrit  petitions because that is the question which has\tbeen
\ndecided\t by the High Court against the petitioners  and\t the
\npetitioners  have challenged the correctness of the  finding
\nreached by the High Court of this point. The policy decision
\nimpugned  in  the writ petitions was  taken  30th  December,
\n1984.  The Letter of Intent was issued in favour of each  of
\nrespondent Nos. 5 to 11 on 1st February 1985 and the Deed of
\nAgreement  was\texecuted on 2nd February 1985. Each  of\t re-
\nspondents nos. 5 to 11 thereafter proceeded to purchase land
\nwhere  the new disilleries were to be located  and  incurred
\nlarge  expenditure  in purchase of such\t land  and  security
\ndeposit\t in a fairly large amount was also paid by  each  of
\nrespondents Nos.5 to 11. Thereafter civil construction\twork
\nfor  putting  up the distillery buildings was  entrusted  to
\nreputed\t builders  and various steps were taken by  each  of
\nrespondents   Nos.5   to   11\tfor   obtaining\t   requisite
\npermission\/consent  from  Madhya Pradesh  Pradushan  Nivaran
\nMandal.\t The  construction of the distillery  buildings\t was
\nstarted and in many cases considerable progress was made  in
\nthe  construction.  Each of respondents Nos. 5\tto  11\talso
\nplaced orders for plant and machinery and this too  involved
\nconsiderable amount of expenditure. All this had to be\tdone
\nwith  quick despatch because the distilleries were  required
\nto  be ready for production by 1st April 1986. Each  of\t re-
\nspondent  Nos. 5 to 11 worked indefeatably, ceaselessly\t and
\nin  all earnestness and spent considerable time, energy\t and
\nresources  in setting up the distilleries at the  new  sites
\nand by the time the writ
\npetitions  came to be filed each of respondent Nos. 5 to  11
\nhad  spent at least Rs. 1.5 crores it not more, on  acquisi-
\ntion of land, purchase of plant and machinery,\tconstruction
\nof  distillery buildings and other incidental and  ancillary
\nexpenses.  The\tfirst writ petition was filed  by  Nand\t Lal
\nJaiswal\t on  28th November, 1985 about 11 months  after\t the
\ndate-of the impugned policy decision, while the second\twrit
\npetition  came\tto be filed by Sagar Agarwal even  later  on
\n24th  January 1986 and the third writ petition of M\/s  Doon-
\ngaji & Co. was filed when the hearing of the first two\twrit
\npetitions was actually going on in the High Court. There can
\nbe no doubt that the petitioners were guilty of gross  delay
\nin  filing  the writ petitions with the result that  by\t the
\ntime  the writ petitions came to be filed, respondent  Nos.5
\nto 11 had, pursuant to the policy decision dated 30th Decem-
\nber 1984, altered their position by incurring huge  expendi-
\nture towards setting up the distilleries.\n<\/p>\n
    Now, it is well settled that the power of the High Court
\nto  issue an appropriate writ under article 226<\/a> of the\tCon-
\nstitution  is discretionary and the High Court in the  exer-
\ncise of its discretion does not ordinarily assist the  tardy
\nand  the indolent of the acquiescent and the  lethargic.  If
\nthere is inordinate delay on the part of the petitioner in
\n42<\/span>
\nfiling a writ petition and such delay is not  satisfactorily
\nexplained, the High Court may decline to intervene and grant
\nrelief in the exercise of its writ jurisdiction. The  evolu-
\ntion  of  this rule of laches or delay is  premised  upon  a
\nnumber of factors. The High Court does not ordinarily permit
\na belated resort to the extraordinary remedy under the\twrit
\njurisdiction  because  it is likely to cause  confusion\t and
\npublic inconvenience and bring in its train new\t injustices.
\nThe  rights of third parties may intervene and if  the\twrit
\njurisdiction  is excercised on a writ petition\tfiled  after
\nunreasonable delay, it may have the effect of inflicting not
\nonly hardship and inconvenience but also injustice on  third
\nparties.  When\tthe writ jurisdiction of the High  Court  is
\ninvoked,  unexplained  delay coupled With  the\tcreation  of
\nthird  party rights in the meanwhile is an important  factor
\nwhich always weighs with the High Court in deciding  whether
\nor  not\t to exercise such jurisdiction. We do not  think  it
\nnecessary to burden this judgment with reference to  various
\ndecisions  or this Court where it has been  emphasised\ttime
\nand  again  that where there is inordinate  and\t unexplained
\ndelay and third party rights are created in the\t intervening
\nperiod,\t the High Court would decline tO interfere, even  if
\nthe State action complained of is unconstitutional or  ille-
\ngal. We may only mention in the passing two decision of this
\nCourt one in Ramanna Dayaram Shetty v. International Airport
\nAuthority  of India & Ors<\/a>., [1979] 3 SCR 1014 and the  other
\nin  Ashok  Kumar Mishra & Ant. v. Collector Rajput  &  Ors.,
\n[1980]\t1  SCR 491, We may point out that in  R.D.  Shetty’s
\ncase  (supra), even though the State action was held  to  be
\nunconstitutional  as  being violative of Article 14<\/a>  of\t the
\nConstitution,  this  Court refused to grant  relief  to\t the
\npetitioner  on\tthe ground that the writ petition  had\tbeen
\nfiled  by  the petitioner more than five  months  after\t the
\nacceptance of the tender of the fourth respondent and during
\nthat period, the fourth respondent had incurred considerable
\nexpenditure, aggregating to about Rs. 1.25 lakhs, in  making
\narrangements for putting up the restaurant and the snack bar
\nof course, this rule of laches or delay is not a rigid\trule
\nwhich . can be cast in a straitjacket formula, for there may
\nbe  cases  where despite delay and creation of\tthird  party
\nrights\tthe  High  Court may still in the  exercise  of\t its
\ndiscretion  interfere  and grant relief to  the\t petitioner.
\nBut, such cases where the demand of justice is so compelling
\nthat  the High Court would be inclined to interfere  inspite
\nof’delay  or creation of ,third party rights would by  their
\nvery nature be few and for between. Ultimately it would be a
\nmatter within the discretion of the Court ex-hypothese every
\ndiscretion  must  be exercised fairly and justly  so  as  to
\npromote justice and not to defeat it.\n<\/p>\n
Here, obviously, there was considerable delay on the part of
\nthe
\n43<\/span>
\npetitioners  in filing the writ petitions and in the  inter-
\nvening\tperiod, respondent Nos.5 to 11 acquired\t land,\tcon-
\nstructed distillery buildings, purchased plant and machinery
\nand  spent considerable time, money and energy towards\tset-
\nting up the distilleries. These circumstances would, in\t our
\nopinion,  be  sufficient to disentitle\tthe  petitioners  to
\nrelief under Article 226<\/a> of the Constitution. The  petition-
\ners however contended that they were not aware of the policy
\ndecision dated 30th December 1984 nor had they any knowledge
\nof the fact that the right to construct distilleries and  to
\nmanufacture  and supply wholesale country liquor  from\tsuch
\ndistilleries was granted to the existing contractors and  it
\nwas only when they came to know about this that they immedi-
\nately  proceeded  to  file the writ petitions.\tNow,  it  is
\ndifficult to believe that the petitioners were not aware  of
\nthe policy decision dated 30th December 1984. The considera-
\ntion  of  this matter started as far back as July  1983\t and
\nthere were prolonged and wide ranging deliberations  lasting
\nseveral months, coupled with spot inspections by the  Vijay-
\nvargi  Committee and the Excise Department and it was  after
\nconsiderable  discussion  and deliberation that\t the  policy
\ndecision  was’ arrived at on 30th December 1984.  The  peti-
\ntioners were, on their own
\nshowing,  liquor  contractors by profession  and  they\twere
\n“associated  with the trade of country liquor in  the  State
\nsince the last several years” and it would be wholly unreal-
\nistic  and  naive to suppose that the petitioners  were\t not
\naware of the change in the policy which was being  discussed
\nat  various  levels over a period of almost  12\t months\t and
\nwhich  was ultimately brought about by the  policy  decision
\ndated 30th December 1984. Those who are in the liquor  trade
\nwould  immediately  know what is happening and\twhether\t any
\nchange\tis taking place in the policy in regard to grant  of
\nlicences  for  manufacture and wholesale supply\t of  country
\nliquor. It is also difficult to believe that the peti-
\ntioners\t did not know that new distilleries were being\tcon-
\nstructed at new sites by respondent Nos.5 to 11. The reigned
\nignorance  of the petitioners is completely exposed  by\t the
\nletter\tdated 1st April 1985 addressed by Sagar\t Agarwal  to
\nthe Commissioner of Excise where it has been stated categor-
\nically:–\n<\/p>\n
\t      “I have learnt that in order to prevent pollu-
\n\t      tion  the Government has taken a\tdecision  to
\n\t      transfer\tthe  distilleries from\tthe  densely
\n\t      populated areas and to establish them in areas
\n\t      having  less  thinner  population.  Government
\n\t      deserves to be congratulated for this decision
\n\t      in the face of pollution prevailing throughout
\n\t      the world.\n<\/p><\/blockquote>\n
\t      For this work existing distillers have taken a
\n\t      decision
\n\t      44<\/span>
\n\t      to  construct  new distilleries at  their\t own
\n\t      cost  and\t they are  being  granted  long-term
\n\t      permanent type licences for the same.  Besides
\n\t      this, the existing supply areas would be\tkept
\n\t      in tact with existing distillers.”\n<\/p><\/blockquote>\n
This letter clearly shows that Sagar Agarwal very well\tknew
\nabout the policy decision dated 30th December 1984 and\tthat
\nhe  was aware that Iong-term permanent licences\t were  being
\ngranted\t to  the existing contractors for  constructing\t new
\ndistilleries and operating the same. It may also be  pointed
\nout  that there was considerable publicity in newspapers  in
\nregard\tto  the construction of new  distillery\t at  village
\nKhapri\tin Chhatisgarh area and information to\tthat  effect
