STATE OF MADHYA PRADESH & ORS. v. NANDLAL JAISWAL & ORS.

The Judgment of the Court was delivered by G

BHAGWATI, CJ: These appeals by special leave are directed against a judgment of the Madhya Pradesh High Court in what has come to be known as, M:P. Liquor case, brought before the High Court by way of three writ petitions unde.r article 226 of the Constitu- tion. Writ Petition No.3718 of 1985 was filed by one Nandl~I Jaiswal H

14 SUPREME COURT REPORTS [1987] 1 S.C.R.

on 28the Novemb.er 1985 while writ petition No.335 of 1986.was filed A by one Sagar Agarwal on 24th-January 1986. Both these writ petitions ·-,... were directed against the policy decision of the State of Madhya Pradesh contained in the Cabinet decision dated 30th December, 1°84. The third writ petition, viz., writ petition No. 785 of 1986 was also filed challenging the same policy decision of the State of Madhya Pradesh B by a firm called M/s Doongaji & Co. but it was filed much later at a time when arguments were actually going on in court in the first two y writ petitions. The respondents in the first two writ petitions were not aware at that time that it was a writ petition which was filed by M/s Doongaji & Co. They thought that it was merely an intervention appli- . cation since no notice was served upon them and they had also no )-; -:-· opportunity of filing an affidavit in reply to that writ petition. All these c three writ petitions were disposed of by a common judgment delivered by a Division Bench of the High Court consisting of Acting Chief y Justice J.S. Verma and Justice B.M. Lal. Both the learned Judges, by separate judgments, substantially set aside the policy decision dated 30th December, 1984. Since the decision of the High Court for all ' D practical purposes went against the respondents, they preferred Civil Appeals Nos. 1622 to 1639 of 1986 before this Court by special leave. M/s Do0 ngaji & Co. and Nand Lal Jaiswal also, to the limited extent that they did not succeed, filed special leave petitions Nos. 6206 and 7440 of 1986. That is how the present appeals and special leave peti- tions have come up before us. The facts giving rise to these appeals and E special leave petitions are material and need to be stated in some -+ detail.

But, before we advert to the facts, it is necessary to set out the relevant provisions of Madhya Pradesh Excise Act, 1915 which is the statute regulating manufacture, sale and possession of intoxicating liquor in the State of Madhya Pradesh. Originally, this Act was enac· ' -- F ~- ted for the former Province of C.P. and Berar but subsequently, after the coming into force of the Constitution, it was extended to the State of Madhya Pradesh by M,P. Extension of Laws Act, 1958 and it was rechristened as M.P. Excise Act 1915. Section 2( 13) of the Act defines 'liquor' to mean 'intoxicating liquor' and to include "spirits or wine, G tari, beer, all liquid consisting of or containing alcohol, and any subst- ance which the State Government may, by notification, declare to be liquor for the purpose" of the Act. The term "manufacture" is defined in Section 2( 14) to include "every process, whether natural or artifi- cial, by which any intoxicant is produced or prepared and also redistil- lation and every process for the rectification, flavouring, blending or H ~olouring of liquor". There is also the definition of 'spirit' in section

STATE OF MADHYA PRADESH v. N. JAISWAL (BHAGWATI, CJ.] 15

2( 17) which provides ihat "spirit" means any liquor containing alcohol obtainted by distillation whether it is denatured or no~. Chapter IV of the Act is headed 'Manufacture, Possession and Sale' and that is the chapter with which we the concerned in the present appeals. Section 13 provides, inter alia, that no distillery or brewery shall be constructed or worked and no person shall use, keep or have in his possession any material, still utensil, implement or apparatus whatsoever for the purpose of manufacturing any intoxicant other than tari,,except under the authority and subject to the terms and conditions of a licence granted in that behalf. It is also obligatory urtder this section to have a licence for manufacture of intoxicant and for bottling liquor for sale and no intoxicant can be manufactured and no liquor can be bottled for sale without such licence. Section 14 is a material section and it c may, therefore, be reproduced in extenso:

' 14. Establishment or licensing of distilleries and ware- houses D (a) establish a distillery in which spirit may be manufac- tured under a licence granted under section 13 on such conditions as the State Government may impose; (b) discontinue any such distillery; • (c) licence, on such conditions as the State Government E may impose, the construction and working of a distillery or brewery; • (d) establish or licence a warehouse, wherein any intoxic- ant may be d\!posited and kept without payment of duty, but subject to payment of such fees as the State Govern- ment may direct; and F r '

(e) discontinue any such warehouse

We may then refer to section 17 which provides inter alia that no intoxicant shall be sold except under the auihority and subject to· the terms and conditions of a licence granted in that behalf. The State Government obviously has the monopoly in regard !c. marufacture, possession and sale of liquor as held in several decisions of this Court. Section 18 recognises the power of the State Government to "lease to any person, on such conditions and for such period as it may think fit the. right-(a) of manufacturing or of supplying by wholesale, or of both, or (b) of selling by wholesale or by retail, or (c) of manufacturing or of supplying by wholesale, or of both, and selling by retail, any

16 SUPREME COURT REPORTS (1987] 1 S.C.R.

A liquor or intoxicating drug within any specified area." There are no other sections in the Act material for our purpose until we come to section 62 which confers on th•~ State Government the power to make Rules for the purpose of carrying out the provisions of the Act. Sub- section 2(h) of section 62 provides that the State Government may make Rules prescribing the authority by, the form in which, and the B terms and conditions on and subject to which, any licence, permit or pass shall be granted and by such rules, among other matters, fix the period for which any licence, permit or pass shall continue in force. The State Government has, in exercise of the power conferred under section 62, made several sets of Rules. Rule II of the Rules of -') General Application made inter alia under sub-section 2(h) of section C 62, lays down the period of licence and clause (2) of this Rule pro- vides: "Wholesale licences for the manufacture, supply and sale of liquor may be granted for any number of years not exceeding five, as the State Government may in each case decide." Rule XXII also framed under sub-section 2(h) of section 62 provides for the manner in 0 which licences shall be granted and it reads as follows:

"XXII. Disposal of licences- ( 1) Licence for the manu- facture or sale of intoxicants shall be disposed of by tender, auction, fixed licence fee or in such other manner as the State Government may, by general or special order, direct. E Except where otherwise prescribed, licence shall be granted by the Collector or by an Officer authorised by him in that behalf."

Rules III to V of the Distillery and Warehouse Rules also made inter F alia under sub-section 2(h) of section 62 deal with the subject of grant of licence and provide, in the following terms, for different kinds of licences which may be issued, viz., licences in Forms D-1, D-l(s) and D-2:

"III. Subject to the sanction of the State Government, the Excise Commissioner may grant a licence in Form D- l and G Form D- l(s) for the wholesale supply of country spirit to retail vendors.

