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PETITIONER: CHINGLEPUT BOTTLERS

       Vs.

RESPONDENT: MAJESTIC BOTTLING COMPANY

DATE OF JUDGMENT15/03/1984

BENCH: SEN, A.P. (J) BENCH: SEN, A.P. (J) VARADARAJAN, A. (J)

CITATION:  1984 AIR 1030            1984 SCR  (3) 190  1984 SCC  (3) 258        1984 SCALE  (1)832  CITATOR INFO :  RF         1989 SC  49  (16,19)

ACT:      Constitution    of    India-Art.    226-High    Court’s Jurisdiction to issue writ of a mandamus in cases where duty sought to he enforced is of discretionary nature.      Natural Justice-Application of rules of natural justice to- cases  which relate not to rights but to mere privileges of licences.      Tamil  Nadu  Arrack  (Manufacture)  Rules,  ’981-R.  7- Commissioner has  no legal duty to grant licence-Approval of Staff   Government is  a pre-requisite for grant of licence- High Court cannot compel grant of licence by Commissioner by issuing writ of mandamus.

HEADNOTE:      On the surrender of the licence for the manufacture and supply of bottled arrack for the Chingleput District for the financial year  ]982-83 by  the then  existing licensee, the Commissioner of  Prohibition and  Excise  called  for  fresh applications from intending persons for the grant of licence under the Tamil Nadu Arrack (Manufacture) Rules, 1981 framed under the  Tamil Nadu  Prohibition  Act,  1937.  Two  firms, namely, Majestic  Bottling Company  and Chingleput Bottlers, filed there  applications and an enquiry with regard to them was held  by the  Assistant Commissioner.  The  Commissioner considered the report of enquiry, gave separate oral hearing to the two applicants and passed an order rejecting both the applications.  As  regards  Majestic  Bottling  Company  the Commissioner held that they did not satisfy the requirements of rr. 5(a) and 5(e). In the case of Chingleput Bottlers, he held that they did not satisfy the requirements of rr. 5(a), 5(c) and  5(e). While  recording the  finding in  respect of Chingleput Bottlers,  the Commissioner relied on a report of the Collector  and other material gathered by him during the course of the enquiry, which included a representation from. Majestic  Bottling   Company  against   the  application  of Chingleput Bottlers.  Both the  applicants  filed  petitions under Article 226 of the Constitution questioning the orders passed by the Commissioner.      A Single  Judge of  the High  Court issued  a  writ  of certiorari quashing the order of the Commissioner insofar as

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he rejected the application of Majestic Bottling Company and also issued a writ of mandamus ordaining the Commissioner to grant the  licence to  Majestic Bottling Company. As regards Chingleput  Bottlers,   the  Single   Judge  rejected  their contention that  the Commissioner  had acted  in  breach  of rules of  natural justice by his failure to furnish them the report of  the Collector and observed that nothing precluded them from  seeking perusal  of the  records or from making a demand for a copy of the same. 191      Both the  applicants preferred  appeals to the Division Bench. The  State Government  which  was  in  possession  of material adverse  to the  two partners  of Majestic Bottling Company did  not initially file a separate counter affidavit but only  did so  at the  conclusion  of  the  hearing.  The Division  Bench   ruled  that   the  order   passed  by  the Commissioner must  be adjudged  by the reasons stated by him and those  reasons cannot  be supplemented  by fresh reasons provided by  the State  Government in  its belated affidavit and upheld the judgment of the Single Judge.      The  State  Government  and  Chingleput  Traders  filed appeals against the judgment of the Division Bench.      It was contended on behalf of the State Government that the grant  of licence  under r.  7 was  subject to the prior approval of the State Government, that if the High Court was satisfied that  the impugned  order of  the Commissioner was liable to  be quashed  on the ground that there was an error apparent on the face of the record, the proper course for it to adopt was to issue a writ of mandamus to the Commissioner to re-determine  the question of grant of such privilege and that the High Court had no power to issue a writ of mandamus directing the Commissioner to grant the licence in favour of Majestic Bottling Company.      It was  contended on behalf of Chingleput Bottlers that the Commissioner  had acted  in breach  of rules  of natural justice  in  not  furnishing  them  a  copy  of  the  report submitted by  the Collector  and other  material gathered by him during the course of the enquiry. Allowing the appeal of the State Government and dismissing the appeal of Chingleput Bottlers. ^      HELD: 1.  No mandamus will lie where the duty sought to be enforced is of a discretionary nature nor will a mandamus issue  to  compel  the  performance  by  a  public  body  or authority of an act contrary to law. [198H-199A]      (a) In  the instant  case the Commissioner was under no legal duty  to grant  a licence to Majestic Bottling Company till he  received the prior approval of the State Government under r.  7. Even assuming that the Commissioner recommended the grant  of a  licence to  them  under  r.  7,  tho  State Government were  under no  compulsion to  grant  such  prior approval. The  grant or refusal of such licence was entirely in the  discretion of  the State  Government. The High Court had no  jurisdiction to  issue a  writ of  mandamus  to  the Commissioner to grant a licence to Majestic Bottling Company contrary to the provisions of r. 7. [199 A-C]      de Smith: Judicial Review of Administrative Action, 4th Ed. pp.  341 and  544: H.W.R.  Wade: Administrative Law. 5th ed. p. 638; referred to.      (b) Absence  of  a  specific  plea  in  the  nature  of demurrer would  not invest  the High Court with jurisdiction to issue  a writ  of mandamus  ordaining the Commissioner to grant a licence under r. 7 without the prior approval of the 192 State Government  which is a condition pre-requisite for the

