http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 27  

CASE NO.: Appeal (civil)  3279 of 2005

PETITIONER: Ashok Lanka & Anr.

RESPONDENT: Rishi Dixit & Ors.

DATE OF JUDGMENT: 11/05/2005

BENCH: N. Santosh Hegde & S.B. Sinha

JUDGMENT: J U D G M E N T

I.A. NOS. 1 & 2  IN &

[Arising out of SLP (Civil)\005\005\005\005.of 2005 (CC No.4529]

                                       W I T H

    CIVIL APPEAL NO.                      OF 2005                  [Arising out of SLP.(Civil) \005\005\005\005. of 2005 (CC 4569)]

  I.A. NO. 1 IN & C.A. NO                  OF 2005               [Arising out of  SLP (Civil) .\005\005\005../2005 (CC No.4571)]                               IA No.1  IN  &  C.A. No.              OF 2005      [Arising out of SLP (Civil)\005\005\005 \005/2005 (CC No.4579)]

               IA No. 1 IN &  C.A. NO.                 OF 2005                [Arising out  SLP  (Civil)\005\005\005  \005/2005 (CC No.4598)]

      C.A. NO.                         OF 2005                         [Arising out SLP (Civil) No. 7802 of  2005]  

                       C.A. NO.                                OF 2005                [Arising out of SLP (Civil)  No.8575 of 2005]                                IA. NOS. 1 & 2 IN & C.A. NO.                      OF 2005                  [Arising out of  SLP (Civil)\005\005..\005./2005 (CC No.5051)]

C.A. NO.                                OF 2005                        [Arising out of  SLP(Civil) No.10422 of 2005]

                       C.A  NO.                                OF 2005     [Arising out of  SLP (Civil) No.10457 of 2005]                                          C.A. NO.                                OF 2005                                [Arising out of SLP (Civil) No.10652 of  2005]  

C.A. NO.                                OF 2005                         [Arising out of  SLP (Civil) No. 10653 of 2005]

                       IA NO. 1 IN & C.A.              OF 2005 [Arising out of SLP (Civil)\005\005\005\005/2005 (CC No.5432)]

               IA NO.1 IN & C.A.               OF 2005

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 27  

               [Arising out of  SLP (Civil)\005..\005.\005/2005 (CC No.5433)]

S.B. SINHA, J :

       Permission to file special leave petitions is granted.

       Leave granted in all the special leave petitions.

INTRODUCTION  

       The trade in country/foreign liquor is said to be res extra  commercium.  A citizen does not have any fundamental right to deal  therewith.  The State alone has the exclusive privilege to deal in liquor from  manufacture to distribution and from sale to consumption.  It is for the State   to part with its exclusive privilege for a price which is loosely called as  ’excise duty’.  The power of the State to control and regulate the trade in  liquor is envisaged under Entry 8,  List II of the Seventh Schedule of the  Constitution of India.  It may also impose excise duty as also countervailing  duty in exercise of its legislative power under Entry 51, List 2 of the Seventh  Schedule of the Constitution.  

ACT AND THE RULES  :         Trade in Country/Foreign Liquor is governed by the Chhattisgarh  Excise Act, 1915 (’the Act’, for short).   

       Section 7(e)  of the Act provides that the State Government may, by  notification, for the whole or for any specified part of the State, delegate to  the Chief Revenue authority or the Excise Commissioner all or any of its  powers under the said Act except the power conferred by Section 62 to make  rules.   Section 62 of  the Act empowers the State to frame rules for the  purpose of carrying out the provisions thereof. Without prejudice to the  generality of the said provisions, the State Government, inter alia, however,  may make rules :

(e)     regulating the periods and localities for which, and  the persons or classes of persons to whom, licences  for the wholesale or retail vend of any intoxicant  may be granted, and regulating the number of such  licences which may be granted in any local area;

(f)     prescribing the procedure to be followed and the  matters to be ascertained before any licence for  such vend is granted for any locality;

(g)     regulating the amount, time, place and manner of  payment of any duty or fee or tax or penalty;          (h)     prescribing the authority by, the form in which,  and terms and conditions on and subject to which  any licence, permit or pass shall be granted, any by  such rules, among other matters \026

(i)     fix the period for which any licence, permit  or pass shall continue in force,

(ii)    prescribe the scale of  fees or the manner of  fixing the fees payable in respect of any

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 27  

such licence, permit or pass.

(iii)   prescribe the amount of security to be  deposited by holders of any licence, permit  or pass for the performance of the conditions  of the same,

(iv)    prescribe the accounts to be maintained and  the returns to be submitted by licence- holders, and

(v)     prohibit or regulate the partnership in, or the  transfer of, licenses."

       Section 63 of the Act provides that all rules made and notifications  issued thereunder shall be published in the Official Gazette, and shall have  effect from the date of such publication or from such other date as may be  specified in that behalf.   

       On or about 15.3.2002, the State Government in exercise of its  aforementioned power made rules known as ’Chhattisgarh Excise Settlement  of Licences for Retail Sale of Country/Foreign Liquor Rules, 2002’ (’the   Rules’, for short).  "Excise Year" has been defined in the Rules to mean the  financial year commencing from 1st April to 31st March of the calendar year.   Rule 4 provides for formation of groups of liquor shops; clause (iii) whereof   prohibits an applicant/firm/company from obtaining licences for more than  two groups of shops.  Rule 5 provides for the period of licence which would  be for an excise year or part thereof.  Rule 8 provides for procedure for grant  of licence, which reads as under :

               "Procedure for grant of licence \026

(a)     Whenever a new licence is proposed to be granted  in an area or locality, the licensing authority shall  invite the applications for this purpose after giving  wide publicity through daily newspapers having  circulation in that area.

(b)     A list of shops of country/foreign liquor for which  the licensing authority proposes to grant licence  shall be exhibited along with shopwise licence fee  minimum monthwise guaranteed quantity, security  amount, and annual quantity in office of Collector,  Tehsil, District Excise Officer/Asstt.  Commissioner excise and Deputy Commissioner  Excise (Flying squad)

(c)     Application for grant of license with application  fee shall be submitted in the prescribed form as  appended to these rules as annexure-4.

(d)     The last date to be fixed for the receipt of  application shall not be earlier than ten days with  effect from the date of publication of the  advertisement in the newspapers."

       Eligibility conditions for applicant are laid down in Rule 9 which read  as follows :

"Eligibility conditions for applicant. \026 The applicant has  to fulfil the following conditions for obtaining the licence  for shop/Group of shops of Country/foreign liquor.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 27  

(a)     Should be a citizen of India or a partnership firm  whose partners are citizens of India.  No change  in  partnership shall be allowed after settlement of  shop(s) /group of shops except with the permission  of the Excise Commissioner.

               (b)     Should be above 21 years of age.

(c)     Should not be a defaulter/blacklisted or debarred  from holding an excise licence under the  provisions of any rules made under the Act.   

(d)     Has to submit an affidavit duly verified by public  notary as proof of the following namely  :

(1)     That he possesses or has an arrangement for  taking on rent suitable premises in that  locality for opening the shops in accordance  with the rules.

(2)     That he possesses good moral character and  have no criminal background and have not  been convicted of any offence punishable  under the Act or Narcotic Drugs And  Psychotropic Substances Act, 1985 or any  other law for the time being in force or any  other cognizable and non-bailable offence.

(3)     That in case he is selected as licensee he will  furnish a certificate issued by  Superintendent of Police of the district of  which he is the resident, showing that he as  well as his family members possess good  moral character and have no criminal  background or criminal record, within thirty  days of grant of licence.

(4)     That he shall not employ any salesman or  representative who has criminal background  as mentioned in clause  (iii) or who suffer  from any infectious or contagious disease or  is below 21 years of age or a woman.

(5)     That no government dues are outstanding  against him."

Rule 10 envisages formation of a District Level Committee; whereas  Rule 11 provides for selection of licensees, clauses (b) and (c) whereof read  thus :

"(b)    The said committee shall select licensees from the  list of applicants.  In case more than one applicants  are found suitable for any particular group of shops  the committee shall select the licensee for such  group of shops by lottery.  In case the selected  applicant does not deposit the required amount  according to rule 13 and does not fulfil the  prescribed formalities or is unable to arrange  suitable premises for the shops within stipulated  period, the licensing authority shall cancel the  allotment and take steps for resettlement of the  shops/group of shops..