IV. The Collector may issue, on payment of a fee of Rs.1000 a licence in Form D-2 for the construction and H working of a distillery to any person to whom a wholesale supply licence has been issued.

p. 17 Copy page pinpoint

V, Subject to sanction of the State Government the Excise A Commissioner may issue a licence in Form D-2 for the construction and working. of a distillery on payment of a fee of Rs. 1000."

It is clear on a plain reading of Rule XXII that a licence for B ( manufacture or sale of country liquor may be disposed of in any one of four different modes, viz,, tender, auction, fixed licence fee or such other manner as the State Government may by general or special order direct. These four different modes are alternative to one another and any one of them may be resorted to for the purpose of disposing of a licence. It is not necessary that the mode of disposal by tender must c first be resorted to and..if that cannot be acted upon, then only the mode of disposal by auction and failing that and not otherwise, the ' third mode of disposal by fixed licence fee and only in the event of it not being possible to adopt the first three modes of disposal, the last mode, namely, 'such other manner as the State Government may by general or special order direct'. This would seem to be plain and incon- D trovertible but Mr. Justice B.M. Lal has rather curiou'sly in his judg- ment held that these four modes of disposal are inter-related. and "failing in one of the clauses, the next is to be acted upon and for applying the fourth clause, it is incumbent for the State to specify the manner by general or special order and this also includes "specifying how and why the other three clauses are not possible to be acted upon E which compels to take resort to the fourth clause". This view taken by Mr. Justice B.M. Lal in regard to the interpretation of Rule XXII is. obviously unsustainable. It is indeed surprising how such a view could possibly be taken. On a plain grammatical construction of Rule XXII it is obvious that the Collector or an Officer authorised by him in that behalf can choose any one of the four modes set out in that Rule. F There is nothing in the language of Rule XXII to justify the inter- pretation that an earlier mode of disp<isal set out in the Rule excludes a latter mode or that reasons must be specified where a latter mode is adopted in preference to an earlier otie. The language of Rule XXII in fact militates against such construction. It is impossible to subscribe to the proposition that it is only when an earlier mode is not possible to G be adopted for reasons to be specified, that a latter one can be fol- lowed. The Collector or an Officer authorised by him can adopt any one of the four modes of disposal of licence set out in Rule XXII, but, of course, whichever mode be adopted, the equality clause of the Constitution should not be violated in its application. H

18 SUPREMIE COURT REPORTS [1987] l S.C.R.

A It is also clear from Rules III, IV and V which we have set out above, that there are two purposes for which a licence in Form D-2 for construction and working of a distillery may be granted. It may be granted as an adjunct to the licence in Form D-1 under Rule r' or it may be granted as an independent licence under Rule V .irrespective whether the grantee holds a licence in Form D-1 or not. There are also two types of licences for wholesale supply of country liquor to retail vendors, namely, licence in Form D-1 and licence in Form D-l(s). The licence in Form D-1 in clause 5 clearly contemplates that the holder of such licence must also have a licence in Form D-2. No one can have a licence in Form D-1 unless he has simultaneously a licence in Form D-2. He must have a distillery in which he distils country spirit in order that he should be able to make whoJ,esale supply of country liquor to retail vendors. If for any reason he is unable to obtain licence in Form D-2 for working a distillery, no licence in Form D-1 can be given to him and if he has such licen~~. it would become ineffective. It is for this reason that when a person is granted a licence in Form D-1 by the D Excise Commissioner under Rule III, he is also simultaneously granted a licence in Form D-2 under Rule IV and the period of both the licences is co-terminus. But, though a person cannot be granted a licence in Form D-1 unless he also obtains licence in Form D-2, the converse does not hold true. A licence in Form D-2 can be granted to a person under Rule V even though he does not hold a licence in Form E D-1. Where a person is granted a licence in Form D-2 for working a distillery under Rule V, without having a licence in Form D-1 for wholesale supply of country liquor to retail vendors, he cannot make wholesale supply of country liquor manufactured by him to retail ven- dors but he can supply such country liquor to a person holding licence in Form D-l(s) or he can manufacture ractified spirit, denatured spirit or foreign liquor as contemplated in condition 3 of the licence in Form D-2. It is not necessary that a person holding a licence in Form D-2 must also simultaneously have a licence in Form D-1.

It is .in the context of these provisions of the Act and the Rules G that we must consider the facts of this case. There were at all maierial times in the State of Madhya Pradesh nine distilleries for the manu- facture of spirit, which were established long back by the State Government under a licence issued by the Excise Commissioner. The names and other particulars of these distilleries are set out in the following table:- H

STATE OF MADHYA PRADESH v. N. JAISWAL (BHAGWATI, CJ.] 19

'I A Name of Production ' · Production Production Distillery capacity in 81-82 82-83 proof litres

1Copy pinpoint1. Gwaiio~ 15 lacs 9 lacs

2Copy pinpoint2. Ujjain 13 lacs IO lacs 10 lacs B I'" 3. Dhar 15 lacs 9 lacs 12 lacs 12 lacs · 14 lacs

4Copy pinpoint4. Badwaha 20 lacs

5Copy pinpoint5. Chhatisgarh 30 lacs 29 lacs 25 lacs

~· 6. 7. Bhopal Seoni 12 lacs 20 lacs 9 lacs 18 lacs 11 lacs 19 lacs

8. Nowgaon (owned 8 lacs 3 lacs 4 lacs c by private ~. individual) .

Total: 133 lacs 90 lacs 104 lacs

9. Ratlam Alcohol 70 lacs 39 lacs 67 lacs D Plant (owned by Govt. Total: 203 lacs 129 lacs 171 lacs

We are concerned in these appeals with only the first seven distilleries .~ since the Nowgaon Distillery has always been owned and worked by a E private firm and the Ratlam Alcohol Plant is owned by the State Government and is managed by the M.P. State Industries Corporation and the impugned policy decision dated 30th December.• 1984 does not concern these last two distilleries. So far as the first seven distilleries are concerned, and hereafter whenever we refer to distilleries we shall y· be referring only to these seven distilleries, the land and .buildings in F . which they were housed belonged to the State Government and origi- \ nally the plant and machinery also belonged to the State Government but in course of time successive holders of the D-2 licences in respect of these distilleries replaced the plant and machinery., The practice followed· by tire Excise Department in regard to the working of these distilleries was to invite tenders for. the wholesale supply of country liquor from these distilleries ·and the tenderers were requested to quote their rates for the wholesale supply of country liquor to the State ~- Government. Normally the lowest tenders were accepted but at times the State Government used to accept even higher tenders taking vari- ons relevant factors into account. The State of Madhya Pradesh was divided in several areas and a particular area was attached to each H

