MIS KHODA Y DISTILLERIES LTD. ETC. v. STATE OF KARNATAKA AND ORS. ETC.

iltKK Narula's case have unanimously held as shown above that there is A no fundamental right to carry on trade or business in potable liquor sold as a beverage. As pointed out above, the proposition of law which is put in a different language in KK Narnla's case has been explained by the subsequent decisions of this Court including those of the Constitution Benches. The proposition of law laid down there has to be read in con- B formity wiih the proposition laid down in that respect by the other decisions of this Court not only to bring comity in the judicial decisions but also to bring the law in conformity with the provisions of the Constitution. The fundamental rights conferred by our Constitution are not absolute. Article 19 has to be read as a whole. The fundamental rights enumerated under Article 19 (1) are subject to the restrictions mentioned in clause (2) C to (6) of ihe said Article. Hence, the correct way to describe the fundamen- tal rights under Article 19(1) is to call them qualified fundamental rights. To explain this position in law, we may take the same illustration as in given in KK Narnla's case. The citizen has undoubtedly a fundamental right to carry on business in ghee. But he had no fundamental right to do business D in adulterated ghee. The expound the theme further, a citizen has no right to trafficking in women or in slaves or in counterfeit coins or to carry on business of exhibiting and publishing pornographic or obscene films and literature The illustrations can be multiplied. This is so because there are certain activities which are inherently vicious and pernicious and are i:;: condemned by all civilised communities. So also, there are goods, articles and services which are obnoxious and injurious to ihe healih, moral, safety and welfare to ihe general public. To contend that merely because some activities and trafficking in some goods can be organised as a trade or business, · right ·to carry on trade or business in the same should be F considered a fundamental right is to beg the question. The correct inter- pretation to be placed on the expression "the right to practise any profes- _sion, or to carry on any occupation, trade or business" is to interpret it to mean ihe right to practise any profession or to carry on any occupation, trade or business which can be legitimately pursued in a civilised society being not abhorrent to the generally accepted standards of is morality. G Human perversity knows no limits and it is not possible to enumerate all professions, occupations, trades and businesses which may be obnoxious to decency morals, healih, safety and welfare of the society. This is apart from the fact that under our Constitution the implied restrictions on the right to practise any profession or to carry on any occupation, trade or business H

518 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.

A are made explicit in clauses (2) to (6) of Article 19 of the Constitution and the State is permitted to make law for imposing the said restrictions. In the present case, it will be clause (6) of Article 19 which places ~estrictions on the fundamental right to do business under Article 19 ( 1) (g). These restrictions and limitations on fundamental right are implicit and inherent even in the fundamental rights spelt out in the American Constitution, B although they are not explicitly stated as in our Constitution by clause (2) to (6) of Article 19. That is how the American Supreme Court has read and interpreted the rights in the American Constitution as pointed out above by the excerpts from the relevant decisions. It will have, therefore, to be held that even under the American Constitution, there is no absolute c fundamental right to do business or trade in any commodity or service. The correct way, therefore, to read the fundamental rights enumerated under Article 19(1) of our Constitution is to hold that the citizens do not possess the said rights absolutely. They have the said rights as qualified by the respective clauses (2) to (6) of Article 19. That is apart from the fact that D Article 47 of the Constitution enjoins upon the State to prohibit consump- tion of intoxicating drink like liquor, which falls for consideration in the present case and, therefore, the right to trade or business in potable liquor is subject also to the provisions of the said Article. Whether one states as in K.K. NfJ1Ula's case that the citizen has a fundamental right to do business but subject to the State's powers to impose valid restrictions under Oause E (6) of Article 19 or one takes the view that a citizen has no fundamental right to do business but he has only a qualified fundamental right to do business, the practical consequence is that same so long as the former view does not deny the State the power to completely prohibit, trade or business in articles and products like liquor as a beverage, or such trafficking as in women and slaves. This Court in K.K. NfJ1Ula's case has not taken such F view.