\nappeared  in  the  issues of Yugdhar dated  7th\t June  1985,
\nNavbharat  dated 8th June 1985 and Amrit Sandesh. There\t was
\nalso  information in regard to transfer of the Badawah\tdis-
\ntillery to village Khodi in the issue of Nai Dunia published
\nfrom  Indore on 12th July 1985. Of course,  the\t petitioners
\nhave  stated in their affidavits that they did not see\tthis
\nnewspaper  publicity  but it is difficult  to  accept  their
\nstatement. We may also point out that, apart from the letter
\ndated  1st April 1985, there was also another  letter  dated
\n25th  September 1985 addressed by Sagar Agarwal to the\tCom-
\nmissioner  of Excise where he made a specific  reference  to
\nthe  policy  decision dated 30th December 1984\twhich  shows
\nthat in any event, Sagar Agarwal knew specifically about the
\npolicy decision as far back as 25th September, 1985 and\t yet
\nno  action  was taken by him until 24th\t January  1986.\t M\/s
\nDoongaji & Company also knew by April 1985 that the distill-
\neries  were being given ‘permanently’ to the  existing\tcon-
\ntractors, vide their letter dated 12th April 1985  addressed
\nto  the Chief Secretary, Government of U.P. The next  letter
\nin point of time, namely, that dated 17th May 1985 addressed
\nby M\/s Doongaji & Company to the Prime Minister, also  shows
\nthat M\/s Doongaji & Company were aware by this time that the
\ndistilleries were being given ‘permanently’ to the  existing
\ncontractors. M\/s Doongaji & Company addressed another letter
\nto  the\t Prime Minister on 7th November 1985 in\t which\tthey
\nonce again complained that the distilleries were being\tmade
\n‘permanent’ to the existing contractors. Now if Sagar  Agar-
\nwal  and  M\/s Doongaji & Company knew as far back  as  April
\n1985  that  the\t distilleries were being  given\t in  private
\nownership  to the existing contractors, it is  difficult  to
\nbelieve\t that  Nand Lal Jaiswal who is also  in\t the  liquor
\ntrade  for  years  did not known about it.  In\tfact,  every
\nperson in the liquor trade would have know about this change
\nin policy which had been made by the State Government  under
\nthe  policy  decision dated 30th December 1984.\t We  do\t not
\ntherefore  see any reason to up set the finding of the\tHigh
\nCourt that the petitioners were guilty of
\n45<\/span>
\nenormous delay in filing the writ petitions and that in\t the
\nmeanwhile,  during  the intervening period,  the  rights  of
\nthird parties had intervened in that respondent Nos.5 to 11,
\nacting on the basis of the policy decision dated 30th Decem-
\nber  1984, had incurred huge expenditure towards setting  up
\nthe distilleries. If the policy decision dated 30th December
\n1984  were now to be set aside at the instance of the  peti-
\ntioners, it would work immense hardship on respondent Nos. 5
\nto  11\tand cause grave injustice to  them,  since  enormous
\namount of time, money and energy spent by them in setting up
\nthe  distilleries  would be totally wasted.  Obviously,\t re-
\nspondent Nos.5 to 11 would not have proceeded with the\twork
\nof setting up the distilleries by spending considerable time
\nand  energy  and  incurring huge expenditure,  if  the\twrit
\npetitions  had\tbeen filed in time, for in that\t event\tthey
\nwould  have known that they would be running a serious\trisk
\nof  losing time, money and resources in case the writ  peti-
\ntions  were allowed. But since no writ petitions were  filed
\nby  any liquor contractors challenging the  policy  decision
\ndated  30th  December  1984 for well nigh  over\t 10  months,
\nrespondent Nos.5 to 11 could not be blamed for embarking  on
\nthe  task  of setting up the distilleries  pursuant  to\t the
\npolicy\tdecision dated 30th December 1984. It would be\tmost
\ninequitous  now\t to tell respondent Nos. 5 to 11  that\tthey
\npolicy decision dated 30th December 1984 was unconstitution-
\nal  and void and that all the time and energy spent and\t the
\nenormous  expenditure  incurred by them in  setting  up\t the
\ndistilleries is therefore futile and they cannot be  permit-
\nted to enjoy its benefits.\n<\/p>\n
    The High Court however, fell into an error in  splitting
\nup  the\t policy decision dated 30th December 1984  into\t two
\nparts,\tone part relating to the grant for  construction  of
\nnew  distilleries by the existing contractors and the  other
\npart  relating to the grant of licences for manufacture\t and
\nwholesale  supply of liquor to the existing  contractors  on
\nconstruction of new distilleries by them and in holding that
\ndelay  on  the part of the petitioners in  filing  the\twrit
\npetitions disentitled them to relief in respect of only\t the
\nfirst part ‘and not in respect of the second. The High Court
\ntook  the view that by reason of the delay in filing of\t the
\nwrit  petitions, the petitioners could not be  permitted  to
\nassail\tthe grant made to the existing contractors for\tcon-
\nstruction  of  new distilleries but so far as the  grant  of
\nlicences for manufacture and wholesale supply of liquor from
\nthe  new  distilleries was concerned. the challenge  to\t the
\nsame  was not precluded by the doctrine of laches  or  delay
\nand taking this view, the High Court proceeded to hold\tthat
\nthe  grant of licences for manufacture and wholesale  supply
\nof liquor made to the existing contractors was violative  of
\nthe equality clause of the Con-\n<\/p>\n
46<\/span><\/p>\n
stitution.  This  view\ttaken by the High Court\t is  in\t our
\nopinion\t plainly erroneous. The policy decision\t dated\t30th
\nDecember 1984 was a single integrated decision arrived at by
\nthe  State  Government\ttaking a holistic view\tof  all\t the
\naspects\t involved  in the decision and it  is  difficult  to
\nappreciate how the High Court could sustain one part of\t the
\npolicy\tand  strike down the other. Either the policy  as  a
\nwhole could be sustained or as a whole, it could be declared
\nto  be\tinvalid, but certainly one part could  not  be\tsus-
\ntained,\t whatever  be the ground and  the  other  pronounced
\ninvalid.  That\twould be making a new policy for  the  State
\nGovernment which it was not competent for the High Court  to
\ndo.  Once  the\tHigh Court came to the\tconclusion  that  on
\naccount\t of delay or laches in the filing of the writ  peti-
\ntions  or  the creation of third.party rights in  the  mean-
\nwhile,\tthe Court would not interfere with one part  of\t the
\npolicy\tdecision,  the Court could not\tinterfere  with\t the
\nsecond part of the policy decision as well. The\t consequence
\nof  sustaining one part of the policy decision and  striking
\ndown the other would not only be to create a new policy\t for
\nthe  State Government but it would also\t cause\tconsiderable
\nhardship  and injustice to respondent Nos. 5 to 11 and\talso
\nresult\tin public mischief and inconvenience detrimental  to
\nthe interest of the State.\n<\/p>\n
    In the first place, under the policy decision dated 30th
\nDecember  1984, new distilleries were to be  constructed  by
\nthe  existing  contractors, not with a view to\tmaking\tthem
\navailable  for manufacturing liquor to any other person\t who
\nmight  give a more acceptable bid or tender for D-1 and\t D-2
\nlicences in the open market, but in order that the  existing
\ncontractors  who put up the new distilleries should be\table
\nto manufacture liquor and make wholesale supply of it  under
\nD-1 and D-2 licences to be granted to them for a period of 5
\nyears.\tThe  grant of D-1 and D-2 licences to  the  existing
\ncontractors for a period of 5 years for manufacturing liquor
\nin the new distilleries constructed by them and supply it in
\nwholesale  to  retail vendors, was an integral part  of\t the
\npolicy\tdecision  dated 30th December 1984. If D-1  and\t D-2
\nlicences were not be granted to the existing contractors but
\nthey were to be disposed of by auction or tender to any\t one
\nwho offers the most favourable rate, why should the existing
\ncontractors or for the matter of that any one, spend so much
\ntime, energy and resources and incur so much expenditure for
\nconstructing  the distilleries. Obviously the inducement  to
\nthe  existing contractors for constructing new\tdistilleries
\nat enormous cost was that they would be granted D- 1 and D-2
\nlicences at least for a period of 5 years. Otherwise, we  do
\nnot see why they should agree to construct new\tdistilleries
\nspending  so  much time and energy and incurring  such\thuge
\nexpenditure. Moreover, according to
\n47<\/span>
\nthe  policy  decision  dated 30th December  1984,  the\trate
\nchargeable  for\t supply of liquor manufactured\tin  the\t new
\ndistilleries  was to be determined from year to year  by  an
\nExpert\tCommittee appointed by the State Government, but  if
\nsuch rate were to depend on the bid which may be made at the
\nauction or tender and obviously the auction or tender  could
\ntake place only at the end of 3 or 5 years and not from year
\nto year–the entire policy of rate fixation laid down by the
\nState  Government would be set at naught. What would  happen
\nin effect is that the old policy which was being followed up
\nto 31st March 1986 and which was sought to be changed by the
\nState  Government would be revived but now the\tdistilleries
\nforming\t the subject matter of that policy would not be\t the
\nold distilleries of which the land and building belonged  to
\nthe State Government and the plant and machinery was subject
\nto  transfer  at a valuation but the new  distilleries\tcon-
\nstructed  by the existing contractors with their own  monies
\nand resources under the Letter of Intent dated 1st  February
\n1985  and  the Deed of Agreement dated\t2nd  February  1985,
\nneither\t of  which  provided for transfer of  the  land\t and
\nbuilding or the plant and machinery to any other person\t who
\nmight be granted D-1 and D-2 licences as a result of auction
\nor  tender. The entire policy of the State  Government\tcon-
\ntained in the policy decision dated 30th December 1984 would
\nbe  frustrated\tand  a new policy would be  made  out  which
\npatently the High Court has no jurisdiction or power to do.
