ST ATE OF PUNJAB AND ANR. v. MIS. DEV ANS MODERN BREWERIES AND ANR. ETC.

The power of the Congress is concurrent with that of the states; the E power of the states is concurrent with that of the Congress. The exercise of state power, however, is subject to several restrictions. It must not impose regulation in conflict with regulations of Congress. It must not, even in the absence of conflict, impose regulations if the Congress is deemed to have occupied the field. The states may not tax interstate and foreign commerce (See Powell, Thomas Reed, "Vagaries and Varieties in Constitutional F Interpretation'', p. 180). There is no Cooley law goveining state taxation. Marshall, J. in Brown v. Maryland, a case involving state tax on selling imported goods wholesale, wherein the tax discriminated against selling goods of foreign origin, but Marshall did not base condemnations on that ground. He held that the Constitutional ban on state taxation of imports keeps the G state from subjecting them to a general non-discriminatory tax, so long as they remain imports. (See Powell, Thomas Reed, "Vagaries and Varieties in Constitutional Interpretation", p. I 81)

As regard whether state laws regulating commerce could be valid, there was a series of tests evolved. The first was the dichotomy evolved by Marshall, H

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A J. between 'commerce' and 'police' powers. This evolved primarily because states had waged destructive wars on each other. A common diagnosis was that state governments had been too responsive to local economic interests; with the result that interstate economic competition was more through political processes than through the marketplace.

B So while one set of views asked for complete state freedom to regulate (successors of Marshall), others asked for the Central power instead. Soon evolved a new dichotomy of 'local' and 'national'. This came about in Cooley v. Board of Wardens of the Port of Philadelphia, [See 53\js (12 How) 299 (1851)) which claimed that even though the Pennsylvania statute concerned manifestly and predictably affected interstate commerce, the subject being regulated was 'local' and not 'national'.

Later the debate moved from here to the test of 'direct' and 'indirect' - State regulations affecting interstate commerce were struck down by the Court if the regulatory impact upon interstate commerce was deemed so substantial to be a 'direct' burden. Thus, from an overview of all the above views in the American and Australian Constitutions one can conclude that the Indian provisions for free trade and commerce are more explicit. While the Australian Constitution failed to expressly define restrictions, the American Constitution defined the clause in an extremely ambiguous manner. The Indian Constitution provides for freedom of trade and commerce, but puts the minimum required restriction in tenns of public interest.

The upshot of the discussions made hereinbefore would be that whereas in tenns of Article 19(6) as also Article 302 of the Constitution of India in relation to a trade which is noxious in nature a complete prohibition would be pennissible, the same would not mean that while pennitting the trade to go on the State's action whether legislative or executive need not undergo the constitutional tests in tenns of Articles 14, 19 or 30 I of the Constitution of India. The argument that the relationship between State and the licensee is contractual in nature but the same would not mean that any legislative interference thereupon as a result whereof the contract becomes more burdensome would not be a subject-matter of challenge. There is no estoppel against statute. There cannot be any waiver of fundamental right.

(B) Freedom of Trade and Commerce: A very brief Trace of History H

STATE v. DEV ANS MODERN BREWERIES [SINHA, J.] I 063

Freedom of trade was the established practice in India during the reign of the British. There were no existing interprovincial duties or trade barriers. However, with the advent of provincial autonomy, it was considered necessary to have a statutory basis. Accordingly, Section 297 of the Government of India Act, 1935 prohibited Provincial governments from imposing barriers on trade within the country. They also could not levy tax, cess, toll or other due which discriminated between goods manufactured in one locality and similar goods manufactured elsewhere. [See Shiva Rao, B. "The Framing of India's Constitution", p.699).

This trend of thought prevailed even at the stage of the framing of the Constitution. In the historical backdrop of the formation of an All-India C Union, it was felt that such a Union would be meaningless and devoid of purpose if trade and commerce throughout India were not free.

Thus, from a single glance at the documents and debates that went into the framing of the Constitution, one can discern that this strand of thought was still extremely prevalent during the drafting of the Constitution. However, D it was met with a worthy and able opponent- one that warned of the danger behind the taking such and absolute view.

(C) Constitutional Intent Behind Article 301:

Article 30 I of the Constitution of India provides that trade, commerce E and intercourse throughout India shall be free and subject only to the provisions of Part XIJI of the Constitution. This Article seeks to limit the legislative powers of the State in matters relating to interstate commerce, trade and intercourse.

The object behind Article 301 is to ensure that the economic unity of F India may not be broken up by internal barriers. See Atiabari Tea Co. v. State of Assam, AIR ( 1961) SC 232 Further, unlike the Fundamental right provided to citizens only under Article 19 ( 1) (g), Article 301 seeks to extend its benefits to all individuals.

This is the basis of operation of Article 301. The essence of Article 301 G is a right of free movement of trade without any barrier whether inter-State or intra-State. It is also not in dispute that the taxes which have direct impact on the flow of trade and commerce constitute a violation of Article 30 I unless the legislation is brought within the scope of Article 302, 304 and 305. (See Jindal Strips Ltd and Ors. v. Stale of Haryana and Ors., JT (2003) 8 H

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A SC 62).

