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PETITIONER:

MOHD. FIDA KARIM AND ANR.

Vs.

RESPONDENT:

STATE OF BIHAR AND ORS.

DATE OF JUDGMENT31/03/1992

BENCH:

KASLIWAL, N.M. (J)

BENCH:

KASLIWAL, N.M. (J)

REDDY, K. JAYACHANDRA (J)

RAY, G.N. (J)

CITATION:

1992 AIR 1191 1992 SCR (2) 408

1992 SCC (2) 631 JT 1992 (2) 520

1992 SCALE (1)768

ACT:

Bihar Excise Act, 1915 : Section 42 and 43.

Liquor shops-Right of vend-Mode of settlement-

Government policy-Grant of licence for five years-Licence

subject to change in policy of Government-Change of policy

to auction-cum-tender method-Change in policy held valid and

not violative of Article 14-Section 42 and 43 held

inapplicable.

HEADNOTE:

The State of Bihar took a policy decision to make

settlement of liquor shops for five years subject to yearly

renewal on fulfilling certain conditions in terms of change

in policy. The said policy was approved by Cabinet on 25 th

January, 1990. Rules were amended accordingly and published

in the official gazette. In pursuance to the said policy

the appellants deposited six months licence fee for the

first year of settlement on 7th March, 1990. The said

policy was challenged and the High Court granted interim

stay of the policy directing the Government to grant licence

on yearly basis through public auction. In the meanwhile

the State Government changed the policy under which the

settlement of liquor shops was to be made by auction-cum-

tender method for the next year and the new policy was

approved by the Cabinet on 16th August, 1990. The

appellants field writ petitions in the Patna High Court

challenging the new policy of auction-cum-tender for the

year 1991-92 which were dismissed.

In appeal to this Court, it was contended on behalf of

the appellants that (i) the period of licence already

granted cannot be curtailed without compliance of section 42

and 43 of the Bihar Excise Act; (ii) Government's action was

arbitrary and violative of Article 14 and the Govt. was

estopped from adopting the new policy on the principle of

promissory estoppel; and (iii) the impugned order was not a

change of policy but was merely an executive order passed on

the wrong assumption as if the High Court had

409

directed the Government to review its policy.

Dismissing the appeal, this Court,

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Held : 1. The Government was fully competent to change

its policy under the terms of the grant of licence itself.

The Memorandum and the sale Notification on the basis of

which the appellants claimed the right to continue the

licence for a period of five years, clearly mentioned that

the grant of licence was on annual basis and such renewal

after every year was subject to the conditions mentioned

therein and also subject to any change in policy. Sections

42 and 43 of the Bihar Excise Act have no application in the

case of change of policy by the Government. [412E-G, 413E]

2. It is also well settled that the right of vend of

excisable articles is exclusively and absolutely owned by

the State Government. [412G]

3. The new policy of adopting the method of auction-

cum-tender is certainly a change of policy. The reason for

change of policy is that the Government realised that making

settlement for five years would give rise to monopolistic

tendency and the interest of revenue was not fully protected

in the former policy. There is nothing wrong in taking such

a view by the State Government and to change its policy in

public interest. The appellants as such have no right to

challenge the new policy. [413A-D]

4. There was neither any promise nor there is any

justification to hold that the appellants altered their

position on the basis of promise. The contention based on

the ground of promissory estoppel or under Article 14 cannot

be accepted. [413D-E]

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1205 of

1992.

From the Judgment and order dated 6.9.91 of the Patna

High Court in C.W.J.C. No. 2102 of 1991.

Kapil Sibal, Harish N. Salve, Ranjit Kumar, G.D.

Bhandari and S.C. Patel for the Appellants.

M.L. Verma, B.B. Singh, Vikash Singh and L.R. Singh for

the Respondents.

410

The Judgment of this Court was delivered by

KASLIWAL, J. Special leave granted.

This appeal is directed against the judgment of the

Patna High Court dated 6th September, 1991. Initially Mohd.

Fida Karim and Dasrath Das had filed special leave petition

challenging the dismissal of their writ petition, C.W.J.C.