13Copy pinpoint13. The contention that if a citizen has no fundamental right to carry on trade or business in potable liquor, the State is also injuncted from carrying on such trade, particularly in view of the provisions of Article 47, G though apparently attractive, is fallacious. The State's power to regulate and to restrict the business in potable liquor impliedly includes the power to carry on such trade to the exclusion of others. Prohibition is not the only way to restrict and . regulate the consumption of intoxicating liquor. The abuse of drink intoxicates can be prevented also by limiting and controlling H its production, supply and consumption. The State can do so also by

KHODAY DISTILLERIES LTD. v. STATEOFKARNATAKA (SAWANT,J.) 519

creating in itself the monopoly of the production and supply of the liquor A When the State does so, it does not carry on business in illegal products. It carries on business in products which are not declared illegal by com- pletely prohibiting their production but in products the manufacture, pos- session and supply of which is regulated in the interest of the health, morals and welfare of the people. It does so also in the interest of the general public under Article 19(6) of the Constitution.

14Copy pinpoint14. The contention further that till prohibition is introduced, a citizen has a fundamental right to carry on trade or business in potable liquor has also no merit. All that the citizen can claim in such a situation is an equal right to carry on trade or business in potable liquor as against the other citizens. He cannot claim equal right to carry on the business against the state when the State reserves to itself the exclusive right to carry on such trade or business. When State neither prohibits nor monopolises the said business, the citizens cannot be discriminated against while granting licen- · ces to carry on such business. But the said equal right cannot be elevated to the status of a fundamental right.

It is no answer against complete or partial prohibition of the produc- tion, possession, sale and consumption etc. of potable liquor to contend that the prohibition where it was inll oduced earlier and where it is in operation at present has failed. The failure of measure permitted by law does not detract from the power of the State to introduce such measures and implement them as best as they can.

We also do not see any merit in the argument that there are more harmful substances like tobacco, the consumption of which is not f prohibited and hence there is no justification for prohibiting the business in potable alcohol. What article and goods should be allowed to be produced, possessed, sold and consumed is to be left to the judgment of the legislative and the executive wisdom. Things which are not considered harmful today, may be considered so tomorrow in the light of the fresh G medical evidence. It requires_ research and education to convince the society of the harmful effects of the products before a consensus is reached to ban its consumption. Alcohol has since long been known all over the world to have had harmful effects on the health of the individual and the \velfare of the society. Even long before the Constitution was framed, it was one of the major items on the agenda of the Society to ban or at least to H

520 SUPREMECOURTREPORTS [1994]SUPP.4S.C.R.

A regulate, its consumption. That is why it found place in Article 47 of the Constitution. It is only in recent years that medical research has brought to the fore the fatal link between smoking and consumption.of tobacco and cancer, cardiac diseases and deterioration and tuberculosis. There is a sizeable movement all over the world includ;ng in this country to educate people about the dangerous effect of tobacco on individual's health. The B society may, in course of time, think of prohibiting its production and consumption as in the case of alcohol. There may be more such dangerous products, the harmful effects of which are today unknown. But merely because their production and consumption is not today banned, does not mean that products like alcohol which are proved harmful, should not be banned.

The 1956 Resolution of Industrial Policy adopted by the Central Government also does not help the petitioner/appellants in their contention that the production of industrial alcohol as an industry has to be recognised and all that can be done is to regulate the said production but not to prohibit it. Apart from the fact that the said resolution has no legal efficacy, and cannot have the effect of limiting the powers of the State to prohibit or restrict the production of potable alcohol, the resolution itself now where speaks against such prohibition or limitation. The licences granted to the distilleries, breweries and wineries of potable liquor are valid only so long as their production, possession, transport, sale, consumption etc. are not completely prohibited in the States concerned.

15Copy pinpoint15. We may now summarise the law on the subject as culled from the aforesaid decisions.

F (a) The rights protected by Article 19(1) are not absolute but qualified. The qualifications are stated in clauses (2) to (6) of Article 19. The fundamental rights guaranteed in Article 19(1)(a) to (g) are, therefore, to be read along with the said qualifications. Even the rights guaranteed under the Constitutions of the other civilized countries ~re not absolute but are. read subject to the implied limitations on them. Those implied limitations are made explicit by clauses (2) to (6) of Article 19 of our Constitution.