LEVY OF TAXES :

Imposition of tax is a constitutional function. No tax can be levied except in terms of Article 265 of the Constitution of India. It is one thing to B say that tax levied is constitutionally valid but it is another thing to say that tax although levied in exercise of its constituent power by a State Legislature, it need not undergo the test of constitutional requi;ement at all. The latter proposition, with utmost respect, would be totally against the letter and spirit of the Constitution of India as also constitutionalism.

c In Saghir Ahmad and Anr v. State of U.P. and Ors., AIR (1954) SC 728, B.K. Mukherjea, J. speaking for the Constitution Bench noticed that after the Constitution Amendment Act, 1951 in terms of Article 19(6) a three-fold provision by way of exception to or limitation upon clause (l)(g) of the Article 19 was made stating: D "In the first place it empowers the State to impose reasonable restrictions upon the freedom of trade, business, occupation or profession in the interests of the general public. In the second place it empowers the State to prescribe the professional and technical qualifications necessary for practising any profession or carrying on E any occupation, trade or business. Thirdly, - and this is the result of the Constitution (First) Amendment Act of 1951 - it enables the State to carry on any trade or business either by itself or through a corporation owned or controlled by the State to the exclusion of private citizens wholly or in part."

F It was observed:

"As has been held by this Court in the case <if Cooverjee v. The Excise Commissioner, etc. [1954] S.C.R. 873 whether the restrictions are reasonable or not would depend to a large extent on the nature of the trade and the conditions prevalent in it." G It was categorically held:

"With regard to the second point also we do not think that the learned Judges have approached the question from the proper stand point. There is undoubtedly a presumption in favour of the constitutionality H of a legislation. But when the enactment on the face of it is found to

STATE v. DEV ANS MODERN BREWERIES [SINHA, J.] I065 violate a fundamental right guaranteed under article 19(1 )(g) of the A Constitution, it must be held to be invalid unless those who support the legislation can bring it within the purview of the exception laid down in clause (6) of the article. If the respondents do not place any materials before the Court to establish that the legislation comes within the permissible limits of clause (6), it is surely not for the appellants to prove negatively that the legislation was not reasonable and was not conducive to the welfare of the community."

The Court clearly held that impost not authorized by law cannot be a reasonable regulation.

The submission of Mr. P.N. Mishra and Mr. Iyer could have been appreciated had the State in terms of Article 4 7 of the Constitution of India imposed a total prohibition or even a partial prohibition. The State of Punjab and Kerala have not only imposed no prohibition, they, not only, with a view to encourage industrial development had been encouraging establishment of all types of industries including those producing Indian-Made Foreign Liquors. D India is also importing liquor manufactured in other countries.

It will appear from the order dated 31.1.2002 passed by his Court that on a query made by this Court, Mr. K.K. Venugopal for the State of Punjab categorically stated that the source of power for imposition of the import fee was Sections 18, 19, 34, 58 and 59 of the Punjab Excise Act, 1944. Even E before this Court, at that stage, the validity of the said fee was not referred to the right of exclusive privilege irrespective of the provisions of the Punjab Excise Act.

It is also undisputed that the State of Kerala at no stage took such a stand at all. Despite the said fact, stand had now been taken that the import duty levied on beer is a part of the exclusive privilege.

0 Revenue is necessary to be raised for development of the State but the same must be done in terms of the Constitution.

For raising revenue, the State itself cannot take a stand which would be immoral to some of us, besides being unconstitutional.

A taxing statute is either constitutional or unconstitutional.

If a statute fails to pass the constitutional test - can it be permitted to succeed on moral or ethical values of some of us? H

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A Is there no distinction between an alcohol for industrial or alcohol for human consumption?

Can the State be permitted to make any legislation even on industrial alcohol?

B These are certain questions which are required to be posed and answered.

In S.K Pattanaik (Dead) through LRs. v. State of Orissa and Ors., [2000] I SCC 413 in which nne of us (Hon. CJI) was a member, this Court held:

c "Excise duty" and "Countervailing duty" are well-known concepts and are attracted in different situations: "Excise duty" is essentially a duty on manufacture of goods, and the taxable event is the manufacture of the excisable goods. "Countervailing duty", on the other hand, is imposed when excisable articles are imported into the State, in order to counterbalance the excise duty, which is leviable on D similar goods if manufactured within the State. So far as countervailing duty is concerned, the incidence of the impost is on the import of the excisable articles, i.e., at the time of entry into the State."

In Aristocrat Agencies, Hyderabad v. Excise Superintendent, Hyderabad E and Ors., [2001] I SCC 496 in which Lahoti, J. was a member, this Court held:

"In our opinion, the demand of differential amount of countervailing .duty from the appellant, under the circumstances, was perfectly justified since demand was made on the basis of the duty as in force on the date of import of the consignment into the State. The duty was to be assessed and collected as in force at the time of obtaining the permit." {

The terms "Excise Duty", "Countervailing Duty", "import duty" are not terms of art. They are made part of the interpretation section contained in the respective Excise Acts.

Similarly, "Licence Fee" and "Fixed Fee" are also defined. Each term must be held to have been used by the Legislature with a view to achieve a definite purpose. One term should not be read as supplement to other. In that view of the matter, import duty cannot be held to be a part of exclusive privilege and, thus, part of a licence fee. If this distinction is borne in mind

STATE v. DEVANS MODERN BREWERIES [SINHA, J.] I067 the statutory injunction contained in Article 301 of the Constitution oflndia as also Section 33A of the Punjab Excise Act cannot be given an economic, purposive and textual meaning. Import duty which is levied under Section 17 of the Kerala Abkari Act and Section 34 of the Punjab Excise Act can be read to be a part of the licence fee which is collected at the time of grant of licence that is by way of parting of its right of exclusive privilege. See B Harinarczyan Jaiswal (supra) and State of U.P. v. Sheopat Rai, (1994] Supp 1 sec 8.