\n\tSecondly, it is obvious that respondent Nos. 5 to 11
\ntook tremendous trouble by way of acquiring land, construct-
\ning buildings, purchasing and installing plant and machinery
\nand  procuring and  utilising large resources in setting  up
\nnew distilleries with a view to working them and manufactur-
\ning liquor for wholesale supply at such rate or rates as may
\nbe  fixed  by the Expert Committee appointed  by  the  State
\nGovernment.  Now if D-1 and D-2 licences are not granted  to
\nthem but are disposed of through auction or tender to anoth-
\ner  person the entire effort put in by them would be  wasted
\nand  they would be disappointed of a legitimate\t expectation
\ncreated\t by  the policy decision dated\t30th  December\t1984
\nwhich remained unchallenged for a period of over 10  months.
\nThere  can  be no doubt that this would\t cause\tconsiderable
\nhardship  and  inconvenience  to respondent Nos.  5  to\t 11.
\nMoreover,  it is difficult to see how D-1 and  D-2  licences
\ncould be disposed of in favour of the most acceptable bidder
\nor tenderer, when  such bidder or tenderer has no distillery
\nin which he can manufacture liquor. D-1 licence, as we\thave
\npointed\t out above, cannot be granted to a person  who\tdoes
\nnot  hold D-2 licence and the grant of D-2  licence   postu-
\nlates  that a distillery would be available to the  licencee
\nwhere he
\n48<\/span>
\ncan  work  for manufacturing liquor. Here, barring  the\t new
\ndistilleries which are being set up by respondent Nos. 5  to
\n11  and\t the Ratlam and Nowgaon distilleries, there  are  no
\nother  distilleries  in the State of  Madhya  Pradesh  where
\nliquor\tcan be manufactured and hence D-1 and  D-2  licences
\ncannot be granted to any person other than respondent Nos. 5
\nto 11, unless the new distilleries constructed.by respondent
\nNos. 5 to 11, are transferred to such other person either by
\nagreement  or after acquisition by the State Government.  We
\ncan plainly rule out the possibility of any agreement on the
\npart of respondent Nos. 5 to 11 to transfer the new distill-
\neries  to any other person to whom D-1 and D-2 licences\t may
\nbe granted by the State Government and the only\t alternative
\nleft  open  to the State Government would  therefore  be  to
\nacquire the new distilleries. But that would again frustrate
\nthe policy of the State Government to transfer the  distill-
\neries  to  private  ownership and the old  policy  would  be
\nrevived,  though  in a different garb. Moreover,  the  State
\nGovernment would have to produce over 40 crores of rupees by
\nway of compensation for the acquisition of the new  distill-
\neries and that would be a heavy drain on the public revenues
\nwhich might otherwise be used for developmental and  welfare
\nactivities. Further more, the entire process of\t acquisition
\nwould take considerable time, may be years, and during\tthis
\nperiod, there would be no production of liquor and the State
\nGovernment  would have to purchase liquor from\toutside\t the
\nState at higher prices in order to satisfy the demand of the
\nconsuming  public, resulting in loss of licence fee as\twell
\nas  excise  duty.  Even if the person to whom  D-1  and\t D-2
\nlicences  may be granted agrees to set up a new\t distillery,
\nit would take considerable time and during the period  taken
\nup  in\tthe construction of the new  distillery,  the  State
\nGovernment  would lose revenue. Of course, it may  be  urged
\nthat if respondent Nos. 5 to 11 are not granted D-1 and\t D-2
\nlicences  but such licences are granted to any other  person
\nor  persons who offer a more acceptable bid or\ttender,\t re-
\nspondent  Nos. 5 to 11 would be constrained to transfer\t the
\nnew  distilleries  to such other person or  persons  because
\notherwise  the new distilleries in their hands would  remain
\nidle  investment. But the State GOvernment cannot  wait\t for
\nsuch chance to materialise and in the meanwhile, lose public
\nrevenue.\n<\/p>\n
    We\thave therefore no doubt that the High Court was\t not
\nat  all justified in splitting up the policy decision  dated
\n30th  December 1984 into two parts and in striking down\t the
\nsecond\tpart, while sustaining’ the first. The Policy  deci-
\nsion  dated  30th December 1984 was  one  integrated  policy
\ndecision and it could either be sustained or struck down  as
\na whole. We must accordingly hold that since the petitioners
\nwere
\n49<\/span>
\nguilty of enormous delay in filing the writ petitions and in
\nthe  intervening period, the rights of respondents Nos 5  to
\n11  were created in that they spent considerable  amount  of
\ntime, energy and resources and incurred huge expenditure  in
\nsetting\t up the new distilleries and sustaining one part  of
\nthe  policy  decision while striking down  the\tother  would
\namont to creating a new policy for the State Government\t and
\nwould also entail considerable hardship and inconvenience to
\nrespondent Nos. 5 to 11 and would also be detrimental to the
\ninterest of the State, it would be unjust. and inequitous to
\ngrant relief to the petitioners against the policy  decision
\nand the petitioners must in the circumstances be held to  be
\ndisentitled  to relief in respect of the policy decision  in
\nits entirity. On this ground alone we would dismiss the writ
\npetitions and allow the appeals of the State Government\t and
\nrespondent Nos, 5 to 11.\n<\/p>\n
    But since considerable arguments were advanced before us
\nin regard to the validity of the policy decision dated\t30th
\nDecember 1984 with reference to Article 14<\/a> of the  Constitu-
\ntion, we shall proceed to consider this question- It  would,
\nhowever, be convenient if we first examine two minor conten-
\ntions  urged  on behalf of M\/s. Doongaji & Co. as  they\t are
\nrelatively  unimportant and can be briefly disposed of in  a
\nfew words. The first contention raised by the learned  coun-
\nsel  appearing on behalf of M\/s. Doongaji & Co. was that  it
\nwas not competent to the State Government to give effect  to
\nthe policy decision dated 30th December 1984 until after the
\npublication  of\t Rules made for that purpose  under  section
\n62(2)<\/a>  (h) of the Act. The learned counsel pointed out\tthat
\nD-2  licence in its existing form does not  contemplate\t any
\nconstruction  licence at all: it is only a licence to  manu-
\nfacture\t liquor and not a licence to construct a  distillery
\nand  hence without publishing Rules relating to licence\t for
\nconstruction of a distillery, the State Government could not
\nimplement  the\tchange of policy under the  policy  decision
\ndated  30th December 1984. This argument was  elaborated  by
\nthe learned counsel by putting forward the following conten-
\ntion  which  we may reproduce in his own words:\t “Rule\tXXII
\ncontemplates  the  disposal of licences\t either\t by  tender,
\nauction or fixed licence fee or in such other manner as\t the
\nState Government may by general or special order direct.  It
\ndoes not enable the State Government without publishing\t the
\nrules  to licence construction and working of  a  distillery
\nunder a changed policy: i.e. a policy which does not involve
\ntender, auction or fixed licence fee. Any other construction
\nwould-render  the  last clause of Rule XXII as\tultra  vires
\nsection 62(2)(h)<\/a> and section 63<\/a> read with section 7(c)<\/a>.” The
\nlearned counsel also urged that “the decision of the Cabinet
\nin a meeting of the
\n50<\/span>
\nCabinet is not an Order” within the meaning of Rule XXII and
\nsince  no order under that Rule was produced, the Letter  of
\nIntent and the Deed of Agreement were without the  authority
\nof  law\t as being in contravention of that Rule. We  do\t not
\nthink this contention has any substance. It is a  contention
\nof  despair.  It is difficult to understand why\t the  policy
\ndecision dated 30th December 1984 cannot be given effect  to
\nwithout\t any new Rules being made by the  State\t Government.
\nThere is nothing in the policy decision dated 30th  December
\n1984  which is contrary to the Rules made under the Act.  It
\nis  true  that\tD-2 licence in its existing  form  does\t not
\ncontemplate construction of a distillery and that the  Rules
\ndo  not seem to have prescribed the form for a\tlicence\t for
\nconstructing a distillery. But, merely because the form of a
\nlicence\t for constructing a distillery is not prescribed  by
\nthe  Rules, it does not mean that such a licence  cannot  be
\ngranted by the Excise Authorities. If the form of a  licence
\nis  prescribed,\t then, of course, such form has to  be\tfol-
\nlowed, but if no form is prescribed, the only consequence is
\nthat  the  licence to be granted by the\t Excise\t Authorities
\nneed  not conform to any particular form. Section  14(c)<\/a>  of
\nthe  Act clearly provides that the Excise  Commissioner\t may
\nlicense\t the  construction and working of a  distillery\t and
\nthere  was,  therefore, nothing contrary to the Act  or\t the
\nRules in the Excise Commissioner issuing Letter of Intent in
\nfavour of each of respondent Nos. 5-11 granting licence\t for
\nconstruction  of  a new distillery. Rule XXII,\tas  we\thave
\nalready\t pointed out, permits any one of four modes of\tdis-
\nposal of licence to be adopted by the Excise Authorities and
\nit  does not prescribe that the fourth mode denoted  by\t the
\nwords  “such  other manner as the State\t Government  may  by
\ngeneral or special order direct” can be resorted to only  if
\nthe  first three modes fail. Here, in the present case,\t the
\npolicy\tdecision  dated\t 30th December\t1984  provided\tthat
\nrespondent  Nos.  5-11, who were the  existing\tcontractors,
\nshould be granted licence to construct new distilleries\t and
\nD-  1 and D-2 licences should be given to them for a  period
\nof five years for manufacturing liquor in such new  distill-
\neries and making wholesale supply of it to retail vendors in
\nthe  areas  attached to those distilleries. This  manner  of
\ndisposal of licences was clearly covered by the fourth\tmode
\nof disposal set out in Rule XXII. We fail to understand\t why
\nany  further  Rules were necessary to be made by  the  State
\nGovernment  in order to give effect to this policy  decision
\narrived\t at by the State Government on 30th December,  1984.