(c)     In case thee is no application for a particular group  of shops or no applicant is found suitable for a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 27  

group of shops the licensing authority shall take  immediate steps for resettlement as per procedure  laid down in rule 8."

                        Rule 13 provides for payment of licence fee and security amount,  which reads as under :

"Payment of licence fee and security amount \026 In case an  applicant is selected as licensee, he shall deposit one  month’s amount of license fee and the security amount  within three days of being informed of his selection.  If  he fails to deposit the amount of one month licence fee  and security amount within prescribed period, his  selection shall stand cancelled and the said licensee shall  be debarred from holding any excise licence in future,  anywhere in the State and his applications fee shall also  stand forfeited.  A consolidated list of such defaulters  under this rule, along with their complete addresses shall  be forwarded by the District Excise officer/Assistant  Commissioner to the Excise Commissioner, who will  circulate the consolidated list of the State to all the  licensing authorities of the State."

       Rule 23 provides for suspension and cancellation of the licence, in the  event any  of the conditions laid down therein is violated;  clause (c)  whereof  is as follows :

"If the affidavit submitted by the  licensee at the time of  application is found incorrect and assertions made therein  are found to be false.        

       In  terms of the provisions of the said Rules, a format in which an  application is to be filed is prescribed  providing for filing of an affidavit  duly verified by a public notary.

AMENDMENT IN THE RULES AND CIRCULARS ISSUED BY THE  COMMISSONER OF EXCISE  :           On or about 9.3.2004,  clause  (c) of  Rule 8 of the Rules was  amended in the following terms :   

"(c)    the application form and affidavit as per format  prescribed by the Excise Commissioner, along with  application fee fixed under Rule 6 shall be submitted to  the licensing authority of concerning district or grant of  license for retail shops/group of country/foreign liquor,  within the stipulated date and time."

       Pursuant to or in furtherance of the said power conferred upon him,  the Commissioner of Excise prescribed  formats  of application form and  affidavit to be furnished with the application for country/foreign liquor  shops/groups.

On or about 14.2.2004, a circular came to be issued by the  Commissioner of Excise whereby and whereunder it was directed that the  applicants were not required to file  affidavits along with their applications  as was laid down in the Rules; but such affidavits may be filed after their  selection was made.    Sub-clauses (1), (2)  of  clause 8 and clause 22 of the  said circular read as follows :

"8. APPLICATION FOR ALLOTMENT OF

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 27  

COUNTRY/FOEIGN LIQUOR SHOP/GROUP :

       (1) Application form for the year 2005-06 for  country/foreign liquor retail shops/groups which has been  amended and published in notification issued by this  office is being enclosed and sent.  Application for  country/foreign liquor retail shop can be made by any  applicant in the specified enclosed format only.  Separate  applications will be accepted for every group.   Application fee in accordance with the cost price of the  concerned group should be in the form of bank  draft/bankers cheque/bank’s cash order form a  nationalized bank/scheduled commercial bank or challan  received after submitting the cash in the treasury is  mandatory to be produced in original with the  application.  Applicant should not make any change or  amendment in the format of application form and  application form will be accepted in prescribed format  only.

       (2)     For the year 2005-06, the Select Committee  will make a draw using a computer and select first,  second and third applicant.  It will be mandatory for  those selected first, second and third applicants to  immediately produce an affidavit duly verified by a  notary.  Selected applicants should not make any changes  or amendments to the format of the affidavit and the  affidavit will be accepted in the specified format only.   Format of the affidavit will be in accordance with the  known format of 2004-05."       

 "22.  AMENDMENT IN THE CHHATTISGARH  EXCISE SETTLEMENT OF LICENCES FOR RETAIL  SALE OF COUNTRY/FOREIGN LIQUOR RULES,  2002 :

       For settlement of retail shops/groups of  country/foreign liquor for the year 2005-06, under  application system, aforesaid directions are being issued  and accordingly proceedings shall be ascertained, even  then where amendment is to be done in the Chhattisgarh  Excise Settlement of Licences for retail sale of  country/foreign liquor Rules, 2002, for that notification  shall be sent severally.  Similarly, for licence fees  prescribed for the year 2005-06 for licence of F.L. 2 &  F.L. 3, notification shall be sent separately."

TENDER PROCESS :

       A notice inviting applications for grant of licence under the Act and  the Rules  was issued on 14.2.2005, clauses (2), (3), (4), (5) and (9)  whereof  are as under :

"2.     As per the above programme, the Collector concerned  shall publish the notice in his district on the date fixed,  wherein in respect of retail country/foreign liquor  shop/group, the minimum surety amount, duty amount,   amount of licence fee annual revenue, 1/12th part of  licence fee and 1/12th part of the duty amount on  minimum surety amount and one month licence fee shall  be mentioned.

3.      For allotment of the country/foreign liquor retail  shops/groups, only those persons/firms/companies shall

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 27  

submit the applications who are entitled for getting the  excise licence under the C.G. Excise Act,  1915.

4.      The applicants for allotment of country/foreign liquor  retail shops/groups for the year 2005-06 shall get the  prescribed proforma from the office of Assistant Excise  Commissioner/District Excise Officer.  On the prescribed  proforma only, the applicant by typing or handwriting  regarding the country/foreign liquor retail shop of the  concerned district shall apply.  For each group, the  separate application will be accepted.  Along with the  application form, as per the cost, the application fees  through the Draft/Bankers cheque/Cash Order of Bank of  Nationalised Bank/Scheduled Commercial Bank or by  cash, shall be submitted in the Treasury through original  challan.  The applicant shall not make any change or  amendment in the prescribed proforma and the  applications in prescribed form will be accepted only.

5.      For the year 2005-06, the selection of first, second and  third candidates will be made by computer through  lottery system and they have to submit immediately the  affidavit certified by the notary.  The selected candidate  shall not make any change or amendment in the affidavit  and the affidavit will only be accepted in the prescribed  form.

9.      The allotment of shops/groups and their running for the  year 20065-06 shall govern as per the C.G. Excise Act,  1915 and the rules framed thereunder and the  Chhattisgarh Excise Settlement of Licences for retail sale  of country/foreign liquor Rules, 2002 and the amended  terms and conditions and the orders of the State  Govt./Commissioner, Excise/Collector/Assistant Excise  Commissioner/District Excise Officer."

       Pursuant to or in furtherance of the said notice inviting applications,  about 2,64,703,. applications were filed out of which about 3000  applications were rejected.  Selection process began in different districts by  the District Level Committees between the period from 9.3.2005 and  16.3.2005.   

The Excise Rules were further amended on or about 22.3.2005 in the  following terms :

               "Raipur, the 22nd March, 2005                         NOTIFICATION          No.F-10/6/2005/CT/V(4).-In exercise of the powers  conferred under Section (d), (e), (f), (g) and (h) of sub- clause(2) of sub-clause (3) of clause 62 of the  Chhattisgarh Excise Act, 1915 (No.II of 1915), the State  Government hereby makes the following amendment in  the Chhattisgarh Excise Settlement of Licenses for retail  sale of Country/Foreign Liquor Rules, 2002, namely :

                       AMENDMENT

               In the said rules, in rule \026 8, -          (i)     The existing clause (C) shall be substituted by the  following clause (C), namely :-

(C)     The application form under rule-6 along

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 27  

with prescribed application fee shall be  submitted to the Licensing Authority of the  concerned district within prescribed date &  time for grant of licence for retail  shop/group of country/foreign liquor in the  proforma prescribed by the Excise  Commissioner.

(ii)    After clause  (C) the following clause (C-1) shall  be added, namely :

(C-I)   The first, second & third applicant selected  for retail shop/group of country/foreign  liquor by the selection committee after  lottery drawn by computer must submit  affidavit verified by the Notary in the  prescribed proforma the next day during  office hours.

