CHATTANYA KUMAR Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) This case has made political history, but those concerned for the Rule of Law must remain unmindful and unruffled by the ripples caused by it. The legality of the action of the Government of the State of Karnataka in awarding contracts for 'bottling' arrack to the appellants and others was questioned in the High court of Karnataka and the order of the State Government was struck down on the ground that it was 'unlawful', 'arbitrary', 'capricious', 'in flagrant violation of the rule of law' and as 'shocking the judicial conscience'. Some of the persons, to whom the bottling contracts had been awarded by the Government, have preferred these appeals under Art. 136 of the Constitution.

(2.) By general concurrence of opinion since days of yore, manufacture and sale of intoxicating liquor has always been considered to be a dangerous and obnoxious trade requiring the strictest vigilance and supervision and even prohibition. It is now firmly established that the Government is the exclusive owner of the privilege of manufacturing and selling intoxicating liquor and that the Government may farm out these privileges for the purpose of raising revenue. The legislatures of the various States in India have enacted excise laws which enable them to raise public revenue by farming out these privileges and further to regulate and supervise the manufacture and sale of intoxicating liquor. The Karnataka Excise Act, 1965 is one such law. The Preamble to the Act States that it is enacted "to provide for a uniform law relating to the production, manufacture, possession, import, export, transport, purchase and sale of liquor and intoxicating drugs and the levy of duties of excise thereon in the State of Karnataka and for certain other matters hereinafter Appearing". S. 2(15), (16), (18) and (19) of the act define the expression 'Indian liquor', 'intoxicant', 'liquor' and 'manufacture'. Section 2(25) defines 'sale or selling' as including 'any transfer otherwise than by way of gift'. Section 2(2) defines "to bottle" as meaning "to transfer liquor from a cask or other vessle to a bottle, whether any process of manufacture be employed or not. and includes re-bottling". Sections 3, 4 and 5 provide for the appointment of Excise Commissioner, Deputy Commissioner and Superintendents and Deputy Superintendents of Excise. Chapter III (Ss. 8 to 12) deals with import, export and transport of intoxicants while Chapter IV (Ss. 13 to 21) deals with their manufacture. possession and sale. Section 13(1)(e) prescribes that 'no person shall bottle liquor for sale except under the authority and subject to the terms and conditions of a licence granted by the Deputy Commissioner in that behalf or under the provisions of S. 18.' Section 16 provides for the establishment of distilleries and warehouses. Section 17 authorises the Government to lease to any person, on such conditions and for such periods as it may think fit the exclusive or other right - (a) of manufacturing or supplying by wholesale or of both; or (b) of selling by wholesale or by retail; or (c) of manufacturing or supplying by wholesale, or of both and of selling by retail any Indian liquor or intoxicating drug within any specified area. Chapter VI provides for the grant of licences and permits and Chapters VII and VIII deal with offences and penalties and detection, investigation and trial of offences. Section 71 invests the Government with the power to make rules, generally and particularly. Pursuant to the power given under S. 71, the Government of Karnataka has made various sets of rules. We are primarily concerned with the Karnataka Excise (Bottling of Liquor) Rules 1967. Prior to November 30, 1984, Rr. 3, 4, 5 and 6 of the Karnataka Excise (Bottling of Liquor) Rules, were as follows:

(3.) In the scheme of things that prevailed before 1984, bottling of liquor was not obligatory. But if liquor was in fact bottled, it had to be done under the authority of and subject to the terms and conditions of a licence and in accordance with the requirements of the Karnataka Excise (Bottling of Liquor) Rules. Under the rules no person was entitled to the grant of licence to bottle liquor unless 'he was a lessee of the right to retail vend of arrack or he held a licence for the distillation or manufacture of liquor or trade and import licence or a licence for the compounding, blending or reducing of liquors or any other licence which requires possession of bottling licence.' In substance it meant that only those persons who were connected with the liquor trade were entitled to apply for the grant of licence to bottle liquor, that is, no one was entitled to apply for the grant of licence to bottle liquor, unless he was already connected with the liquor trade. It appears that in July 1981, there was a ghastly tragedy resulting in the death of 336 persons, men, women and children as a result of the consumption of liquor containing methanole. Several more persons lost their eye-sight A Commission of Enquiry headed by a High Court Judge was appointed by the Government of Karnataka to investigate into the cause of the tragedy and to recommend the steps which should be taken to prevent the repetition of any such tragedy. After the Commission submitted its report, the Government decided that in order to avoid 'adulteration, short measurement and evasion of excise duty', it was necessary that arrack should be supplied in sealed bottles. Apart from adulteration, it was also realised that supply of loose arrack was unhygienic and, therefore, it was necessary that arrack should be sold in sealed bottles. The decision of the Government was announced in the budget speech of the Chief Minister and instructions were given to the Excise Commissioner to issue necessary notifications inviting applications for bottling arrack.