PRINCIPLES GOVERNING INTERPRETATION OF CONSTITUTION:

Constitution being the most important legal document, presents the most trying construction problems. (See Siegan, Bernard H., "Economic C Liberties and the Constitution", p.8) "Interpretation of any document, from ordinary real estate contracts to the Constitution, is influenced by the circumstances, mores, conventions, and prevailing notions of contemporary society; and clearly, the meanings given to words may change over the years. That which was reasonable, proper and logical in one century may be unacceptable in another. Many concerns of the yesteryear that prompted certain interpretations have now faded and been replaced with new attitudes. Ideas and feelings about labour, property, producers' and consumers' interests, the environment and human rights do not remain static. Inventions and discoveries have occurred that were beyond the contemplation of those who lived centuries ago. The certainties of one period may appear as mistakes in another. Nonetheless, the nation retains its commitment to a supreme legal document establishing the terms of the relationship between the governor and the governed. (See Siegan, Bernard H., "Economic Liberties and the Constitution'', p9) F Many believe that the Constitution is a flexible and evolving document, always adaptable to changes in society's conditions and circumstances. Others insist that judges be strictly bound by its words and by the historical record of what the framers of both the original text and the amendments intended.

A constitutional provision should always receive a fair, liberal and G progressive interpretation so that its true objects might be promoted. By this it can fulfil the aspirations of the people at large. . . To achieve the above goal, the Organic method of interpretation which is now universally accepted, requires us to see the present social conditions and interpret the Constitution in a manner so as to resolve the present H

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A difficulties. The social conditions existing at the time when the Constitution was made may be very different from the present conditions and hence if we interpret the Constitution from the angle of the Constitution makers we may arrive at a completely outdated and unrealistic view. As Justice Marshall observed in McCulloch v. Maryland, (1819) 4 Wheat 316 "this provision is made in a Constitution, intended to endure for ages to come, and consequently to be adopted to the various crises of human affairs". So "a Constitutional provision will not be interpreted in the attitude of a lexicographer, with one eye on the provision and the other on the lexicon. The meaning of the word or expression used in the Constitution often is coloured by the context in which it occurs, the simpler and more common the word or expression, the more meanings and shades of meanings it has. It is the duty of the Court to determine in what particular meaning and particular shade of meaning the word or expression was used by the Constitution makers and in discharging the duty the Court will take into account the context in which it occurs, the object to serve which in war used, its collocation, the general congruity with the concept or object it was intended to articulate and a host of other consideration.

The interpretative changes in the Constitution must not only be considered from its plain language for the purport and object it seeks to achieve but also having regard to the international treaties and conventions but also principles of interpretation governing the same. The necessity of interpretative changes having regard to the changing scenario has recently been noticed by this Court in its several decisions.

In order to determine whether total prohibition would be reasonable the F Court has to balance the direct impact on the fundamental right of the citizens thereby against the greater public or social interest sought to be ensured. Implementation of Directive Principles contained in Part IV is within the {

expression of "restrictions in the interest of the general public".

In other words, there exists a distinction between a fundamental right G of a citizen to carry on trade in obnoxious matters under Article 19( I)(g) of the Constitution of India and freedom to carry on such trade throughout the country without any hindrance or obstruction except in terms of reasonable regulations which may be made under Part XIII of the Constitution of India.

STATE v. DEV ANS MODERN BREWERIES [SINHA, J.] 1069

INTERNATIONAL TREATIES AND COVENANTS: A With a view to interpret the constitutional provision, global changes and outlook in trade and commerce would be relevant factors.

The impugned notifications not only touch inter-state trade, it affect international trade also. "Import of liquor'' envisages liquor imported both B from outside the State as also outside India. International treaties and covenants, therefore, would play a significant role.

The national policy of globalisation of trade leading to WTO has been noticed by a Constitution Ben.ch of this Court in Islamic Academy ofEducation (supra) stating : C " ... The right of a minority is a human right so also the right of development. Thus, subject to reasonable restrictions, any unaided institution imparting professional courses may although exercise greater autonomy in the matter of management and determination of the fee structure, it will have a limited right so far as the right to admit students is concerned. T.MA. Pai Foundation says that merit shall be the criteria. Right of development finds place in WTO and GA TT. It takes into consideration globalisation and opening up of economy. Excellence in professional education must be viewed from the economic interest in the country. In order to compete with the other developed countries, GDP of India should be around 15% instead of present rate of 5%. This can be achieved only by producing students of excellence, which can be achieved only by encouraging institutions of excellence imparting professional education to those who are meritorious. Giving encouragement to the students, having better merit will, thus, have a direct nexus with the economic and consequently the national interests of the country. The right of development from the human right point of view must be construed liberally."

It was further observed :

"Having regard to globalisation and opening up of the market, the State expects various medical colleges and educational institutions and universities to move in. Under WTO and GATT human development has taken its firm root. A decent life to the persons living in the society in general is perceived." H

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A GLOBALISATION: Globalisation has brought a radical change in the economic and social landscape of the country. Its impact on Constitution and constitutionalism is significant. As and when occasion arises the interface between the globalisation and constitutionalism whether from economic perspective or human rights perspective is required to be seriously gone into. Often the economic changes in the country relating to regulation of markets brought about competition law leading to substantial erosion of administrative law by private law are matters which eventually would fall for our decisions. The Court will have to take a realistic view in interpretation of Constitution having regard to the changing economic scenario.

Can we shut our eyes to the fact that except the State of Gujarat, no other State has imposed a complete prohibition. In fact, the States are encouraging liberalization to such an extent that in the near future alcohol beverages may be allowed to be sold in the small grocery shops. The executive authorities are contemplating to grant permission to open liquor at the Airports. The society has accepted pub culture in the metros. A view in the matter, therefore, is required to be taken having regard to the chan~ing scenario on the basis of ground reality and not on the basis of the centuries' old maxims.

Subsidies and Countervailing Duties: E The WTO and GATT, inter alia, provides for subsidies and countervailing duties.