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grant of such privilege. The High Court was unduly technical in applying  the rules  of pleading  and short-circuited the whole procedure  upon  a  wrongful  assumption  of  its  own powers. The  view  taken  by  it  is  manifestly  erroneous; otherwise, the statutory requirements of such prior approval of the  State Government under r. 7 would be rendered wholly otiose. [201 C-E]      K.N. Guruswamy  v. Stare of Mysore,[1955] 1 S.C.R. 305; and P.  Bhooma Reddy v. State of Mysore, [1969] 3 S.C.R. 14; distinguished.      (c) It is not possible to accept the contention that no useful purpose  would have  been served  by the  High  Court remitting  the   matter  for   the  reconsideration  of  the Commissioner since it had already found that all the reasons that could  be given  for  upholding  the  validity  of  the Commissioner’s order  were bad  and unsustainable.  This was not a case where it could be said that there was nothing for the  State   Government  to  consider  while  examining  the question whether  it should  accord or refuse prior approval to the  grant of  licence to Majestic Bottling Company under r. 7.  One of the relevant factors that the State Government had to  take into  consideration was whether the partners of that Company  were persons who would abide by the provisions of the Act and the rules. The facts disclosed in the counter affidavit of  the State  Government  lay  a  serious  charge against the  partners of that Company and it was permissible for  the   State  Government   to  take   those   facts   as justification for  refusal to  grant prior approval under r. 7. [202C, 203A-B, E-F]      (d) The  proper course  for the High Court to adopt was to issue  a writ  of mandamus  directing the Commissioner to redetermine the question after following the procedure of r. 7 and  in case he came to a decision to grant the licence in favour of  Majestic Bottling Company, to refer the matter to the State Government for its prior approval. [206A-B]      M/s Hochtief Gammon v. State of Orissa, [1976] 1 S.C.R. 667; Padfield  v. Minister  of  Agriculture,  Fisheries  and Food, L.R. [1968] A.C. 997: referred to.      Gujarat State  Financial Corpn.  v. M/s.  Lotus  Hotels Pvt. Ltd., [1983] 3 S.C.C. 379; distinguished.      State of Tamil Nadu v. C. Vadiappan, [1982] 2 Mad. L.J. 30; and  K. Ramaswamy  v. Government  of  Tamil  Nadu  (Writ Appeal No. 368 of 1981); overruled.      2. It  is a  fundamental rule  of law  that no decision must be  taken which  will affect  the rights  of any person without first  giving him  an opportunity of putting forward his case.  Strict adherence  to the rules of natural justice is required  where a  public authority  or body  has to deal with rights.  The audi  alteram partem rule may not apply to cases which relate not to rights or legal expectation but to mere privilege  or licence.  An authority  or body  need not observe the  rules of  natural justice  where its  decision, although  final,   relates  not   to  a  ’right’  but  to  a ’privilege’ or ’licence’. All that is emphasised in such 193 cases is  that the  applications for  grant of  privilege or licence must  be considered  fairly. There are no inflexible rules of natural justice of universal application. Each case depends on  its own  circumstances. Rules of natural justice vary with  the varying constitutions of statutory bodies and the rules  prescribed by  the legislature  under which  they have to act. [209C-D-G, 213D-E-G]      The  right  to  know  the  case  to  be  met  does  not necessarily involve  any right to know the source of adverse information or  to confront  the informants,  for,  in  some

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cases it  would be  quite proper for the authority to employ confidential sources. [210B-C]      Ridge v.  Baldwin: L.R.  [1964] A.C.  40; R.  v. Gaming Board for  Great Britain, [1970] 2 All E.R. 528; R. Surinder Singh Kanda  v. Government of the Federation of Malaya, L-R. [1962] A.C.  322; Breen  v. Amalgamated,  Engineering Union, [1971] 2 Q.B. 175; Mac Innes v. Onslow Fane & Anr., [1978] 3 All E.R.  211. Kishan Chand Arora v. Commissioner of Police, [1961] 3.  S.C.R.  135;  and  Nakkuda  Ali  v.  M.F.  De  S. Jayaratne L.R. [1951] A.C. 66. referred to.      3. In the instant case there is nothing in the language of r.  7 to suggest that in refusing to grant the privilege, the Commissioner  is obliged  to act ’judicially’. The order refusing a licence under r. 7 is purely an administrative or executive order and is not open to appeal or revision. There is no  lis between  the Commissioner  and the  person who is refused such  privilege. The  power of  refusal  of  licence unlike the  power to  grant  is  not  subject  to  any  pre- condition. The grant of a liquor licence under r. 7 does not involve any  right or  expectation but  it is  a  matter  of privilege. The  Commissioner was  under no obligation either to disclose  the sources  of information  or the gist of the information that  he had.  All that was required was that he should act fairly and deal with the applications without any bias, and  not in  an arbitrary  or capricious  manner.  The Commissioner was  entitled to  act  on  the  report  of  the Collector and  also on other material gathered by him during the course  of the  enquiry. It  cannot  be  said  that  the Commissioner in  dealing with  the applications  did not act fairly in  not furnishing  a  copy  of  the  report  of  the Collector  or  in  taking  a  representation  from  Majestic Bottling Company.  There is  also no  suggestion of any mala fides  on   the  part  of  the  Commissioner  or  the  State Government. [213G-H, 214A-B, C-E, G-H]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION:  Civil  Appeals  Nos.  1 1970-1 1972 of 1983      Appeals by  Special leave  from the] judgment and order dated the  27th July, 1983 of the Madras High Court in W. A. Nos. 523, 531 & 528 of 1983.      K.K.  Venugopal   and  C.   S.  Vaidyanathan   for  the Appellants in CA-Nos. 1 1970-71183.      Sahnti Bhushan, A. T. M. Sampath and Mr. K. Subramaniam for the Respondents in CA. Nos. 1 1970-71/83. 194      A.K. Sen and A.V. Rangam for the Appellant in CA. No. 1 1972 of 1983.      Soli J. Sorabjee A.T.M. Sampath and K. Subranmaniam for the Respondent in CA. 11972/83.      The Judgment of the Court was delivered by      SEN, J. These appeals by special leave directed against a judgment  of a  Division Bench  of the  Madras High  Court dated July  7, 1983  upholding the  judgment and  order of a learned Single Judge dated June 13, 1983 relate to the grant of a  licence for the manufacturing and supplying of bottled arrack  to  the  wholesale  and  retail  licensees  for  the Chingleput district  under r.  7 of  the Tamil  Nadu  Arrack (Manufacture) Rules,  1981 (’Rules’, for short) framed under the Tamil  Nadu Prohibition  Act, 1937  (’Act’  for  short). These appeals raise separate and distinct questions and must therefore receive separate consideration.      Put very shortly, the essential facts are these. On May