2.      This amendment shall be effective for the  settlement of Licenses for retail sale shops of  Country/Foreign liquor for the year 2005-06."

WRIT PROCEEDINGS  : The instant case originally arose out of a public interest litigation in  Jitendra Pali vs. State of Chhattisgarh (WP No.706 of 2005).  Subsequently,  the other petitions came to be filed by candidates including Rishi Dixit vs.  State of Chhattisgarh (WP No. 956 of 2005).  Both the writ petitions were  heard together and separate judgments were delivered in each of them.  The  judgment in WP No.956 of 2005 came to be passed by the High Court on  31.5.2005, which is the subject matter of appeal arising out of SLP (Civil)  CC No 4529; while the judgment and order in WP No. 706 of 2005 came to  be passed by the High Court on 8.4.2005 which is the subject matter of  appeal arising out of SLP (Civil) No.8575 of 2005.               Originally in the said writ application the changes made in the  selection process, namely, from manual to computer was in question; but an  application for amendment of the writ petition was made on 9.3.2005  wherein it was contended that the selection process adopted by the State was  vitiated, inter alia, on the premise that no affidavit was filed by the  applicants as was mandatorily required by Rule 9 of the Rules.   

The contention raised on behalf of the State after the amendment   dated 22.3.2005 before the High Court was that Rule 9 was directory in  nature and not mandatory and in any event, as the said rule was amended in  consonance with the powers of the State regarding  retrospective amendment  of the Rules, the selection process was  not vitiated.  Now, this amendment  validates with retrospective effect, the filing of affidavits after the selections  are made.     

       Before we consider the judgment passed by the High Court, we may  notice that an interim order was passed in the writ petition  on 3.3.2005.  On  or about 7.3.2005, however, the said interim order was modified by the High  Court directing :

       "As mentioned above, in view of the return has  been filed and the matter is to be heard and disposed of  finally, we modify the earlier order of M.W.P. No.  593/2005, to the extent that the respondents may continue  with the process of selecting the licensees, however, if  before the disposal of this writ petition the process of  selection of the licensees is completed, the respondents  should not communicate the order of their selection to the  selected licensees."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 27  

       With a view to complete the narration of facts, we may also mention  that several intervention applications were also filed by the alleged  successful bidders.

HIGH COURT JUDGMENT  :          The High Court upon analyzing the provisions of the Act and the  Rules framed thereunder was of the opinion that the State was entitled to  make the selection of the eligible candidates through computer.  It was,  however, opined that the District Level Committees did not make any  scrutiny whatsoever to find out as to whether the applicants concerned  satisfied the eligibility conditions laid down in Rule 9 or not, as no  information was required to be furnished in the format prescribed by the  Commissioner of Excise in that behalf.  The High Court was further of the  opinion that the disclosure of such information by the applicants even before  the submission of applications were necessary so as to enable the authorities  to satisfy themselves about the fulfillment of different eligibility conditions  mentioned in Rule 9.  Consequently, it was directed that a fresh selection be  made in terms of the extant rules.   

       The High Court while rejecting  the wider challenge on the legal  policy, held : (a) The circular letter dated 14.2.2005 issued by the  Commissioner of Excise was contrary to the Rules insofar as eligibility  criteria laid down in Rule 9 thereof were dispensed with. (b) The  applications filed by the applicants were not properly scrutinized, except the  requirement of Rule 9(c), namely, whether the applicants were black-listed  or otherwise not eligible. (c)  While holding that the application fees to the  extent of 77 crores earned by the State need not be refunded, it directed  scrutiny of about 2.65 lakhs applications by the respective District Level  Committees for their satisfaction that all eligibility requirements stand  satisfied whereafter only the draw of lottery may take place.

The High Court, however, for the reasons stated in its judgment  although not directed for calling for fresh applications but mandated the  State to consider the necessary informations required from the applicants by  way of affidavit before the candidates are selected for grant of liquor licence.    

PROCEEDINGS BEFORE THIS COURT :  Applications for grant of special leave to appeal have been filed by  the State of Chhattisgarh as also by  several selected candidates.  By an order  dated 8.4.2005, this Court stayed the operation of the impugned order  subject to the condition that if the Government desires to award the contract  as an interim arrangement to the successful bidders, it shall do so only after  obtaining the necessary approval of the Committee already constituted for  consideration of these applications.

       The said order was communicated on 9.4.2005. The applications of  the selected candidates were scrutinized on 10.4.2005 and 11.4.2005 and  licences were granted to the so-called successful bidders on 11.4.2005 and  12.4.2005.

SUBMISSIONS  :

       Mr. Ashok Desai, the learned Senior Counsel appearing on behalf of  the State, would submit that the High Court fell in grave error in  interpretation/construction of  Rule 9 of the Rules inasmuch as it failed to  take into consideration that whereas clauses (a) to (c) contained therein are  mandatory in nature, clause (d) is directory in nature as the same was  required to be fulfilled only upon the selection of the candidates concerned.   The learned counsel placed strong reliance, in this behalf, on a decision of  this Court in Dr. Mahachandra Prasad Singh etc. vs. Chairman, Bihar  Legislative Council and Others [(2004) 8 SCC 747].   According to the  learned counsel, the State, having the requisite power to amend the Rules  with retrospective effect, issued the Notification dated 22.3.2005 which was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 27  

retrospective in nature.  [Reliance, in this connection, has been placed on  The State of Madhya Pradesh and Others vs. Tikamdas  (1975) 2 SCC 100].   It was contended that the High Court also failed to construe properly the  effect of  amended Rule 8 (c) in terms whereof affidavit to be verified before  the public notary in the prescribed format was required to be filed on the day  following the selection and, thus, the requirement of filing the affidavit  along with application in terms of the said rule was dispensed with.  In any  view of the matter, the learned counsel would urge that having regard to the  fact that all candidates including the writ petitioners before the High Court  understood the rule in the same manner, namely, the affidavits were required  to be filed after the selection process was over and, thus, did not choose to  file any affidavit whatsoever and, thus, the rules should have been construed  in such a manner.   The learned counsel placed on strong reliance, in this  connection, on G.J. Fernandez vs. State of Karnataka and Others  [(1990) 2  SCC 488). In any event,  the same  would amount to acquiescence on the  part the  writ   petitioners.  Strong reliance in this behalf has been placed on  Nain Sukh Das and Another vs. The State of Uttar Pradesh and Others  [(1953) SCR 1184].  It was submitted that the validity of the rules/circulars  having not been challenged by the writ petitioners, the High Court fell in  error in passing the impugned judgment.  The learned counsel would argue  that one of the applicants was a lawyer and others being interested persons,  the writ petition in the nature of public interest litigation was not  maintainable.  The learned counsel would submit that having regard to the  well-settled principles of law that the State despite Article 14 of the  Constitution of India has a greater play in the joints while parting with its  exclusive privilege, non-compliance of Rule 9 could not be held to have  vitiated the entire selection process.  Reliance, in his behalf, has been placed  on State of M.P. and Others vs. Nandlad Jaiswal and Others  [(1986) 4 SCC  566].

       In any view of the matter, Mr. Desai, would argue that it is not a fit  case where the court should grant any relief in favour of the writ petitioners.   Strong reliance, in this connection, has been placed on K.N. Guruswamy vs.  The State of Mysore and Another [(1955) 1 SCR 305].   

       Mr. Dushyant A. Dave, learned Senior Counsel appearing on behalf of  the Appellants in Civil Appeal arising out S.L.P. (CC No. 4571), while  supplementing the arguments of Mr. Desai,  pointed out that the amending  rules having not been challenged and having regard to the fact that the  requirement of filing an affidavit has not been given up, the High Court fell  in error in holding Rule 9 as mandatory, despite the fact that the said  requirement was to be complied with only at a later stage.   

       Mr. Ravi Shanker Prasad, the learned Senior Counsel appearing on  behalf of the Appellants in Civil Appeal arising out of SLP No. 10653 of  2005 would contend that even the unamended Rule 9 envisaged filing of an  affidavit at a post selection stage as would appear from the language used in  clauses (a), (b) and (c) as contrasted from clause (d)  thereof.  The  amendment in the rules, the learned counsel would contend, made the  position patent when it was latent.  Rule 9, as Mr. Prasad would argue, was  required to be read with Rule 13 and so read it would be evident that the  nature of requirement for filing an affidavit was only post selection.

