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Gwalior Distilleries Pvt. Ltd. v. The State of Madhya Pradesh & Ors.

Civil Appeal · 2019 INSC 212Decided 15 Feb 2019
Civil Appeal No. 1701 of 2019
Justice L. Nageswara Rao · Justice M.R. Shah

Background

A spirit manufacturer holding a D-1 licence wanted a CS-1 licence (needed to manufacture, bottle, and wholesale-supply country spirit) in Madhya Pradesh. The excise authorities rejected its application solely because it had not participated in a separate tender process for supply of country spirit, even though the company argued that neither the Excise Act nor the governing Rules actually required tender participation as a precondition for a CS-1 licence, and that several other similarly-placed distillers had still been allowed to take part in the tender despite also lacking a CS-1 licence. The High Court dismissed the company's challenge, holding that area-allotment was a necessary precondition for a CS-1 licence and that there is no fundamental right to trade in liquor.

Decision Breakdown

The Supreme Court held that neither Section 18 of the Madhya Pradesh Excise Act, 1915 nor Rule 3 of the Madhya Pradesh Country Spirit Rules, 1995 made tender participation a precondition for grant of a CS-1 licence: Rule 3 merely provides that a CS-1 licensee will subsequently be allotted an operating area by the Excise Commissioner. The rejection of the appellant's licence application purely for not having joined the tender was therefore arbitrary and not grounded in the actual statutory scheme. While reaffirming that no one has an absolute right to trade in liquor, the Court held that once the State chooses to grant such licences to some parties, it must do so consistently with Article 14's guarantee against arbitrary or discriminatory state action. It set aside the High Court's judgment and directed the authorities to reconsider the licence application strictly per the Act and Rules, without insisting on the extra-statutory tender-participation condition.

Lesson Learnt

Even in a field like liquor trade where there is no fundamental right to do business, government authorities cannot impose licensing conditions that go beyond what the governing statute and rules actually require: any such extra, unauthorized condition is arbitrary and can be struck down under Article 14.

Official source (sci.gov.in)View Judgment (PDF)

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