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28, 1982  one O.H. Kumar carrying on business under the name and style  of Messrs Three Star Bottling Company surrendered his licence for the manufacture and supply of bottled arrack for the Chingleput district for the financial year 1 982.83. The Commissioner  of Prohibition & Excise, Madras called for applications from  intending persons  for the  grant of  the licence.  In   response  to   the  notice   issued  by   the Commissioner under  r. 3(2)  of the  Rules, there  were  two applications filed  under r.  5 in  Form 1,  namely,  by  J. Balaji. managing partner of Messrs Majestic Bottling Company on June  9, 1982  and by  V. Ramabadran, managing partner of Messrs  Chingleput   Bottlers  on   June   14,   1982.   The Commissioner  issued   a  questionnaire   and  directed  the Collector, Chingleput to have an inquiry held as regards the suitability of  the applicants  for the  grant of a licence. Pursuant thereto,  the Collector  had an inquiry held by the Assistant Commissioner  (Excise) which  lasted for four days i.e. from  June 21  to June  24, 1982. After the preliminary inquiry  and   field  inspection   made  by   the  Assistant Commissioner (Excise),  the Collector  forwarded his  report dated July  2, 1982  to the  Commissioner who  fixed July S, 1982 for oral hearing of the parties.      On July 5, 1982, the Commissioner separately heard both J.  Balaji   and  V.   Ramabadran.  At   the  hearing,   the Commissioner recorded  the statements  of both J. Balaji and v. Ramabadran in 195 support of  their respective  claims. On  July  31,1982  the Commissioner   passed    an   order   rejecting   both   the applications. As  regards Messrs  Majestic Bottling Company, the Commissioner  held that  their application  was in order but that  they did not satisfy the requirements of r. S (a), and (e)  of the  Rules. As  to their  suitability under r. S (a), he  found that  though the  partnership had been formed prior to  the date  of the  application i.e. On June 9, 1982 the firm  actually got registered subsequent thereto on June 23, 1982  and therefore  there was  no valid  partnership in existence on  June 14,  1982 i. e. On the date of the filing of the  application. As  regards r. 5(e), he held that there was no  water facility in the lands owned by the partnership firm.      As regards Messrs Chingleput Bottlers, the Commissioner held that  the application  made by  them was  not in  order because it was not accompanied by a solvency certificate and that there  was no  potable water  available at the proposed site. He  further held  that there  was only  one and a half feet water  in the  well at  the site  and D  it was of poor quality. He also came to the conclusion that the application had not  been made  bona fide  on behalf  of the partnership firm but  as benami for others. The Commissioner accordingly held that  Messrs Chingleput  Bottlers did  not  fulfil  the requirement of r. 5(a), (c) and (e) of the Rules.      The finding  of the Commissioner that Messrs Chingleput Bottlers were  mere benamidars  of O.H.  Kumar, the previous licensee, was  based on  the report of the Collector and the other material  gathered by  him during  the course  cf  the inquiry.      Both  Messrs   Majestic  Bottling  Company  and  Messrs Chingleput Bottlers  filed separate petitions under Art. 226 of the  Constitution before  the High  Court questioning the validity of  the order  passed by  the Commissioner.  By his judgment dated  June 13,  1983 a  learned Single  Judge held that the  Commissioner was  not justified  in rejecting  the application  of   Messrs  Majestic  Bottling  Company  on  a wrongful  assumption   that  they   did  not   satisfy   the