       Drawing our attention to the fact that the mode of selection through  lottery is permissible in view of the decision of this Court in Rajendra Singh  vs. State of M.P. and Others [(1996) 5 SCC 460], Mr. Prasad would contend  that the requirement to comply with the rules should have been considered  having regard to the changed mode of selection in terms of Rule 11(b).   Public Interest Litigation, Mr. Prasad would urge, should not be entertained  whereby the economic policy adopted by the State in the matter of vending  liquor is challenged.  Reliance, in this connection, has been placed on   Nandlal Jaiswal (supra). Mr. Prasad also placed strong reliance upon Balco  Employees’ Union (Regd.) vs. Union of India and Others [(2002) 2 SCC  333] in support of his contention that if the petitioner was not aggrieved, he  cannot have locus standi to maintain a writ petition.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 27  

       Mr. C.S. Vaidyanathan, the learned Senior Counsel appearing on  behalf of the Appellants in Civil Appeal arising out of SLP (CC No.4579),  would submit that the object of the Act and the rules framed thereunder  being to augment the revenue and preventing  adulteration of liquor; the  state action can be challenged only if it is unfair in the sense that nobody  was given an opportunity to participate in the auction.  As in this case all  persons were treated similarly in pursuance of or in furtherance of the  advertisement, insofar as no applicant had filed any affidavit, it cannot be  said that anybody was prejudiced by reason of non-compliance of Rule 9.   The learned counsel would also contend that the writ petitioner having  himself not filed any affidavit, he is estopped and precluded from  questioning the alleged violation of Rule 9, which only provides for  compliance of a procedural requirement.   

       Mr. Mukul Rohtagi, the learned Senior Counsel appearing on behalf  of the Appellants in Civil Appeal arising out of SLP (CC No.4569) would  also contend that requirement of Rule 9(d) was only post selection.

       Mr. Soli J. Sorabjee, the learned Senior Counsel appearing on behalf  of the Respondents, on the other hand, would take us through various  documents with a view to show that the District Level Committees after  passing of this Court’s order dated 8.4.2005 proceeded to consider the  applications filed by the successful candidates in a post haste manner which  would clearly demonstrate non-application of mind on their part.  The  learned counsel pointed out that in many cases there had been hardly any  deliberation amongst the members of the committee; while in some cases  even affidavits were not filed.  Drawing our attention to Rule 11, the learned  counsel would submit that in no case a summary report was prepared so as   to enable the Scrutiny Committee to scrutinize the eligibility conditions.  Mr.  Sorabjee would argue that Rule 9 is mandatory in nature and, thus,  all  applications for grant of liquor licence would call for scrutiny.  Even if such  a consideration is read to be directory, no substantial compliance thereof  having been made, it was argued, the entire selection process must be held to  be vitiated in law.  The learned counsel would contend that from the  affidavit filed by the State, it would appear that the contents of the affidavits  had not been verified in accordance with law and the contents thereof had  ex-facie been accepted on a pre-supposition that they were correct although   there exists no statutory rule empowering the Committee to raise such a  presumption.

       Dr. A.M. Singhvi, the learned Senior Counsel appearing on behalf of  the some of the Respondents would urge that the functionaries of the State  and/or the Selection Committees, having regard to the nature of transaction  were required to verify the applications before selection.  It was pointed out  that despite the fact that the High Court by an order dated 7.3.2004  prohibited the State from disclosing the list of selected candidates, the so- called selected candidates filed applications for grant of special leave to  appeal before this Court on the premise that they had been selected.  It was  submitted that the amendment carried out in Rule 9 on or about 9.3.2004  was wholly irrelevant.  Drawing our attention to the judgment of the High  Court, the learned counsel would submit that it has rightly been found  that  sub-rule (3) of Rule 9 compared to the old provisions contained therein in  view of the language thereof clearly demonstrates that Rule 9 is mandatory  in nature.   The amendment made in Rule 9 by reason of the notification  dated 22.3.2005, Dr. Singhvi would argue, cannot put the clock back as the  entire selection process was completed by then.   

       Mr. G.L. Sanghi, the learned Senior Counsel appearing on behalf of  some of the Respondents  would submit that keeping in view the fact that  while exercising its jurisdiction under the Act, the State is concerned with  the maintenance of public health and, thus,   Rule 9 should be held to be  mandatory particularly having regard to the fact that such affidavit is also  necessary for the purpose of exercise of power by the State for suspension  and cancellation of licence in terms of Rule 23(1) (c) of the Rules.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 27  

       Conditions conceived in Rule 9 being in public interest, Mr. Sanghi  would contend, are mandatory in character.  It was pointed out that whereas  in terms of amendment dated 9.3.2004, the Commissioner of Excise  had  been empowered to prescribe the format, he had no jurisdiction to do away  with or dilute the statutory requirements to file an affidavit as required by  Rule 9 of the Rules.   

Mr. Ravindra Shrivastava, the learned Senior Counsel appearing for  the some of the respondents, would urge that the eligibility clauses contained  in the Rules must be held to be mandatory in nature  and in support thereof  reliance has been placed on Ramana Dayaram Shetty vs. The International  Airport Authority of India and Others [(1979) 3 SCR 1014] and R. Prabha  Devi and Others vs. Government of India, Through Secretary, Ministry of  Personnel and Training, Administrative Reforms and Others [(1988) 2 SCC  233].

       Dr. Rajiv Dhawan, the learned Senior Counsel appearing on behalf of  the writ petitioners/Appellants, would, inter alia, submit that the  interpretation and/or construction of the rules must be made having regard to  Article 47 of the Constitution of India vis-‘-vis the doctrine of ’res extra  commercium’.  The learned counsel would contend that before the High  Court a contention was raised that a solvency certificate should be directed  to be filed along with the application for grant of  licence as it would help in  prevention of investment of  black money in the trade.  The learned counsel  would urge that the courts in a situation of this nature will apply cautionary  principles having regard to the fact that the activities of the State must be  responsible in nature.  Dr. Dhawan would submit that the rules have to be  read as a whole and not in a manner which would give undue advantage to  persons who were not fit to carry on the trade in liquor keeping in view the  obnoxious nature thereof.  The rules were required to be applied from stage  to stage, it was argued, having regard to the purport and object thereof so  that effective step may be taken by the Committee to weed out the unwanted  applicants.  

PUBLIC INTEREST LITIGATION  : It may not be necessary for us to consider as to whether the public  interest litigation should have been entertained by the High Court or not. The  High Court did entertain the public interest litigation without any objection  and ultimately allowed the same. Furthermore it is well settled that even in a  case where a petitioner might have moved the court in his private interest  and for redressal of personal grievances, the court in furtherance of the  public interest may treat it necessary to enquire into the state of affairs of the  subject of litigation in the interest of  justice. [See Guruyayoor Devaswom  Managing Committee and Anr. Vs. C.K. Rajan and Others  [(2003) 7 SCC  546 \026 para 50] and  Prahlad Singh vs. Col. Sukhdev Singh (1987) 1 SCC  727]  

ACQUIESCENE : When a public interest litigation was entertained the individual  conduct of the writ petitioners would take a backseat. There cannot be any  doubt whatsoever that in a given case a party may waive his legal right. In  an appropriate case, the doctrine of acquiescence or acceptance sub silentio   may also be invoked. [See Haryana State Coop. Land Dev. Bank vs. Neelam  [2005 (2) SCALE 434], but the High Court, in the instant case,  has gone  into the question with a wider perspective. This Court is not only required to  construe the provisions of the statute but also to take into consideration the  subsequent events which took place vis-a-vis the action on the part of the  State after passing of the interim order. The issue as regard application of  acquiescence or waiver. therefore in our opinion has become irrelevant.

