AFR

Reserved

Civil Misc. Writ Petition No. 1043 of 2010

Rakesh Singh ... Petitioner

Vs.

State of UP and others... Respondents.

Hon'ble Yatindra Singh, J

Hon'ble Rajes Kumar, J.

(Delivered by Hon'ble Yatindra Singh J)

1. The main question involved in this writ petition is,

'Whether a model shop can be relocated/ created during an excise year in

an area where there is another liquor shop in existence.'

THE FACTS

2. The petitioner was granted a licence of Indian made foreign liquor (IMFL) shop

for the excise year 2009-10 at Shamshabad, Agra. He was an existing licensee for

the excise year 2010-11.

3. The State Government came out with the excise policy for renewal and

settlement of different categories of liquor shops on 26.2.2010. An advertisement

was also published in the news papers on 28.2.2010 informing about the same.

Later, it was also circulated by the Excise Commissioner by his letter dated

3.3.2010.

4. The petitioner applied for renewal of his IMFL shop licence. It was renewed for

the same area on the terms of the policy.

5. In the excise year 2009-10, 19 model shops were also sanctioned in District

Agra. Out of these 19 shops, 16 were settled but 3 shops at Diwani Chauraha,

super market Sanjay Place, and Maruti Estate Chauraha remained unsettled.

6. In the excise year 2010-11, out of these 19 shops, 4 shops (including the 3

unsettled shops for the excise year 2009-10) remained unsettled. There were other

shops in the State that could not be settled. The State government granted

approval on 14.5.2010 for settling all unsettled shops in the State on the terms and

conditions mentioned therein. It included settling the shops at reduced licence fee.

The Excise Commissioner also sent a letter on 19.5.2010 granting approval on the

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2

same terms.

7. It appears that out of four model shops in district Agra, one shop was settled but

three shops—namely, the unsettled shops of excise year 2009-10—could not be

settled despite being advertised on 7.4.2010, 28.4.2010, 12.5.2010, 26.5.2010 and

4.6.2010, even on the reduced licence fee of 75% of the previous year.

8. Considering the interest of revenue, the collector sent a letter on 17.7.2010 to

the Excise Commissioner requesting him to grant approval to transfer of location of

the three unsettled shops to Jeewan Mandi, Shamshabad, and Sadar Bazar

Chauraha. In anticipation of the approval, he also published an advertisement for

settlement of these model shop on 19.7.2010. The approval to transfer the location

was granted by the Excise Commissioner on 21.7.2010.

9. Sri Ravi Sharma (Respondent-4) applied for model shop at Shamshabad, Agra

(the disputed model shop). It was settled in his favour on 23.7.2010. He deposited

the requisite amount.

10. By the time, the disputed model shop was settled in favour of Respondent-4, at

Shamshabad, the IMFL licence of the petitioner at Shamshabad was renewed for

the excise year 2010-11. The petitioner, anticipating the loss of income, filed the

present writ petition challenging the transfer of location of the disputed model shop

to Shamshabad, Agra as well as settlement of the same in favour of respondent-4.

POINTS FOR DETERMINATION

11. We have heard Sri Ashok Mehta, Sri KK Arora holding brief of Sri Mukesh

Prasad, counsel for the petitioner; Sri SP Kesarwani counsel for respondents-1 to 3

and Sri Niraj Sharma counsel for respondent-4.

1

The following points arise for

determination in the case:

(i)Whether there is any right to trade in liquor?

(ii)Whether a model shop can be relocated;

(iii)Whether a new model shop can be created during an excise year;

(iv) Whether creation of a model shop be objected by an existing licence;

(v) Whether a model shop can be advertised and settled during an excise year;

1We are thankful to the counsel appearing in the case for correcting a part of the

judgement under the heading 'THE FACTS' 'POINTS FOR DETERMINATION'. Yet

mistakes, if any, are ours.

3

(vi)Whether there is any malice in fact or fraud in relocating/ creating the

disputed model shop at Shamshabad, Agra.

1

st

POINT: LIQUOR TRADERS HAVE ONLY STATUORY RIGHTS

12. The constitution guarantees rights regarding commerce at two places:

•Firstly, Article 19(1)(g), apart from other rights, guarantees the right to carry

on any occupation, trade or business;

•Secondly, Part-XIII of the Constitution. It is titled as 'Trade, commerce and

intercourse within the territory of India'. Its first article namely, Article 301

provides that, subject to part XIII, trade, commerce and intercourse within

the territory of India shall be free. The other articles of part XIII provide

restrictions on the parliament as well as stale legislature on their legislative

powers.

Does it mean that anyone has right to carry on trade in liquor? Is there no

limitation?

13. Historically, the intoxicants—including tobacco, opium, liquor—have been

subject matter of monopoly of the State. It is the State that has the sole privilege of

trading in intoxicants. No one but the State had a right to trade in them.

14. Even, after the advent of the Constitution guaranteeing fundamental right to

carry on any occupation, trade or business, the position remains the same: one

reason is Article 47, in part IV of the Constitution.

15. Part IV of the Constitution is titled as 'Directive Principles of State Policy'. They

are not enforceable but are fundamental in governance of the State. They are the

goals to be achieved. Article 47, one of the Directive Principles of the State Policy,

provides that the State shall endeavour to bring about prohibition of consumption of

intoxicant drugs and of drugs which are injurious to health except for medical

purpose. In view of this, the State can always provide total ban in trade of an

intoxicant. In fact, this proposition was not even disputed in State of Bombay Vs FN

Balsara: AIR 1951 SC 318 (paragraph-24).

16. In the subsequent cases, the Supreme Court, step by step held that there is no

fundamental right to carry on trade in intoxicant liquor.

17. The Supreme Court in,

4

•Cooverje B Bharucha Vs Excise Commissioner; AIR 1954 SC 220

(paragraph-7) held on the basis of Crowley vs. Christensen (1890) 34 Law

Ed 620 that there is no such inherent right;

• State of Assam Vs AN Kidwai: AIR 1957 SC 414 (paragraph-3) held that

there was no absolute right to trade in liquor.