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requirement of  r. 5(a)  and (e)  of the Rules. He held that the order  was vitiated  by an error apparent on the face of the record inasmuch as J. Balaji, managing partner of Messrs Majestic Bottling Company had produced record with regard to the availability of water.      The Learned  Single Judge however set aside the finding of the  Commissioner that  the application  made  by  Messrs Chingleput 196 Bottlers was  not in order because it was not accompanied by a solvency  certificate holding  that  non-production  of  a solvency certificate  would not  entail a  dismissal of  the application on  that ground  alone, as also the finding with regard to  non-availability of  water at  the proposed  site since the  blending  unit  of  Messrs  Three  Star  Bottling Company was  already functioning  there. The  learned single Judge rejected  the contention of Messrs Chingleput Bottlers that the  Commissioner had  acted in  breach of the rules of natural justice  by his failure to furnish the report of the Collector observing that nothing precluded them from seeking perusal of the records; nor did they make a demand for it.      By his  judgment, the learned Single Judge by the issue of a  writ of  certiorari quashed  the impugned order of the Commissioner insofar  as he rejected the application made by Messrs Majestic  Bottling Company  on the  ground that there was an  error apparent on the face of the record but instead of remitting  the matter  back to  the Commissioner  to  re- consider the  question of  grant of such privilege, issued a writ of  mandamus ordaining  the Commissioner  to grant  the licence to  Messrs Majestic  Bottling  Company.  He  further upheld  the   order  of   the  Commissioner   rejecting  the application of  Messrs Chingleput  Bottlers for the grant of privilege on  the ground  that they  were mere benamidars of the previous  licensee. Aggrieved  by the  judgment  of  the learned Single  Judge, both  the State Government and Messrs Chingleput Bottlers  preferred appeals  under cl. 1 S of the Letters Patent. Upholding the judgment of the learned Single Judge the  learned Judge  of the  Division Bench  held  that learned Single  Judge was justified not only in quashing the same but  in  issuing  a  writ  of  mandamus  directing  the Commissioner to  grant  the  licence  in  favour  of  Messrs Majestic Bottling  Company without  the prior  approval  the State Government under r. 7 of the Rules.      Before proceeding  further, we  would like  to  mention that the  State Government  did not file a separate counter. There was  a counter-affidavit filed by R. Lakshmanan, Joint Commissioner  (IV),  Department  of  Prohibition  &  Excise, Madras on behalf of both the State Government as well as the Commissioner of  Prohibition &  . Excise  seeking to support the impugned  order passed  by the Commissioner. In addition to the grounds mentioned by the Commissioner for the refusal of the  applications for  grant of  privilege, there  was an additional ground  taken in  paragraph 11 and it was alleged that J. Balaji, managing partner of Messrs Majestic Bottling Company and his other partner Smt. Shanthi, who incidentally is also his 197 mother  were   the  two   erstwhile  directors   of   Messrs Dhanalakshmi Chemical  Industries Private  Limited,  Ranipet upto November  26, 1980  and there  was prima facie evidence that the company had misused the large quantity of rectified spirit  by  diverting  alcohol  from  industries  to  arrack production and  therefore they  were persons  not likely  to abide by  the provisions  of the  Act and  the Rules  farmed thereunder within  the meaning  of r.  5(b), and  this would

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have been a relevant point to be taken into consideration by the State  Government in  the matter  of grant or refusal of prior approval  under r. 7(1). It was alleged that these two persons  were  directors  during  the  aforesaid  period  of misuse.      At the  conclusion of the hearing of the appeals before the High  Court, the  State Government filed a supplementary affidavit of  S. Ranganathan,  Deputy Secretary to the State Government of Tamil Nadu, Department of Prohibition & Excise furnishing further  and better  particulars of  the  alleged misuse of  rectified spirit  by Messrs Dhanalakshmi Chemical Industries  Private   Limited  which   had  put   the  State Government to a loss of revenue to the tune of Rs. 2 crores. It was  averred that  investigation into the case was almost complete and  a prosecution was about to be launched against the Company  and its directors, including J. Balaji and Smt. Shanthi,  the  two  partners  of  Messrs  Majestic  Bottling Company. Inasmuch  as no such objection was taken before the learned Single  Judge, the  learned Judges  felt that it was not necessary for them to deal with the facts brought out in the two  counter-affidavits. It  appears  that  the  learned Advocate-General also  did  not  press  the  ground  at  the hearing of  the appeals.  The learned  Judges held  that the validity of  the impugned  order passed  by the Commissioner must be  adjudged by the reasons stated by him and cannot be supplemented by fresh reasons by the State Government in the shape of affidavit or otherwise .      There  are   really  two   questions  that   fall   for determination. The  first is  as to  the jurisdiction of the High Court  to issue a writ of mandamus. It is said that the grant of licence under r. 7 is subject to the prior approval of the  State Government  and is  in the  discretion of  the State  Government.  The  High  Court  is  not  the  granting authority and  therefore had  no power  to issue  a writ  of mandamus directing  the Commissioner  to grant  a licence to Messrs Majestic  Bottling Company.  The second  question  is whether the  Commissioner  acted  in  breach  of  the  rules natural justice in not furnishing 198 to Messrs Chingleput Bottlers a copy of the report submitted by the  Collector and  other material gathered by him during the course  of the  inquiry tending  to show  that they were benamidars of  one O.H.  Kumar, the previous licensee. It is said that  Messrs  Majestic  Bottling  Company  had  at  the separate hearing  before the  Commissioner submitted a brief styled as  a representation  containing several documents in opposition to  the application  made  by  Messrs  Chingleput Bottlers on  the ground  that their  application was  benami without furnishing  a copy of the same to them and this must have influenced  the mind  of the  Commissioner. Even if the Commissioner was  not acting in a judicial Or quasi judicial capacity, he  was required  to  act  fairly.  The  rules  of natural justice  therefore required  that Messrs  Chingleput Bottlers should  not be  deprived of  this business  without knowing the  case they  had to meet. Both the questions that arise will have to be dealt with separately.      The  first   issue,  as  already  indicated,  raises  a question of  prime importance  and of  some  difficulty.  It would therefore  be convenient,  in the  first instance,  to deal with  the appeal  preferred by the State Government. It is urged  that the High Court had no jurisdiction to issue a writ of  mandamus ordaining  the  Commissioner  to  grant  a licence to  Messrs Chingleput  Bottlers under  r. 7  of  the Rules without the prior approval of the State Government. It is said  that although a writ of mandamus may be a necessary