What is a countervailing duty?

F It is defined as, "a duty imposed [on imports] to offset the advantage to foreign producers, derived from a subsidy that their government offers for the production or export of any article taxed." [See Webster's 3rd New International Dictionary, 1993)

It has also been defined by Article VI of GA TT as, "a special bounty G levied for the purpose of offsetting any bounty or subsidy bestowed directly or indirectly, upon the manufacture, production or export ofany merchandise." (See WTO in the New Millenium, 5ed., p.123].

What is the rationale behind the imposition of a countervailing duty?

H The economic rationale is very doubtful, as the effect of a countervailing

STATE v. DEVANS MODERN BREWERIES [SINHA, J.) 1071

,. duty is to make the product more expensive in the importing country. However, A there has been some level of an explanation provided. Every time a tariff barrier is negotiated and agreed on, WTO members have reasonable expectations that they can profit from the conditions of competition established in the market of the member, binding its tariff and gain market share. Moreover, members have 'paid' for the binding by promising to open up their market, that is, by binding their own tariffs. WTO members may not B frustrate their promises by subsidising their domestic industry producing the product for which a tariff binding has been previously offered. If this were allowed WTO members might lose the incentive to make concessions in the future. [See "The World Trade Organisation-Law, Practice and Policy" by Mitsuo Matsushita, Thomas J. Schoenbaum & Petros C. Mavroidis p.279). C We need not go into the question in details as regard the provisions of subsidies as found placed in GA TT. But it may be relevant to note the impact of subsidies on international trade. (See Jackson, John J., in "The Jurisprudence of GATT and WTO"pp 434-5.) D CHANGING SCENARIO:

Socialism might have been a catchword from our history. It may be present in the Preamble of our Constitution. However, due to the liberalization policy adopted by the Central Government from the early nineties, this view that the Indian society is essentially wedded to socialism is definitely withering away.

Although, the United States is guided by a capitalist philosophy unlike the socialist policy laid down in the Indian Constitution, the very fact that clianges in society have to be reflected in the interpretation of the Constitution, while still preserving the core constitutional intent of the Constitutional makers is a factor to be reckoned with. This has never been more important than in the age of globalization when vast changes are taki!1g place both at the social and political levels.

Constitution: How should be interpreted in Present Day Scenario: G Legal history is a good guide for the purpose of appreciating the legal development across the world particularly in the field of international law.

The judiciary cannot cling to age-old notions of any underlying philosophy behind interpretation. It has to move with the times. As Willes CJ H

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A once said, "When the nature of things changes, the rules of law must change too". (See Davies v. Powell, (1737) Willes 46 at 51) This is a truism in that the legislature and, within limits, the courts should change rules to keep the law abreast of change. (See Dias Jurisprudence, 5th Edition, page 147)

In Francis Bennion Interpretation of Statutes, Fourth edition at page B 771, it is stated: "Changes in social conditions - Where relevant social conditions have changed since the date of enactment, what was then classed as a social mischief may not be so regarded today. It is very difficult for the court to apply an enactment so as to 'remedy' what is no longer c regarded as a mischief. The consequence is an interpretation that minimizes the coercive effect of the enactment and gives great weight to criteria such as the principle against doubtful penalisation."

While interpreting such a situation, one must take into consideration D the flexibility in law as has been highlighted by this Court in M V. Al Quamar v. Tsav/iris Salvage (International) Ltd. and Ors., (2000] 8 SCC 278 wherein it was opined:

'43. The two decisions noted above in our view deal with the situation amply after having considered more or less the entire gamut of judicial precedents. Barker, J's judgment in the New Zealand case ((1980) I E NZLR 104 (NZSC)) very lucidly sets out that the court has to approach the modem problem with some amount of flexibility as is now being faced in the modem business trend. Flexibility is the virtue of tht'.law courts as Roscoe Pound puts it. The pedantic approach of the law courts are no longer existing by reason of the global change of outlook in trade and commerce. The observations of Barker, J. and the findings thereon in the New Zealand case ((1980) I NZLR 104 (NZSC)) with (

the longish narrations as above, depicts our jnclination to concur with the same, but since_. issue is slightly different in the matter under consideration, we, -however, leave the issue open, though the two decisions as above cannot be doubted in any way whatsoever and we feel it expedient to record that there exists sufficient reasons and justification in the submission of Mr. Desai as regards the invocation of jurisdiction under Section 44-A of the Code upon reliance on the two decisions of the New Zealand and Australian Courts."

H There cannot be any doubt whatsoever that a law which was at one

STATE v. DEVANS MODERN BREWERIES [SINHA, J.] 1073

point of time was constitutional may be rendered unconstitutional because of A passage of time. See Kapila Hingorani (supra) and John Va//amattom and Anr. v. Union of India JT (2003) 6 SC 37.

In R v. Hughes 12 BHRC 243 ~ (2002) UKPC 12, the Privy Council observed : B "Under the constitution the people of St. Lucia enjoy certain fundamental rights and freedoms. The supremacy of those constitutional rights and freedoms is secured by s.120 of the constitution : "This Constitution is the supreme law of Saint Lucia and, subject to the provisions of s.41 of this Constitution, if any other law is inconsistent with this Constitution, this Constitution shall prevail and the other law shall, to the extent of the inconsistency, be void." The constitution controls not only the statute law but any law in force in St. Lucia, including 'any unwritten rule of law' (s.124). Therefore, unless para IO applies, any law, whether written or unwritten, which is inconsistent with the constitution is to that extent void.