18. However there was a discordant note in the case of Krishna Kumar Vs J & K

State: AIR 1967 SC 1368 (the KrishnaKumar case). It was observed while

dismissing the appeal arising out of dismissal of the writ petitions. However, the

court did not go into the question whether there was any infringement of a

fundamental right in this case or not, as it was not raised before the High Court.

The court made the following passing remarks:

'A scrutiny of these decisions does not support the contention that the courts

held that dealing in liquor was not business or trade. They were only

considering the provisions of the various Acts which conferred a restricted

right to do business. None of them held that a right to do business in liquor

was not a fundamental right.

We, therefore, hold that dealing in liquor is business and a citizen has a right

to do business in that commodity; but the State can make a law imposing

reasonable restrictions on the said right, in public interests.'

19. The KrishnaKumar case was explained in the case of State of Orrisa Vs

Harinarain: AIR 1972 SC 1816. Then came Har Shankar Vs The Deputy Excise

and Taxation Commissioner: AIR 1975 SC 1121 (paragraph 53) and Nashirwar Vs

State of MP: AIR 1975 SC 360 (paragraph 23). These cases firmly established that

there was no fundamental right to carry on trade in liquor. This preposition has

been reaffirmed in the subsequent decisions (see below)

2

of the Supreme Court.

20. The State has sole privilege to deal with liquor and it can part that privilege on

payment of money. This consideration of payment of money for imparting a

privilege is neither a tax, nor a fee. It is simply a levy for granting sole exclusive

right of the State. It does not restrict trade, commerce and intercourse among the

States. It is for this reason that it has been held that Article 301 and 304 of Chapter

XIII do not apply to liquor trade {See State of Punjab vs. Devans Modern Breweries

2This proposition has been subsequently reiterated in State of MP Vs Nand Lal AIR 1987 SC 251;

Rajendra Singh Vs State of MP AIR 1996 SC 2736; Ugar Sugar Works Ltd. Vs Delhi Admin AI

2001 SC 1447; Prohibition and Excise Suptd. AP Vs Tody Tappers Coop AIR 2004 658; State of

Punjab Vs Devans Modern Breweries Ltd: 2004(11) SCC 26= 2003 (10) JT (SC) 485.

5

Ltd; 2004 (11) SCC 26 (paragraph 113) = 2003 (10) JT (SC) 485}.

21. Does it mean that the liquor licensees are at the mercy of the State or, the

State can act arbitrarily or, there is no limitation on the State. This may not correct.

•Article 19 does not apply to trade in liquor, but Article 14 may apply.

However, while considering the applicability of Article 14, a greater latitude

is allowed to the State considering the nature of the commodity and also the

reason for granting liquor licence namely to earn revenue—a matter of

economic policy. {See State of MP Vs Nandlal: AIR 1987 SC 251

(paragraph 33)};

•A licensee is also entitled to protection of the rights conferred upon him by

the statute or the rules made thereunder or the contract entered between

the parties.

In case of infringement of such right, the remedy can always be invoked.

2

nd

POINT: SHOP CAN BE RELOCATED

22. In this case, neither any model shop was proposed at Shamshabad, Agra for

the excise year 2009-10, nor was it proposed at the beginning of the excise year

2010-11. The proposal to relocate the disputed shop at Shamshabad was sent by

the Collector on 17.7.2010 and approval was granted by the Excise Commissioner

on 21.7.2010. Is it legal?

23. The number of liquor shops and their location is fixed under UP Number and

Location of Excise Shop Rules, 1968 (The Number-Location Rules). It provides the

determination of number and location of the shops by the Collector.

24. The distribution and location of a shop and sub-shops in a district is to be

determined by the Collector under rule 2-A. It is subject to control of the State

government as well as by the Excise Commissioner. In the military cantonment this

power is to be exercise with consent of the officer commanding the station.

25. Rule 3 of the Number-Location Rules provides the principles to be observed in

fixing the number of shops and sub-shops.

26. Rule 5 of the Number-Location Rules provides principles to be observed in

determining the location and sites of the shops. It provides that location of sites will

be decided by the Collector; it is subject to rule 2-A.

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27. Sub rule (2) of rule 5 {rule 5(2)} of the Number-Location Rules provides that no

change in the site of any shop or sub-shop shall be permitted except for cogent

reason to be recorded.

28. There is no prohibition that a liquor shop cannot be relocated. On the contrary

the Number-Location Rules not only grants power to the Collector to determine the

location of the liquor shop but also permit change of the site for cogent reasons.

29. In the present case, the disputed model shop was already proposed but at a

different place. However, it could not be settled in the excise year 2009-10 at that

place. It could neither be settled in the beginning of excise year 2010-11, nor could

it be settled even after reducing the licence fee to 75% in that area. It is for this

reason and considering the interest of revenue that the disputed model shop was

relocated to Shamshabad, Agra.

30. The purpose of granting liquor licence is to earn revenue and to regulate liquor

trade. The site/ location of the shop was changed to save loss and earn more

revenue. It is cogent and relevant reason for relocating the site of the disputed

model shop.

31. In my opinion,

•The site of a model shop can be relocated during the excise year;

•In this case there were cogent reasons for relocating the disputed model

shops.

3

rd

& 4

th

POINT: NO OBJECTION CAN BE TAKEN

32. This is not a case of creation of a new shop but of relocation of an existing

model shop. However, the counsel for the petitioner submitted that:

•No model shop was proposed for Shamshabad, Agra in the excise year

2009-10 as well as in excise year 2010-11;

•Even if it be a case of relocation, it is creation of a new model shop for this

area;

•This is illegal.