20 SUPREME COURT REPORTS [1987] 1 S.C.R.

distillery for the wholesale s11pply of country liquor in that area. The A person whose tender was accepted for any particular distillery was given a D-2 licence for working the distillery and also a D-1 licence for wholesale supply of country liquor manufactured in that distillery to retail vendors in the area attached to the distillery. These licences in Forms D-1 and D-2 were ordinarily issued for a period of five years. B Respondent Nos.5 to 11 in the writ petition of Nandlal Jaiswal were the holders of D-1 and D-2 licences in respect of these distilleries for the period ending 31st March, 1986. There were two districts, how- ever, which were not attached to any distillery, namely, Jabalpur and Betul and so far as these two districts were concerned, a licence in Form 0-l(s) to make wholesale supply of country liquor to retail ven- •'j '

dors in these two districts was being given and for the period ending c 31st March, 1986 it was issued in favour of Sagar Aggarwal. The country liquor required by Sagar Agarwal for supply to retail vendors ) in Jabalpur and Betul Districts was being obtained by him from the Ratlam Alcohol Plant at the rate of Rs.1.80 per proof litre but, as will be presently seen, the supply of country liquor from Ratam Alcohol 0 Plant was wholly inadequate and Sagar Agarwal was constrained to purchase country liquor from other sources at higher price in order to fulfil his commitment under D- l(S) licence .

. Since the land and buildings In which the distilleries were housed belonged to the State Government, the holder of D-2 licence in respect of any particular distillery had to pay rent for the land and buildings to the State Government at a rate agreed upon from time to time. So far as the plant and machinery of the distillery was concerned, originally it was .installed by the State Government at its own cost but in course of time it had to be replaced and such replacement was allowed to be made by the holder of the D-2 licence for the time being. It was however a condition of D-2 licence that on the expiry of the period of licence, if fresh D-2 licence was not issued in favour of the existing licence holder, he would be bound to transfer the plant and machinery in favour of the new licence, holder at a price to be determined by a Valuation Committee. Therefore, during the period of D-2 licence, the plant and machinery belonged to the licence holder for the time being. The licence holder was bound to manufacture country liquor in the distillery for which he was given D-2 licence and on the strength of D-2 licence supply country liquor so manufactured to retail vendors in the area attached to the distillery at the rate quoted in the tender and accepted by the State Government. The bottling and sealing charges were also fixed by the State Government from time to time and they were payable to the licence holder by the retail venddrs. It may be

STATE OF MADHYA PRADESH v. N. JAISWAL (BHAGWATI, CJ.] 21

"\ pointed out that at the material time the bottling and sealing charges were fixed at 80 paise per bottle which came to Rs.3.40 per proof litre.

Now, the totaI dpacity of all the 9 distilleries including Nowgaon Distillery and Ratlam Alcohol Plant was only 203 lacs proof litres but even this capacity of production was not realised and the actual pro- duction fell for short of this capacity. The to.t,al production of country B ) liquor from all the 9 distilleries in the year 81-82 came to only 129 lacs proof litres and though in the year 1982-83 there was some improve- ment, the total production did not go beyond 171 lacs proof litres. The -~ result was short supply on many occasions leading to loss of licence fee as well as excise duty by the State Government. The State Govern- ·) ment, in order to me@t the requirement of the consuming public, had c actually to purchase liquor from other States at a higher price.

"· Moreover,,the consumption of liquor was growing from year to year and it was 'estimated that by the year 1991, the total consumption to country liquor would be likely to be in the neighbourhood of 482.36 lacs proof litres and by the tum of the century it was expected to be in the neighbourhood of 1696.80 lacs proof litres. Obviously, the existing, D 9 distilleries were totally inadequate to meet this growing demand for country liquor. Furthermore, the buildings in which these distilleries were housed had become old and were in a state of disrepair and it was not easy for the State Government to maintain, them in good condition L without incurring heavy expenditure every year. The plant and machinery were also old and antiquated and it was necessary to instal new and modem plant and machinery having increased capacity 'to '

- . manufacture country liquor. Moreover, it seems· that though at the time of construction, these distilleries were away from the city or town, what had happened was that with the growth of population and haphazard and unplanned urban development, these distilleries had ' Y' now come to be in the heart of the city or own and they created health hazards and pollution problems. There was a demand from all sections J of the public living in surrounding area to move the distilleries away ·in order to avoid water and environmental pollution. It was in these circumstances, when the .mind of the State Government was already exercised in respect of these matters that an application was made by M.P. Distillers' Association in July 1983 for transferring these distil- G ; leries to private ownership. The members of the M.P. Distillers' Association who were old distillers holdirig D-2 licence In respect of ·~· these distilleries offered to invest their own funds in the construction of new buildings and installation of latest plant and machinery with capacity to produce more country liquor in conformity with the standards laid down by M.P. Eradication of Pollution Board for H

22 SUPREME COURT REPORTS [1987] 1 S.C.R.

Removal of Polluted water by constructing lagoons, etc., provided A they were assured D-1 licence for the area attached to their respective distilleries.

This application of M.P . Distillers Association was examined by the State Government at different levels. The Excise Commissioner B submitted his opinion to the Separate Revenue Department stating y that "it would be more appropriate to hand over the Government distilleries to private ownership because thereby the Government will get additional income from the sale of buildings, land, etc., of the ' distilleries and at the same time the distillers will pay more heed to the distilleries bwldings, etc., due to transfer of the distilleries to private ownership and they will instal the latest machinery and implements as C a result of which there will be an increase in liquor production and supply of liquor as per requirement of the State Government and at the same time they will be liable for solving the problem of pollution." The Revenue Department, after obtaining the Report from the Excise Commissioner examined the matter carefully from various aspect. But D since several points required consideration such as whether the distil- leries should be transferred to private ownership during the period of the subsisting contracts, and if so, what would be the legal consequ- ences and whether the distilleries should be allowed to continue at the same place or should be transferred to new sites in view of the problem of pollution and the question of transfer of distilleries to private E ownership was itself an important policy issue, the Separate Revenue Department referred the matter to the Chief Minister with a sugges- tion that a high level committee shmild be appointed for the purpose of examining the various issues. The State Government accordingly under the orders of the Chief Minister constituted a Cabinet Sub- Committee consisting. of Ministers of Separate Revenue Department, I - p Major and Minor Irrigation Department, Commerce and Industry ~- Department and Rehabilitation and Environment Department and four highly placed officers, namely, Chief Secretary, Secretary, "·- Separate Revenue Department., Secretary Finance Department and Excise Commissioner were directed to assist the Cabinet Sub- Committee. The Separate Revenue Department submitted a note for G the consideration of the Cabinet Sub-Committee and this note formulated various issues arising for consideration and set-out various aspects relating to these issues so as to form the basis for discussion. • These issues may be summarised as follows:

(I) Whether the transfer of ownership of Government dis- H tilleries should be made during the present contract period only or on the commencement of new contract?