ANALYSIS OF THE RULES  : The Chhattisgarh Excise Act, 1915 and the rules framed thereunder  are regulatory in nature.  They are being so enacted so as to ensure public  health as trade in liquor is considered to be obnoxious one.  The State has a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 27  

duty to see that its people do not consume spurious or adulterated liquor.  The Act and the rules no doubt contain  provisions for cancellation and/or  suspension of the licence in the event the conditions laid down therein are  violated,  but it is beyond any cavil that before a licence is granted, the  applicant must satisfy all the statutory conditions and meet the eligibility  requirements. [See  Ramana Dayaram Shetty (supra) and R. Prabha Devi   (supra).  Rule 8(e) provided for a requirement to furnish a bank draft from a  nationalized bank as earnest money.  Rule 9 of the Rules preserves all other  eligibility requirements.  The Circular dated 15.3.2003 dispensed with the  requirements as contained in Rule 8(e) of the Rules.  The number of outlets  were increased by 92 from 812 to 904.  The High Court has noticed that  none of the eligibility requirements except those as contained in Rule 9(c) of  the Rules had been observed by the Committee.  The State has earned Rs. 77  crores from 2.65 lakhs applicants whose eligibilities were not verified.   Indisputably, the State while granting a licence in favour of a person dealing  in liquor should ensure that the same is granted to a person who would be  otherwise eligible to deal therewith.

       The provisions of the Act and the Rules framed thereunder contain  several restrictions and limitations which are imposed upon the applicants.   The procedures for selection must be fair and in consonance with the  provisions of the Act and the Rules.  

The persons who fulfill the said eligibility criteria and satisfy the  requirements laid down under the Act and the Rules only could file such  applications which required scrutiny thereof so as to enable the statutory  authorities to consider their cases for grant of licence. The advertisement  issued by the State calls upon only such persons to file applications who are  suitable therefor, which in turn would mean that the applicants must satisfy  the authorities that they are eligible for grant of licence. The applicants must  also demonstrate that they are suitable for grant of licence as in the event of  their being found unsuitable, steps are required to be taken by the committee  for resettlement of the shops, wherefor procedures laid down in Rule 8 were  required to be complied with again.

Stricter restriction is contemplated in the matter of compliance of the  terms and conditions of the licence.  Rule 4 of the Rules permits not more  than two groups to a single licensee.  

Rule 9 provides that the eligibility conditions should be scrutinized  before an application is made.   Rule 9 is in two parts.  It  deals with the  eligibility conditions of the applicant.  It  does not make any exception as  regard  fulfilment of different clauses inasmuch as the said rules begin with  the expression "the applicant has to fulfil the following conditions".  Such  conditions are required to be fulfilled for obtaining the licence. Whereas  clauses (a), (b) and (c) thereof are essential conditions which would debar a  person from filing an application and if such an application is filed, the same  would be liable to be rejected at the outset.  An applicant having regard to  the expressions used in clause (d) has to file an affidavit. Filing of such  affidavit, therefore, is mandatory.    However, affidavit is required to be filed  by the applicant to show  that : (i) he possesses or may arrange for taking on  rent suitable premises; (ii) he possesses good moral character and  has no  criminal background and has not been convicted of any offence punishable  under the Act or Narcotic Drugs and Psychotropic Substances Act, 1985 or  any other law for the time being in force or any other cognizable and non- bailable offence.  Clause (3) of sub-rule (d) of Rule 9 enjoins a duty upon  the authorities to get the same verified whereupon only  a certificate is  required to be issued by the Superintendent of Police of the district of which  he is the resident in the event his selection as a licensee showing that he as  well as his family members possess good moral character and there is no  criminal background or criminal record against them.  Such certificate is  required to be filed within thirty days from the grant of licence.  He also in  terms of the said clause (5) of sub-rule (d) of Rule 9 is to state that no  government dues are outstanding against him.  

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 27  

       Keeping in view that a large number of applications are required to be  dealt with, the rules contemplate constitution of a committee comprising the  Collector of the District and the District Excise Officer/Assistant  Commissioner of the District, who would be the enforcing agency.  Rule 11  provides for the mode and manner in which selection is to take place.   Clause (a) thereof provides for preparation of a summary report by the  Member Secretary for the purpose of placing it before the District Level  Committee.  Clause (b) thereof provides that in the event the Committee  selects licensees from the list of the applicants and in the event  more than  one  applicants are found suitable for any particular group of shops, the  Committee shall select the licensee for such group of shops by lottery, in  which event the selected applicant has to deposit the required amount  according to Rule 13 and fulfill the other prescribed formalities including   the requirement to comply with the provisions of clause (1) of sub-rule (d) of  Rule 9.   Clause (b) of Rule 11, therefore, presupposes that before a licence  is granted the requirements contemplated therein should be complied with. A  candidate before selection must be found to be eligible therefor. It postulates  that before the actual licence is granted, the conditions precedents as  contained therein are required to be fulfilled, failing which the Committee  must take steps for resettlement of shops or group of shops.  The question of  payment of licence fee or security amount arises when an applicant is  selected for grant of licence in terms of Rule 13.

The Scrutiny Committee is also enjoined with a duty to see as to  whether a person was a defaulter or not.         

       Rule 9, as it originally stood, thus, on proper construction must be  held to have laid down that  an affidavit was required to be filed by the  applicant which is fortified by the fact that Rule 23(1)(c) contemplates that if  the affidavit submitted by the licensees at the time of application is found  incorrect and assertions made therein are found to be false, the Licensing  Authority would be empowered to suspend or cancel the licence.  The rule  read as a whole, therefore, provided for filing of an affidavit at the time of  grant of licence.  Furthermore the vary fact that a circular  was issued by the  Commissioner of Excise asking the applicants to file an affidavit after the  selection process is over itself is a pointer to the fact that filing of such an  affidavit along with the application was considered by all concerned to be  necessary.  The advertisement was also required to be issued in consonance  with the rules and not in derogation thereof.    It would, therefore, be not  correct to contend that whereas clauses (a) to (c) of Rule 9 postulates  compliance thereof at a pre-selection stage, clause (d) postulates compliance  at the post-selection stage.  The distinction between compliance of   requirements at pre-selection and post-selection is also evident from reading  Rule 9(d)(1)(2) and Rule 9(d)(3) separately, inasmuch whereas the former  clearly postulates compliance at  pre-selection stage, the latter deals with a  situation which is post-selection.  

The expression "has to submit an affidavit" ex facie is mandatory in  nature and such affidavit  necessarily has to deal with the requirements  contained in clauses (1) and (2).  If the rule making authority was of the  opinion that such an affidavit was required to be filed at a later date and not  with an application, it could have said so in express terms; as has been done in  the case of sub-rule (3) of Rule 9.  In fact, all the sub clauses were to be a part  of affidavit as clauses (3), (4) and (5) would be only by way of undertaking,  although the requirements of clauses (3) and (4) can be fulfilled after the grant  of licence.  The same should appear from the format of the affidavit itself.  

The question as to whether a statute is mandatory or directory would  depend upon the statutory scheme. It is now well known that use of  the  expression "shall" or "may" by itself is not decisive. The  court while  construing a statute must consider all relevant factors including the purpose  and object the statute seeks to achieve.  [See  P.T. Rajan Vs. T.P.M. Sahir  (2003) 8 SCC 498 and U.P. State Electricity Board Vs. Shiv Mohan Singh  and Anr. (2004) 8 SCC 402.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 27  

Furthermore, filing of an affidavit in the prescribed format is a  statutory requirement under the Rules.  Filing of such an affidavit is  necessary as in the event the same on verification is found to be incorrect,  not only the deponent can be proceeded against but his licence would also be  liable to be cancelled.  Filing of an affidavit under the Rules is, therefore,  mandatory in character.

The Commissioner of Excise issued a circular letter dated 14.2.2005  which power evidently he did not possess in terms of Section 7 of the Act.  Although the State may delegate its power to the Commissioner of Excise,  such a delegation cannot be made in relation to the matters contained in the  rule making power of the State.  The matters which are, therefore, outside  the purview of the rules only could be the  subject-matter of delegation in  favour of the Commissioner of Execise. The Commissioner of Excise is a  statutory authority.  He is bound to exercise his power only within the four- corners of the Act or the rules framed thereunder and not de’ hors the same.