\nThe fourth mode of disposal set out in Rule XXII was, in our
\nopinion,  sufficient to permit disposal of licences  in\t the
\nmanner\tset out in the policy decision dated  30th  December
\n1984.  The  argument that there was no\tgeneral\t or  special
\norder  made by the State Government pursuant to\t the  policy
\ndecision dated 30th December 1984 which would bring the case
\nwithin the
\n51<\/span>
\nfourth mode set out in Rule XXII is equally futile. When the
\npolicy\tdecision dated 30th December 1984 was arrived at  by
\nthe  State  Government itself, there could be  no  need\t for
\nseparate  general or special order to be made by  the  State
\nGovernment  in that behalf. This would seem to be  clear  on
\nprinciple, but we find that there is a dedsion of this Court
\nin  State  of Orissa & Ors. v. Harinarayan Jaiswal  &  Ors<\/a>.,
\n[1972]\t3  SCR 784 where the same view\thas  been  accepted.
\nThere,\tthe  section  which came up  for  consideration\t was
\nsection\t 29<\/a> of the Bihar and Orissa Excise Act,\t 1915.\tSub-
\nsection (2) of this section provided that the sum payable to
\nthe  State  Government in consideration of the grant  of  an
\nexclusive  privilege  to manufacture and  supply  or  liquor
\nshall  be  determined as follows: “by calling tender  or  by
\nauction or otherwise as the State Government may, by general
\nor special order, direct.” The State Government adopted\t the
\nmethod of selling the exclusive privilege by private negoti-
\nations and this was challenged on behalf of the\t petitioners
\non  the ground that the Government could sell the  exclusive
\nprivilege by private negotiations only if an order was\tmade
\nunder  section\t29<\/a>  sub-section (2) that  the  privilege  in
\nquestion  shall be sold by private negotiations and no\tsuch
\norder  having  been made by the State Government,  the\tsale
\neffected by the State Government was invalid. This challenge
\nwas negatived by Hegde, J., speaking on behalf of the  Court
\nin the following words:\n<\/p>\n
\t      “In  the\tcases of public auctions or  in\t the
\n\t      case  of calling for tenders, orders from\t the
\n\t      Government   directing  its  subordinates\t  to
\n\t      notify  or hold the auctions or call for\tten-
\n\t      ders  is\tunderstandable. Public\tauctions  as
\n\t      well as calling for tenders are done by subor-
\n\t      dinate  officials.  Further due  publicity  is
\n\t      necessary\t in adopting those methods.  To\t re-
\n\t      quire the Government to make an order that  it
\n\t      is going to sell one or more of the privileges
\n\t      in question by negotiating with some one is to
\n\t      make  a mockery of the law. If the  Government
\n\t      can enter into negotiation with any person, as
\n\t      we think it can, it makes no sense to  require
\n\t      it to first make an order that it is going  to
\n\t      negotiate with that person. We must understand
\n\t      a\t  provision  of\t law   reasonably.   Section
\n\t      29(2)(a)<\/a> does not speak of any order. It\tsays
\n\t      that “the State Government may, by general  or
\n\t      special  order direct”. The direction  contem-
\n\t      plated  by  that provision is a  direction  to
\n\t      subordinate  officials. It is  meaningless  to
\n\t      say that the Government should direct itself.”\n<\/p><\/blockquote>\n
This  decision provides a complete answer to the  contention
\nurged on
\n52<\/span>
\nbehalf\tof M\/s. Doongaji & Co. based on the language of\t the
\nlast  clause  of Rule XXII. It is true that  what  has\tbeen
\nproduced  before the Court by way of policy  decision  dated
\n30th December 1984 is the decision of the Cabinet and if its
\nproduction  had\t been  objected to on behalf  of  the  State
\nGovernment, a question would perhaps have arisen whether  it
\nis barred form the scrutiny of the Court under clause (3) of
\nArticle\t 163<\/a> of the Constitution. But, it has been  produced
\nby the petitioners without any objection on the part of\t the
\nState  Government  and\tonce it is produced,  the  Court  is
\nentitled to look at it and it clearly contains the  decision
\nof the State Government and must be held to fall within\t the
\nlast  clause of Rule XXII. This view finds complete  support
\nfrom the decision of this Court in L.G. Chaudhari v.  Secre-
\ntary, L.S.G. Deptt., Govt. of Bihar & Ors., AIR 1980 SC 383.
\n    The learned counsel appearing on behalf of M\/s  Doongaji
\n& Co. also raised another contention based on the provisions
\nof the Industries (Development & Regulation) Act<\/a>, 1951.\t The
\nargument of the learned counsel was that respondent Nos.  5-
\n11  were not entitled to set up new distilleries at the\t new
\nsites  without obtaining a licence from the Central  Govern-
\nment under Section 11<\/a> of this Act and since there was  noth-
\ning  to\t show  that they had obtained  such  licence  before
\nsetting up the new distilleries, their action in setting  up
\nthe new distilleries was illegal and could not give rise  to
\nany  rights  in their favour. But, this contention  is\talso
\nunsustainable.\tIn the first place, no such  contention\t was
\nraised\tin the writ petitions and neither the State  Govern-
\nment nor respondent Nos. 5-11 had any opportunity of answer-
\ning  such contention. This contention is based on facts\t and
\nwe  cannot permit the petitioners to raise it for the  first
\ntime in the present appeals. The foundation for this conten-
\ntion  should  have been laid in the writ petitions  and\t the
\nnecessary  facts should have been pleaded in support of\t it.
\nNo  such  plea having been raised and no such  facts  having
\nbeen  pleaded  in the writ petitions, we cannot\t allow\tthis
\ncontention  to be raised before us. Moreover, it is  obvious
\nfrom  section 11<\/a> read with the definitions of ‘factory’\t and
\n‘industrial  undertaking’ contained in sub-sections (c)\t and\n<\/p>\n
(d)  of section 3<\/a> of this Act that licence from the  Central
\nGovernment  for setting up new distilleries would be  neces-
\nsary  only  if 50 or more workers would be working  in\tsuch
\ndistilleries  and here in the present writ petitions,  there
\nis nothing to show that 50 or more workers were going to  be
\nemployed  in the new distilleries. We were told at  the\t Bar
\nthat in fact old distilleries were also working without\t any
\nlicence from the Central Government, presumably because less
\nthan  50  workers were employed in such\t distilleries.\tThis
\ncontention of the learned counsel on behalf of M\/s  Doongaji
\n& Co. must also, therefore, be rejected.\n<\/p>\n
53<\/span><\/p>\n
   That\t takes us to the next contention urged on behalf  of
\nthe  petitioners  in regard to the validity  of\t the  policy
\ndecision  dated 30th December 1984 tested with reference  to
\nArticle\t 14<\/a> of the Constitution. The High Court, of  course,
\ndeclined to interfere with what it called the first part  of
\nthe  policy  decision on account of laches or delay  on\t the
\npart of the petitioners but came to the conclusion that\t the
\nsecond\tpart  of the policy decision was  violative  of\t the
\nequality  clause.  The High Court observed that\t the  policy
\ndecision  dated 30th December 1984 “in so far as it  relates
\nto  the\t grant\tof licences for\t manufacture  and  wholesale
\nsupply\tof country liquor  ……..  contravenes Article  14<\/a>
\nof  the\t Constitution  and interference to  that  extent  is
\ncalled\tfor”. The argument which found favour with the\tHigh
\nCourt  was,  and that is the argument which  was  reiterated
\nbefore\tus  on behalf of the petitioners,  that\t the  policy
\ndecision dated 30th December 1984 that licence to  construct
\nnew  distilleries should be given only to the existing\tcon-
\ntractors and D-1 and D-2 licences to manufacture and  supply
\nit  in wholesale to retail dealers liquor in such  new\tdis-
\ntilleries  should be granted to them alone to the  exclusion
\nof  other  liquor  contractors without\tholding\t auction  or
\ninviting often which would give an opportunity to all liquor
\ncontractors  interested in setting up new  distilleries\t and
\nmanufacturing and supplying liquor to complete for the grant
\nof such licences, was arbitrary and irrational and there was
\nno valid justification for selectively preferring the exist-
\ning  contractors  to other liquor contractors for  grant  of
\nsuch licences. This contention, plausible though it may seem
\nat  tint blush, is, in our opinion, wholly untenable.  There
\nare  two very effective answers to it given by\tthe  learned
\nAttorney General and the learned counsel for Respondent Nos.
\n5-11 and we shall immediately proceed to discuss them.
\n    But, before we do so, we may at this stage\tconveniently
\nrefer  to a contention of a preliminary nature\tadvanced  on
\nbehalf\tof  the State Government and  respondent  Nos.\t5-11
\nagainst\t the applicability of Article 14<\/a> in a  case  dealing
\nwith  the grant of liquor licences. The contention was\tthat
\ntrade or business in liquor is so inherently pernicious that
\nno one can claim any fundamental right in respect of it\t and
\nArticle\t 14<\/a> cannot therefore be invoked by the\tpetitioners.
\nNow, it is true, and it is well settled by several decisions
\nof  this Court including the decision in Har Shanker &\tOrs.