STATE OF MADHYA PRADESH v. N. JAISWAL [BHAGWATI. CJ.] 23

(2) Necessity of spot inspection of distilleries and survey of ·A buildings and change of their place?

(3) Policy to be adopted for transfer of buildings and lands of distilleries?

(4) Establishment of proper machine and implements for B manufacture of liquor in the distilleries for use of Mahuwa product in the State? ·

(5) Determination and question of fixing prices of liquor under the new'management? c The Cabinet Sub-Committee at its meeting held on 27th June 1984 considered these issues and after discussion came to tlie conclusion that in view of the problem of pollution, it should first of all be examined "as to which distillery is to be transferred from the existing site and which distillery is to be maintained at the present site" and in order to determine this question, the Cabinet Sub-Committee consti- D luted a Committee headed by Shri Vijayvargi Special Secretary, Separate Revenue Department. The Vijayvargi Committee was also authorised to select new sites for the distilleries which in its opinion ' required to be removed from the existing sites on account of the prob- .J- lem of pallution. The Vijayvargi Committee thereafter made spot ins- pection of all the 9 distilleries in the State and submitted its report to E

- the Cabinet Sub-Committee on 18th July 1984. This Report was a detailed and exhaustive Report and it was pointed out in this Report that 5 distilleries, namely, Bhopal, Ujjain, Badwaha, Seoni and Bhilai were required to be removed to new sites on account of the problem of . pollution, but so far as the remaining two distilleries at Gwalior and Dhar were concerned, it was not necessary to remove them from their F present sites, though in regard to Dhar Distillery, it was necessary to fix lagoon plant for removing pollution. The Vijayvargi Committee also stated in its Report that it was necessary to make arrangement in regard to polluted water thrown out from Nowgaon and Ratlam Distilleries. G The Cabinet Sub-Committee at its meeting held on 2 lst July 1984 considered the Report of the Vijayvargi Committee and decided to accept it wholly. The Cabinet Sub-Committee directed that an esti- mate of the cost involved in setting op the Bhopal, Ujjain, Badwaha, Seoni and BhiJ,,j distilleries at the new sites should be worked out by the Excise Commissioner as also by the M. P. Consultancy Cirganisa- H

24 SUPREME COURT REPORTS (1987] I S.C.R.

A tion and the valuation of the lands and buildings of Gwalior and Dhar distilleries, which according to the Vi jayvargi Report, were not neces- sary to be shifted to new sites, should also be got done by the Col- lectors concerned on the basis of prevailing market rates. It was also directed by the Cabinet Sub-Committee that an estimate of sales of country liquor projected in the next 20 years should be got made and it B should also be examined whether such future demand could be met by the present distilleries and on this basis how many distilleries in the public cooperative and private sectors would be necessary to. be established. Pursuant to this direction, an estimate of the cost likely to be incurred in establishment of Bhopal, Ujjain, Badwaha, Seoni and Bhilai distilleries at the new sites including purchase of land, construc- C tion of buildings, setting up of modem plant and machinery and arrangement for lagoon for polluted water thrown out by the distil- leries, was prepared by the.Excise Commissioner and the Report made · by the Excise Commissioner showed that, according to this estimate, the likely cost would be in the neighbourhood of Rs.20 crores 60 lakhs. The Excise Commissioner also estimated the likely increase in con- D sumption of liquor in the next 20 years a:nd in his Report gave figures showing that at the end of 20 years the annual requirement of liquor in the State would be 2967 lacs proof litres and that the total established capacity of all the 9 distilleries taken together would not be sufficient to meet this growing requirement of liquor consumption. So far as the valuation of the land and buildings of Gwalior and Dhar. distilleries E was concerned, no report wa• submitted by the concerned Collectors until the next meeting of the Cabinet Sub-Committee.

F The Cabinet Sub-Committee thereafter met on 10th August 1984 and at this meeting the Cabinet Sub-Committee considered the report of the Excise Commissioner in regard to the estimated cost of estab- lishing Bhopal, Ujjain, Badwaha, Seoni and Bhilai distilleries at new y I - sites as also the estimated increase in consumption of liquor over the next 20 years and after discussing all the various related issues, the Cabinet Sub-Committee arrived at certain decisions which are set out in paragraph 3 of the proceeding of this m~eting which form part of the record. It is not necessary here to set out these decisions, because G ultimately they culminated in the recommendations made by the Cabinet Sub-Committee to which we shall presently make reference. But at this meeting the Cabinet Sub-Committee decided to invite re- presentatives of the M.P.Distillers Association and to give them a hearing before taking final decision in the matter.

H The representatives of the M.P. Distillers Association met the

STATE OF MADHYA PRADESH v. N. JAISWAL [BHAGWATI, CJ.] 25

"\ members of the Cabinet Sub-Committee at the meeting held on 3 Ist A August 1984. These representatives made various suggestion~ to the Cabinet Sub-Committee and these suggestions included inter alia the suggestion that even Gwalior add Dhar distilleries should be transfer- red to new sites since the problem of pollution, though not pressing at the present moment, was bound to arise after 5 or 7 years, but if the existing lands and buildings of these two distilleries were to be trans- 8 'I• ferred, such transfer should be made on\he basis of their book value and not at the market price. It was also pleaded by these representa- tives that if the distilleries were going to be transferred to private ~- ownership, such transfers should be effected in favour of, the existing contractors and .not outsiders. Some suggestion was also made on behalf of these representatives that compensation should be c paid by the State Government, to the existing co,ntractors for the "'- expenditure incurred by them in construction of roads, molasses col- lection pits, wharehouses etc. These suggestions were considered and examined by the Cabinet Sub--Committee.