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adjunct to  a writ  of certiorari  the proper course for the High Court to have adopted was, if it was satisfied that the impugned order  of the Commissioner was liable to be quashed insofar as  he  rejected  the  application  made  by  Messrs Majestic Bottling  Company on  the ground  that there was an error apparent  on the  face of the record, to have issued a writ of mandamus Commissioner to redetermine the question as to the  grant of  such privilege.  Reliance is  placed on de Smith’s Judicial  Review of  Administrative Action, 4th edn. at pp.341  and 544.  The contention  must, in  our  opinion. prevail.      In order  that a  writ of  mandamus may issue to compel the Commissioner to grant the licence, it must be shown that under the  Act and  the Rules  framed thereunder there was a legal duty  imposed on  the Commissioner  to issue a licence under r.  7 of  the Rules  without the prior approval of the State Government  and that  Messrs Majestic Bottling Company had a  corresponding legal  right for  its  enforcement.  No mandamus will lie where the duty sought to be enforced is of a discretionary nature nor will a mandamus 199 issue to  compel the  performance by  such  public  body  or authority of  an act  contrary to  law. The  Commissioner of Prohibition &  Excise was  under no  legal duty  to grant  a licence to Messrs Majestic Bottling Company till he received the prior  approval of the State Government under r. 7. Even assuming that  the Commissioner  recommended the  grant of a licence, to them under r. 7, the State Government were under no compulsion  to grant  such prior  approval. The  grant or refusal of  such licence  was entirely  in the discretion of the State  Government. The High Court had no jurisdiction to issue a  writ of  Mandamus to  the Commissioner  to grant  a licence to  Messrs Majestic Bottling Company contrary to the provisions of r. 7 of the Rules.      The   learned    Judges   observed   that   in   normal circumstances they  would have  upheld the  objection of the learned Advocate  General as to the jurisdiction of the High Court to  issue a  writ of mandamus, but in view of the fact that the  State Government had chosen not to file a separate return taking a specific plea that in the event of a writ of certiorari being  granted, the Court should not issue a writ of mandamus  for the  grant of  licence since  the grant  or refusal of  licence was subject to the prior approval of the State Government under r. 7 of the Rules. The learned Judges accordingly held that the learned Single Judge was justified in issuing  a writ  in the  nature of mandamus directing the Commissioner to issue a licence in favour of Messrs Majestic Bottling Company  in view  of the  fact that there were only two applicants  in the  field and  the application of Messrs Chingleput  Bottlers   having  been   rejected,  the   State Government had  no other  option but  to make  the grant  in favour of  Messrs Majestic  Bottling Company.  Further,  the learned Judges  observed that to sustain the objection would be tantamount  to allowing  the State  Government to  sit in appeal over  the judgment  of the  High Court. In substance, the learned  Judges were  of the  view that  failure of  the State Government  to take a specific plea as to jurisdiction precluded  them   from  raising   a  question   as  to   the jurisdiction of  the High Court to issue a writ of mandamus. We are afraid, we cannot accept this line of reasoning.      It is  true that  sometimes it  is prudent  to couple a writ of  certiorari with  a writ  of mandamus to control the exercise of  discretionary power. The following illuminating passages from  de Smith’s  Judicial Review of Administrative Action; 4th  edn. at  pp.341 and  544  pithily  sum  up  the

