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Anilkumar v. State Of Kerala
Factual and Procedural Background
The constitutional validity of Rule 9(10)(b) of the Kerala Abkari Shops Disposal Rules, 2002 was challenged. Appellants contended that Rule 9(10)(b) (and Rule 4(2)) violated their fundamental rights under Articles 19(1)(g) and 21 of the Constitution of India and were ultra vires Section 29 of the Abkari Act.
Rule 4(2) required grantees of retained toddy shops to engage existing workers and eligible workers of abolished shops who were registered with the Toddy Workers Welfare Fund Board as on 31 March, 2000 and redeployed to their shops, and to engage one arrack worker of the abolished arrack shops allotted on the basis of district level seniority. Rule 9(10)(b) required the absorption, in a shop as decided by Government, of one arrack worker who had been unemployed since the abolition of arrack shops with effect from 1 April, 1996, observing district level seniority.
On the basis of these rules, directions were issued to various toddy shop licensees and to retail shops of Kerala Beverages Corporation Ltd. to absorb one displaced arrack worker; licensees and some existing toddy workers were aggrieved and challenged the rules. The Government framed the rules as a rehabilitation measure after arrack sales were prohibited from April 1996, which caused closure of many arrack shops and unemployment among arrack shop workers. The Government had earlier provided compensation in 1997 and welfare benefits to some retrenched arrack workers.
The learned Single Judge had determined the matter earlier; the present bench (Radhakrishnan, J.) agreed with the Single Judge and dismissed the appeals challenging the rules.
Legal Issues Presented
- Whether Rule 9(10)(b) (and Rule 4(2)) of the Kerala Abkari Shops Disposal Rules, 2002 violate Articles 19(1)(g) and 21 of the Constitution of India.
- Whether Rule 4(2) and Rule 9(10)(b) are ultra vires the powers conferred under Section 29 of the Abkari Act.
- Whether the impugned rules amount to an unreasonable restriction on trade in liquor and thereby infringe Article 14 or other constitutional protections asserted by the appellants.
Arguments of the Parties
Appellants' Arguments
- The impugned rules (Rule 4(2) and Rule 9(10)(b)) violate fundamental rights guaranteed under Articles 19(1)(g) and 21 of the Constitution.
- The rules are ultra vires Section 29 of the Abkari Act.
- In one appeal (W.A. No. 664 of 2004), counsel additionally contended that authorities of the excise department violated required procedure in issuing directions (referring specifically to notices exhibited as P49 and P50).
Respondent / Government's Position
- The rules were framed as a rehabilitation measure for arrack workers rendered unemployed by the Government's policy of prohibiting the sale of arrack from April 1996.
- The Government has the power under Section 18-A read with Sections 24 and 29 of the Abkari Act to grant privileges and to prescribe conditions and restrictions attached to licences; making rehabilitation a condition of receiving the privilege is within that power.
- The Government did not compel anyone to run a toddy shop; only those who avail the privilege of conducting a toddy shop must comply with licence conditions, including absorption of a displaced arrack worker.
- Procedural infirmities in implementation (as to Exhibits P49 and P50) were matters that appellants could have raised before the administrative authorities for consideration.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Khoday Distilleries Ltd. v. State of Karnataka, [(1995) 1 S.C.C 574] | Held that a citizen has no fundamental right to carry on trade or business in liquor; State may prohibit trade in potable liquor as res extra commercium; State may place restrictions under Article 19(6) by subordinate legislation or executive order. | The court relied on this authority to support the conclusion that there is no fundamental right to trade in liquor and that the State may impose restrictions or conditions (including by subordinate legislation) on such trade. |
| Ugar Sugar Works Ltd. v. Delhi Administration, [(2001) 3 S.C.C 635] | Each State has authority to formulate its own liquor policy bearing in mind welfare and interests of citizens. | The court cited this case to confirm that the State can adopt policy measures regulating liquor trade in view of welfare considerations, supporting the validity of the rehabilitation condition in the impugned rules. |
| Secretary to Government, Tamil Nadu v. K. Vinayagamurthy, [(2002) 7 S.C.C 104] | No citizen has an inherent right to sell intoxicating liquor by retail; restrictions placed by State must be reasonable and reasonableness differs trade to trade. | The court used this precedent to emphasize that restrictions on retail sale of liquor must be reasonable and that the State's imposition of licence conditions (such as rehabilitation obligations) falls within permissible regulatory power. |
Court's Reasoning and Analysis
The court began by examining the purpose and content of the impugned rules and the statutory scheme. It noted that the rules were adopted to rehabilitate arrack workers who became unemployed when the State prohibited the sale of arrack from 1 April 1996. The Government had earlier provided monetary compensation and welfare benefits to some retrenched workers, but continued to seek rehabilitation through employment in toddy shops and retail shops of the Kerala Beverages Corporation Ltd.