Mr. Desai is also not correct in his submission that  clause 22 of the  said circular contemplates a future amendment in the rules.  Even if the same  contemplates a future amendment, the same would not sub-serve the  statutory requirements inasmuch as the Commissioner of Excise was not  supposed to know as to how the existing rules would be amended and  whether the same would be applied prospectively or retrospectively.  The  Court cannot draw a presumption that the Commissioner of Excise could  proceed on a pre-supposition that his action in issuing a circular contrary to  rules would stand ratified by retrospective operation of the rules.  A statutory  authority, it is trite, must exercise his jurisdiction with the four-corners of  the statute and cannot deviate or depart therefrom.            It is interesting to note that the Rules were amended only for one  excise year.  The rule making power should be exercised having regard to  the policy to be adopted by the State.  Such a policy may vary from time to  time.  Having regard to the exigency for the situation, rule may also be  amended but we do snot see any reason as to why an attempt should be made  to amend the rule only with a view to justify an  illegal action on the part of  the Commissioner of Excise for the year 2005-06.  Although the validity of  the rules have not been challenged, the court cannot shut its eyes from  considering this aspect of the matter.  We are not oblivious of the fact that  framing of rules is not an executive act but a legislative act;  but there cannot  be any doubt whatsoever that such subordinate legislation must be framed  strictly in consonance with the legislative intent as reflected in the rule  making power contained in Section 62 of the Act.      

       By reason of the amendment carried out in the rules in terms of the  notification dated 9.3.2004, the Commissioner  of Excise was empowered to  prescribe a format of the application form and affidavit.  Such an application  or affidavit could be filed within the date and time stipulated by him but the  same would not mean that while prescribing a format in respect of an  application form or affidavit, he became authorized to dilute the statutory  requirements or dispense with the same.  No exception can although be  taken as regard the format relating to the applications, strong exception has  to taken as regard the format of the affidavit.  Clauses 5 and (6) of the  affidavit are  as under :

"(5)    That the Deponent neither owes any dues to the  government or public works nor his name exists in  the black list and neither he has been debarred to  acquire excise licence under Chhattisgarh Excise  Act, 1915 and rules made thereunder and amended  Chhattisgarh Excise Settlement for License for  Retail Sale of Country/Foreign Liquor Rules,  2002."      

(6)     That the Deponent bears good moral character.  He  has not been held guilty of non-bailable offence

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 27  

under Chhattisgarh Excise Act, 1915 or Narcotics  Drugs and Psychotropic Substances Act, 1985 or  any other procedure or law promulgated that time."   

       A bare comparison of the said clauses with Rule 9 would demonstrate  that the same do not satisfy the statutory requirements   

ARE THE AMENDING RULES \026 RETROSPECTIVE :         At this juncture, we may notice the effect of the amendment effected in  terms of the notification dated 22.3.2005.  But before we proceed to do so, it  may be noticed that indisputably the entire selection process was over by  16.3.2005.

       By reason of the said notification, clause (c) of Rule 8(1) was  substituted.  The substituted provisions lay down that the application form  prescribed in terms of Rule 6 together with the prescribed application fee  shall be submitted in the proforma prescribed by the Commissioner of  Excise.

       Yet again clause (C-1) was added after clause (c) providing that the  first, second and third applicants selected must submit an affidavit duly  verified by the public notary in the prescribed proforma next day during  office hours.  The notification does not state that the amendment will have a  retrospective effect.  In absence of any express provisions contained in the  notification, the court will not ordinarily presume the same to be  retrospective in nature.   

       A statute must be read reasonably.  A statute should not read in such a  manner which results in absurdity.   A statute, on its plain language,  although postulates a prospective operation, it  cannot be held to be  retrospective only because it would apply for the excise year for which  applications were invited despite the fact that the selection process made  thereunder is over.  The State is bound by the terms of the advertisement and  the rules existing at that time.  The statutory authorities and the applicants  are expected to follow the law  as it stood thence.  No step could be taken on  the pre-supposition that the rule would be amended. It is also not a case  where draft rules were already in existence and such draft rules had been  applied, which could otherwise be permissible in law. But a situation of this  nature is not contemplated in law.    

       Mr. Desai would argue that as amendment has to be effective for the  settlement of licence for country/foreign liquor retail shops for the year  2005-06, the same may be held to be retrospective in nature.  Even for the  said purpose, it was expected of the rule making authority to say so  expressly.   

A rule may not be challenged  as ultra vires the Act, but its  interpretation can certainly be an issue.  The rule if given retrospective effect  would become unworkable and would not capable of being given effect to.   A rule cannot be framed keeping in view that the Commissioner has issued  certain circular which is illegal.  By reason of a rule making power, an  invalid action on the part of the Commissioner of Excise cannot be  validated.  

If a selection process is over upon following a procedure which is  illegal, by reason of a rule making power the same cannot be rendered valid  simply by directing that the same shall govern the selection of applicants for  grant of licence under the Act for the year 2005-06.   

       The question as to whether it can be given effect to or not is, thus,  required  to be judged on its own without reference to the circular issued by  the Commissioner of Excise.  Cassus Omissus, it is well known, cannot be  supplied by the court. [See  P.T. Rajan vs.  T.P.M. Sahir and Others \026 (2003)  8 SCC 498]

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 27  

We have noticed hereinbefore that despite the fact that the order of  injunction was issued by the High Court while modifying the interim order  on 7.3.2005, the State was asked not to publish the selection list.  The  contentions raised in the petitions for grant of special leave to appeal,  however, leave no manner of doubt that such selection list whether in  violation of the order of the High Court or otherwise had been published.  If  the said rules are considered to be retrospective, admittedly, the affidavits  had not been filed on the next day of such selection and, thus, the rules are  not capable of being implemented.  

Different situations may arise in different cases in the matter of grant  of injunction as was noticed by this Court in  Deoraj vs. State of  Maharashtra and Others [(2004) 4 SCC 697] stating :

"12. Situations emerge where the granting of an interim  relief would tantamount to granting the final relief itself.  And then there may be converse cases where withholding  of an interim relief would tantamount to dismissal of the  main petition itself; for, by the time the main matter  comes up for hearing there would be nothing left to be  allowed as relief to the petitioner though all the findings  may be in his favour. In such cases the availability of a  very strong prima facie case \027 of a standard much  higher than just prima facie case, the considerations of  balance of convenience and irreparable injury forcefully  tilting the balance of the case totally in favour of the  applicant may persuade the court to grant an interim  relief though it amounts to granting the final relief itself.  Of course, such would be rare and exceptional cases. The  court would grant such an interim relief only if satisfied  that withholding of it would prick the conscience of the  court and do violence to the sense of justice, resulting in  injustice being perpetuated throughout the hearing, and at  the end the court would not be able to vindicate the cause  of justice. Obviously such would be rare cases  accompanied by compelling circumstances, where the  injury complained of is immediate and pressing and  would cause extreme hardship. The conduct of the parties  shall also have to be seen and the court may put the  parties on such terms as may be prudent."

Even the manner in which the interim order of this Court is given  effect leaves a lot to be desired.  It is not in dispute that the order of this  Court dated 8.4.2005 was communicated on 9.4.2005. 10.4.2005 was a  Sunday and, therefore, it was not expected that the services of the public  notary would be available, or the  stamp would be available on that day for  affirming affidavits.  The affidavit filed on behalf of the State clearly shows  that on 09.04.2005 itself , that is the day on which the order by this Court  was communicated, the concerned persons were informed as regard their  selection, if not prior thereto.  The State’s letter dated 9.4.2005 relating to  Application No.01010140 shows that thereby one Ramesh Prasad Dheemar  was informed that he had been selected for Desi/English wine shop/Circle  Tikrapara Circle as a first licensee.  Even the unnecessary stipulations had  not been scored out therefrom.  He was not asked to file an affidavit by  10.4.2005.  He was merely asked to deposit 1/12th part of the payable duty as  yearly security  within three days and 1/12th part of yearly licence fee by  30.4.2005, whereafter licence was to be granted to him. We fail to  understand as to how without making a scrutiny as regard compliance of  conditions, licences were  granted  on 11.4.2005 and 12.4.2005.  The  affidavit of the State reveals :

"That the process of selection of Applicants under  the Circular dated 14.2.2005 had already been completed  on 16.3.2005 and a list of the Applicants selected after

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 27  

the draw of lotteries had been submitted before the  Hon’ble Chhattisgarh High Court on 22.3.2005.  A typed  copy of the list of successful Applicants as submitted  before the Hon’ble Chhattisgarh High Court is annexed  hereto and marked as Annexure "RCG-2".