33. The counsel for the petitioner also brought to our notice the proviso to rule 4 of

the UP Excise Settlement of Licences for Retail Sale of Foreign Liquor (Excluding

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Beer and Wine) Rules, 2001 and UP Excise (Settlement of Licences for Retail Sale

of Country Liquor) Rules, 2002, which is as follows:

'Provided that the State Government or Excise Commissioner may create

new shops during an excise year on demand of the Licensing Authority of

the district.'

And submitted that:

•The aforesaid proviso permits the State Government or the Excise

Commissioner to create a new shop during the excise year on demand;

•However, there is no such provision in UP Excise (Settlement of Licence for

Model-Shop of Foreign Liquor) Rules, 2003 (the Model-Shop Rules);

•No model shop can be created or advertised in middle of an excise year;

•No shop was proposed at Shamshabad, Agra at beginning of the year. The

creation and settlement of the disputed model shop is illegal.

34. The petitioner was an existing licensee of FMIL shop for the excise year 2009-

10. His licence renewed in terms of the excise policy for the year 2010-11. The

English translation

3

of sub clause (4) of clause 7 {clause 7(4)} of the excise policy

of this year is as follows:

'Creation of Model Shop for the year 2010-11:

15% of model shop can be created by Excise Commissioner. In case there

is necessity to grant model shops more than 15% then it can be done with

the approval of the State government.'

In this policy it was clearly mentioned that 15% of model shops can always be

increased.

35. Apart from above, the advertisement for renewal as well as grant of liquor

shops is also on the record. It is under this advertisement that the petitioner had

applied for its renewal of his licence. The clause 1 of this advertisement states

4

that

for the excise year 2010-11,

•Country made liquor, foreign liquor and model shops and can be increased

by 15%; and

3 The original Hindi Version is as follows:

माडल शापस का सृजन-

वषर २०१०-११ के िलए १५ पितशत तक माडल शाप का सृजन आबकाकरी आय

ुक

, उ०प० दारा िकया जायेगा।

१५ पितशत से अिधक आवशयका होने पर द

ुकानो का सृजन शासन की अनुमित से िकया जायेगा।

4 The Hindi version of clause one of the advertisement is as follows :

वषर २०१०-११ के िलए देशी शराब, िवदेशी मिदरा या माडल शापस की द

ुकानो की वतरमान संखया मे १५ पितशत

तथा बीयर की द

ुकानो की वतरमान संखया मे २५ पितशत तक की वृिद की जायेगी।

8

•Beer shops can be increased by 25 %.

36. The petitioner got his licence renewed with full knowledge that the model shop

can be increased. There is no allegation in the writ petition that creation of model

shop is more than 15% in Agra district or in the State. Even if it is taken that the

disputed model shop is actually a new shop then there is no invalidity: it was so

stipulated in the policy as well as in the advertisement. The petitioner got his

licence renewed with full knowledge that the number of model shops can be

increased. He is estopped from challenging it.

37. The question whether a new liquor shop can be created or not is no longer an

undecided question (res integra) or as American jurist put it, 'a case of first

impression or something new' (res nova) but it has been decided before.

38. In The Civil Misc. Writ Petition No. 1163 of 2003, Anil Kumar Tyagi vs. state of

UP decided on 17.10.2003 (the AnilKumar case), the petitioner was an existing

licencee of an FMIL shop. Another FMIL shop was created and advertised for

being settled. This was challenged in the writ petition. A division bench of our

court dismissed it holding:

'By means of excise policy...and also by advertisement...iin pursuance of

which the petitioner applied for renewal, it was made clear to the petitioner,

who was a prospective applicant, that more than one licence can be granted

for the same period, i.e. same excise year in any locality. Therefore,

petitioner was fully aware and now petitioner cannot challenge it on the

ground that it will cause him financial loss or loss of his business.

...The petitioner got his licence renewed after understanding the terms and

conditions of renewal of his licence. Now he is estopped from challenging

the same. There is no contravention of the terms of licence by the

respondents. Petitioner cannot challenge the grant of additional licence on

the ground that his business will suffer.'

39. The same question in respect of the model shop was also upheld by a division

bench in WP 1406 of 2007, Km. Namita Tiwari vs. State of UP (the Namita case),

decided on 4.3.2008. I was a member of this bench. It was observed there:

'The petitioner got her licence renewed with the knowledge that the licence

for model liquor shops will be granted. She cannot object to the same.'

An appeal was taken to the supreme Court against the decision in the Namita

case. It was registered as special leave to Appeal (Civil) No. 4933 of 2008. It was

9

dismissed on 7.3.2008, though by a non-speaking order.

40. In the AnilKumar case as well as the Namita case, the shops were newly

created and advertised during the excise year in the area where liquor shops were

in existence. Yet, the action was upheld and decision in one, was upheld by the

Supreme court as well.

41. There is no prohibition that new shops cannot be created. The excise policy

and the advertisement inviting application for the renewal of licences clearly

indicated that model shops could be increased by 15%. The policy cannot be set at

naught on the ground that it cannot be done.

42. In my opinion,

•The model shops upto 15% can be created during an excise year;

•The petitioner cannot object to the creation of new model shops (within the

permissible limits) as he got his license renewed with this knowledge;

•He is estopped from challenging the same.

5

th

POINT: MODEL SHOP CAN BE ADVERTISED AT MIDDLE OF

EXCISE YEAR

43. Rule 4 of the Model-Shop Rules provides inviting application for grant of

licence for the model shops. It was amended by the UP Excise (Settlement of

Retail Licences for Model Shop of Foreign Liquor) (Third Amendment) Rules, 2009

(the 2009 Third -Amendment Rules). The 2009 Third Amendment Rules were

published in the UP Gazette on 11 February 2009 and they came into force at

once. Both of these rules are indicated below in a table.