(a) The right to practise any profession or to carry on any occupa- tion, trade or business does not extend to practising a profession or carrying on an occupation, trade or business which is inherent·

KHODAYDISTILLERIESLID.y. SfATEOFKARNATAKA(SAWANf,J.( 521

ly vicious and pernicious, and is condemned by all civilised societies. It does not entitle citizens to carry on trade or business in activities which are immoral and criminal and in articles or goods which are obnoxious and injurious to health, safety and welfare of the general public, i.e., res extra co111111erciz11n, (outside commerce). There cannot be business in crime. B (c) Potable liquor as a bever.age is an intoxicating and depressant drink which is dangerous and injurious to health and is, therefore, an article which is res extra co111111ercizan being inherently harm- ful. A citizen has, therefore, no fundamental right to do tra~e or business in liquor. Hence the trade or business in liquor can be c completely prohibited.

(d) Article 47 of the Constitution considers intoxication drinks and drugs as injurious to health and impeding the raising of level of nutrition and the standard of living of the people and improve- ment of the public health. It, therefore, ordains the State to bring D about prohibition of the consumption of intoxicating drinks which obviously include liquor, except for medicinal purposes. Article 47 is one of the Directive Principles which is fundamental in the governance of the country. The State has, therefore, the power to completely prohibit the manufacture, sale possession, distribu- E '- tion and consumption of potable liquor as a beverage, both because it is inherently a dangerous article of consumption and also because of the Directive Principle contained in Article 47, ~xcept when it is used and consumed for medical purposes. (e) For the same reason, the State can create a monopoly either in itself or in the agency created by it for the manufacture, posses- sion, sale and distribution of the liquor as a beverage and also sell the licences to the citizens for the said purpose by charging fees. This can be done under Article 19(6) or even otherwise.

(!) For the same reason, again) the State can impose limitations and restrictions on the trade or business in potable liquor as a beverage which restrictions are in nature different from those imposed on the trade or business in legitimate activities and goods and article which are res conunerchun. The restrictions and limitations on the trade or business in potable liquor can H

522 SUPREMECOURTREPORTS (1994] SUPP. 4S.C.R.

A again be both under Article 19(6) or otherwise. The restrictions and limitations can extend to the State carrying on the trade or business itself to the exclusion of and elimination of others and/or to preserving to itself the right to sell licences to do trade or business in the same, to others.

B (g) When the State permits trade or business in the potable liquor \\ith or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make discrimination between the citizens who are qualified to carry on the trade or business. c (h) The State can adopt any mode of selling the licences for trade or business with a view to maximise its revenue so long as the method adopted is not discriminatory.

(i) The State can carry on trade or business in potable liquor notwithstanding that it is an intoxicating drink and Article 47 enjoins it to prohibit its consumption. When the state carries on such business, it does so to restrict and regulate production, supply and consumption of liquor which is also an aspect of reasonable restriction in the interest of general public. The State cannot on that account be said to be carrying on an illegitimate business.

G) The mere fact that the State levies taxes or fees on the produc- lion, sale and income derived from potable liquor whether the production, sale or income is legitimate or illegitimate, does not make the State a party to the said activities. The power of the State to raise revenue by levying taxes and fees should not be confused with the power of the State to prohibit or regulate the trade or business in question. The State exercises its two different powers on such occasions. Hence the mere fact that the State levies truces and fees on trade or business in liquor or income derived from it, does not make the right to carry on trade or business in liquor a fundamental right, or even a legal right when such trade or business is completely prohibited.

(k) The State cannot prohibit trade or business in medicinal and toilet preparations containing liquor or alcohol. The State can

KHODAYDISTILLERIESLTD.v. SfATEOFKARNATAKA[SAWANT,J.] 523

however, under Article 19(6) place reasonable restrictions on the right to trade or business in the same in the interes.t of general public.

(I) Likewise, the state cannot prohibit trade of business in industrial alcohol which is not used as a beverage but used legitimately for industrial purposes. The State, however, can place reasonable restrictions on the said trade or business in the interests of the general public under Article 19 (6) of the Constitution.

(m) The restrictions placed on the trade or business in industrial alcohol in medicinal and toilet preparations containing liquor or alcohol may also be for the purpose of preventing their abuse or c diversion for use as or in beverage.