That, accordingly based on the result of the  selection process, the Collectors of all Districts in the  State called upon the selected Applicants to submit  affidavit in the prescribed format.  The affidavits  submitted were duly processed/scrutinized by the District  Level Committee constituted in each district as per Rule  10 of the 2002 Rules (comprising of the Collector as the  Chairman and Assistant Commissioner/District Excise  Officer as the Member Secretary).  The licences were  thereafter granted on 11.4.2005/12.4.2005 subject to the  condition that the same were only temporary and were  granted under an interim arrangement and were subject to  further orders to be passed by this Hon’ble Court.  Thus,  the temporary licences for the year 2005-06 for running  country/foreign liquor retail shops in the State have been  issued after following the process prescribed in the 2002  Rules and after scrutiny of affidavits and consequent  approval by the Committee already formed under the  Rules, as had been directed by this Hon’ble Court.  An  English translated copies of the information received  from each of the 16 districts in the State granting  temporary licences to the successful Applicants is  enclosed hereto and filed as Annexure "RCG-3 (Colly.)".

We have noticed hereinbefore that even in the notice, the selected  candidates had not been asked to submit affidavits  in the prescribed format.   It is not expected of the statutory functionaries to ask the selected candidates  to comply with the requirements orally. It is beyond our comprehension as to  why such a post haste action was taken by the State.

Our attention has been drawn to the following charts prepared by the  Respondents :

       "EXAMPLES OF SAME ADDRESS OF DIFFERENT FAKE  SELECTED APPLICANTS OF RAIGARH, CHAMPA JANJGIR AND  KAWARDHA DISTRICTS   

3, Shankar Nagar Raipur Near Dr Anoop Verma, Katora Talab, Civil  Lines, Raipur Behind Prince Hotel, Katora Talab, Civil  Lines Raipur 27, Kholi  Vikas Nagar,  Bilaspur  H. No.15/262 Near Chandnia  Para, Canal,  Janjgir Pg Names Pg

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 27  

Names Pg Names Pg Names Pg Names 77 Raj Kr. Singh 79 Rajendra Prajapati 222 Vikas  Jaiswal 82 Rakesh Singh 86 Ram Bachan Yadav 78 Munna  Gupta 84 Surendra Lal 87 Jitendra Singh 82 Babloo  Kr. Rai 88 Santosh  Kumar 78 Jai  Prakash Singh 90 Shiv  Narayan Jaiswal

259 Urmila Devi 220 Jitendr Singh 80 Guddu Moar

260 Satish  Singh 222

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 27  

Vinay  Gupta 81 Raghven dra  Kumar  Singh  

258 Vinod  Pandey

258 Avadh  Narayan  Shukla

258 Shyam  Lal  Gupta

259 Jagdish  Yadav

259 Bunty  Singh

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 27  

Jamat Mandir  Para, Kavardha 30, Block B, Quarter Mohalla, RSB  Tower,  Taarbahar, Bilaspur Lochan Nagar,  P.S.  Chakradhar  Nagar, Dist. Raigarh Punjabi  Colony, Dayal  Band, Bilaspur Nehru Nagar,  Bilaspur Pg Names Pg Names Pg Names Pg Names Pg Names 79 Pramod  Singh 91 Parikha  Paswan 92 Ashok  Kumar  Singh 93 Surjit  Singh  Bhatia 80 Sushil  Kumar 83 Shailend ra  Singh 222 Stayend er Singh  92 Lakshmi  Prasad 94

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 27  

Ravindr  Nath  Upadhy a 80 Manoj  Singh 85 Santosh  Kumar

Shiv  Narayan Jaiswal 227 Umesh  Singh 258 Dharme mdra  Singh

223 Munna  Singh

H.No.7/279 Pursuram Ward FCI Gowdown Bhatapara, Raipur Shankar Nagar, Dist. Janjgir 1/73, Near  Ranjit Singh  Dhaba,  Shivrinarayan,  Tehsil  Navagarh, Dist.  Janjgir 5/12, Bazar  Para, Dhara  Dwar, Dist.  Janjgir Chanpa H. No.190 Pratap  Ganj Thana  Sarngarh,  Raigarh Pg Names Pg Names Pg Names Pg Names

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 27  

Pg Names 85 Sanjiv  Kumar  Gupta 83 Raja  Piyush  Narayan 83 Mahendr a Singh 228 Parmesh war  Singh 228 Santosh  Kr. Singh 87 Dashrat  Yadav 92 Kamakh ya  Narayan  Singh 91 Arvind  Singh  228 Santu  Singh 229 Dilipdas  222 Sanjiv  Kr. 90

84 Lakshmi  Pd  Gupta

224 Vishnu  Singh

226 Uday  Singh

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 27  

227 Abhima nu  Gupta

From a perusal of the aforementioned charts, it would appear that different persons  belonging to different communities had filed different applications showing the  same address.  Even persons having the same name had filed more than one  application.   

       Mr. Desai submitted that  these allegations give rise to separate cause of  actions.  We do not agree.   

       Although we do not intend to put a seal of finality on the said issue,  we are constrained to observe that having regard to the actions of the  statutory functionaries, the entire exercise of the scrutiny as regard  ascertainment of the eligibility of the candidates vis-‘-vis selection process  is required to be undertaken  again by the Selection Committee.   Furthermore, this Court is entitled to take into consideration subsequent  events so as to do the complete justice to the parties. [See Board of Control  for Cricket, India & Anr. Vs.  Netaji Cricket Club & Ors.  [2005 (1) SCALE  121].   When this Court passed an interim order it was expected that the  statutory requirements therefore, shall be complied with.  Even if Rule 9 is  held to be directory, substantial compliance thereof was necessary. A  mandatory statute requires strict compliance whereas a directory statute  requires substantial compliance.  Even if a statute is directory, the State  cannot say that the requirements contained therein do not envisage  compliance thereof.  The authorities of the State cannot raise a plea that they  would not even notice the inherent defects contained in the application.   They could not proceed on a presupposition,  for which there is no legal  sanction, that contents of the affidavit would be correct.  No summary report   required to be prepared by the Member Secretary for its placement before  the Committee appears to have not been prepared.  The Rules  postulate that  each and every application must be examined carefully.  Mere fact that a  large number of applications have been filed, as a result whereof the State  had been able to obtain crores and crores of rupees by itself did not entitle  the State to dispense with the statutory requirements.  The application fees  were not meant to be utilized for the purpose of earning revenue but to meet  the administrative charges required therefore.  Application fees cannot be  equated with tax.    

Undoubtedly, the state has the exclusive privilege to deal in liquor but  it has also to be borne in mind that it has a constitutional and legal duty to  safeguard the public interest and public health. The conditions for grant of  licence as laid down in the statute are required to be observed only with a  view to sub serve the constitutional goal and not to subverse the same.

An affidavit  required to be filed in whatever format it may be must  disclose all the informations required under the law which would enable the  statutory authorities to verify the same.  Licences to deal in liquor cannot be  granted on  mere asking by a person and only because he is in a position to  fulfil the requirements as regard deposit of licence fee and other charges.  

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 27  

Undoubtedly, the State is entitled to raise its revenue but it is also obligated  to fulfil its constitutional and statutory duties.

PRECEDENTS  RELIED UPON ON BEHALF OF THE APPELLANTS :  

In the Nandlal Jaiswal (supra),  whereupon  Mr. Desai placed strong  reliance, this Court was concerned with grant of licences for running  distilleries.  Therein, this Court observed that the legislature should be  allowed some play in the joints because it has to deal with complex problems  but it did not say that a statutory authority while exercising its statutory  functions may do away with or dilute the statutory mandates.  