The court then analyzed the statutory provisions empowering the State. It extracted and considered Section 18-A of the Abkari Act (grant of exclusive or other privilege on payment of rentals) and observed that Section 18-A, read with Sections 24(c) and 24(d), permits the Government to grant privileges and to prescribe conditions, restrictions and particulars for licences. The court concluded that Section 18-A together with Section 24 and Section 29(1) furnish "abundant power" to the Government to prescribe licence conditions such as absorption of displaced arrack workers.
The court further relied on precedents of the Apex Court establishing that there is no fundamental right to carry on the liquor trade and that States may regulate or prohibit trade in liquor, and impose restrictions through subordinate legislation or executive orders. Applying these authorities, the court held that the imposition of rehabilitation conditions on those who accept the privilege of conducting toddy shops was within the State's legislative and executive competence and did not infringe Articles 19(1)(g) or 21.
On the procedural complaint raised in one appeal, the court observed that alleged infirmities in notices (Exhibits P49 and P50) were matters that appellants could and should have taken up before the administrative authorities; therefore the court found no ground to overturn the Single Judge's judgment on that basis.
Holding and Implications
APPEALS DISMISSED
Holding: The court upheld Rule 4(2) and Rule 9(10)(b) of the Kerala Abkari Shops Disposal Rules, 2002 and rejected the appellants' contention that the rules violated Articles 19(1)(g), 21 (and Article 14 as argued). The court held that the State possessed the statutory power under Section 18-A read with Sections 24 and 29 of the Abkari Act to prescribe the challenged licence conditions and that there is no fundamental right to carry on trade in liquor that would invalidate those conditions.
Implications: The direct effect is that the directions issued under the impugned rules (requiring absorption of one displaced arrack worker by relevant licensees who avail of the privilege to conduct toddy shops) are sustained and the appeals against those directions are dismissed. The opinion applies existing Supreme Court authorities to the facts; the decision upholds the rules within the existing statutory and precedential framework and does not announce a new legal principle beyond that framework.
Radhakrishnan, J.:— Constitutional validity of Rule 9(10)(b) of the Kerala Abkari Shops Disposal Rules, 2002, is under challenge in these proceedings. Appellants contend that the above mentioned rule violates the fundamental rights guaranteed to them under, Arts. 19(1)(g) and 21 of the Constitution of India and therefore liable to be struck down.
2. The Kerala Abkari Disposal Rules, 2002 was enacted by the Government in exercise of the powers conferred under Ss. 18-A and 29 of the Abkari Act 1 of 1077. Appellants' grievance mainly centres around Rule 4(2) and 9(10)(b) of the Rules which, according to them, not only violate Arts. 19(1)(g) and 21 of the Constitution of India but also ultra vires the powers conferred under S. 29 of the Act. For easy reference, we may refer to those provisions at the very outset.
4(2). The shops so notified under sub-rule (1) above shall be such shops as are retained after abolition of certain existing shops. Grantees of privilege of such retained shops shall undertake to engage the existing workers and such eligible workers of the abolished shops who were registered with the Toddy Workers Welfare Fund Board as on 31 March, 2000 and as are redeployed to their shops. Grantee of privilege shall also undertake to engage one arrack worker of the abolished arrack shops of the State as would be allotted to his shop for rehabilitation, on the basis of district level seniority.
9(10)(b). One arrack worker who has been remaining unemployed since the abolition of arrack shops with effect from 1 April, 1996, shall be absorbed in the shop as may be decided by Government by observing the District level seniority of such Arrack workers.
Section 4(2) obliges the grantee of the privilege to undertake to engage existing workers and such eligible workers of the abolished shops who were registered with the Toddy Workers Welfare Fund Board as on 31 March, 2000 and as are redeployed to their shops. Grantee of the privilege shall also undertake to engage one arrack worker of the abolished arrack shops of the State as would be allotted to his shop for rehabilitation on the basis of district level seniority. Rule 9(10)(b) also obliges the licensee to absorb one arrack worker who has been remaining unemployed since the abolition of arrack shops with effect from 1 April, 1996. On the basis of the above mentioned rules, directions were given to various licensees to absorb one arrack worker in their respective shops. Licensees of the toddy shops are aggrieved by those directions, so also some of the existing toddy workers.
3. The Government thought of rehabilitating arrack workers who were employed in various arrack shops and have issued directions not only to the licensees of toddy shops but to the retail shops of Kerala Beverages Corporation, Ltd., as well. Arrack was being sold in Kerala through licensed retail shops until March, 1996. However, from April, 1996 onwards, the Government of Kerala had prohibited the sale of arrack which led to closure of large number of arrack shops leading to unemployment of large number of arrack shop workers who were working under the licensed contractors in the retail arrack shops. The Government in the year 1997 gave compensation of Rs. 30,000 to each of the retrenched arrack workers and welfare fund benefits were also granted to those who were in the rolls of the Abkari Workers Welfare Fund. However, the problem of retrenched arrack workers persisted and Government decided to rehabilitate them by providing them with employment in the toddy shops and in retail shops of Kerala State Beverages Corporation Limited. In order to achieve the above objects, the above mentioned Rules were framed. Government have not compelled anybody to employ those workers, but those licensees who avail of the privilege of conducting the toddy shop need only employ them.