\netc. v. Deputy Excise & Taxation Commissioner & Ors., [1975]
\n3 SCR 254 that there is no fundamental right in a citizen to
\ncarry  on trade or business in liquor. The State  under\t its
\nregulatory power has the power to prohibit absolutely  every
\nform  of activity in relation to  intoxicants–its  manufac-
\nture,  storage, export, import, sale and possession. No\t one
\ncan claim as against the
\n54<\/span>
\nState the right to carry on trade or business in liquor\t and
\nthe  State  cannot be compelled to part with  its  exclusive
\nright or privilege of manufacturing and selling liquor.\t But
\nwhen  the State decides to grant such right or privilege  to
\nothers the State cannot escape the rigour of Article 14.<\/a>  It
\ncannot act arbitrarily or at its sweet will. It must  comply
\nwith the equality clause while granting the exclusive  right
\nor  privilage  of manufacturing or selling  liquor.  It\t is,
\ntherefore,  not\t possible to uphold the\t contention  of\t the
\nState  Government and respondent Nos. 5-11 that\t Article  14<\/a>
\ncan  have  no  application in a case where  the\t licence  to
\nmanufacture  or\t sell liquor is being granted by  the  State
\nGovernment.  The  State cannot ride roughshod over  the\t re-
\nquirement of that Article.\n<\/p>\n
    But,  while considering the applicability of Article  b,
\nin such a case, we must bear in mind that, having regard  to
\nthe nature of the trade or business, the Court would be slow
\nto interfere with the policy laid down by the State  Govern-
\nment  for  grant of licences for. manufacture  and  sale  of
\nliquor.\t The Court would, in view of the  inherently  perni-
\ncious  nature  of  the commodity allow a  large\t measure  of
\nlatitude  to the State Government in determining its  policy
\nof  regulating, manufacture and trade in  liquor.  Moreover,
\nthe  grant  of licences for manufacture and sale  of  liquor
\nwould  essentially be a matter of economic policy where\t the
\ncourt  would hesitate to intervene and strike down what\t the
\nState  Government has done, unless it appears to be  plainly
\narbitrary,  irrational\tor  mala fide. We  had\toccasion  to
\nconsider the scope of interference by the Court under  Arti-
\ncle 14 while dealing with laws relating to economic  activi-
\nties in R.K. Garg etc. v. Union of India & Ors. etc.  [1982]
\n1 SCR 947. We pointed out in that case that laws relating to
\neconomic  activities should be viewed with greater  latitude
\nthan  laws touching civil rights such as freedom of  speech,
\nreligion,  etc. We observed that the legislature  should  be
\n,allowed some play in the joints because it has to deal with
\ncomplex problems which do not admit of solution through\t any
\ndoctrinaire or strait-jacket formula and this is particular-
\nly  true in case of legislation dealing with  economic\tmat-
\nters,  where,  having regard to the nature of  the  problems
\nrequired to be dealt with, greater play in the joints has to
\nbe  allowed to the legislature. We quoted with approval\t the
\nfollowing  admonition  give by Frankfurter, J. in  Morey  v.
\nDond, (354 US 457):\n<\/p>\n
\t      “In the utilities, tax and economic regulation
\n\t      cases,  there  are good reasons  for  judicial
\n\t      self-restraint  if not judicial  deference
\n\t      to legislative judgment. The legislature after
\n\t      all  has the affirmative\tresponsibility.\t The
\n\t      courts have only the power to destroy, not  to
\n\t      reconstruct. When these are added
\n\t      55<\/span>
\n\t      to the complexity of economic regulation,\t the
\n\t      uncertainty,  the\t liability  to\terror,\t the
\n\t      bewildering conflict of the ‘experts, and\t the
\n\t      number of times the judges have been overruled
\n\t      by  events-self-limitation can be seen  to  be
\n\t      the path to judicial wisdom and  institutional
\n\t      prestige and stability.”\n<\/p><\/blockquote>\n
What we said in that case in regard to legislation  relating
\nto  economic matters must apply equally in regard to  execu-
\ntive action in the field of economic activities, though\t the
\nexecutive decision may not be placed  on as high a pedestial
\nas  legislative judgment in so far as judicial deference  is
\nconcerned.  We\tmust  not forget that  in  complex  economic
\nmatters\t every\tdecision is necessarily empiric\t and  it  is
\nbased  on  experimentation or what one may call\t ‘trial\t and
\nerror method’ and, therefore, its validity Cannot be  tested
\non any rigid a ‘priori’ considerations or on the application
\nof any straight-jacket formula. The court must while adjudg-
\ning  the  constitutional validity of an\t executive  decision
\nrelating  to  economic matters grant a\tcertain\t measure  of
\nfreedom\t or  play  in the ‘joints’ to  the  executive.\t“The
\nproblem\t of Government” as pointed out by the Supreme  Court
\nof the United States in Metropolis Theatre Company v.  State
\nof  Chicago, 57 Lawyers Edition 730 “are practical ones\t and
\nmay  justify, if they do not require, rough  accommodations,
\nillogical, it may be, and unscientific. But even such criti-
\ncism  should not be hastily expressed. What is best  is\t not
\ndiscernible,  the  wisdom of any choice may be\tdisputed  or
\ncondemned. Mere errors of Government are not subject to\t our
\njudicial review. It is only its palpably arbitrary exercises
\nwhich can be declared void.” The Government, as was said  in
\npermian\t Basin Area Rate cases 20 Lawyers Edition (2d)\t312,
\nis  entitled  to  make pragmatic adjustments  which  may  be
\ncalled\tfor  by particular circumstances. The  Court  cannot
\nstrike down a policy decision taken by the State  Government
\nmerely\tbecause it feels that another policy decision  would
\nhave been fairer or wiser or more scientific or logical. The
\nCourt can interfere only if the policy decision is  patently
\narbitrary,  discriminatory or mala fide. It is\tagainst\t the
\nbackground  of these observations and keeping them  in\tmind
\nthat we must now proceed to deal with the contention of\t the
\npetitioners based on Article 14<\/a> of the Constitution.
\n    The\t first answer to the contention of  the\t petitioners
\nis,  and  this\tin our opinion is a fatal  answer,  that  no
\nliquor contractors have in fact been excluded from consider-
\nation under the policy decision dated 30th December 1984. It
\nis undoubtedly true that, on the application of the existing
\ncontractors,  the State Government decided to grant to\tthem
\nlicences  to construct new distilleries in lieu of  the\t old
\ndistilleries in
\n56<\/span>
\nGwalior, Ujjain, Dhar, Badwaha, Chattisgarh, Bhopal Seoni as
\nalso to give them D-1 and D-2 licences to manufacture liquor
\nin  such  new distilleries and to sell it  in  wholesale  to
\nretail vendors in the respective areas attached to such\t new
\ndistilleries and it might appear on a superficial reading of
\nthe policy decision dated 30th December 1984 that the entire
\ncake  was  handed over to the existing contractors  and\t all
\nother liquor contractors were left out and they were  denied
\nan  opportunity\t of asking for similar\tlicences.  But\tthis
\nview, in our opinion, is based on a misreading of the policy
\ndecision  dated 30th December 1984. It ignores clause  2  of
\nthe  policy  decision which clearly provides that  “if\tsome
\nsuch  ‘similar\tmatters are put up, the\t department  on\t the
\nbasis  of  the principles recommended by  the  Cabinet\tSub-
\nCommittee  should  take decisions”. It is  clear  from\tthis
\nclause\tthat the State Government envisaged the\t possibility
\nof other liquor contractors making similar applications\t for
\nlicences  to construct new distilleries and  to\t manufacture
\nand  supply  liquor  from such new  distilleries  and  hence
\nprovided that if any such applications are made, they should
\nbe  disposed  of by the Excise Department on merits  on\t the
\nbasis  of the principles “recommended by the  Sub-Committee”
\nthat  is, on the basis of the same principles on  which\t the
\nlicences were decided to be granted to the existing contrac-
\ntors. It is therefore impossible to see how it can at all be
\ncontended that other contractors were excluded from  consid-
\neration\t for the grant of licences for new distilleries.  If
\nany liquor contractor makes an application for a licence  to
\nconstruct  a new distillery on the same terms on  which\t li-
\ncences\tare granted to the existing contractor his  applica-
\ntion  would  have to be considered on merits by\t the  Excise
\nAuthorities and the Excise Authorities may, if they find the
\nproposal  suitable, grant to such liquor contractor  licence
\nto construct a new distillery along with D-2 licence on\t the
\nsame  basis.  The  Excise Authorities may,  in\tsuch  event,
\neither\t(1)  direct such liquor\t contractor  to\t manufacture
\nrectified spirit, denatured spirit or foreign liquor in\t the
\nnew  distillery for the remaining period of the D-1 and\t D-2
\nlicences of the existing contractors and thereafter consider
\nhim along with other liquor contractors for grant of D-1 and
\nD-2 licences in respect of the new distillery or (2)  reduce
\nand\/or\talter  the  area of supply-of any  of  the  existing
\ncontractors and grant D-1 licence to such liquor  contractor
\nin  respect of the carved out area. If the Cabinet  decision
\ndated  30th  December 1984 while granting  licences  to\t the
\nexisting contractors leaves it open to other liquor contrac-
\ntors to come in and apply for similar licences, it is diffi-
\ncult  to  see how the challenge based on Article 14<\/a>  can  be
\nsustained.\n<\/p>\n
This  view taken by us is sufficient to dispose of the\tcon-
\ntention
\n57<\/span>
\nbased  on  Article  14.<\/a> But apart from this  answer  to\t the
\ncontention  which  has found acceptance with  us,  there  is
\nanother\t answer which is equally strong and cogent.  Let  us
\nconsider  the circumstances under which the policy  decision
\ndated  30th  December 1984 came to be  taken.  The  proposal