Rule-4 before amendment Rule-4 after amendment

4-Application for Model Shop- The

Excise Commissioner under the

direction issued by the State

Government from time to time shall

invite application in the beginning of the

Excise Year for Model shop in the Form

prescribed by him after giving wide

publicity through daily newspaper

having circulation in the State. In

4. Application for Model Shop- The

licensing authority shall under the

direction issued by the Excise

Commissioner from time to time with the

prior approval of the State Government

invite application for Model shop in the

Form prescribed by the Excise

Commissioner after giving wide publicity

through daily news papers having

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response to such publicity, applications

received by licensing authority during

the year shall be considered and

disposed off as per rules.

circulation in that area.

44. There is difference in rule 4 as it existed prior to amendment of the Model-Shop

Rules and after its amendment in 2009. The earlier rule stated that the Excise

Commissioner could invite applications for model shop in the beginning of the

excise year. However, the words 'in the beginning of the Excise Year' are missing

after amendment.

45.There is marked change in the earlier rule-4 and that after its amendment. The

earlier rule specifically provided inviting applications in the beginning of the excise

year, the present rule permits inviting application without specifying that it has to be

in the beginning of the excise year. To say that the applications have to be invited

for the beginning of the excise year is to read the words that were left out. This

cannot be done.

46. The disputed model shop is not a new shop but a shop that was already in

existence. The State government and the Excise Commissioner had already

issued direction on 14.5.2010 and 19.5.2009 for settling the same. There was no

necessity of any fresh direction or approval.

47. The State has adopted a policy to increase the number of shops for enhancing

its revenue. There was a provision to advertise shops other than model shops

during an excise year. However, there was no such provision for model shops. By

the amendment, this has become permissible. In case a restricted meaning is

given to rule 4 of the Model Shop Rules that model shops must be advertised only

at the beginning of the excise year then policy and purpose of amendment of the

Model Shop Rules would be frustrated.

48. In my opinion the model shop can be advertised in middle of the excise year in

an area where a shop is in existence.

6

th

POINT: THERE IS NO MALAFIDE

49. I have upheld the right to relocate, create, and advertise a liquor shop but

11

exercise of the power has to be bonafide. Malice in fact or fraud vitiates the

exercise of power and in case there is any malice or fraud in the same, then it can

be set aside.

50. In the present case there is no allegation of any malice in fact or fraud in

exercise of power. No officer has been impleaded in the personal capacity. Even

during arguments there was no suggestion of malice in fact or fraud on the part of

the State or its officials.

51. The only argument raised from the side of the petitioner was that there was

malice in law that there is no power to do so. This I have negated.

52. In the present case, the disputed model shop was relocated, advertised and

settled considering the interest of revenue. It is not only the disputed model shop

but two other unsettled model shops were also relocated in different areas.

53. Considering the entire facts and circumstances of the case, there is neither any

malice nor any illegality in relocating and settling the disputed model shop at

Shamshabad, Agra.

CONCLUSIONS

54. My conclusions are as follows:

(a) Subject to rule 2-A and rule 5 of the UP Number and Location of Excise

Shop Rules, 1968, the Collector has got the power to relocate a liquor shop

for cogent reasons;

(b) A liquor shop can be created during an excise year in terms of policy and

advertisement.

(c) A model shop can be advertised in the middle of an excise year;

(d) In the present case the model shop has been re-located and settled

considering the interest of the revenue. There is no malice or fraud in

exercising this power.

55. In view of my conclusions, the writ petition has no merits. It is dismissed.

BBL

12

( Delivery by Hon'ble Mr. Justice Rajes Kumar )

56.I had a privilege to see the judgement delivered by my brother, Hon’ble Mr.

Justice Yatindra Singh. With due respect, I beg to defer with the view taken by His

Lordship for the reasons stated herein below:

FACTS

57. For the settlement of Country Liquor, Indian Made Foreign Liquor, Beer Shop

and Model Shop for Foreign Liquor a new policy has been introduced for the

Excise year 2009-10. Under the said policy, the shops of the districts fallen in the

Zone, other than Special Zone were to be settled by fresh lottery system. For the

settlement of the shops, separate rules were framed for Country Liquor, Foreign

Liquor, Model Shops for Foreign Liquor and Beer Shops.

58. The petitioner applied and granted licence of Indian Made Foreign Liquor shop

for the excise year 2009-10 at Shamshabad, Agra.

59. The State Government by Government Order No.601E-2/13-2010-10/2010,

dated 26.02.2010 has come out with the policy for the excise year 2010-11. The

policy is annexed as annexure-3 to the writ petition. The advertisement was also

published in the newspaper on 28.02.2010 informing about the said policy and a

letter dated 03.03.2010 was circulated by the Excise Commissioner.

60. The said policy provided for the renewal of the existing licences for the excise

year 2009-10 and further settlement of new shops of Country Liquor, Foreign

Liquor and Model Shop for Foreign Liquor. The said policy provided that for the

excise year 2010-11, upto 15% shops would be created by Excise Commissioner

and in case of need, beyond 15% can be created on the approval of the State

Government. In the letter of Commissioner of Excise dated 03.03.2010 a time

schedule for the renewal and creation of new shops was also provided. The time

schedule provided acceptance of renewal application by 16.03.2010 upto 3

O’Clock. Clause 2 (i) of the Schedule provided the time schedule for the settlement

of newly created shops of Country Liquor, Foreign Liquor, Beer Shops and Model

Shops for the excise year 2010-11. It provided that the advertisement to be issued

on 16.03.2010 stating therein that the application may be distributed between

13

17.03.2010 to 22.03.2010 upto 2 O’Clock and deposit by 5 O’Clock. Clause 2 (iv)

provided the date of lottery on 25.03.2010 at 11.00 A.M.

61. It may be mentioned here that under the new policy for the excise year 2010-11

no new shop has been created at Shamshabad, Agra within the provided time

schedule.