Before the next meeting of the Cabinet Sub-Committee was held on 20th September 1984, a letter dated 10th Sept. 1984 was submitted by the Finance Department in which two points were raised by the Finance Department. One was that "transfer of distilleries should be made by getting the comparative bids offered and it should be given to .L the highest bidder" and the other was whether on transfer to private ownership the distillers "would be required to obtain any permission under the Industries Development and Regulation Act and if permis-

.. sion is not granted, whether any problem would arise out of it." The ·Cabinet Sub-Committee at the meeting held on 20th September 1984 discussed these .two points and so far as the first point was concerned, ~- the Cabinet Sub-C6mmittee came to the conclusion that "the transfer of distilleries should be made only to the present contractors and their F I present supply area should be attached with them" and with regard to ..\\ the second point, the Cabinet Sub-Committee felt that since the distil- Ieries which were going to be established at the new sites were in lieu of the present distilleries, it may not be necessary to obtain fresh licence under the Industries Development and Regulation Act but if fresh licence was required, it should be the responsibility of the distil- G Iers to obtain the same. The Cabinet Sub-Committee also took various -~ other decisions which are set out in paragraph 4 of the proceedings of this meeting held on 20th September 1984. It is not necessary to repro- duce these decisions, but it may be pointed out that the request of the representatives of the M.P. Distillers Association that the land and buildings of the Gwalior and Dhar distilleries may be transferred at H

26 SUPREME COURT REPORTS [1987) l S.C.R.

A book value and not at market value was rejected and the Cabinet Sub·Committee decided that the transfer should be at the prevailing market price. The Cabine\ Sub-Committee, however, agreed that "if any distiller wants a change of place in the future, the decision ·about it would be taken by the Separate Revenue Department". The Cabinet Sub-Committee also recommended that an agreement should be ex- B ecuted in writing between the distillers and the Excise Department in which it should be provided that on the construction of the distillery and the installation of the plant and machinery, the distiller shall be entitled to obtain D-2 licence in respect of the distillery. It was decided at this meeting that the draft Report of the Cabinet Sub-Committee shall be finalised in accordance-with the decisions taken at the various C meetings of the Cabinet Sub Committee.

D The Report of the Cabinet Sub-Committee was thereafter fina- lised and after setting out the history of the discussions that preceded the preparation of the Report, it proceeded in paragraph 17 to make the following recommendations:

A. Transfer of ownership of distilleries ' (I) All the Government distilleries shoul I be transferred to the ·contractors concerned whose contracts are current for the periods from 1. 7. 1981 to 3 1.3. 1986. E (2) The present builclings, lands of Gwalior and Dhar Dis- tilleries should be transferred as per the price of the present market rates reported by the Committees formed under the Chairmanship of the,llegional Commissioners after receiv-

F ing the same from the distilleries and no concession should ~·· be given therein.

(3) There should be an agreement with the Distillers who .• are allotted lands for establishing distilleries•at the new sites to the effect that the Government will be bound to 'issue them D-2 licence after the construction of buildings and fitting of plant, on fulfilling all terms and conditions.

B. Allotment of lands for construction of distilleries at the __.. new places

(4) Generally a principle should be accepted in connecti.on with the price of land to be allotted to the distillers at those

STATE OF MADHYA PRADESH v. N. JAISWAL [BHAGWATI, CJ.] 27

five places whose distilleries are to be transferred at any other place that if the land to be allotted is a Government land, its j)larket value plus 20% of its market price and the amount so arrived at should be treated .as the premium of that land and on that basis ground rent should be fixed as per rules. The land should be given on 30 years' lease. B ;--<' (5) If the land to be allotted is a'non-Government land and if it is to be allotted after acquisition, then as a result of acquisition the compensation to be paid plus 20% and the ~~, amount that would be arrived at should be treated as pre- mium of that land and after taking ground rent as per rules ,the land ~hould be given on 30 years' lease. c ( 6) The directions of the Industries Department in connec- '·- ti on with allotment of land should also be kept in view.

(7) No financial aid should be given by the Government to the distillers for payment of premium, etc., of the land. D

(8) If the land allotted is used for any other purpose than the purpose for which it is allotted, the land would auto- ·matically stand diverted to the State Government. Such a provision should be made in the terms and conditions of the lease deed. E

C. Leiter of Intent, for grant of D. 2 Licences

( 1) D-2 licences should be granted alongwith letter of in- tent only to those distillers to whom land is allotted for "- I construction of distilleries. The Sub-Committee also feels that the distilleries to be constructed at the new sites shall '" be in lieu of the present distillery. Therefore, this will not be necessary to obtain licences from the Central Govern- ment. But, for any other reason, if any licence .is comput- sory under the rules, Acts of the Government of India or the State Government, the distiller shall be liable to obtain it. The State Government will seild their applications with recommendations to the Government of India. ~· D. Construction of Lagoon, etc., for making arrangement for passing water from distilleries H

28 SUPREME COURT REPORTS [ 1987] J S.C.R

( 11) It will be obligatory for the distillers while construct- A ing the distilleries to observe the standards fixed by the M.P. Eradication of Pollution Board for removing the pol- luted water and the environment. clean and to construct Lagoon, etc. for the same.

B ( 12) It should also be mentioned in the letter of intent that the distillers shall make similar arrangement in the distil- -,... leries that would be transferred to the distillers at their present site only. Without such arrangement D-2 licence should not be given to the distillers. -,A E. Construction of Laboratories for Liquor test c ( 13) The distillers shall be compulsorily required to con- y struct. a laboratory for examination of liquor in the distil- lery. It will also be compulsorily required to construct a laboratory for examination of liquor in the distillery. It will D be compulsory to construct laboratory for liquor test in the distilleries which are to be transferred to the distillers at the existing spot only.

F. Arrangement/or manufacturing liquor from Mahuwa ~ E ( 14) The plants for manufacturing liquor from Mahuwa also should be established by the distillers for manufactur- ing liquor from Mahuwa in all the distilleries in the State so that, if it is necessary, liquor should be manufactured from Mahuwa and the Mahuwa produced in the State should be properly used within the state only and they should get I F reasonable price for the Mahuwa purchased by them at the -"( support price of MARPED or Vano Upaj Vyaper Sangh. For each distillery 71/z % liquor should be manufactured -!- from Mahuwa of its total productive capacity and it should be mentioned in D-2 licence.

G G. Period of D-2 licences • (15) In the beginning 0-2 licence (Distillery Licence) should be granted for five years and thereafter there should Ji be a provision for its renewal. Necessary amendment in the Excise Act or Rules for the same should be made. H

STATE OF MADHYA PRADESH v. N. JAISWAL [BHAGWATI, CJ.] 29

H. Fixation of liquor price A ( 16) The Sub·Committee was apprised of the system of fixation of cost of liquor in the State of U.P., West Bengal and Maharashtra States. Prices fixed in Uttar Pradesh by calling tenders whereas in Maharashtra under Eythule Alcohol Price Control Order on the recommendation of B the State Goyernment, the prices of liquor are fixed by the \ Government of India. In West Bengal, for fixation of prices a Committee is formed consisting of a Charteretl Accountant a cost Accountant and a Senior Officer of the ~.··· Excise Department. In the opinion of the committee, prima facie, the system being adopted in the West Bengal was found more scientific and appropriate and it was re· c commended to adopt this method. Action be taken after obtaining necessary details in i::onnection with this system and after the distilleries are transferred to private owner· ship, the prices should be fixed every year. D ( 17) On transfer to private ownership, the rates proposed by the Committee to be brought into effect from 1.4. I986 should be fixed finally after discussing the same between the State Government and the distillers. Till the final rates are not fixed the present rates of the distilleries shall be maintained as they are and after that only it should be adjusted against the new rates.