No. 2102 of 1991 by a Division Bench of the Patna High Court

by order dated 6th September, 1991. In view of the fact

that by a common decision, the Patna High Court had

dismissed many other identical writ petitions, the

petitioners in those other writ petitions also submitted

intervention applications before this Court and such

intervention applications have been allowed. 35

applicants/interveners are also supporting the present

appeal filed by Mohd. Fida Karim and Dasrath Das.

The controversy in this case relates to the mode of

settlement of the right of vend of country liquor, Indian

made foreign liquor and spiced country liquor under the

provisions of the Bihar Excise Act, 1915 (hereinafter

referred to as the 'Excise Act') and Rules framed

thereunder. The Government changed its policy from time to

time. Prior to 1984, settlement of country liquor shops was

done by renewing the licence according to the sliding scale

of system. In 1984, the State Government decided to make

settlement of country liquor shops by public auction. This

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was done on annual basis for a period commencing from 1st of

April to 31st March of the next following year. This

practice continued upto 1989-90. During the currency of the

above licensing period 1989-90, the State Government

appointed a high power committee and according to its

recommendations made a policy to make settlement of liquor

shops for five years by renewing the existing licences,

subject to fulfilling certain conditions like, satisfactory

record of performance and enhancement of licence fee at the

rate of 10 per cent every year and also enhancement of the

minimum guaranteed quota at the rate of 5 per cent every

year. The above policy decision was taken by a Cabinet

Memorandum dated 25th January, 1990. In pursuance to the

above policy decision, the Excise Commissioner by

communication dated 8th February, 1990 informed the

licensing authorities to take steps for settlement of excise

shops as per the amended policy of the Government. On 17th

February, 1990, necessary amendments were also made in the

Rules framed under Section 89 of the Excise Act

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inconsonance with the new policy of the Government. The

amendments were duly published in the official Gazette on

7th March, 1990, to come into force with effect from 1st

April, 1990. The case of the apellants is that in pursuance

to the aforesaid policy, the appellants agreed to the new

terms and conditions and necessary agreements were also

executed. The appellants also deposited six months' licence

fee for the first year of settlement, on 7th March, 1990.

According to the appellants a concluded contract came into

effect on 7th March, 1990 itself, which was to come into

force with effect from 1st April, 1990.

Some of the persons not satisfied with the aforesaid

Government policy, challenged the same by filing four writ

petitions in the High Court. The High Court passed interim

orders on 9th March, 23rd March, and 13th April, 1990 in

these writ petitions. The High Court in the interim orders

granted stay on the new policy of the Government and in its

place gave directions to grant the licence on yearly basis

through public auction. Initially, it was directed that

the period of such settlements shall not exceed four months,

but subsequently it was made on monthly basis. It was also

directed that the aforesaid orders will not stand in the way

of the State Government in reviewing the policy decision. We

have only mentioned the substance of such interim orders

passed on 9.3.1990, 23.3.1990 and 13.4.1990, as the same

have been quoted in extenso by the High Court in its

impugned order dated 6th September, 1991. It appears that

the aforesaid interim orders were passed by the High Court

under the vain hope that the main writ petitions would be

disposed of soon. However, before the writ petitions could

be heard finally, the Government started the process of

reviewing the policy decision dated 25th January, 1990/8th

February, 1990. By Memorandum dated 7.7.1990 placed before

the Council of Ministers, it was proposed that the

settlement of the country liquor shops, spiced country

liquor shops and foreign liquor shops should be made by

auction-cum-tender method, according to which the persons

interested were required to submit their sealed tender and

also to participate in the public auction. The settlement

was to be made finally in favour of the person making the

highest offer whether by way to tender or at auction. The

Cabinet approved the aforesaid policy on 16th August, 1990.

The Excise Commissioner also sent necessary instructions to

all licensing authorities by letter dated 25th February,

1991 in regard to the proposed mode of settlement by

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auction-cum-tender for the year 1991-92.

412

The present appellants as well as the interveners filed writ

petitions challenging the aforesaid new policy of auction-

cum-tender for the year 1991-92.