15. This Court neither in KK Narula's case (supra) nor in the second Synthetics and Chemicals Ltd. case (supra) has held that the State cannot prohibit trade or business in potable liquor. The observations made in KK D Narula's case (supra) that a citizen has a fundamental right to trade or business in liquor are to be understood, as explained above, to mean only that when the State does not prohibit the trade or business in liquor, a citizen has the right to do business in it subject to the res•rictio.ns and limitations placed upon it. Those observations cannot be read to mean that E a citizen has an unqualified and an absolute right to trade or business in potable liquor. This position in law is explained by this Court ~!so in Har Shankar's case (supra). The decision in the second Synthetics and Chemi- cals Ltd. case (snpra) also cannot be read to mean that the Court in that case has taken the view that a citizen has a right to trade or business in potable liquor. That decision is confined to trade or business in industrial F alcohol which is legitimately used for industrial purpose and not for consumption as an intoxicating drink. The Court has also there not taken any exception to the right of the State to place reasonable restrictions on the trade or business even of industrial alcohol to prevent its diversion for the use in or as intoxicating beverage. G

16Copy pinpoint16. We, therefore, hold that a citizen has no fundamental right to . trade or business in liqnor as beverage. The State can prohibit completely the trade or business in potable liquor since liquor as beverage is res extra commercium. The State may also create a monopoly in itself for trade or business in such liquor. The State can further place restrictions and limita- H

524 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.

A tions on such trade or business which may be in nature different from those on trade or business in articles res-commercium. The view taken by this Court in K.K. Nam/a's case (supra) as well as in the second Synthetics and Chemicals Ltd. case (supra) is not contrary to the aforesaid view which has been consistently taken by this Court so far.

17Copy pinpoint17. One of the incidental contentions, viz., whether the State can create monopoly in trade or business in potable liquor is already answered above. This is apart from the fact that Article 19(6) provides for such monopoly in favour of the State even in trades and businesses which are legitimate. It is not, therefore, necessary to dilate upon this aspect any c further.

18Copy pinpoint18. The last contention in these groups of matters is whether the State can place restrictions and limitations under Article 19 (6) by subordinate legislation. Article 13 (3)(a) of the Constitution states that law includes D "any ordinance, order, bye- law rule, regulation, notification, custom or usage having in the territory of India the force of law". Clauses (2) to (6) of Article 19 make no distinction between the law made by the Legislature and the subordinate legislation for the purpose of placing the restrictions on the exercise of the respective fundamental right mentioned in Article 19 (1) (a) to (g). We are concerned in the present case with clause (6) of E Article 19. It will be apparent from the said clause that it only speaks of "operation of any existing law in so far as it imposes .... " "from making any law imposing" reasonable restrictions on the exercise of the right conferred by Article 19(l)(g). There is nothing in this provision which make it imperative to impose the restrictions in question only by a Jaw enacted by the Legislature. Hence the restrictions in question can also be imposed by any subordinate legislation so long as such legislation is not violative of any provisions of the Constitution. This is apart from the fact that trade or business in potable liquor is a trade or business in a res extra commercium and hence can be regulated and restricted even by executive order provided it is issued by the Governer of the State. We, therefore, answer the question accordingly.

In the view that we have taken, the appeals, special leave petitions and writ petitions will now be placed before an appropriate bench for decision in accordance with the law laid down above.

KHODAYDISflLLERIESLID. '· SfATEOFKARNATAKA [SAWANT,J.J 525

S.L.P 24-24 OF 1994 A

19Copy pinpoint19. In these petitions, the contention raised is that the A.P. (Regula- tions of Wholesale Trade, Distribution and Retail Trade in Indian Liquor and Foreign Liquor, Wine and Beer) Act No. 15 of 1993 (hereinafter referred to as the "Act") deals with taking over only of "trade" and not 11 business 11 in liquor and, therefore, the petitioners cannot be prevented from carrying on the "business" of wholesale dealing in Indian Made Foreign Liquor (IMFL) during the period of the validity of their FL-15 licences issued to them. It is not disputed that the petitioners are wholesale traders in Indian Made Foreign Liquor (IMFL) and have been carrying on the said trade under FL-15 licence issued to them. The licen.ce permits them to sell IMFL in the premises indicated in the licence.