62. It appears that in the excise year 2009-10, 19 model shops were also

sanctioned in the district Agra. Out of these 19 model shops, 16 model shops were

settled but three model shops at Diwani Chauraha, Super Market Sanjay Place,

and Maruti Estate Chauraha remained unsettled. No model shop at Shamshabad,

Agra has been created in the excise year 2009-10. In the excise year 2010-11, out

of these 19 model shops, 4 model shops (including 3 unsettled shops for the

excise year 2009-10) remained unsettled. There were other shops in the State

which could not be settled. The State Government granted the approval on

14.05.2010 for settling all unsettled shops in the State on the terms and conditions

mentioned therein. It included settling the shops at reduced licence fee. The Excise

Commissioner also sent a letter dated 19.05.2010 granting the approval. It appears

that out of 4 model shops in district Agra, one model shop was settled but three

model shops namely, the unsettled shops of the excise year 2009-10 could not be

settled despite being advertised on 07.04.2010, 28.04.2010, 12.05.2010,

26.05.2010 and 04.06.2010, even on the reduced licence fee of 75% of the

previous year.

63. When the aforesaid three model shops could not be settled, the Collector sent

a letter dated 17.07.2010 to the Excise Commissioner requesting him to grant the

approval for transfer of location of three unsettled shops to Jeewan Mandi,

Shamshabad and Sadar Bazar Chauraha. In anticipation of the approval, he also

published advertisement for settlement of these model shops on 21.07.2010. The

approval to transfer the location was granted by the Excise Commissioner on

21.07.2010.

64. Sri Ravi Sharma, the respondent no.4 applied for model shop at Shamshabad,

Agra (the disputed model shop). It was settled in his favour on 23.07.2010. Being

aggrieved by the creation and the settlement of new Model Shop at Shamshabad

as the business would be badly affected, the petitioner filed the present writ

petition.

14

65. Heard Sri Ashok Mehta, Sri K.K.Arora, Advocate holding brief of Sri Mukesh

Prasad, learned counsels for the petitioner, Sri S.P. Kesarwani, learned Standing

Counsel appearing on behalf respondent nos.1 to 3 and Sri Neeraj Sharma,

learned counsel appearing on behalf of respondent no.4.

66. Learned counsel for the petitioner made the following submissions:

Undisputedly under the new excise policy for the excise year 2010-

11, 15% new model shop could be created by the Excise Commissioner

but time schedule was also provided. As per time schedule the

advertisement for the settlement of such newly created model shops could

be made on 16.03.2010 upto 3 O’Clock. No advertisement was made in

respect of the newly created shop for Shamshabad area. Admittedly, the

new model shop has not been created at Shamshabad area prior to

16.03.2010 and no advertisement has been made for the settlement of

such shops on 16.03.2010. Under the rule, the shops can only be

transferred within the same area and not outside the area. The petitioner

has applied for the renewal of the licence with the view that there was no

other Foreign Liquor Shop in the area on payment of huge licence fee. The

opening of the new model shop at Shamshabad area would badly affect

the business of the petitioner. The excise authorities are the statutory

authority and can only act within the ambit of the policy of the State

Government and the rules framed thereunder. Neither the policy nor rule

gives the power to the excise authorities to transfer unsettled shops from

one area to another area. They also do not give any power to create a new

shop during the excise year.

There is no approval of the State Government for the transfer of the

model shop from different area to Shamshabad or to create a new model

shop at Shamshabad.

The proviso to Rule 4 of U.P. Excise Settlement of Licenses for

Retail Sale of Foreign Liquor (Excluding Beer and Wine) Rules, 2001 and

U.P. Excise (Settlement of Licences for Retail sale of Country Liquor)

Rules, 2002 provides that the State Government or Excise Commissioner

may create a new Model Shop during any excise year on demand of the

licensing authority of the district but there is no such rule under the U.P.

Excise (Settlement of Retail Licenses for Model Shop for Foreign Liquor)

(3

rd

Amendment) Rules, 2009

15

67. Learned Standing Counsel submitted that the petitioner has no fundamental

right to carry on the business of liquor guaranteed under the constitution. The State

has exclusive privilege to deal with the liquor and to part its privileges. In the

excise policy for the excise year 2010-11 there was a provision for creation of 15%

of model shop. The excise authorities are competent to transfer the unsettled shop

of one area to another area during excise year. They have also power to create a

new shop in the area during the excise year. There is no prohibition under the

policy or under the Rule. The impugned model shop has been transferred to

Shamshabad from another area because in that area, the shop could not be settled

to earn more revenue. He invited the attention of the Court to the amended Rule 4

of U.P. Excise (Settlement of Retail Sale for Model Shop for Foreign Liquor) (3

rd

Amendment), Rules 2009. In the amended rule the word “in the beginning of the

excise year” has been deleted. It means that under the amended rule 4 the excise

authority can invite application for model shop during the excise year.

68.He placed reliance on the following decision:

1.Krishna Kumar Vs. J & K State, reported in AIR 1967 (SC), 1368.

2.State of Orissa Vs. Harinarain, reported in AIR 1972 (SC), 1816.

3.Har Shankar Vs. The Deputy Excise and Taxation Commissioner,

reported in AIR 1975 (SC), 1121.

4.Nashirwar Vs. State of MP, reported in AIR 1975 (SC), 360.

5.2004 (11) SCC, 26 (Para 113),

6.In the case of Writ Petition No.1169 of 2003, Anil Kumar Tyagi,

decided on 17.10.2003.

7.In Writ Petition No.1406 of 2007 (Tax), Kumari Namita Tiwari Vs.

State of U.P. and others, decided on 04.03.2008.

69. The fundamental question is whether the excise authorities have a power to

transfer the model shop of one area to another area or to create a new model shop

in the area during the excise year.