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function of a writ of mandamus; 200           "It  is   now  open   to  a  court  when  granting      certiorari to  remit the matter to the authority with a      direction to  reconsider and  to decide  in  accordance      with the  findings of  the court.  Apart from this, the      role  of   the  courts  is  limited  to  ensuring  that      direction has  been exercised  according  to  law.  If,      therefore,  a   party  aggrieved  by  the  exercise  of      discretionary power  seeks  an  order  of  mandamus  to      compel the  authority to  determine the  matter on  the      basis legally  relevant considerations, the proper form      of the  mandamus will  be one  to  hear  and  determine      according to  law; though  by holding  inadmissible the      considerations on which the original decision was based      the court may indirectly indicate the particular manner      in which  the discretion  ought  to  be  exercised.  In      practice the  frontier between  control of legality and      control of  the actual  exercise of  discretion remains      indeterminate, for the courts are sometimes observed to      cross the  boundaries that  they have  set to their own      jurisdiction."      **                 **                **              **           "The duty  to observe  these basic  principles  of      legality in  exercising  a  discretion  is  unlike  the      "duty" to  apply the law correctly to findings of fact,      prima facie  enforceable by  mandamus. Hence  where  an      authority   has    misconceived   or   misapplied   its      discretionary powers by exercising them for an improper      purpose, or capriciously, or on the basis of irrelevant      considerations   or    without   regard   to   relevant      considerations it  will be  deemed to  have  failed  to      exercise its  discretion or  jurisdiction at  all or to      have failed to hear and determine according to law, and      mandamus may  issue to  compel it  to act in accordance      with the law "      Professor H.W.R.  Wade in  his Administrative  Law, 5th edn. at  p. 638  also defines  the  purpose  of  a  writ  of mandamus in these words:           "Mandamus  is   often  used   as  an   adjunct  to      certiorari. If a tribunal or authority acts in a matter      where it  has no  power to  act at all, certiorari will      quash the decision and prohibition will prevent further      unlawful proceedings. If there is power to act, but the      power is  abused (as  by breach  of natural  justice or      error on the face of the record), certiorari will quash      and mandamus  may issue  simultaneously  to  require  a      proper rehearing.  An example  is Board of Education v.      Rice [1911] AC 179 cited elsewhere; the Board’s 201      decision was ultra vires since they had addressed their      minds  to  the  wrong  question,  consequently  it  was      quashed by  certiorari and  the Board were commanded by      mandamus to determine the matter according to law, i.e.      within the limits indicated by the House of Lords."      In  our   judgment,  the   High  Court   exceeded   its jurisdiction in  issuing a  writ of  mandamus directing  the Commissioner to  grant a licence to Messrs Majestic Bottling Company without the prior . approval of the State Government as enjoined  by r. 7 of the Rules. The High Court was unduly technical in  applying the  rules of pleadings. Absence of a specific plea  in nature  of demurrer  would not  invest the High Court  with jurisdiction  to issue  a writ  of mandamus ordaining the  Commissioner to  grant a  licence  to  Messrs Majestic Bottling  Company under  r. 7  of the Rules without

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the prior  approval of  the State  Government  which  was  a condition pre-requisite  for the grant of such privilege. It is regrettable  that  the  High  Court  should  have  short- circuited the  whole procedure upon a wrongful assumption of its own  powers.  The  view  taken  by  the  High  Court  is manifestly erroneous.  Otherwise, the  statutory requirement of such  prior approval  of the  State Government under r. 7 would be rendered wholly otiose.      We  should   not  be   understood  as  laying  down  an inflexible rule  that the  High  Courts  cannot,  under  any circumstances, regulate  or control the manner of grant of a liquor licence  by the issue of a writ of mandamus. It would all depend  upon the  facts and  circumstances as to whether the High  Court should  issue a writ of mandamus or not. The grant of  a liquor  licence is a matter of privilege. In the very nature of things, the grant of refusal of licence is in the discretion  of the State Government. Normally, where the statute vests  a discretionary  power upon an administrative authority, the  Court would  not interfere with the exercise of such discretion unless it is made with oblique motives or extraneous purposes  or upon  extraneous considerations. The present case  does not  fall within the rule laid down in K. N. Guruswamy v. The State of Mysore & or and P. Bhooma Reddy v. State  of Mysore  & ors. The decisions in Guruswamy’s and Bhooma Reddy’s  cases are  both in consonance with the well- settled principle that the High Court can always issue a 202 writ of  mandamus under Art. 226 of the Constitution against a public  authority to  compel the  performance of  a public duty where such authority acts in violation of the law.      It is  urged on  behalf  of  Messrs  Majestic  Bottling Company placing  reliance on  the decision  of the  House of Lords in  Padfield v.  Minister of  Agriculture, Fisheries & Food and  that of  this Court  in Messrs  Hochtief Gammon v. State of  Orissa &  ors. following  the same  that, no doubt where the  reasons given  are bad  and the authority had not taken  into  consideration  the  relevant  matters  or  real grounds on which the order could have been passed, the Court can direct  the authority  to reconsider  the matter  in the light of  such relevant  matters. But  it was  urged that no useful purpose  would be  served in  remitting the matter to the authority for reconsideration where all the reasons that can be  given for  upholding the  validity of the order have been found  by the  Court to  be bad  and unsustainable. The submission] is  that in  such a  case the  Courts  will  not direct the  authority to  reconsider the  matter  for,  then there is nothing to reconsider but the Court will direct the authority to  carry out  what it  has by  the impugned order refused to do. In Hochtief Gammon’s case, this Court deduced the following principles from the decision of House of Lords in Padfield’s case:           "The Executive  have to  reach their  decisions by      taking  into   account  relevant  considerations.  They      should not  refuse  to  consider  relevant  matter  nor      should they  take into  account  wholly  irrelevant  or      extraneous consideration.  They  should  not  misdirect      themselves on a point of law. Only such a decision will      be lawful.  The Courts  have  power  to  see  that  the      Executive  acts  lawfully.  It  is  no  answer  to  the      exercise of  that power to say that the Executive acted      bonafide  nor   that  they  have  bestowed  painstaking      consideration. They  cannot avoid scrutiny by courts by      failing to  give reasons. If they give reasons and they      are not  good reasons,  the court  can direct  them  to      reconsider the  matter in the light of relevant matters