As the preamble of the Act shows, it has been enacted to take over the wholesale trade and distribution in Indian liquor/Foreign Liquor, Wine and Beer from the private sector in order to have an effective control over the wholesale supply and distribution of the liquor. The State Government had taken a policy decision that in public interest, the exclusive privilege of the s'!pplying in wholesale the Indian liquor/Foreign liquor, Wine and _, Beer in the whole of the State of Andhra Pradesh shall be vested in the A.P. Beverage Corporation limited and f'1r terminating all existing licences for wholesale trade and distribution of the Indian Liquor/Foreign Liquor, E Wine and Beer. The title of the Act also shows that it is for regulation of wholesale trade and distribution and retail trade in Indian Liquor/Foreign Liquor, Wine and Beer, Section 3 of the Act further makes it clear that any licence issued to sell Indian Liqnor/Foreign Liquor, Wine and Beer in wholesale and remaining in force on the appointed day, shall otand ter- p minated with effect from that day. As stated above, the licence issued to the petitioners. viz., FL-15 is also to sell the liquor in the premises and to do no more. When, .therefore, the Act terminated the said licence of the petitioners with effect from the appointed day, the whole of the trade or business of the petitioners for sale of the liquor came to an end. It is, therefore, difficult to understand the logic of the petitioners' contention G that what was extinguished was only the trade of sale and not the business of sale. However, we will examine even the said contention for what it is worth.

There is no doubt that the word "business" is more comprehensive H

526 SUPREME COURT REPORTS [1994) SUPP. 4 S.C.R.

A than the word "trade" since it will include manufacture which the word 11 ''trade any not ordinarily include. The primary meaning of the word trade11 1 '

is the exchange of goods for goods or goods for money. However, the word "trade!! has also secondary meaning viz., business carried on with a view to profit. In fact, the words "trade" and "industry" are also used interchangeab- ly many times. It all depends upon the context in which the words occur. B In Words and Phrases Legally Defined, Third Edition (Volume 4: R-Z) by John B, Saunders, the word "trade" is explained as:

"'Trade' in its primary meaning is the exchange of goods for goods or goods for money and in a secondary meaning it is any c business carried on with a view to profit, whether Manual or mercantile, as distinguished from the liberal arts, or learned professions and from agricultural. However, the word is of very general application, and mnst always be considered in the context in which it is used. As used in various revenue Acts, 'trade' is not limited to buying and selling, but may include manufacture. In the D 'expression restraint of trade' the word is used in its loosest sense to cover every kind of trade, business, profession or occupation. (47 Halsbury's Law (4th edn.) Para 1)."

E (Emphasis supplied)

In Skinner v. Jack Breach Ltd., [1927] 2 KB 220 at 225- 227, DC, Lord I Hewart, C.J. has observed:

"No doubt in a great many contexts the word "trade" indicates a process of buying and selling but that is by no means an exhaustive F defmition of its meaning. It may also mean a calling or industry or class of skilled labour.

While interpreting the provisions of the Industrial Courts Act, 1919 Lord Wright, in National Association of Local Government Officers v. G Balton Corporation, (1943) AC 166 at 184, 185, has observed thus:

"Section 11 of the Act of 1919 (Industrial Court Act 1919) shows that 11 trade11 is used as including "industry because it refers to a trade dispute in the industry of agriculture .... Trade and i.1dustry are thus treated as interchangeable terms. Indeed, "trade" is not H only in the etymological or dictionary sense, but in legal usage, a

KHODAYDISTILIERIESLID.v. SfAIBOFKARNATAKA(SAWANr,J.J 527 term of the widest scope. It is connected originally with the word A "tread" and indicates a way of life or an occupation. In ordinary usage it may mean the occupation of a small shopkeeper equally with that of a commercial magnate. It may also mean a skilled 11 craft •

In Aviation Shipping Co. Ltd. v. Murry (Inspector of Taxes), (1%1) 2 B All ER 805 at 811 C.A., Lord Donovan has observed :

"A trade is an organised seeking after profits as a rule with aid of physical assets."

21Copy pinpoint21. Thus it is apparent that the word "trade" may include all the connotations of the word "business". As held in KK Narula's case (supra), in Article 19 (1) (g) of our Constitution, the words "trade" and ''business" are used synonymously. Hence, we reject the contention and hold that after the taking-over of the trade, viz., the activity of buying and selling liquor, no activity was left with the petitioners to carry on under the licence held by them.

22Copy pinpoint22. The special leave petitions are frivolous and are dismissed with costs.

A.G. Appeals and Petitions disposed of.