Similar contentions have been raised before us on

behalf of the appellants, which were made before the High

Court. The challenge to the new policy has been made on the

following three grounds. Firstly, it has been submitted

that there is no provision in the Excise Act or the Rules to

review or revoke the grant of licence or to curtail or

reduce the period of licence except as provided under

Sections 42 and 43 of the Excise Act. The licence already

granted for a period of five years from 1990 to 1995 cannot

be made ineffective by the so-called new policy of auction-

cum-tender. A further limb of this ground is that the

period cannot be curtailed without compliance of the

mandatory provisions of Sections 42 and 43 of the Excise

Act. The second ground of challenge is that the Government

is estopped from doing so on the principle of promissory

estoppel. The third ground is that in any events, the

exercise of power, in the facts of the case is arbitrary,

irrational and patently unreasonable as such is violative of

Article 114 of the Constitution. The High Court has dealt

with all these contentions in detail and has rejected the

same by giving cogent reasons. We fully agree with the view

taken by the High Court.

It is important to note that the Memorandum dated 25th

January, 1990 and the letter dated 8th February, 1990 and

the sale Notification on the basis of which the appellants

are claiming the right to continue the licence for a period

of five years, clearly mentioned that the grant of licence

was on annual basis and such renewal after every year was

subject to the conditions mentioned therein and also subject

to any change in policy. Thus, the Government was fully

competent to change its policy under the terms of the grant

of licence itself. It is also well settled that the right

of vend of excisable articles is exclusively and absolutely

owned by the State Government.

Mr. Kapil Sibal, Learned Senior Counsel appearing on

behalf of the appellants did not dispute the aforesaid legal

position, but his contention was that the impugned order of

the Government made in August, 1990 cannot be termed a

change of policy, but in fact was merely an executive order

passed on a wrong assumption as if the High Court in its

interim

413

orders had given a direction to the Government to review its

policy. We do not find any substance in this contention.

The new policy of adopting the method of auction-cum-tender

is certainly a change of policy. The reason for change of

policy given by the Government is that it realised that

making settlement for five years would give rise to

monopolistic tendency, which will not be in public interest,

at the same time the interest of revenue was not fully

protected in the former policy. This clearly goes to show

that the Government wanted to adopt a new policy in public

interest to be made applicable from the year 1991-92.

Learned Counsel appearing on behalf of the State of Bihar

submitted in clear terms that the earlier policy was wrong

and the Government realised its mistake and thus adopted a

new policy to augment its revenue and to avoid monopolistic

tendency. We do not find anything wrong in taking such

view by the State Government and to change its policy

considering the same to be in public interest. It is not

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disputed that the appellants have continued the business of

sale of liquor for the whole year 1.4.1990 to 31.3.1991. The

appellants as such have no right to challenge the new policy

which has to apply for the year 1991-92, even under the

terms of their agreement. We do not find any force in the

contention raised on behalf on the appellants on the ground

of promissory estoppel or under Article 14 of the

Constitution. There is no basis at all made out in the

pleadings in support of the above grounds and the High Court

has rightly rejected the same. There was neither any

promise nor there is any justification to hold that the

appellants altered their position on the basis of promise.

Section 42 and 43 of the Excise Act have no application in

the case of change of policy by the Government.

Lastly, it was contended on behalf of the appellants

that the licensees who had taken the licence under the

earlier policy of the Government of 25th January, 1990/8th

February, 1990 had submitted National Saving Certificates by

way of security and in case the Government had changed its

policy, it was bound to return the National Saving

Certificates to the respective licensees. We consider this

submission to be just and proper. Learned Counsel for the

State appearing before us also conceded that such National

Saving Certificates would be returned to the licensees. We

accordingly direct the State Government to return to the

licensees. We accordingly direct the State Government to

return all the National Saving Certificates taken by way of

security to all the licensees who had entered in agreements

under the old policy of five years license, within two

months

414

from the date of the communication of this order. This

direction will not apply in case of such licensees who have

filed civil suits for the recovery of such amounts and their

cases would be governed by the ultimate decision in those

civil proceedings.

In the results, we dismiss this appeal with no order as

to costs.

T.N.A. Appeal dismissed.

415