It was further observed : E "Since para I 0 introduces these exceptions to the rights and protection which people would otherwise have under the constitution, it must be construed like any other derogation from constitutional guarantees. In State v. Petrus, (1985] LRC (Const) 699 at 720 in the Court of Appeal of Botswana, Aguda JA referred to Corey v Knight ( 1957) 150 Cal App 2d 671 and observed that - F "it is another well known principle of construction that exceptions contained in Constitutions are ordinarily to be given strict and narrow, rather than broad, constructions."

In case of doubt, para I0 should therefore be given a strict and G narrow, rather than a broad, construction."

In Project Gabcikovo-Nagymaros (Op. Ind. Weeramantry) the International Court in its judgment dated 25.9.1997 at page 114, albeit in the context of ecology observed: H

1074 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A "As this Court observed in the Namibia case, "an international instrument has to be interpreted and applied within the framework of the entire legal system prevailing at the time of the interpretation" (Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, I.CJ. Reports 1971, B p. 31, para 53), and these principles are "not limited to the rules of international law applicable at the time the treaty was concluded."

In People's Union for Civil Liberties and Anr. v. Union of India and Anr., [2003] 4 SCC 399] at page 403 it held :

C ".. .It is established that fundamental rights themselves have no fixed content, most of them are empty vessels into which each generation must pour its content in the light of its experience. The attempt of the court should be to expand the reach and ambit of the fundamental rights by process of judicial interpretation. The Constitution is required D to be kept young, energetic and alive".

Public Policy:

The matter is covered by statutory provisions. The court cannot interpret on equality, freedom or commerce clauses of the Constitution in such a E manner so as to take away the rights and obligations created under a statute on the ground of public morality or otherwise. When a statute permits a trade, morality takes a back seat as 'legislature' as contra distinguished from 'judiciary' is supposed to be the authority to consider the morality or otherwise of certain things prevailing in the society.

F This Court in Murlidhar Agarwal and Anr. v. Stale of U.P. and Ors., [1975] I SCR 575 while dealing with the concept of 'public policy' observed thus:-

" ... Public policy does not remain static in any given community. It may vary from generation to generation and even in the same G generation. Public policy would be almost useless if it were to remain in fixed moulds for all time .

... The difficulty of discovering what public policy is at any given moment certainly does not absolve the judges from the duty of doing so. In conducting an enquiry, as already stated, Judges are not hide- H bound by precedent. The Judges must look beyond the narrow field

STA TE v. DEV ANS MODERN BREWERIES [SINHA,J.] I075 of past precedents, though this still leaves open the question, in which direction they must cast their gaze. The judges are to base their decision on the opinions of men of the world, as distinguished from opinions based on legal learning. In other words, the judges will have to look beyond the jurisprudence and that in so doing, they must consult not their own personal standards or predilections but those of the dominant opinion at the given moment, or what has been termed customary morality. The judges must consider the social consequences of the rule propounded, especially in the light of the factual evidence available as to its probable results ... The point is rather this power must be lodged somewhere and under our Constitution and laws, It has been lodged in the Judges and if they have to fulfil their function as Judges, it could hardly be lodged elsewhere.

NEED TO HAVE AN ECONOMIC INTERPRETATION:

The wave of privatization, multinationals influx into society, etc has lead to a very wide debate on the merits of such a scheme and the judiciary has a very wide role to play in discerning what the current position of the economic trend of the country is, bearing in mind the Constitutional goals of our Founding Fathers. Economic factors were by no means absent during the framing of the Constitution. On the contrary, in several instances economic elements were of considerable importance. E However, the very nature of the playing field has changed with the changes taking place in an evolving society. This is true of every society. Thus, can we still say that the same economic interests that the Constitutional Framers sought to. achieve exist in the same form even today, bearing in mind the changes that have taken place due to the onslaught of globalization in the last 2 decades? All these factors have to borne in mind while an interpretation of the Constitution has to take place.

Opposition will rise to every conceivable change in socio-political- economic scenarios. Some persons are by nature, conservative in their subconscious evaluation of change. They refuse to acknowledge man's power to make his own history and they explicitly reject the notion that observed institutions of 'interaction are in themselves, products of intended human action. (See Buchanan, James A., "Sources of Opposition to Constitutional Reform", in McKenzie, Richard B., "Constitutional Economics", at p.22) Thus any change proposed to be made by the lawmakers or the judiciary will meet with a certain level of opposition, but that does not mean that age-old H

1076 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A notions are clung to. The impact of changes in society also has to be reflected f in the lawmaking process.

In interpretation of the provisions of the Constitution especially those provisions dealing with the regulation of economy of the nation must receive such interpretation which fosters economic growth. Th(: stagnatic economy of any nation has a bane for the world economy. Keeping this in view the interpretation of the Constitution should receive such a treatment which would be in tune with the original intention of the Constitution makers.

The ultimate duty to achieve and maintain integrity of the nation vis- a-vis life lies on the Union. It is for this reason though law and order is included in the List II of the Seventh Schedule of the Constitution of India, national security, internal security and policy powers to regulate various aspects of social, political and economic conduct of human beings vested in the Union Parliament. Further by reason of Article 352, it is the parliament which can take over the administration of any state. These are intended to maintain integrity and push economy forward. A growing economy results in more industries and more jobs. When people are employed the purchasing power will go up the per capita income will go up resulting in more payment for goods. This again requires more industries. In the long run, subject to providing congenial atmosphere results in foreign investment.

E The Court having regard to globalisation should take notice of the futuristic thought in developed countries for interpretation of the Constitution in the ascertainment of meaning of the relevant provisions thereof with reference to everything which is logically relevant.