\nwhich ultimately culminated in the policy decision was first
\ninitiated  in July 1983 by the M.P. Distillers\tAssociation,
\nwhich  was of course an association of existing\t distillers,
\nmaking a representation to the State Government for privati-
\nsation of the distilleries. The situation which prevailed at
\nthat  time in regard to the distilleries was quite  disturb-
\ning. Whatever might have been the position at the date\twhen
\nthe distilleries were constructed, considerable human  habi-
\ntation\thad  grown around them over the years  and,  barring
\nGwalior\t and Dhar distilleries, all the\t other\tdistilleries
\nwere  in  thickly populated localities and even\t so  far  as
\nGwalior and Dhar distilleries were concerned, it was  appre-
\nhended\tthat within 5 or 7 years they would also be  in\t the
\nsame  unhappy situation. The result was that the working  of
\nthe  distilleries at the old sites was causing serious\tair,
\nwater and environmental pollution. The note prepared by\t the
\nseparate  Revenue  Department for the consideration  of\t the
\nCabinet\t Sub-Committee as also the Report of the  Vijayvargi
\nCommittee clearly showed that there was considerable air and
\nwater pollution on account of dirty water flowing out of the
\ndistilleries and fouling air and water. There was not enough
\nspace at the old sites for constructing lagoons for  removal
\nof the polluted water coming out of the distilleries. It was
\ntherefore  necessary  to transfer the  distilleries  to\t new
\nsites  which would be away from human habitation and.  where
\nthe  distilleries could be constructed keeping in  mind\t the
\nstandards  fixed  by the M.P. Pradushan Nivaran\t Mandal\t for
\nremoval\t of polluted water and keeping the environment\tdean
\nand wholesome. Moreover, the total capacity of the  distill-
\neries including Ratlam Alcohol plant and Nowgaon  distillery
\nwas  only 203 lakhs proof litres and even this\tquantity  of
\nproduction  was not being reached largely on account of\t old
\nplant and machinery. The result was short supply of  country
\nliquor leading to loss of licence fee as well as excise duty
\non the part of the State Government. Moreover, the estimated
\nconsumption  of liquor in the State was likely to be  around
\n482.36\tlakhs proof litres by the year 1991 and by the\tturn
\nof the century it was expected to reach the startling figure
\nof  1696.80  lakhs proof litres. The  existing\tdistilleries
\nwere obviously incapable of meeting this growing demand\t for
\ncountry liquor. The plant and machinery of the\tdistilleries
\nhad became antiquated and worn out and the licensees for the
\ntime  being had no incentive to replace it by  modern  plant
\nand machinery. The buildings in which the distilleries\twere
\nhoused\thad  also become old and dilapidated and  the  State
\nGovernment was not in a position to
\n58<\/span>
\nmaintain them in good condition and obviously the  licencees
\nfor  the time being were also not interested in keeping\t the
\nbuildings in good state of repair because the buildings\t did
\nnot belong to them. It was therefore absolutely essential to
\nconstruct  new\tdistilleries  with  modern   technologically
\nadvanced plant and machinery at new sites where there  would
\nbe no problem of air or water pollution. The question was as
\nto  how\t this should be done whether  the  new\tdistilleries
\nshould\tbe  constructed by the State Government\t or  whether
\nthey  should be placed in the private sector.  The  proposal
\nmade by M.P. Distillers Association was that the  distiller-
\nies  should  be transferred to private\townership  and\tthey
\noffered to take over the existing distilleries. The  Cabinet
\nSubCommittee considered this question in all its aspects and
\nreached\t the conclusion that it would be better\t to  entrust
\nthe  construction  of the new distilleries  to\tthe  private
\nsector rather than ask the State Government to do so.  There
\nare  four  very good reasons why the  Cabinet  Sub-Committee
\ntook this view. In the first place, the distilleries were in
\nprivate ownership in almost all the States barring the State
\nof M.P. and there was no reason why the State of M.P. should
\nnot  fail  in  line with what was  happening  in  the  other
\nStates. Secondly, the State Government would have to  invest
\nabout Rs.50 crores, in any event more than Rs.40 crores,  if
\nthe  State Government had to construct and cut up  new\tdis-
\ntilleries.  This  large amount would  become  available\t for
\nother  developmental and welfare programme, if,\t instead  of
\nthe  State Government the private sector was entrusted\twith
\nthe  task of construction of new distilleries. Thirdly,\t the
\nState  Government  would not have to,  incur  any  recurring
\nexpenditure  on maintenance of the buildings and  the  plant
\nand  machinery, because in the event of construction of\t the
\nnew  distilleries being entrusted to private  entrepreneurs,
\nmaintenance  of\t buildings as well as  plant  and  machinery
\nwould  become their responsibility and moreover\t they  would
\nhave  real interest in keeping and maintaining them in\tgood
\ncondition.  And lastly, the land and buildings in which\t the
\ndistilleries were then housed would become available to\t the
\nState  Government  for sale and, situated as  they  were  in
\nthickly\t populated areas, they would fetch a  very  handsome
\nprice  which would go to augment the resources of the  State
\nGovernment.  The State Government for these reasons  thought
\nit  desirable  that  the construction  of  new\tdistilleries
\nshould\tbe in the private sector and, after discussion\twith
\nthe M.P. Distillers Association the State Government decided
\nto  entrust  the  construction of new  distilleries  to\t the
\nexisting  contractors who had already offered to  take\tover
\nthe distilleries.\n<\/p>\n
    There was also one other factor which, according to\t the
\nState  Government and respondent Nos. 5 to 11, weighed\twith
\nthe State
\n59<\/span>
\nGovernment  in arriving at the decision to entrust the\tcon-
\nstruction  of new distilleries to the  existing\t contractors
\ninstead of inviting offers by advertisement and that  factor
\nwas  that  the\tlicences of the\t existing  contractors\twere
\ncoming\tto an end on 31st March, 1986 and it  was  therefore
\nnecessary  that\t the new distilleries should  be  ready\t for
\nmanufacture of liquor before 1st April, 1986. The  construc-
\ntion of new distilleries was a time-consuming job because it
\ninvolved  selection  of appropriate land,  approval  of\t the
\nauthorities  to the land selected, entrustment\tof  contract
\nfor  construction  to a competent contractor,  obtaining  of
\nsanction of the municipal and other authorities to the plans
\nacquisition  of\t materials  and\t construction  of  buildings
\nplacing of orders for modern sophisticated plant and machin-
\nery  and  installation of such plant and  machinery  in\t the
\ndistilleries. This whole process was bound to take consider-
\nable  time and the State Government could not  therefore  be
\nfaulted if they negotiated with the existing contractors who
\nhad  come  forward with a positive offer and  entrusted\t the
\nconstruction of new distilleries to them so that they  could
\nbe ready for manufacture by 1st April 1986. Moreover it\t may
\nbe  noted that no other person with experience of working  a
\ndistillery  had come forward with an offer to set up  a\t new
\ndistillery.  It\t is not possible to believe  that  when\t the
\nexisting  contractors  who were members of  M.P.  Distillers
\nAssociation had made an offer to the State Government to set
\nup  new\t distilleries  and  considerable  deliberations\t and
\ndetailed  enquiries were going on at the highest  level\t for
\ndeciding whether the new distilleries should be handed\tover
\nto  the private sector and negotiations were actually  being
\ncarried\t on  with the M.P. Distillers  Association  in\tthat
\nbehalf\tthe other liquor contractors were not aware  of\t any
\nsuch proceedings. Even after the policy decision dated\t30th
\nDecember, 1984 was reached by the State Government,  neither
\nNandial Jalswal nor M\/s Doongaji & Co. made any\t application
\nfor  grant of licence to construct a new distillery  on\t the
\nsame  terms on which licences were decided to be granted  to
\nthe existing contractors. It is true that Sagar Aggarwal did
\nmake an offer but it may be noted that in the first place he
\nwas  at no time a D-2 licencee and he had no  experience  of
\nworking a distillery and secondly, his main interest was  in
\nhaving D-1(S) licences for Jabalpur and Betul districts.  It
\nis  also significant that while taking a decision  to  grant
\nlicences to the existing contractors to put up new  distill-
\neries, the State Government did not wish to create a monopo-
\nly  in\tfavour\tof the existing contractors  and  the  State
\nGovernment therefore, when entering into the Deed of  Agree-
\nment,  limited the duration of D-2 licence to be granted  to
\neach of the existing contractors to five years and also left
\nit  open to other distillery contractors to come in  on\t the
\nsame terms. In fact the learned Attorney General
\n60<\/span>
\nfrankly\t stated that if M\/s Doongaji & Co. made an  applica-
\ntion  for  a licence to construct a new\t distillery  on\t the
\nbasis as others, his application would be considered by\t the
\nState Government. We fail to appreciate how in these circum-
\nstances it can at all be contended that the policy  decision
\ndated 30th December, 1984 taken by the State Government\t was
\narbitrary or irrational so as to be violative of Article  14<\/a>
\nof the Constitution.\n<\/p>\n
    We may also point out that when the State Government  is
\ngranting licence for putting up a new industry, it is not at
\nall necessary that it should advertise and invite offers for
\nputting\t up such industry. The State Government is  entitled
\nto  negotiate with those who have come up with an  offer  to
\nset  up such industry. This principle was clearly  and\tune-