4. The Apex Court in Khoday Distilleries Ltd. v. State of Karnataka, [(1995) 1 S.C.C 574], held that citizen has no fundamental right to carry on trade or business in liquor. State can prohibit completely trade or business in potable liquor since trade or business in liquor as a beverage is res extra commercium. State can also place restrictions and limitations on such trade or business in res commercium and such restrictions and limitations under Art. 19(6) can be placed by subordinate legislation or even by executive order. The Apex Court in Ugar Sugar Works Ltd. v. Delhi Administration, [(2001) 3 S.C.C 635] held that each State has the authority to formulate its own liquor policy bearing in mind the welfare and interests of the citizens. In Secretary to Government, Tamil Nadu v. K. Vinayagamurthy, [(2002) 7 S.C.C 104] the Apex Court held that no citizen can claim to have any inherent right to sell intoxicating liquor by retail, and that restrictions or limitations, if any, placed by the State on such sale must be reasonable and reasonableness of restrictions would differ from trade to trade and no hard and fast rule concerning all the trades can be laid down.
5. The rule-making authority in its wisdom thought it necessary to rehabilitate those persons who lost employment due to the Government's policy decision to do away with the sale of arrack in the State. Several arrack shops were to be closed down due to the Government policy resulting large: scale unemployment. Government felt they have got obligation to rehabilitate those persons who are in the lower strata of the society. Under such circumstances Rule 4(2) and 9(10)(b) were introduced in the Kerala Abkari Shops Disposal Rules, 2002. We have already indicated there is no compulsion on the part of any citizen to conduct toddy shops. Only those persons who are agreeable to comply with the statutory rules, agreements and licence conditions need only employ displaced workers. Section 18-A which also lends support to the Government policy and the rules framed. Section 18-A is extracted below:
18A. Grant of exclusive or other privilege of manufacture, etc., on payment of rentals.— (1) It shall be lawful for the Government to grant to any person or persons, on such conditions and for such period as they may deem fit, the exclusive or other privilege
(i) of manufacturing or supplying by wholesale; or
(ii) of selling by retail; or
(iii) of manufacturing or supplying by wholesale and selling by retail any liquor or intoxicating drugs within any local area on his or their payment to the Government of an amount as rental in consideration of the grant of such privilege. The amount of rental may be settled by auction, negotiation or by any other method as may be determined by the Government, from time to time, and may be collected to the exclusion of, or in addition, to the duty or tax leviable under Ss. 17 and 18.
(2) No grantee of any privilege under Sub-sec. (1) shall exercise the same until he has received a licence in that behalf from the Commissioner.
(3) In such cases, if the Government shall by notification so direct, the provisions of S. 12 relating to toddy and toddy producing trees shall not apply.
Section 18-A provides for the grant of licence. Section 18-A has to be read with SS. 24(c) and 24(d). While S.ISA provides for the grant of licence S. 24(c) and 24(d) stipulates that licence granted shall be subject to such conditions and restrictions and in such form and should contain particulars as the Government may direct either generally, or in any particular instance in that behalf.
6. We are in agreement with the learned Single Judge that S. 18-A read with S. 24 of the Act gives abundant power to the Government to prescribe conditions for the grant of licence to sell liquor. Government is also entitled to prescribe in exercise of its power under S. 29(1) read with Ss. 18-A and 24 conditions for the grant of licence to sell toddy. One such condition prescribed is that every toddy shop licensee should absorb one displaced arrack worker. State Government has got the power to lay down conditions and limitations even through subordinate legislation or through executive orders. This being the legal position, we find no infirmity in Rule 4(2) or Rule 9(10)(b) of the Abkari Shops Disposal Rules, 2002 and we uphold those rules and the contention that rules violate Arts. 14 and 19(1)(g) of the Constitution is without any merits since there is no fundamental right to carry on trade in liquor.
7. Counsel appearing for the appellants in W.A No. 664 of 2004 contended that even assuming that the rules are valid, authorities of the excise department have violated the procedure. We are of the view this is a matter which the appellants could have taken up before the authorities concerned. Counsel made specific reference to notices Exhibits P49 and P50 and pointed out that there is some infirmity in those notices. Such infirmities in our view could have been brought before the authorities concerned in the event of which the authorities would consider whether there is any procedural irregularities in implementing the rules. In such circumstances, we find no reason to interfere with the judgment of the learned Single Judge. The appeals lack merits and they are accordingly dismissed.
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