In "An Economic Interpretation of the Constitution of the United States" F by Charles A. Beard in Chapter VI the Constitution of the United States has been read as an economic document. Referring to Hamilton, it is stated that free trade over a wide range would be reciprocal and would give great diversity to commerce enterprise and will render stagnation less liable for offering more distant markets when local demands fall off. G Lawrence. H. Tribe in his constitutional treatise 'American Constitutional Law', 3rd Edition emphasized upon the debate, at page 822, as regards court's new focus on economic activity citing Lopez [514 US at page 566] acknowledging that the determination whether an interstate activity is commercial or noncommercial may in some cases result in legal uncertainty. H The learned author states:

STA TE v. DEV ANS MODERN BREWERIES [SINHA.J.J 1077 "As long as the Court adheres to the principle that a limitless commerce power is inconsistent with the text and structure of the Constitution and believes that its role is to strike down legislation that exceeds the commerce power (rather than relying on Congress to exercise self- restraint), it will need to apply some sort of administrable test to distinguish among classes of activities. It could seek to limit congressional power through a highly sensitive test for measuring the existence of "substantial effects on commerce," but the ·interconnectedness of our society and the fact that every act has "economic" consequences combine to suggest that, with respect to almost any activity, one could make a strong argument that its repetition all over the country probably will substantially affect commerce. If any activity can meet the substantial effects test, then the only other possibility may be the one the court pursued: limiting the category of activities that can be aggregated in the first place - for example, by focusing on "commercial" activities as Lopez appears to have done. If that proved unworkable in practice, then the Court may find itself unable, after all, to effectuate any substantive limits on D Congreess' commerce power - unless the Court takes the truly dramatic step of rejecting entirely the substantial effects test and the aggregation principle that is its companion, as Justice Thomas urged in his solo concurrence, advocating the overruling of such foundational landmarks as Wickard v. Filburn, NLRB v. Jones & Laughlin Steel Corp., and E Katzenbach v. McC/ung."

The history of commerce power of the United States vis-a-vis the decisions of the Supreme Court is stated in 'The Oxford Companion to the Supreme Court of the United States' edited by Kermit L. Hall, 1992 edition wherein under the heading 'Commerce Power Today' it is stated: F "Commerce Power Today: During the fifty years following the post- New Deal era Congress expanded national regulation into myriad aspects of the national life, using the Commerce Clause as the constitutional base, all with the Supreme Court's approval. One of the most significant areas of national intervention was that of racial G discrimination. In I964 Congress enacted a Civil Rights Act banning racial discrimination in hotels, motels, restaurants, theaters, and motion picture houses throughout the country, now based on the Commerce Clause rather than the Fourteenth Amendment. In Heart of Atlanta Motel, Inc. v. United States (1964) and Katzenbach v. McC/ung(i964), H

1078 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A the Supreme Court found that racial discrimination had a deleterious ( effect on interstate commerce and was a proper object for congressional attention.

In National League of Cities v. Usery, (1976), the Court struck down legislation based on the Commerce Clause for the first time in B forty years when it held that the minimum wage-maximum hour requirements of the amended Fair Labor Standards Act of 1938 could not be extended to state and local governmenJ employees. Such requirements, said the Court, involved a congressional intrusion into an "attribute of state sovereignty" (p. 845). Less than a decade later the Court overruled the Usery case in Garcia v. San Antonio c Metropolitan transit Authority, ( 1985). Marshall, Taney and Waite (1937). R.S. Myers, "The Burger Court and the Commerce Clause: An Evaluation of the Role of State Sovereignty," Notre Dame Law Review 60 (1985); 1056-1093 ."

D In United States v. Lopez, [514 US 549 (1995)] the United States r Supreme Court struck down a statute as beyond the Congress' Commerce

power on the ground that the activity regulating was neither a part of nor at a substantial fact upon interstate commerce. The decision recognizes a debate as regard Congress' commerce power. Commenting upon Lopez, the learned Author States:. E "It is by no means certain, of course, that future applications of Lopez will turn entirely, or even predominantly, on deciding whether a regulated activity is sufficiently "commercial'' to qualify for the "substantial effects" test and the aggregation principle. The Lopez Court did not expressly hold that only economic or commercial activities could be regulated by Congress whenever they meet these impact tests. Lopez relied ultimately on the more general meta- principle that upholding the Gun-Free School Zones Act as a regulation • of activity substantially affecting commerce "would require us to conclude that the Constitution's enumeration of powers does not presuppose something not enumerated ... This we are unwilling to do."

The American decisions are replete with conflicting views taken from time to time from Gibbons v. Ogden, 22 US 9 Wheat I (1824) to NLRB v. Jones & laugh/in Steel Corp. 301 US I (1937) and Katzenbach v. McClung H 379 US 294 (1964) as to whether the Congress should be the sole authority

STATE v. DEV ANS MODERN BREWERIES (SINHA. J.] I 079 to control the commerce clause or not. [See 'A Book of Legal Lists' by A Bernard Schwartz, 'A History of the Supreme Court' by Bernard Schwartz and 'American Constitutional Law' by Lawrence H. Tribe].

In Joseph lochner.v. People of the State of New York, [198 US 937] a question arose as to whether a legislation in limiting of employment in bakeries to sixty hours a week and ten hours a day is constitutional. The law was struck down stating:

"It is also urged, pursuing the same line of argument, that it is to the interest of the state that its population should be strong and robust, and therefore any legislation which may be said to tend to make people healthy must be valid as health laws, enacted under the police power. If this be a valid argument and a justification for this kind of legislation, it follows that the protection of the Federal Constitution from undue interference with liberty of person and freedom of contract is visionary, wherever the law is sought to be justified as a valid exercise of the police power. Scarcely any law but might find shelter under such assumptions, and conduct, properly so called, as well as contract, would come under the restrictive sway of the legislature."