\nquivocally  accepted  by this Court in Kasturi\tLal  Lakshmi
\nReddy  v. State of Jammu & Kashmir<\/a>, [1980] 3 SCR 1338  where
\ncontracts  entered into by the state Government\t with  three
\nmanufacturers  giving them the right to set up factories  in
\nthe State for the manufacture of rosin, turpentine and other
\nderivatives  and making available to them an assured  supply
\nof 4,000, 3,500 and 8000 metric tonnes of rosin per year  by
\ngiving them tapping contract were challenged as violative of
\nArticle 14<\/a> of the Constitution on the ground that the  State
\nGovernment had not issued any advertisement inviting  offers
\nfor  award of tapping contract or stating that\tthe  tapping
\ncontract  would be given to any party who would be  prepared
\nto put up a factory for manufacture of rosin, turpentine and
\nother  derivatives within the State and thereby equality  of
\nopportunity  to\t compete for obtaining\tsuch  contracts\t was
\ndenied to other persons. This Court speaking through one  of
\nus (Bhagwati, J., as he then was) pointed out:-\n<\/p>\n
\t\t    “The pre-dominant purpose of the  trans-
\n\t      action was to ensure setting up of a factor by
\n\t      the 2nd respondents as part of the process  of
\n\t      industrialisation\t of the State and since\t the
\n\t      2nd respondents for that purpose. If the State
\n\t      were giving tapping contract simplicitor there
\n\t      can  be no doubt that the State would have  to
\n\t      auction  or  invite tenders for  securing\t the
\n\t      highest  price,  subject, of  course,  to\t any
\n\t      other  relevant overriding  considerations  of
\n\t      public  weal or interest, but in a  case
\n\t      like  this where the State is  allocating\t re-
\n\t      sources  such as water, power,  raw  materials
\n\t      etc. for the purpose of encouraging setting up
\n\t      of  industries  within the State,\t we  do\t not
\n\t      think the State is bound to advertise and tell
\n\t      the people that it wants a particular industry
\n\t      to be set up within the State and invite those
\n\t      interested to come up
\n\t      61<\/span>
\n\t      with proposals for the purpose. The State\t may
\n\t      choose  to  do so, if it thinks fit and  in  a
\n\t      given situation, it may even turn to be advan-
\n\t      tageous  for  the State to do so, but  if\t any
\n\t      private  party  comes  before  the  State\t and
\n\t      offers to set up an industry, the State  would
\n\t      not be committing breach of any constitutional
\n\t      or legal obligation if it negotiates with such
\n\t      party  and  agrees to  provide  resources\t and
\n\t      other facilities for the purpose of setting up
\n\t      the industry. The State is not obliged to tell
\n\t      such  party; “Please it. I will  first  adver-
\n\t      tise, see whether any other offers are  forth-
\n\t      coming and then after considering all  offers,
\n\t      decide  whether  I should let you set  up\t the
\n\t      industry”.  It  would be most  unrealistic  to
\n\t      insist on such a procedure  ……………The
\n\t      State must be free in such a case to negotiate
\n\t      with  a  private entrepreneur with a  view  to
\n\t      inducing him to set up an industry within\t the
\n\t      State and if the State enters into a  contract
\n\t      with such entrepreneur for providing resources
\n\t      and other facilities for setting up an  indus-
\n\t      try, the contract cannot be asailed as invalid
\n\t      so  long\tas the State had  acted\t bona  fide,
\n\t      reasonably  and  in public  interest.  If\t the
\n\t      terms  and conditions of the contract  or\t the
\n\t      surrounding circumstances show that the  State
\n\t      has  acted  mala fide or out  of\timproper  or
\n\t      corrupt  motives\tor in.order to\tpromote\t the
\n\t      private  interests of some one at the cost  of
\n\t      the  State, the Court will undoubtedly  inter-
\n\t      fere  and strike down State action  as  aribi-
\n\t      trary,  unreasonable  or\tcontrary  to  public
\n\t      interest.\t But so long as the State action  is
\n\t      bona  fide and reasonable, the Court will\t not
\n\t      interfere merely on the ground that no  adver-
\n\t      tisement\twas given or publicity made or\tten-
\n\t      ders invited.”\n<\/p><\/blockquote>\n
Here,  in the present case, the pre-dominant purpose of\t the
\npolicy\tdecision  dated 30th December, 1984  was  to  ensure
\nconstruction and setting up of new distilleries with  modern
\ntechnologically\t advanced plant and machinery at  new  sites
\nwhere there would be no possibility of air and water  pollu-
\ntion and if for achieving this purpose the State  Government
\nconsidered the offer of the existing contractors and negoti-
\nated  with  them  and ultimately decided to  grant  to\tthem
\nlicences  for construction of new distilleries on the  terms
\nand conditions set out in the recommendations of the Cabinet
\nsub-Committee  it  is difficult to see how, in view  of\t the
\ndecision  in  Kasturi Lal Lakshmi Reddy’s case\t(supra)\t the
\nState Government could be said to have acted arbitrarily  or
\ncapriciously in violation of Article 14<\/a> of the Constitution.
\nThe con-\n<\/p>\n
62<\/span><\/p>\n
tention\t of the petitioners based on Article 14<\/a> of the\tCon-
\nstitution must therefore stand rejected.\n<\/p>\n
    Before we part with this case we must express our strong
\ndisapproval  of\t the observations made by B.M.\tLal,  J.  in
\nparagraph 1,9, 17, 18, 19 and 34 of his concurring  opinion.
\nThe  learned  Judge made sweeping  observations\t attributing
\nmala  fides, corruption and underhand dealing to  the  State
\nGovernment. These observations are in our opinion not at all
\njustified by the record. In the first place it is  difficult
\nto appreciate how any such observation could be made by\t the
\nlearned Judge without any foundation for the same being laid
\nin the pleadings. It is true that in the writ petitions\t the
\npetitioners used words such as ‘mala fide’, ‘Corruption’ and
\n‘corrupt practice’, but the use of such words is not enough.
\nWhat is necessary is to give full particulars of such  alle-
\ngations\t and  to set out the material facts  specifying\t the
\nparticular person against whom such allegations are made  so
\nthat he may have an opportunity of controverting such  alle-
\ngations.  The requirement of law is not satisfied in so\t far
\nas  the pleadings in the present case are concerned  and  in
\nthe absence of necessary particulars and material facts,  we
\nfail  to see how the learned Judge could come to  a  finding
\nthat the State Government was guilty of factual mala  fides,
\ncorruption  and under-hand dealings. The learned  Judge\t ob-
\nserved that amount was spent by respondent Nos. 5 to 11\t “in
\nworking\t out the contract in approaching the  concerned\t au-
\nthorities of the State”. This observations carried a  direct
\nallegation that money passed from respondent Nos. 5 to 11 to
\n“the concerned authorities” for getting the licences. But no
\nsuch allegation was at any time made by the petitioners\t and
\nwhen the petitioners did not make any such allegation in the
\npleadings, nor even stated as to which authority took monies
\nby  way of illegal gratification, it is difficult to  under-
\nstand  how  the learned Judge could possibly  make  such  an
\nobservation. The petitioners also did not make any  specific
\nimputation of under hand dealing in the writ petitiones\t and
\nyet  the learned Judge inexplicably came to  the  conclusion
\nthat the State Government was guilty of ‘sinister  underhand
\ndealing’.  The\tlearned Judge was clearly not  justified  in
\ndoing so.\n<\/p>\n
    But,  quite apart from this objection based on  lack  of
\nproper\tand adequate pleading, we think that even on  merits
\nthe observations made by B.M. Lal, J. were clearly  unjusti-
\nfied. There is not an iota of evidence to establish or\teven
\nas much as to indicate that the State Government was actuat-
\ned by any collateral purpose or was guility of any ‘sinister
\nunderhand dealing’ or was prompted by any currupt motive  in
\nreaching the policy decision dated 30th December, 1984.\n<\/p>\n
63<\/span><\/p>\n
What the learned Judge has said is based entirely on conjec-
\nture and suspicion and approach which does not go well\twith
\njudicial  disposition  of a case. There\t are  two  important
\nfactors which throw considerable light in determining wheth-
\ner  a policy decision is mala fide or motivated by  improper
\nconsiderations.\t One  relates to the manner  and  method  of
\nreaching  the policy decision and the other to\tthe  circum-
\nstances\t in which the policy decision is taken and the\tcon-
\nsiderations  which have entered into the making of it.\tNow,
\nit  is\tdear from the detailed statement of facts  which  we
\nhave  given  at the commencement of this judgment  that\t the
\nentire\tprocess\t commencing with the representation  of\t the
\nM.P. Distillers’ Association in July 1983 and culminating in
\nthe policy decision dated 30th December 1984 was spread over
\na  period  of about 17 months and it included  gathering  of
\ninformation,  on-spot inspection of the sites,\tcollegiality
\nof  deliberations, candour of inter-departmental and  intra-
\ndepartmental communication and a dialectical interaction  of
\ndifferent  multilateral viewpoints. The policy decision\t was
\nan informed and reasoned decision arrived at after  detailed
\ninquiries, fact-finding efforts and reports spreading over a
\nperiod\tof more than a year and a half. Several queries\t and
\nissues\twere  raised by the Finance  Department\t boldly\t and
\nfearlessly  and\t these\tqueries and issues  were  fully\t and
\nfrankly dealt with, clarifications were given and the entire
\nmatter\twas  fully considered. There was no attempt  at\t any
\nstage  of  suppress  discussion and debate or  to  avoid  or
\nside-track or push under the carpet any doubts or  questions
\nraised by any of the parties involved in the  deliberations.