       In G.J. Fernandez (supra), again this Court was interpreting the  conditions of NIT and not the statutory rules.  It is only in the fact situation  obtaining therein it was observed that the way in which the tender  documents issued by it had been understood and implemented by the KPC  had been explained in its ’note’, which sets out the general procedure which  the KPC was following in regard to NITs issued by it from time to time.   The said decision has no application in a case requiring compliance of   statutory requirements.

       In Dr. Mahachandra Prasad Singh (supra),  this Court was concerned  with interpretation of an election of the Bihar Legislative Council Members  (Disqualification on Ground of Defection) Rules, 1994.  While considering  the submission that an  affidavit which is required to be filed in terms of sub- rule (6) of Rule 6 of the Rules, the Court  held that the provisions thereof are  not  so mandatory in nature that even a slight infraction of the Rules would  render the entire proceedings initiated by the Chairman invalid or without  jurisdiction.  It was in that sense the provisions were  held to be directory in  nature.  We may notice that in terms of the Civil Procedure (Amendment)  Act, 2002, a plaint must be verified by an affidavit, which is mandatory in  nature.              In Nain Sukh Das (supra) this Court was concerned with a case where  the election of the municipal member was sought to be set aside on the  ground of alleged violation of Article 15(1) of the Constitution. In that case  it was held that the petitioners therein never asserted their rights by taking  appropriate proceedings to get the bar under Article 15(1) removed and in  that situation, this the Court did not exercise its jurisdiction under Article 32  of the Constitution stating:

"\005It may be, as we have already remarked, that the  petitioners could claim such relief as rate-payers of the  Municipality in appropriately framed proceedings, but  there is not question of enforcing petitioners’  fundamental right under article 15(1) or article 14 in such  claim. There is still less ground for seeking relief on that  basis against respondent 3 who is only a nominated  member\005"

The said decision has no application in the instant case.

In K.N. Guruswamy (supra), the appellant therein sought to enforce  his right in obtaining a contract to which he was entitled to but no relief was  granted as the excise year had already expired. Issuance of such a writ was  found to be resulting in futility.   Such is not the case herein.  

In Rajendra Singh  (supra),  this Court held that the jurisdiction of the  High Court under Article 226 is not intended to facilitate avoidance of  obligations voluntarily incurred, though the licensees are not precluded from  seeking to enforce the statutory provisions governing the contract.

The writ petitioners herein filed a writ at a pre-selection stage and  furthermore have not sought for enforcement of the contract.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 27  

In Balco Employees’ Union  (supra), this Court was concerned with  an economic policy of the State which is not the case herein.  

Furthermore, it is now beyond any cavil  that economic policies of the  State although ordinarily would not be interfered with, but the same is not  beyond the pale of judicial review. [See Cellular Operators Association of  India and Others vs. Union of India & Others \026 (2003) 3 SCC 186]

       It is also not a case where no relief can be granted to the writ  petitioners, as was done in the case of K.N. Guruswamy (supra), having  regard to the fact situation obtaining therein.

SHOULD WE ISSUE GUIDELINES :

Before parting, we make it clear that in these appeals we did not go  into the larger question raised by Dr. Dhawan that the State must insist for a  solvency certificate keeping in view the similar provisions contained in the  statutes enacted by the other States, nor this Court, as at present advised, is  inclined to issue the requisite guidelines therefor.   

There cannot, however, be any doubt or dispute that having regard to  the several decisions of this Court, e.g.  The State of Bombay vs. R.M.D.  Chamarbaugwala [(1957)  SCR 874], M/s Fatehchand Himmatlal and Others  etc. vs. State of Maharashtra etc. [(1977) 2 SCC 670], Khoday Distilleries  Ltd. and Others   vs. State of Karnataka and Others [(1995) 1 SCC 574],  B.R. Enterprises etc. vs. State of U.P. and Others etc. [(1999) 9 SCC 700],   State of A.P. and Others vs. Mcdowell & Company and Others [(1996) 3  SCC 709], State of Punjab and Another vs. Devans Modern Breweries Ltd.  and Another [(2004) 11 SCC 26], trade in liquor is considered to be res extra  commercium although tobacco produce has not been declared so. [See  Godawat Pan Masala Products I.P. Ltd. and Another vs. Union of India and  Others [(2004) 7 SCC 68].  The State while exercising its power of parting  with its exclusive privilege to deal in liquor has a positive obligation that any  activity therein strictly conforms to the public interest and ensures public  health, welfare and safety.  Strict adherence to the requirement to comply  with the statutory provisions must be considered from that angle.  

CONCLUSION  :

The question, however, which now falls for consideration is as to  what order should be passed in the peculiar facts and circumstances of this  case.         In this case  the mode of selection is in question.  All the parties  participated in the selection process. Some of them became successful.  They  had not complied with the statutory requirements not because they were not  willing to do so but because the statutory authorities were not correctly  advised.  The conduct of the statutory authorities although must be  deprecated but that by itself, in our opinion, may not come in the way of the  successful candidates in getting the just relief.    

       Keeping in view the peculiar facts and circumstances of this case, we  intend to issue the following directions :

i)      The Member Secretary shall scrutinize all the applications of the  successful candidates afresh and prepare a summary report within one  week from date.

ii)     Irrespective of the format prescribed by the Commissioner of Excise,  each of the selected candidates must file an appropriate affidavit,  which would be in strict compliance of the requirement of Rule 9.

iii)     Such affidavits must be filed before the respective committees within  one week from date, the contents whereof  would be verified in terms

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 27  

of Order 6 Rule 15 of the Civil Procedure Code.  The said affidavits  shall be scrutinized by the Committee so as to enable them to arrive at  a finding as to whether the applicants fulfil the eligibility criteria and  are otherwise suitable for grant of licence under the Act and the rules.   iv)     The writ petitioners or any other person in the locality may file  appropriate applications before the said Committee with a view to  show that the selected candidates do not fulfill the eligibility criteria  or are debarred or are otherwise unsuitable from obtaining a licence  under the Act.          v)      Such objections may also be filed within two weeks from date.  The  Committee may consider the said objections and, if necessary, may  call for further or better particulars from the selected candidates so as  to satisfy themselves about their eligibility etc.

vi)     The respective District Level Committees shall strictly verify and  scrutinize the affidavits as also other documents furnished by the said  applicants so as to arrive at a decision that the statutory requirements  have been complied with upon application of their mind.          vii)    The members of the Committee are made personally liable to see that  all statutory requirements are complied with.  They would strictly  apply the statutory provisions as regard eligibility and suitability of  the candidates.  

viii)   The aforementioned exercise by the Committee should be completed  within one month.  In the event, any affidavit filed by a selected  candidate either pursuant to this order or filed earlier in the format  prescribed by the Commissioner of Excise is found to be incorrect,  strict action in accordance with law shall be taken against him          ix)     The Superintendent of Police of each district within whose  jurisdiction the selected candidates ordinarily reside shall verify the  antecedents and other relevant particulars of the selected candidates  vis-‘-vis their eligibility/suitability  to obtain a licence and submit a  report to the Committee by 12.6.2005 which would be strictly  in  terms of sub-rule (3) of Rule 9.  While issuing such a certificate in  favour of the selected candidates by 12.6.2005, he  shall also file a  copy of the report before the Committee.

x)      We direct the Chief Secretary of the State and Commissioner of  Excise to act strictly in accordance with law and oversee the  functioning of the Scrutiny Committees.

xi)     If the State and the  Commissioner of Excise come  across  misconduct on the part of any of the officers including the members  of the Committee, strict action must be taken against the concerned  officer.                  xii)    The selected candidates in the meanwhile may carry on the trade in  liquor pursuant to the licence granted in their favour but the same  shall be subject to this order as also the decision of the Scrutiny  Committee.       

The Writ Petitioners and the Respondents shall be at liberty to  mention before the High Court for  appropriate order(s).   

       These appeals are disposed of on the aforementioned terms.  No costs.