( 18) The present system of connecting the area of supply for each distillery shall be maintained in future also as it is. It would be proper to maintain the present right of reduc· lion or increase in the supply regions of any distillery which is with the State Government/Excise Commissioner, as it IS. I

I. Control of Excise Department on the Distilleries

( 12) Even after the transfer of distillaries to private owner, ship, there should be control of the Excise Department over them as per the present system and for this purpose if any amendment is found necessary, it should be made in the Excise Act/Rules.

The Finance Department, however, submitted a Report raising 5 H

30 SUPREME COURT REPORTS [1987] 1 S.C.R.

A points against the recommendations made in the Report pf the Cabinet Sub-Committee. These points were answered by the General Adminis- tration Department in the summary prepared by it for submission to the Cabinet. These points together with the answers given by the General Administration Department may be reproduced as follows:

B "Point No. I

The distilleries which are to be transferred to the pri- vate distilleries on account of the problem of pollution, it is not proper to transfer to them ihe land and buildings.

c Answer

In this connection it is pertinent to note that the Cabinet Sub-Committee has only reommended transfer of -~ Gwalior and Dhar distilleries to the existing distillers. Looking to the problem of pollution, other five distilleries D have been recommended to be transferred at the new sites and their construction and establishment in the private ownership. Hence, the question of transfer of land and buildings of these distilleries does not arise. It is clear that !he lands and buildings of the present five distilleries will be of the State Government and they can be used for Govem- E men! purposes. So far as the transfer of Gwalior and Dhar distilleries and their lands and buildings are concerned, the said distillers have made applications to the State Govern- ment that they also intend to establish distilleries at the new sites. If the State Government decides to establish these distilleries at other places, the question of transfer of F lands and buildings of these distilleries does not arise.

Point No.2

A serious thought should be given to the question that the j I State Government should give an undertaking to the distil- r G lers that the State Government shall purchase liquor from them for ever and for that purpose no tender will be in- vited.

Answer

H With regard to this point, it would be proper to make

STATE OF MADHYA PRADESH v. N. JAISWAL (BHAGWATI, CJ.I 31

mention of the fact that the distillers whom the land will be allotted for the construction of new distilleries, they will only be granted D-2 licence and· Jetters of intent will be issued in that regard. D-2 licence is granted for the manu- facture of liquor. D-1 licence relates to the supply and rates of .the same. According to the present arrangement, the State Government purchase liquor from those contractors who are granted licences for the same and in case of any short supply on account of some reason, liquor is imported from other States. This arrangement should also be made for future also. As far as the ceiling of tender is concerned, it is with regard to rates of liquor. On this point, a note has been given against point Nos.-l and 5. c Point No.3

As there is a possibility of increases of consumption of liquor in future, and the increased quantity of liquor will have to be purchased by the.· State Government from the D present contractors, that will amount to monopoly system and the contractors may put the State Government into trouble at any time. For this purpose. the State Govern- ment should possess a right of granting D-2 licence to any other distiller. E Answer

In this connection, it should be mentioned that during the existence of the contract. if there is an increase in the consumption of liquor the supply of the same is done by the contractors or from outside. This arrangement shall be con- F tinued in future also. As for as grant of D-2 licence to other distillers is concerned, it will be given to them according to the requirement. The Sub-Committee has not made such a recommendation that apart from the existing distillers, no other person should be granted o·-2 licence. G Here a question may arise that on the conferral of private rights on the distilleries ·and in case of absence of favourable conditions or difference of opinion about the fixation of prices of liquor. the distillers taking advantage of their propri!'tory rights may not close the distilleries' Ordinarily, no such imagination can be made because after H

32 SUPREME COURT REPORTS [ 1987] l S.C. R.

A investing such a hug~ amount the intention of the distillers is to gain profits. For that purpose, their effort would be to ,,. I constantly run th~ distilleries and for meeting such an eventuality some arrangement should be made in the agreement that could be entered with the distillers so that • the distilleries can be taken over the State Government . 13 Point No.4

c The Sub-Committee has recommended that for the supply of liquor the rates of the same may be fixed by a Committee consisting of a Chartered Accountant, a cost accountant and a senior Officer of the Excise Department. The Finance Department has suggested that in this Committee, representatives of the Finance Department and the Sepa- J rate Revenue Department and the representative of the Separate Department should be its Chairman which would fix the rates on the basis of principles. D Answer

This suggestion is capable of being accepted. It may be pertinent to mention here that the Sub-Committee was apprised of the different systems adopted by different E States with regard to supply rates. The Sub-Committee has . ro(

recommended the system prevalent in West Bengal be- cause the Sub Comn1ittee felt that this system is more sci- entific and fit. The Sub Committee has also mentioned that after obtaining further information about this system, action should be taken and after transfer of the distilleries F into private ownership the prices should be fixed every ,

Point No.5 year. Presently, the prices of liquor are fixed for a period of five years. l (i There should be competition which can be achieved through tender system. Hence, for fixing prices, tender system should be adopted and nobody should be given to say that the rates have been fixed arbitrarily. Answer H As mentioned in recommendation No. 17 of the Sub

STATE OF M.ADHYA PRADESH '· N. JAISWAL [BHAGWATI. CJ.] 33

Committee dated 1.4.86, the rates to be made effective from 1.4.86 will be proposed by a Committee which will be giveri effect to after discussion (negotiations) with the State Government and the distillers. The Sub Committee has also made a recommendation that till the time the final rates are not fixed, till that period the respective distilleries will maintain their existing rates and after that they will adjust against the new rates. Hence, it will be clear that according to the new system fixation of prices will be fixed by calling tenders. For the present supply rates, tenders are invited and on that basis after negotiations with the distil- . lers the final rates are fixed."

The summary alongwith the Report of the Cabinet Sub Commit- c tee and all other papers and proceedings leading upto the making of "'- the Report were all placed before the Cabinet at the meeting tield on 30th December 1984 when the following decision was taken:

"I. Looking to different angles of the subject, the recom- D ·mendations of the Cabinet Sub-Committee should be en- dorsed.