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    though  the   propriety,   adequacy   or   satisfactory      character of  these reasons may not be open to judicial      scrutiny.  Even   if   the   Executive   considers   it      inexpedient to  exercise their powers they should state      their reasons and there must be.. material to show that      they have considered all the relevant facts. 203      This was  not a  case where it could be said that there was nothing  for the  State Government  to  consider  as  to whether should  accord or refuse prior approval to the grant of a  licence to Messrs Majestic Bottling Company under r. 7 of  the  Rules.  The  Commissioner  by  the  impugned  order rejected the  applications for  grant of  a licence  made by both Messrs Chingleput Bottlers and Messrs Majestic Bottling Company and  therefore the  stage was not reached. The stage for the  State Government  to reconsider the matter of grant of  privilege   under  r.   7  would  only  arise  when  the commissioner makes  a recommendation  for  the  grant  of  a licence to  Messrs Majestic Bottling Company. At that stage, the State  Government would  have to  consider whether  they should accord prior approval for the grant of such privilege to Messrs  Majestic Bottling  Company having  regard to  the matters specified  in r.  5 of  the Rules and the conditions set out in r. 6(c), in view of the further facts brought out in the  supplementary counter  affidavit of Deputy Secretary to the  State Government, Department of Prohibition & Excise in support  of the  objection  raised  in  para  11  of  the counter-affidavit. One  of the  relevant  factors  that  the State  Government   must,  as   they   should,   take   into consideration is the suitability of Messrs Majestic Bottling Company for  the grant  of licence as required under r. S(a) and the other is whether J. Balaji, the managing partner and Smt. Shanthi the other partner, were persons who would abide by the  provisions of  the Act and the Rules made thereunder as enjoined  by r. 5(b). The facts lay a serious charge that Balaji, managing partner of Messrs Majestic Bottling Company and his  other partner Smt. Shanthi were directors of Messrs Dhanalakshmi Chemical  Industries Private  Limited,  Ranipet upto November  26, 1980  and  that  there  was  prima  facie evidence showing  that the company had misused the rectified spirit issued  to it  causing a loss of revenue to the State Government to  the tune  of Rupees two crores or thereabout. lt would  be permissible  for the  State Government  to take these facts  as justification  for refusal  to  grant  prior approval under r. 7 of the Rules.      In coming  to the  conclusion  they  did,  the  learned Judges have drawn sustenance from the decision of this Court in Gujarat  State  Financial  Corporation  v.  Messrs  Lotus Hotels Private Limited and of the High Court in the State of Tamil Nadu  & Anr.  v. C.  Vadiappan in  support of the view that the  High Court  had jurisdiction  to issue  a writ  of mandamus directing the State of Tamil Nadu and 204 the Commissioner  of  Prohibition  &  Excise  to  grant  the privilege for  the manufacture  and supply of bottled arrack to Messrs  Majestic  Bottling  Company  for  the  Chingleput district under  r. 7  of the  Rules. The decision in Gujarat State  Financial   Corporation’s  case  (supra)  is  clearly distinguishable  and  is  not  an  authority  for  any  such proposition. No  such question  arose in  that case  at all. There, the Court was dealing with a contract entered into by the Gujarat  State Financial  Corporation with  Messrs Lotus Hotels Private  Limited for  the purpose  of setting up a 4- star hotel.  The Company  approached the  Corporation for  a loan of  rupees 30  lakhs and  tile Corporation sanctioned a

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loan of  Rs. 29.93  lakhs on  certain terms  and  conditions which the  Company accepted. The Corporation however finally resolved not  to disburse  the loan to the Company whereupon the Company  moved Gujarat  High Court  by a  petition under Act. 226  for the  issue of a writ of mandamus to direct the Corporation to  disburse the loan. A learned Single Judge of the High  Court issued  the writ  as prayed  for and  it was confirmed by a Division Bench. on appeal by the Corporation, this writ  Court held  that the  High Court was justified in issuing the  writ of mandamus. The decision in Gujarat State Financial Corporation’s case, (supra) turned on the doctrine of  promissory   estoppel  and   it  does  not  justify  the conclusion reached by the learned Judges in the present case for the  issue of  a writ  of mandamus.  It is  needless  to stress that  if the  requirement of law was that the advance of loan  to be  sanctioned by  the Gujarat  State  Financial Corporation was  to be  subject to the prior approval of the Reserve Bank  of India, the decision of the Court would have been otherwise:      It is difficult to subscribe to the doctrine evolved by the  High  Court  in  Vadiappan’s  case,  (supra)  that  the Commissioner is  the ’sole arbiter’ under r. 7 of the Rules. It relied  upon the earlier decision of the High Court in K. Ramaswamy v. Government of Tamil Nadu & ors laying down that the proviso  to r.  6 of  the Tamil  Nadu Arrack  (Supply by Wholesale) Rules,  1981 had  to be  understood strictly in a negative sense.  According to  the High  Court, at  best  it confers on  the Government  a power  to veto. By itself, the High Court  observed, ’it  does not  make the  Government  a final arbiter  between the  competing claims. The High Court further observed  in  Ramaswamy’s  case,  supra,  that  ’the weighing of  the pros  and cons and the consideration of the merits and demerits of the rival clai- 205 ments remained,  from first to last with the Commissioner as his sole  responsibility, and  that the  requirement of  the Government’s proper  approval under  the proviso  to r. 6 of the Tamil  Nadu Arrack  (Supply by Wholesale) Rules 1981 was no doubt  a necessary part of the validity of every licence, but ’the  enabling power  cannot be  employed as a machinery for a  review in  every case  but only  as a  check  upon  a possible abuse  of its  power by  the  Commissioner’.  That- approach of  the High  Court seems  to run  counter  to  the scheme of the Act and the Rules framed thereunder. The grant of a  liquor licence  under r. 7 is a matter of privilege of the State  Government. The Commissioner merely exercises the delegated powers  of  the  State  Government.  The  ultimate responsibility for  the grant  of such privilege is with the State Government under r. 7 of the Rules.      Nor  can  we  subscribe  to  the  contention  that  the Commissioner had  to act under the directions and control of the State  Government under  sub-s. (2) of s. 25A of the act while exercising  his powers delegated under sub-s (1) of s. 17C read  with s. 25A (1) in the matter or grant of a liquor licence under  r. 7  of the  Rules. It would not justify the High Court  to issue  a writ of mandamus to the Commissioner to grant a licence to Messrs Majestic Bottling Company under r. 7  of the  Rules without  the prior approval of the State Government.  Obviously,   the  State   Government  and   the Commissioner cannot  act de  hors the  scheme of the Act and the Rules  framed thereunder.  Further, the  contention that the State  Government had already made up their mind against the grant  of such  privilege to  Messrs  Majestic  Bottling Company and that there was no occasion for the High Court to send back  the case  to the  Commissioner as  it would  have