70. It would be appropriate to refer the relevant extract of the Government Order

dated 26.02.2010 circulated by Excise Commissioner vide letter dated 03.03.2010:

16

4&ekMy 'kIl dk l`tu &

o"kZ 2010&11 ds fy, 15 izfr'kr rd ekMy 'kki dk l`tu vkcdkjh

vk;qDr] m0 iz0 }kjk fd;k tk;sxk A 15 izfr'kr ls vf/kd vko';drk gksus ij

nqdkuksa dk l`tu 'kklu dh vuqefr ls fd;k tk,xk A

le; lkfj.kh

vkxjk] okjk.klh ,oa y[kum tksu (cjsyh izHkkj dks NksMdj) dh QqVdj

nqdkuksa ds O;oLFkkiu dh le; lkfj.kh&

dze

la[;k

izFke pj.k fnukad

1(i)o"kZ 2010&11 dh vkcdkjh uhfr esa fn;s x;s

funsZ'kkuqlkj okf"kZd O;oLFkr o rn vk/kkfjr

U;wure izR;kHkwr ek=k@csfld ykblsal Qhl@

ykblsal Qhl@ izfrHkwfr /kujkf'k esa o`f) dj

ns'kh 'kjkc dh nqdkuksa dh izkfLFkfr] okf"kZd

O;ofLFkr (rn vk/kkfjr) U;wure izR;kHkwr ek=k

(fu/kkZfjr o`f) ds lkFk) csfld ykblsal Qhl]

ykblsal Qhl] uohuhdj.k Qhl o izfrHkwfr

/kujkf'k dk fooj.k rS;kj fd;k tkuk A

05&03&2010

ii)mijksDrkuqlkj gh fons'kh efnjk rFkk ch;j dh

nqdkuksa o ekMy 'kkIl dh ykblsal Qhl] izfrHkwfr

/kujkf'k ,oa uohuhdj.k Qhl dk fooj.k rS;kj

fd;k tkuk A

(iii)mijksDr leLr nqdkuksa ds uohuhdj.k gsrq

vkosnu i=ksa dk forj.k fnukad 06&03&2010 ls

fnukad 16&03&2010 dks vijkg~u 13-00 cts rd

djus ,oa Hkkax dh QqVdj nqdkuksa dh uhykeh gsrq

lekpkj i= esa foKfIr dk izdk'ku

(iv)Ukohuhdj.k gsrq vkosnu i= tek djus dh

vfUre frfFk

16&03&2010 ds

vijkg~u esa 15-00 cts

rd

f}rh; pj.k

2(i)mijksDrkuqlkj uohuhdj.k ds i'pkr vo'ks"k

ns'kh@fons'kh efnjk ch;j dh nqdkuksa ,oa ekMy

'kIl rFkk ns'kh 'kjkc@fons'kh efnjk ch;j dh

nqdkuksa ,oa ekMy 'kkIl rFkk ns'kh 'kjkc@fons'kh

efnjk] ch;j dh uol`ftr nqdkuksa ,oa uol`ftr

ekMy 'kkIl ds fy, o"kZ 2010&11 gsrq fu/kkZfjr

U;wure izR;kHkwr ek=k@ fu/kkZfjr ykblsal Qhl

ij O;oLFkkiu lkoZtfud ykVjh izfdz;k ls

vkosnu i= ekx dj fd;k tk;sxk A ,slh nqdkuksa

ds laca/k esa ns'kh 'kjkc ds izdj.k esa U;wure

izR;kHkwr ek=k] rn vk/kkfjr csfld ykblsal Qhl

,oa ykblsal Qhl rFkk /kjksgj /kujkf'k o izfrHkwfr

/kujkf'k rFkk fons'kh efnjk] ch;j dh nqdkuksa ,oa

ekMy 'kkIl ds laca/k esa ykblsal Qhl] /kjksgj

16&03&2010

17

/kujkf'k o izfrHkwfr /kujkf'k dks vafdr djrs gq,

vkosnu i= ekaxus ,oa ykVjh gsrq vkosnu i=ksa

dk forj.k fnukad 17&03&10 ls izkjEHk dj

fnukad 22&03&10 dks vijkg~u 14-00 rd djus

,oa lk;a 17-00 cts rd tek djus gsrq lekpkj

i=ksa esa foKfIr dk izdk'ku A

(ii)vkosnu i=ksa dk forj.k A 17&03&2010 ls

22&03&2010 dks

vijkg~u 14-00 cts

rd

(iii)izns'k dh leLr Hkax dh QqVdj nqdkuksa dh

uhykeh (blds i'pkr ;fn dksbZ frfFk fu/kZkfjr

djuh gksrks ftykf/kdkjh@ykblsal izkf/kdkjh Lo;a

fu;r djsaxs) A

18&03&2010

(iv)vkosnu i=ksa dks tek djus dh vfUre frfFk A 22&03&2010 dks lk;a

17-00 cts rd

(v)vkosnu i=ksa dk ijh{k.k 23@24&03&2010

(vi)LkkoZtfud ykVjh A 25&03&2010 dks izkr%

11-00 cts ls

r`rh; pj.k

3(i)mDr izfdz;k ds i'pkr vo'ks"k jgh ns'kh 'kjkc

dh nqdkuksa ds O;oLFkkiu gsrq o"kZ 2009&10 ds

okf"kZd O;ofLFkr ,e- th- D;w- ij vk/kkfjr csfld

ykblsal Qhl o ykblsal Qhl rFkk fons'kh

efnjk] ch;j dh nqdkuksa ,oa ekMy 'kkIl dh o"kZ

2009&10 dh ykblsal Qhl ij vkQj ekaxdj

O;oLFkkiu gsrq foKfIr A

25&03&2010

(ii)vkosnu i=ksa dk forj.k A 26&03&10 ls

29&03&10 vijkg~u

14-00 cts rd

(iii)vkosnu i=ksa dks tek djus dh vfUre frfFk rFkk

vkosnu i=ksa dk ijh{k.k

29&03&10 dks lk;a

17-00 cts rd

(iv)vkQj ds vk/kkj ij vuqKkih dk p;u@

lkoZtfud ykVjh A

30&03&2010 izkr%

11-00 cts ls

(v)vo'ks"k ns'kh 'kjkc@ fons'kh efnjk] ch;j Hkkax

dh nqdkuksa ,oa ekMy 'kkIl dk nSfud vk/kkj ij

O;oLFkkiu gsrq foKkiuA

30_03&2010

(vi)nSsfud vk/kkj ij fnukad 01&04&2010 ls nqdkuksa

ds O;oLFkkiu dh dk;Zokgh A

31&03&2010

71. It is also relevant to refer the proviso to Rule 4 of U.P. Excise

Settlement of Licenses for Retail Sale of Foreign Liquor (Excluding

Beer and Wine) Rules, 2001 and U.P. Excise (Settlement of Licenses

for Retail Sale of Country Liquor) Rules, 2002 (hereinafter referred to

18

“Country Liquor Rules”) as follows:

“Provided that the State Government or Excise

Commissioner may create new shops during an excise year on

demand of the Licensing Authority of the district.”