2. If some such similar matters are put up, the department on the basis of the principles should take decisions." E Pursuant to this policy decision dated 30th December 1984 a Letter of Intent dated 1st February 1985 was issued by the State Government in favour of each of respondent Nos. 5 to l l for grant of D-2 lincence for the construction of a distillery at a new site for the purpose of manufacturing country liquor with effect from lst April

t.· 1986 in lieu of the existing distillery in respect of which snch respon- F dent held D-2 and D-1 licences for the period ending 3 lst March 1986. The Letter of Intent set out various conditions subject to which D-2 licence was to be granted in favour of each of respondent Nos. 5 to l l. Clause ( l) of the Letter of Intent prescribed the following condition:

l. (a) The licence shall be granted for a period of five G years commencing from l-4-1986, subject to the payment of .licence fees of Rupees Twenty Five thousand in advance and such security as may be prescribed by the Excise Commissioner for due observance of rules, and conditions of licence. H (b) It will be the responsibility of the licensee to obtain

34 SUPREME COURT REPORTS (19&71 1 S.C.R.

a licence/permission, if any required by the State A Governmet or Government of India. (c) The licence shall be further subject to renewal every year on payment of a licence fees of Rs. Five thousand in advance and subject to due observance of the provisions of the Excise Act and rules made there-under and conditions of the licence.

The licensee to whom the Letter of Intent was issued was required ~ under Clause 2 of the Letter of Intent tp construct the distillery on the land approved by the State Government and the M.P. Pollution · Board. It was provided by Clause 12 of the Letter of Intent that the licensee shall make proper arrangements for treatment of effluents discharge under a scheme duly approved by the M.P. Pollution Board and that any direction issued by the Excise Commissioner in this re- gard shall be binding on the licensee. Clause 14 of the Letter of Intent stipulated that the licensee shall be bound to complete construction of distillery and installation of plant and machinery as required by the D Excise Commissioner well before !st April 1986.

The Letter of Intent was followrd by a Deed of Agreement dated 2nd February 1985 executed by and between the Governor of Madhya Pradesh acting through the Excise Commissioner and each of respon- dent Nos. 5 to 11. The Deed of Agreement recited that the Letter of E Intent has been issued by the State Government for grant of D-2 licence for construction of distillery for manufacture of spirit with effect from 1st April 1986. Clause 1 of the Deed of Agreement pro- vided that the licensee shall be bound to take land on lease for a period . of 30 years from the State Government, but this clause is not material because ultimately none of respondent Nos. 5 to 11 took land on lease from the State Government and each of them purchased his own land, the site of course being approved by the State Government. Clause 2 of the Deed of Agreement is rather material and it may be reproduced in full:-

2. "The Govt. shall be bound to sanction D-2 licence in favour of the Licensee who has been granted letter of intent to manufacture spirit w.e.f. 1-4-86 in lieu of CHHATTISGARH DISTILLERY situated at INDUS- TRIAL ESTATE BHILAI for a period of 5 years subject to renewal every year'on payment of Licence Fee Rs.5,000 and on due fulfilment of the conditions of the licence and the provisions of M.P. Excise Act 1915 and the Rules made thereunder."

STATE OF MAD HY A PRADESH ,_ N. JAISWAL {BHAGWATI, CJ.) 35

It was provided by Cluase 4 of the Deed of Agreement that the licen>ee shall be bound to manufacture country spirit in the distillery from mahuwa also and the country spirit made from mahuwa shall not be less than 7.5% of the total production in the distillery. So far as the pricing of country liquor made from mahuwa, khandsari molasses or mill molasses was concerned, Clause 6 of the Deed of Agreement provided as follows:- B

"The rate of country spirit made from Mahuwa, Khandsari molasses or mill Molasses shall be determined every year by the State Govt. on the basis of the recommendation of the committee constituted by the State Govt. in this behalf. The cost price so determined shall be final and binding on C the Licensee."

The other clauses of the Deed of Agreement are not material and we need not refer to them in detail beyond merely stating that they were introduced in the Deed of Agreement in conformity with the policy decision dated 30th December 1984. D

Pursuant to the Letter of'intent and the Deed of Agreement each of respondent Nos.5 to 11 selected with the approval' of the State Government the new site at which the distillery should be located, purchased land at such new site, started constructing buildings for . housing the distillery and placed orders for purchase the plant and E' machinery to be installed in the distillery. Some of the plant and machinery started arriving and it began to be installed in the distillery. l:here was some dispute between the parties as to how much amount each of respondent Nos. 5 to 11 had expended by the time the first writ p_etition came to be filed by Nand Lal Jaiswal but it could not be seriously contested that considerable amount of money had already F _ been spent by respondent Nos. 5 to 11 in acquiring land, constructing buildings, placing orders for purchase of plant and machinery and taking other necessary steps before 28th November 1985 when Nand Lal Jaiswal filed the first writ petition. There is evidence to draw that considerable more progress had been made by respondent Nos. 5 to 11 · in this direction by the time the second writ petition came to be filed by G Sagar Agarwal. Each of them had, on a conservative estimate, spent over one or two crores of rupees by the time Nand Lal Jaiswal and Sagar Agarwal filed these writ petitions challenging the policy decision dated 30th December 1984'. On the filing of tljese writ petitions, an application for stay was made but it was rejected by the High Court with the result that the work of setting up the-distilleries continued H

36 SUPREME COURT REPORTS [ JQ87] I S.C.R.

space and the distilleries were almost complete by the time decision came to be given by the High Court disposing of these writ petitions.

When the writ petitions were argued before the High Court, one of the questions seriously debated was whether under the policy deci- sion dated 30th December 1984, D-2 licence was to be granted to each of respondent Nos.5 to 11 only for a limited period of 5 years com- mencing from !st April 1986 or it was to be granted for a minimum period of five years with a clause for automatic renewal from year to year after the expiration of the period of five years so that all other persons would be totally excluded from entering the field and a mono- poly would be created in favour of respondent Nos.5 to 11 for all time to come so far as D-2 licence for manufacturing liquor in the distillery was concerned. The petitioners relied on clause I of the Letter of Intent.in support of their contention that a monopoly was sought to be created in favour of respondent Nos.5 to 11 for maufacturing liquor in the distilleries respectively set up by them by granting D-2 licence which was renewable every year after the expiration of the initial period of 5 years without any limitation of time and this was clearly arbitrary and irrational so as to be violative of Article 14 of the Con- stitution. This contention was negatived by the Division Bench and particularly by Acting Chief Justice, J.S. Verma in view of the cate- gorical statement made on behalf of the State Government by the learned Advocate-General as also by the learned Advocates appearing on behalf of respondent Nos.5 to 11 that under the policy decision dated 30th December, 1984, D-2 licence was .to be granted only for a maximum period of 5 years "subject to its renewal within the period of 5 years on the terms and conditions" mentioned in the Letter of Intent and "there was no undertaking on the part of the State Government" to grant, by way of renewal or otherwise D-2 licence after the expiry of I