It was observed:

"It was further urged on the argument that restricting the hours of labor in the case of bakers was valid because it tended to cleanliness on the part of the workers, as a man was more apt to be cleanly when not overworked, and if cleanly then his "output" was also more likely to be so. What has already been said applies with equal force to this contention. We do not admit the reasoning to be sufficient to justify the claimed right of such interference. The state in that case would assume the position of a supervisor, or paterfamilias, over every act of the individual, and its right of governmental interference with his hours of labor, his hours of exercise, the character thereof, and the extent to which it shall be carried would be recognized and upheld. In our judgment it is not possible in fact to discover the connection between the number of hours a baker may work in the bakery and the healthful quality of the bread made by the workman."

It was held that the legislations although claimed to have been made under the police power or really purported to be for the purpose of protecting the public health and welfare, in reality are passed through other motives. H

1080 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A Justice Holmes in his dissenting view, however, resented the economic theory governing the majority judgment.

In India even such a debate is necessary having regard to the provisions contained in Part XIII of the Constitution of India in terms whereof the State in relation to certain matters may have a regulatory or taxing power but the B same would be subject to the commerce clause.

PRECEDENT:

Doctrine of precedent is a well-accepted principle. A ruling is generally considered to be binding on lower courts and courts having a smaller Bench c structure.

"A precedent influences future decisions. Every decision is pronounced on a specific set of past facts and from the decision on those facts a rule has to be extracted and projected into the future. No one can foresee the precise situation that will arise, so the rule has to be D capable of applying to a range of broadly similar situations against a background of changing conditions. It has therefore to be in general terms and 'malleable' ... No word has one proper meaning, nor can anyone seek to fix the meaning of words for others, so the interpretation of the rule remains flexible and open-ended. (See Dias E Jurisprudence, 5th Edition, page 136)"

However, although a decision has neither been reversed nor overruled, it may cease to be 'law' owing to changed conditions and changed law. This is reflected by the principle 'cessanle ratione cessat ipsa lex'.

" ... It is not easy to detect when such situations occur, for as long as the traditional theory prevails that judges never make law, but only declare it, two situations need to be carefully distinguished. One is (

where a case is rejected as being no longer law on the ground that it is now thought never to have represented the law; the other is where a case, which is acknowledged to have been the law at the time, has ceased to have that character owing to altered circumstances. (See Dias Jurisprudence, 5th Edition, page 146-147)"

It is the latter situation which is often of relevance. With changes that ,, are bound to occur in an evolving society, the judiciary must also keep abreast of these changes in order that the law is considered to be good law. H This is extremely pertinent especially in the current era of globalization when

STATEv. DEV ANS MODERN BREWERIES [SINHA, J.] I081 the entire philosophy of society, on the economic front, is undergoing vast changes.

In M.A. Murthy v. State of Karnataka and Ors., [2003] 7 SCC 517, this Court held:

" ... The doctrine of binding precedent helps in promoting certainty and consistency in judicial decisions and .enables an organic development of the law besides providing assurance to the individual as to the consequences of transactions forming part of the daily affairs."

HAD KALYANI STORES (SUPRA) BEEN RENDERED PER INCUR/UM: c Ka/yani Stores (supra) is a Constitution Bench judgment. A Constitution Bench has unequivocally held that Article 30 I of the Constitution of India shall apply to trade of liquor. Once this Court comes to the conclusion that doctrine of res extra commercium was not applicable, Kalyani Stores must be applied in all fours. In any event, the decision of a Constitution Bench cannot be brushed aside as having been passed 'sub si/entio' or on the basis of doctrine of 'per incurium'

Judicial discipline envisages that a coordinate bench follow the decision of earlier coordinate bench. If a coordinate bench does not agree with the principles of law enunciated by another bench, the matter may be referred only to a larger bench. See Pradip Chandra Parija v. Pramod Chandra Patnaik, [2002] I SCC I at paras 6 and 7; followed in State of Tripura v. Roop Chand Das and Ors., [2002] 7 SCC 273 at para 2 But no decision can be arrived at contrary to or inconsistent with the law laid down by the coordinate bench. Kalyani Stores (supra) and K.K. Narula (supra) both have been rendered by the Constitution Benches. The said decisions, therefore, cannot be thrown out for any purpose whatsoever; more so when both of them if applied collectively lead to a contrary decision proposed by the majority.

In Halsbury's Laws of England (Fourth Edition) Vol. 26, at pages 297- 298, Para 578, it is stated: G "A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of coordinate jurisdiction which covered the case before it, in which case it must decide which case to follow Young v. Bristol Aeroplane Co. Ltd. (1944) I KB 718 at 729 (I944) 2 ALI ER 293 at 300. In Hudderfield H