\nIt  is\talso significant that the policy  decision  was\t not
\narrived\t at  by a single individual in the  secrecy  of\t his
\nchamber but it was by the entire Cabinet and it was based on
\nthe  recommendations made by the Cabinet SubCommittee  which
\nwas  composed  of four Ministers.assisted by  officers\tfrom
\ndifferent  departments belonging to the highest scholars  of
\nthe  civil  service. It may also be noted that\tthe  Cabinet
\nSub-Committee  considered the matter from different  angles,
\nobtained relevant information, sent a Committee of  officers
\nfor  spot  inspection, took stock of the valuation  and\t the
\nlikely\tinvestment, reviewed the problem and worked out\t the
\nsolution  and made its recommendations to the  Cabinet.\t The
\nentire proceedings of the Cabinet Sub-Committee were  before
\nthe Cabinet including the reasons for which the\t recommenda-
\ntions were made and it was after considering these recommen-
\ndations\t that the Cabinet reached the policy  decision.\t The
\nentire proceedings show that there was complete openness  of
\ndiscussion  and\t deliberation. There was  no  suddenness  of
\ndecision, no impulsive caprice or arbitrariness in  reaching
\nthe  decision. The policy decision was plainly and  avowedly
\nan informed and institutionalised decision and the manner in
\n64<\/span>
\nwhich  it  was\treached is clearly indicative  that  it\t was
\nneither\t mala fide nor guided by any corrupt  or  collateral
\nconsiderations.\n<\/p>\n
    We have already discussed the circumstances under  which
\nthe  policy  decision dated 30th December, 1984 came  to  be
\nmade. We need not repeat what we have said in the  preceding
\nparagraphs  in regard to the making of the  policy  decision
\nand the circumstances under which it was made. These circum-
\nstances plainly and unmistakably point to the bona fides  of
\nthe policy decision. It is not possible to discern any\tmala
\nfides  or any improper or corrupt motive on the part of\t the
\nState  Government  in reaching the policy  decision.  It  is
\nsignificant  to note that the State Government did not\tcon-
\ncede whatever was demanded by the existing contractors.\t The
\nexisting  contractors wanted the land and buildings  of\t the
\nexisting distilleries to be transferred to them at a  valua-
\ntion  but  the Cabinet Sub-Committee did not agree  to\tthis
\nsuggestion and insisted that the existing contractors  would
\nhave  to acquire land at new sites, construct buildings\t for
\nsetting\t up new distilleries, and the land and buildings  in
\nwhich the existing distilleries were housed would come\tback
\nto  the\t State\tGovernment. The\t Cabinet  Subcommittee\talso
\ninsisted  on the existing contractors to make the  necessary
\narrangements for removing air and water pollution in the new
\ndistilleries  as also to construct a laboratory with  modern
\nequipment.  The\t State Government also changed the  mode  of
\nrate fixation. Originally the rates for supply of liquor  to
\nthe retail vendors were fixed on the basis of tenders  every
\nfive  years with the result that the rates accepted  by\t the
\nexcise authorities on the basis of the tenders continued  to
\nprevail\t for a period of five years. Now it is a fallacy  to
\nassume\tthat the lowest rates quoted by the tenderers  would
\nnecessarily  be the cheapest and the best. If the  tenderers
\nform  a syndicate they can push up the rates for  supply  of
\nliquor\tand in fact it is obvious from the rates which\twere
\naccepted by the excise authorities for the five year period,
\n1st April, 1981 to 31st March, 1986, that these were not the
\nmost  reasonable rates. The Cabinet Sub-Committee  therefore
\nfelt  that  the system of rate fixation\t prevalent  in\tWest
\nBengal\twas  the  most beneficial to  the  State  Government
\nbecause it provided for rate fixation by an expert Committee
\nwhich  would take into account the escalation or  de-escala-
\ntion in the price of raw materials, varying labour cost\t and
\nfluctuating  market  conditions every year and arrive  at  a
\nreasonable rate, fair both to the licencee and to the  State
\nGovernment.  The  Cabinet-Committee also did  not  recommend
\ntaking over of the plant and machinery of the old distiller-
\nies  from  the existing contractors against payment  of\t its
\nvalue  with  the  result that the old  plant  and  machinery
\nremained with the existing contractors and obviously it
\n65<\/span>
\nwould  have no value because they would not be able to\tsell
\nit  to any one and it would be dead junk in their hands\t and
\nthe  price paid by them to the out-going licences  would  be
\ntotally\t lost. It is indeed difficult to see how it  can  at
\nall  be said that in making its recomendations, the  Cabinet
\nSub-Committee  was  guilty of any mala\tfides  or  underhand
\ndealing\t or was actuated by any corrupt motive. The  Cabinet
\nmerely\taccepted  the  recomendations made  by\tthe  Cabinet
\nSubCommittee and in fact when the deed of Agreement came  to
\nbe  executed with each of the existing contractor the  State
\nGovernment actually introduced a provision that D-2 licences
\nwould  be  given  only for a period of five  years.  We\t are
\ntherefore unable to appreciate how B.M. Lal, J. could possi-
\nbly pass strictures against the State Government attributing
\nmala  fides, under-hand dealing and corruption to the  State
\nGovernment.\n<\/p>\n
    We\tmay also in this connection refer to  an  allegation
\nmade by Sagar Aggarwal that by reason of the policy decision
\ndated 30th December. 1984 the State Government would incur a
\nloss  of about Rs. 56 crores. This allegation did  not\tfind
\nfavour with Acting Chief Justice J.S. Verma but it seemed to
\nhave impressed B.M. Lal, J. because he categorically  stated
\nin  paragraph 17 of his concurring opinion that even if\t D-1
\nlicences were granted to respondent Nos. 5 to 11 only for  a
\nperiod\tof  five years the State Government would  suffer  a
\nloss  of Rs. 56 crores. We find it difficult  to  understand
\nhow  B.M. Lal, J. could possibly come to a  conclusion\tthat
\nthe  State  Government would be incurring a loss of  Rs.  56
\ncrores by the policy decision dated 30th December, 1984. The
\nfigure of Rs. 56 crores was arrived at by Sagar Aggarwal  on
\nthe  assumption that if instead of granting licence  to\t the
\nexisting  contractors  to  construct  new  distilleries\t and
\ngiving them D-1 and D-2 licences for a period of five years,
\nD- 1(S) licence was granted to him for the entire  territory
\nof the State of Madhya Pradesh and he was able to get liquor
\nfrom  the Ratlam Alcohol plant at the rate of Rs.  1.80\t per
\nproof  litre  in sufficient quantity so as ‘to\tbe  able  to
\nsupply liquor to retail vendors in the entire State he would
\nbe  able  to save for the State Government a sum of  Rs.  56
\ncrores on the basis that otherwise a rate of Rs. 4 per proof
\nlitre  would  be charged by the existing  contractors.\tThis
\nassumption  is,\t in  our opinion, wholly  unfounded.  It  is
\ntotally\t absurd\t and  chimerical. In the  first\t place,\t the
\nRatlam\tAlcohol plant was unable to supply the\trequirements
\nof  even Jabalpur and Betul districts and during the  period
\nending\t31st March 1986 Sagar Aggarwal himself had  to\tpur-
\nchase liquor from outside at higher rates in order to satis-
\nfy the requirements of these two districts for which he held
\nD-1(S) licence. ‘If that be so, how could Ratlam
\n65<\/span>
\nAlcohol\t plant\twhich could not produce more  than  60\tlakh
\nproof litres at the outside, possibly supply liquor for\t the
\nwhole of the territory of the State. If Ratlam Alcohol plant
\ncould be made to supply the requirement of the entire  State
\nthere would be no need for any other distillery at all.\t But
\nobviously the capacity of the Ratlam Alcohol plant was\tvery
\nlimited\t and it was not able to achieve production on up  to
\nthis  capacity.\t Secondly, it was decided  that\t the  Ratlam
\nAlcohol\t plant would manufacture only ractified\t spirit\t for
\nmaking\tmasala\tliquor\twhich was  more\t popular  and  which
\nbrought greater revenue to the State and obviously therefore
\nRatlam\tAlcohol plant could not be available  for  producing
\nordinary  liquor for supply to the retail vendors.  Thirdly,
\nit  is difficult to understand how the learned\tJudge  could
\nassume that Sagar Aggarwal would continue to get liquor from
\nRatlam\tAlcohol\t plant\tat the rate of Rs.  1.80  per  proof
\nlitre.\tThe rate for supply of liquor by the Ratlam  Alcohol
\nplant would naturally depend upon varying market conditions.
\nAnd lastly we fail to understand how the learned Judge could
\nproceed\t on  the assumption that a rate of  Rs.4  per  proof
\nlitre  would be fixed by the Export Committee for supply  of
\nliquor\tby the existing contractors from the new  distiller-
\nies.  We do not know what rate would be fixed by the  Expert
\nCommittee. That would depend upon diverse considerations and
\nof course one of the considerations would certainly be\tthat
\nSagar Aggarwal had offered minus 2.31 rupees per proof litre
\nwhile  taking  D-1(S) licences for Jabalpur and\t Betal\tdis-
\ntricts.\t The  figure of Rs.56 crores put  forward  by  Sagar
\nAggarwal  and  accepted\t by the learned\t judge\twas  clearly
\nhypothetical  and  based on assumptions which  were  totally
\nunwarranted.  We  do not think that the\t learned  Judge\t was
\nright  in observing that the public exchequer would incur  a
\nloss  of  Rs.56\t crores by the policy  decision\t dated\t30th
\nDecember,  1984 and that the policy decision  was  therefore
\nvitiated by mala fides or under-hand dealing or improper  or
\ncorrupt motive.\n<\/p>\n
    We may observe in conclusion that Judges should not\t use
\nstrong and carping language while criticising the conduct of
\nparties\t or  their witnesses. They must act  with  sobriety,
\nmoderation  and\t restraint. They must have the\thumility  to
\nrecognise  that\t they are not infallible and any  harsh\t and
\ndisparaging strictures passed by them against any party\t may
\nbe mistaken and unjustified and if so, they may do consider-
\nable harm and mischief and result in injustice. Here, in the
\npresent case, the observations made and strictures passed by
\nBM.  Lal,  J. were totally unjustified and  unwarranted\t and
\nthey ought not to have been made.\n<\/p>\n
67<\/span><\/p>\n
    We must therefore hold that the High Court was in  error
\nin allowing the writ petitions even to a limited extent.  We
\naccordingly  allow the appeals of the State  Government\t and
\nrespondents Nos. 5 to 11 and dismiss the writ petitions. The
\nspecial leave petitions of M\/s. Doongaji & Co. and Nand\t Lal
\nJaiswal\t will also stand dismissed. We would however on\t the
\nfacts  and circumstances of the present case make no  orders
\nas to costs.\n<\/p>\n
S.R.\t\t\t   Appeals  allowed  and   Petitions\ndismissed.\n68<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India State Of Madhya Pradesh & Ors vs Nandlal Jaiswal & Ors on 24 October, 1986 Equivalent citations: 1987 AIR 251, 1987 SCR (1) 1 Author: P Bhagwati Bench: Bhagwati, P.N. (Cj) PETITIONER: STATE OF MADHYA PRADESH & ORS. Vs. RESPONDENT: NANDLAL JAISWAL & ORS. DATE OF JUDGMENT24\/10\/1986 BENCH: BHAGWATI, P.N. (CJ) […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-250153","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nState Of Madhya Pradesh & Ors vs Nandlal Jaiswal & Ors on 24 October, 1986 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/state-of-madhya-pradesh-ors-vs-nandlal-jaiswal-ors-on-24-october-1986\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Of Madhya Pradesh & Ors vs Nandlal Jaiswal & Ors on 24 October, 1986 - 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