F the period of 5 years commencing from !st April 1986. The learned Attorney General, appearing on behalf of the State Goverment, as also the learned advocates appearing on behalf of respondent Nos.5- 11, reiterated the same stand before us namely, that there was no l commitment on the part of the State Government to grant D-2 licence beyond the maximum period of 5,years and that the provision in regard fo renewal from year to year was to operate within this period of 5 years. The learned counsel appearing on behalf of the petitioners, however, urged that this concession made on behalf of the State Government and respondent Nos.5-11 was of no avail, since it was contrary to the terms of the policy decision dated 30th December 1984 and the provision in the Letter of Intent and, in any event, the validity of the policy decision dated 30th December 1984 could be tested only

STATE OF MADHYA .PRADESH v. N. JAISWAL [BHAGWATI, CJ.] 37

on its own tern1s and if it was ·otherwise invalid, the concession made on behalf of the State Government and respondent Nos.5- l l could not save it. We do not think that this contention urged on behalf of the petitioners i~ well-founded. It is.undoubtedly true that the recomme- dations of the Cabinet Sub-Committee which were accepted. by the Cabinet in the policy decision dated 30th December 1984 provided that in the beginning, D-2 licence shalt be granted for a period of 5 years and thereafter there shall be a provision for its renewal and for this purpose, necessary amendment in the M.P. Excise Act, 1915 or the Rules made under the Act shall be made. But, it is sigJ!ificant to note that no such amendment in the Act or the Rules was made by the State Government and when the Letter of Intent was issued and the Deed of Agreement was executed and even thereafter, the provisions of the Act remained unamended and Rule II of the Rules of General Appli- C cation also continued to stand in its unamended form. It is obvious that without an amendment of Rule II of the Rules of General Application, • the maximum period for which D-2 licence could be granted to respon- dent Nos.5-11 was only 5 years and there could be no provision for automatic renewal thereafter from year to year. It is, therefore, clear D that whatever might have been the original intention, it was not effectuated by carrying out necessary amendment in the provisions of the Act or in Rule II of the Rules of Genera) Application and the ultimate decision of the State Government was to grant D.2 licence for a limited period .of 5 years. This would also seem to be clear beyond · doubt if we examine closely clause 2 of the Deed of Agreement. This E clause provided in terms clear and explicit that the State Government shall be bound to grant D-2 licence to the licensee "for a period of 5 years subject io renewal every year on payment of licence fee of Rs.5,000 and on the fulfilment of the conditions of the licence.and the

t provisions of the M.P: Excise Act, 1915 and the rules made thereun- der". Obviously the provision of renewal every year was to operate within the span of 5 years itself and every year, the licence would be · renewable on payment of licence fee of Rs.5,000 and due fulfilment of the conditions of the licence and the provisions of the Act and the Rules. It is not possible to spell out from this clause that the licence was to be granted for an initial period of 5 years and thereafter it was liable to be renewed frorn year to year. This so called concession made on behalf of ihe State Government and respondent Nos.5- l l was, therefore, really not a concession at all but it was a stand taken in recognition of the correct position in regard to the grant of D-2 licence. The High Court was, in the circumstances, right in holding that the grant of D-2 licence to respondent Nos.5-l l was for a maximum period of 5 years and it did not operate .to create monopoly in their favour for an indefinite period of time.

38 SUPREME COURT REPORTS [19871 I S.C.R.

The High Court and particularly the Judgment of the Acting A Chief Justice J.S.Varma with Justice B.M. Lal divided the policy deci- sion dated 30th December 1984 into two parts. The first part according to the High Court related "to the grant for construction of the new distilleries by the existing contractors" and the other part related "to the grant of licence for manufacture and wholesale supply of liquor B with effect from !st April 1986 to the existing contractors on construc- tion of new distilleries by them". The High Court first took up for consideration the question of validity the first part and held that having regard to the inordinate delay in the filing of the writ petitions no interference was "called for with the grant to this extent''. The High Court observed and we are quoting here in full what the High Court has said in regard to the first part since that contains the finding c of the High Court on the question of delay:-

"In our opinion, the delay in bringing these petitions to challenge the grant made to the existing contractors who are respondents in these petitions for construction of the new distilleries, is not adequately explained and, therefore, it would not be appropriate to interfere with the grant to this extent since at this stage, particularly when the con- structions by the respondents are nearly complete. We have, therefore, reached the conclusion that without expre- ..,...._, ssing any opinion about the validity of the scheme relating to the grant only to the existing contractors for construction of the new distilleries, no interference with the grant to this extent alone should be made in these petitions on the short ground that there is unexplained delay in challenging the grant to this extent in these petitions and during the in- tervening period, the new distilleries have almost been completed, if not wholly completed and any interference with the grant to this extent will result in needless compli- cations. For this reason alone, we decline to examine the validity of grant made in favour of the respondents only to the extent it permits them to construct the new distilleries. In our opinion, the facet of promissory estoppel relied on against the petitioners on the basis of their conduct is appli- cable only to this extent."

The High Court then proceeded to consider the question of validity of the second part relating to the grant of lii:;ences for manufacture and wholesale supply of country liquor to the existing contractors and held that this part of the policy decision dated 30th December 1984 contra-

STATE OF MADHYA PRADESH v. N. JAISWAL [BHAGWATI, CJ.] 39

~ vening Article 14 of the Constitution and was therefore liable to be struck-down as invalid. The High Court took the view.that the existing contractors cannot be said to constitute a distinct class by themselves so that grant of D-1, D-2 licences to them for manufacture an\1 wholesale supply of country liquor to the exclusion of other persons could be justified under the equality clause of the Constitution. ;> Though the High Court did not say so in express terms the view taken by it seem to be that the grant of D-1, D-2 licences given thrown open for all intending applicants and no one should have been excluded

~ from consideration for the grant which means that the proposed grant of D-1, D-2 licences should have been advertised so that one and all could compete for the grant. by filing their tenders or by bidding at an auction. The High Court in this view set aside the grant of D-1, D-2 c · licences to respondent Nos.5 to 11 but since there are no other distil- ~ leries apart from those constructed by respondent Nos.5 to 11 and country liquor under D-1, D,2 licences could be manufactured and supplied only from those distilleries, the High Court evolved a new formula namely, that the persons to whom D-1, D-2 licences may be granted on the basis of tender or auction should be entitled to take D over the distilleries constructed by respondent Nos.5 to 11 at a proper value assessed by the State Government. The High Ccmrt accordingly allowed the writ petitions to this limited·extent and directed that each party shall bear and pay its own costs of the writ petitions. The ques- .L !ions.is whether this view taken by the High Court is correct. E Before we prqteed to coilsider this questlon, we nlay point out that Acting Chief Justice, J.S. Verma, who delivered the main judg-