1082 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A Police Authority v. Waton, (1947) KB 842 [1947] 2 All ER 193. or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decision; or when the decision is given in ignorance of the terms of a statute or rule having statutory force Young v. Bristol Aeroplane Co. Ltd (1944) I KB 718 at 729 (1944) 2 All ER 293 at 300. See also Lancaster Motor Col. London ltd. v. B Bremith Ltd., (1941) I KB 675 For a Divisional Court decision disregarded by that court as being per incuriam, (See Nicholas v. Penny, (1950) 2KB 466, [1950] 2 All ER 89). A decision should not be treated as given per incuriam, however, simply because of a deficiency of parties, Morve/le ltd v. Wakeling, (1955) 2 QB 379 C [1955] I ALL ER 708 C. or because the court had not the benefit of the best argument, Bryers v. Candadian Pacific Streampships ltd ( 1957) I QB 134, [ 1956] 3 All ER 560 CA Per Singleton LJ, affd Sub nom. Candadian Pacific Streampship Ltd v. Bryers, (1958) AC 485, ( 1957) 3 All ER 572. and, as a general rule, the only cases in which decision should be held to be given per incuriam are those given in ignorance of some inconsistent statute or binding authority A. and J. Mukclow ltd v. /RC, (1954) Ch. 615. [1954] 2 All ER; 508 CA, Morelle ltd v. Wakeling, (1955) 2 QB 379, [1955] I All ER 708 CA, See also Bonsor v. Mu.~icians Union, (1954) Ch. 479 (1954) I ALL ER 822 CA, where the per incuriam contention was rejected and on appeal to the house of Lords although the House overruled the case which bound the Court of Appeal, the House agreed that court had been bound by it see (1956) AC 104. [1955] 3 All ER 518 HL. Even ifa decision of the Court of Appeal has misinterpreted a previous decision of the House of Lords, the Court of Appeal must follow its previous decision and leave the House of Lords to rectify the mistake. F Williams v. I Glasbrook Bros Ltd, [1947] 2 All ER 884 CA"

In Dr. Vijay laxmi Sadho v. Jagdish, JT (2001) I SC 382 it has been observed as follows:

"As the learned Single Judge was not in agreement with the view G expressed in Devi/a/ Case AIR ( 1960) SC 936: [ 1960] 3 SCR 378 it would have been proper, to maintain judicial discipline, to refer the matter to a larger Bench rather than to take a different view. We note it with regret and distress that the said course was not followed. It is well-settled that if a Bench of coordinate jurisdiction whether on the basis of "different arguments" or otherwise, on a question of law, it H

STATE v. DEVANS MODERN BREWERIES [SINHA,J.) 1083

is appropriate that the matter be referred to a larger Bench for A resolution of the issue rather than to leave two conflicting judgments to operate, creating confusion. It is not proper to sacrifice certainty oflaw. Judicial decorum, no less than legal propriety forms the basis of judicial procedure and it must be respected at all costs".

In Stale of Bihar v. Ka/ilea Kuer @ Ka/ilea Singh and Ors., JT (2003) B 4 SC 489, a Bench of this Court upon taking a large number of decisions into consideration observed :

"Looking at the matter, in view of what has been held to mean by per incuriam, we find that such element of rendering a decision in C ignorance of any provision of the statute or the judicial authority of binding nature, is not the reason indicated by the Full Bench in the impugned judgment, while saying that decision in the case of Ramkrit Singh (supra) was rendered per incuriam."

It was further opined: D " ... The earlier judgment may seem to be not correct yet it will have the binding effect on the letter bench of coordinate jurisdiction. Easy course of saying that earlier decision was rendered per incuriam is not permissible and the matter will have to be resolved only in two ways - either to follow the earlier decision or refer the matter to a E larger Bench to examine the issue, in case it is felt that earlier decision is not correct on merits."

It is also trite that the binding precedents which are authoritative in nature and are meant to be applied should not be ignored on application of the doctrine of sub silentio or per incurium without assigning specific reasons F therefor. I, for one, do not as to how Kalyani Stores (supra) and K.K. Narula (supra) read together can be said to have been passed sub silenlio or rendered per incurium.

CONCLUSION: G The propositions of law which emerge from the discussions made hereinbefore are :

, I (I) The maxim 'res extra commercium' has no role to play in determining the constitutional validity of a statute. H

1084 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A The State, in its discretion having regard to the provisions contained in Article 47 of the Constitution of India may part with ., ' its right of exclusive privilege but once it does so, the grant being subject to the terms and conditions of a statute, the common law principle based on the maxim 'res extra commercium' shall have no application in relation thereto. B (2) When the constitutionality of a taxing statute is questioned, the same has to be judged on the touchstone of the constitutional provisions including Article 30 I thereof. The freedom guaranteed under Article 30 I of the Constitution of India may not be considered in isolation having regard to the expression contained c therein that such freedom is subject to Part XIII of the Constitution of India.

(3) The right to carry on trade in liquor is a fundamental right within the meaning of Article 19( I )(g) of the Constitution of India 'Ind the State may, however, legislate prohibiting such trade either in D whole or in part in terms of clause (6) of thereof.

(4) Article 14 is applicable in the matter of grant by the State and, thus, there is no reason as to why grantee would not be entitled to invoke the commerce clause contained in Article 30 I of the Constitution of India. E (5) In interpreting the constitutional provisions, the court should take into consideration the implication of its decision having regard to the international treaties dealing with countervailing duty, etc.

(6) The decision of Kalyani Stores (supra) being an authoritative pronouncement, the same is binding irrespective of the fact as to F whether therein the decisions of this Court in Chamarbaugwa/a (supra), Har Shan/car (supra) and Khoday Distilleries (supra) have been referred to or not, keeping in view the fact that even i11 K. K. Naru/a (supra), another Constitution Bench has held that trade in liquor is a fundamental right. G Before parting, I may observe that it had been my endeavour not to repeat the reasonings of B.N. Agrawal, J. with whom I respectfully agree and, with utmost respect, I dissent from the views of the majority. , ' H

STATE v. DEV ANS MODERN BREWERIES [SINHA, J.] 1085

ORDER A In view of the majority opinion rendered by Hon' ble Dr. Justice AR. Lakshmanan, on behalf of himself, Hon'ble the Chief Justice and Hon'ble Mr. Justice R.C. Lahoti, Civil Appeal No. 3017 of 1997 is allowed and Civil Appeal Nos. 2696-2697 of2003 are dismissed. There shall be no order as to costs. B G.N. C.A. No. 3017 of 1977 allowi:d C.A. No. 2696-2697 of 2003 dismissed .