72. Rule 4 of the Model Shop Rules provides inviting application for

grant of licence for the model shops. It was amended by the U.P.

Excise (Settlement of Retail Licences for Model Shop of Foreign

Liquor) (Third Amendment) Rules, 2009 (hereinafter referred to as

“3

rd

Amendment Rules”). The 2009 Third Amendment Rules were

published in the U.P. Gazettee on 11

th

February, 2009 and they came

into force atonce. Both of these rules are indicated below in a table.

Rule-4 before amendment Rule-4 after amendment

4. Application for Model Shop- The

Excise Commissioner under the direction

issued by the State Government from time

to time shall invite application in the

beginning of the Excise Year for Model

Shop in the Form prescribed by him after

giving wide publicity through daily

newspaper having circulation in the State.

In response to such publicity, applications

received by licensing authority during the

year shall be considered and disposed off

as per rules.

4. Application for Model Shop

– The licensing authority shall

under the direction issued by the

Excise Commissioner from time

to time with the prior approval of

the State Government invite

application for Model shop in the

Form prescribed by the Excise

Commissioner after giving wide

publicity through daily news

papers having circulation in that

area.

73. The number of liquor shops and their location is fixed under U.P.

Number and Location of Excise Shop Rules, 1968 (hereinafter

referred to “Number Location Rules”). It provides the determination

of number and location of the shops by the Collector.

74. The distribution and location of a shop and sub-shops in a district

is to be determined by the Collector under rule 2-A. It is subject to

control of the State Government as well as by the Excise

Commissioner. In the military cantonment this power is to be exercise

with consent of the officer commanding the station.

75. Rule 3 of the Number Location Rules provides the principles to be

observed fixing the number of shops and sub-shops.

76. Rule 5 of the Number Location Rules provides principles to be

19

observed in determining the location and sites of the shops. It

provides that location of sites will be decided by the Collector, it is

subject to rule 2-A.

DETERMINATION

77. In the present case, neither any Model Shop was proposed at

Shamshabad for the excise year 2009-10 nor was proposed at the

beginning of the excise year 2010-11. The proposal to transfer the

disputed shop at Shamshabad was sent by Collector on 17.07.2010

and the approval was granted by the Excise Commissioner on

21.07.2010. Learned Standing Counsel is not able to show any

approval for such transfer by the State Government.

78. Neither any rule of 3

rd

Amendment Rules nor policy provides any

power to the excise authorities to transfer Model Shop from one area

to another area during the excise year. They also do not provide any

power to create a new Model Shop during the excise year. The

Government policy for the excise year 2010-11 for the settlement of

country liquor shop, foreign liquor shop and model shop vide

Government Order dated 26.02.2010 only provided that 15% new

Model Shop could be created by the Excise Commissioner. The time

schedule referred hereinabove provided that advertisement for newly

created Model Shop was to be issued on 16.03.2010. The object

behind this is that the existing licencee while applying for the renewal

may be able to know about the creation of the new shop in the area.

Sub-rule (2) of Rule 5 of Location Rules is applicable where there is

change of site in the same area and not the transfer of shop from one

area to another area. The transfer of Model Shop from one area to

another area in fact amounts to creation of new shop at Shamshabad.

As per the letter of Commissioner of Excise dated 03.03.2010, the

advertisement for the settlement of newly created shop could be

made on 16.03.2010. The proviso to Rule 4 of U.P. Excise Settlement

of Licenses for Retail Sale of Foreign Liquor (Excluding Beer and

Wine) Rules, 2001 and Country Liquor Rules provides that the State

Government or Excise Commissioner may create a new shop during

the excise year on the demand of licensing authority of the district.

There is no such provision in the 3

rd

Amendment Rules. Therefore, in

the absence of any provision in the Rule, empowering to create new

20

shop during the excise year, no new shop can be created during the

excise year.

79. Rule 4 provides that the licensing authority shall under the

direction of the Excise Commissioner with the prior approval of the

State Government invite application for Model Shop. Prior to 3

rd

Amendment Rules the application could only be invited in the

beginning of the excise year. However, in existing Rule 4 the word “in

the beginning of excise year” has been deleted. Therefore, now the

application can be invited even during the excise year for Model

Shop. The question for consideration is whether the existing Rule 4

also gives the power to create a new Model Shop or to transfer the

Model Shop from one area to another area during the excise year and

the application in respect thereof can be invited during the excise

year. Existing Rule 4 does not give any power to the licensing

authority or to any other excise authority to create a new Model Shop

or to transfer the Model Shop from one area to another area. There

is a difference between inviting the application and creation of new

Model Shop.

80. In my opinion, Rule 4 applies to the existing Model Shop either

exists on account of renewal of the licence or newly created within the

time schedule. The word “in the beginning of the excise year” appears

to have been deleted to meet with the situation where the such Model

Shops have either not been settled or due to same reason the licence

has been cancelled. It does not give any power to excise authority to

create a new Model Shop or to transfer the existing Model Shop from

one area to another area. Any view to the contrary may amounts to

give the power to the excise authority which is not contemplated in

the rules.

81. The excise authorities are the creation of the Statute. They are

authorized to act within the ambit of the powers provided under the

Act or Rules or by the policy of the State Government. Neither the

Excise Act nor the Rules or policy provides any power to excise

authorities to create a new Model Shop of foreign liquor or to transfer

Model Shop from one area to another area. Thus, the transfer of

Model Shop for foreign liquor from another area to Shamshabad and

21

the creation of new Model Shop at Shamshabad during the excise

year is wholly unjustified.

82. In my view the power to the excise authorities to create a new

Model Shop or to transfer the Model Shop from one area to another

area during the excise year may amount to giving arbitrary power and

causing great hardship to the existing licencee. It will be open to the

excise authorities to open the Model Shoop during the excise year as

per their own choice at any place by adopting the pick and choose

policy, which may lead to a corrupt practice.

83. In the case of Har Shankar and others Vs. The Deputy Excise

and Taxation Commissioner and others (Supra), the issue before

the Apex Court was whether the Financial Commissioner has no right

to authorise the levy or collection of any amount which strictly is not a

fee; an auction bid for fixing “fees” is a contradiction in terms of the

contract; Government can not under a contract impose a levy which it

has no power to impose by law; the demand made by the

Government for payment of large sums of money by hoteliers and

bar-keepers who supply foreign liquor for consumption on their

premises is arbitrary, without the authority of law and otherwise

illegal. This case is distinguishable on the facts of the present case.

The issue which was involved before the Apex Court is not the issue

involved in the present case.

84. In the case of State of Punjab Vs. M/s Dial Chnd Gian Chand

and Company (Supra) the respondent gave his bid for country liquor

vend at Bagrian in Sangrur district at an auction held on March 25,

1969 and its bid being the highest in the amount of Rs.1,32,000/- was

accepted The Excise and Taxation Commissioner was not satisfied

with regard to the bids received for 15 bids and directed re-auction on

March 26, 1969. Pursuant to this order, when fresh auctions were

held in respect of the 15 bids in Patiala district on March 26, 1969 it

included a vend at village Gulwati. Village Gulwati is at a distance of 4

to 5 furlongs from Bagrian where the vend for which the bid of the

respondent was accepted was to be located. The highest bid for

Gulwati was in the amount of Rs.68,000/-, which was accepted. The

respondent filed writ petition as it felt that there may be an unhealthy

22

competition. The High Court has allowed the writ petition and held

that opening of shops at Gulwati was not in accordance to law. The

High Court has accordingly, reduced the liability of the licence fee by

Rs.68,000/- which was for Gulwati shop. Apex Court set aside the

order of the High Court on the ground that the approach of the High

Court was not justified, inasmuch as there was no breach of terms of

the contract. It further held that there is no material on record to show

that any assurance was held out to the respondent that no liquor vend

will be opened within a short distance from Bagrian. It appears that

the auction held for 15 vends in the adjoining Patiala district on March

26, 1969 included a country liquor vend at Gulwati. It has been further

held that High Court was not justified in reducing the amount of

licence fee, which was payable under the terms of the contract. This

decision is not applicable to the facts of the present case. The policy

of the State Government and the rules which are under consideration

in the present case were not available in the said case. In the

circumstances, the decision is distinguishable on the facts and is not

applicable.

85. The decision of the Apex Court in the case of Rajendra Singh

Vs. State of Madhya Pradesh and others, reported in AIR, 1996

(SC), 2736 relates to the cancellation of the licence, in contravention

of the terms of the licence. It is clearly distinguishable and is not

applicable.

86. In the case of State of Punjab and another Vs. M/s Devans

Modern Brewaries Limited and another, reported in JT 2003 (10)

SC, 485, the question relates to the power of the State Government

to levy the import fee on the import of liquor under the licence granted

by the State Government. The challenge was that levy was violative

of Articles 301 and 304 of the Constitution of India. This case is not

applicable to the present case.

87. In the case of Anil Kumar Tyagi Vs. State of U.P. and others

(Supra), the Division Bench of this Court held that by means of

excise policy which was given wide circulation and also by

advertisement which was published in newspapers on 07.03.2003 in

pursuance of which petitioner applied for renewal, it was clear to the

23

petitioner, who was a prospective applicant, that more than one

licence can be granted for the same period, i.e. same excise year in

any locality. Therefore, the petitioner was fully aware and now

petitioner can not challenge it on the ground that it will cause him

financial loss or loss of his business. This view of the Division Bench

may be correct under the excise policy of the State Government

available in the year 2003-04 but this view is not correct under the

new excise policy of the State Government.

88. In the case of Pradeep Kumar Vs. The State of Uttar Pradesh

and others, decided on 2305.2008, the Division Bench of this Court

has not considered the policy and the various rules, therefore, it is not

a good precedent. In any view the issue requires reconsideration in

the light of the view taken by me hereinabove.

CONCLUSION

89. In view of the above, I am of the view that:

(i)Under the excise policy for the year 2010-11 and rules

framed thereunder the excise authorities has no power

to transfer the Model Shop of one area to another area

or to create a new Model Shop during the excise year.

(ii)Under the relevant excise rules the creation of new

Model Shop/transfer of Model Shop from one area to

Shamshabad, Agra is against the excise policy of the

State Government for the excise year 2010-11;

(iii)Under the relevant excise rule the newly created

Model Shop/transferred Model Shop can not be

advertised during the excise year.

90. In the result, the writ petition is allowed and the advertisement

dated 17.07.2010 and in pursuance thereof the settlement of Model

Shop at Shamshabad is hereby quashed.

R./

24

ORDER OF THE COURT

91. There is difference of opinion among us. Our conclusions are also

contained at the end of our separate judgements.

92. One of us (Justice Yatindra Singh) has dismissed the writ petition;

whereas, the other (Justice Rajes Kumar) has allowed the writ

petition.

93. In view of the difference of opinion, let the case be listed before

the third Judge after nomination.

94. For our detailed judgements, see separate sheets of papers

attached with the writ petition.

Date: 12.11.2010