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amounted to  the State  Government being  asked  to  sit  in appeal over  the judgment  of  the  High  Court,  cannot  be accepted. We  regret to  say, the  High Court  has tried  to circumvent the whole procedure by issuing a writ of mandamus directing the  Commissioner to  grant a  licence under  r. 7 without the  prior approval  of  the  State  Government.  As already stated,  the grant  of a  licence under  r. 7 of the Rules is  a privilege. There are no charges of mala fides on the part  of the  State Government.  There is  no suggestion that the  State Government  had already  made up their mind. This is also not a case where the rules of necessity require recourse to  a writ  of mandamus  to command  the issue of a licence without conforming to the procedure prescribed under r. 7.      In the  premises, it  was  not  a  proper  exercise  of jurisdiction for  the High  Court to  have issued  a writ of mandamus under Art. 226 206 of the  Constitution ordaining  the Commissioner  to grant a licence to  Messrs Majestic  Bottling Company  under r. 7 of the  rules   without  the   prior  approval   of  the  State Government. In  our opinion,  the proper course for the High Court to adopt was to issue a writ of mandamus directing the Commissioner to redetermine the question after following the procedure of r. 7 and in case he came to a decision to grant the licence  in favour  of Messrs Majestic-Bottling Company, to refer  the matter  to the  State Government for its prior approval. Otherwise  r. 7  of the  Rules would  be rendered. completely otiose.      Turning to  the  appeal  preferred  by  M/s  Chingleput Bottlers, learned  counsel for  them has  mainly advanced  a three-fold submission:  (1) The  Commissioner had  acted  in flagrant violation  of the  rules of natural justice in. not furnishing to  Messrs Chingleput  Bottlers  a  copy  of  the report  of  the  Collector  and  other  extraneous  material comprising of a representation received from Messrs Majestic Bottling Company along with various other documents. Nor had he disclosed  to them  the substance  of the  report of  the Collector or  other information gathered by him irrespective of  the  source.  (2)  The  impugned  order  passed  by  the Commissioner was  vitiated by errors apparent on the face of the record.  There was  no factual  basis for the assumption that the  three persons from whom Messrs Chingleput Bottlers had taken  the lease  of the land on which the blending unit is located.  viz, K.J.  George, M/s.  Visvambaran  and  E.K. Chandrasekaran, were  real partners  of  Messrs  Three  Star Bottling  Company.   There  was  also  no  warrant  for  the suspicion cast  by the  Collector in  his report that Messrs Chingleput Bottlers  were mere benamidars of one O.H. Kumar, proprietor  of  Messrs  Three  Star  Bottling  Company,  the existing licensee,  on the ground that they had entered into an agreement  to purchase  the blending  unit from  him. The function  of   the  Commissioner  in  making  the  grant  of privilege under  r. 7 of the Rules of being a quasi judicial nature,  the  Commissioner  could  not  act  on  unwarranted conjectures and  mere surmises. (3) The Commissioner had rot acted fairly inasmuch as he adopted a double standard. For a secret  inquiry  was  conducted  against  Messrs  Chingleput Bottlers for  adjudging their  suitability for  the grant of privilege while  no such  inquiry was  made  against  Messrs Majestic Bottling Company. The Commissioner had thus treated Messrs Chingleput  Bottlers  and  Messrs  Majestic  Bottling Company on an unequal footing and thus the procedure adopted was violative  of Art.  14.  The  observation  made  by  the Commissioner that  the deposit  of  Rs.  10,01,001  made  by

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Messrs Chingleput Bottlers with 207 the Indian overseas Bank had not come from bona fide sources and that  obviously  there  was  some  secret  understanding between O.H.  Kumar and  Messrs Chingleput  Bottlers was not based on  any material  at all.  The Commissioner  knew that O.H. Kumar,  the previous licensee, was not in a position to advance  rupees  10  lakhs  and  odd  to  Messrs  Chingleput Bottlers.  Again,  no  such  inquiry  was  made  as  to  the financial capacity  of  Messrs  Majestic  Bottling  Company. Further, the  Commissioner had  wrongly assumed  that Messrs Chingleput Bottlers  and given their address as ’Ramabadran, c/o Messrs  Three Star  Bottling Company, Iyanchery’ when no such address  was ever  furnished and therefore the impugned order is  vitiated by  an error  apparent on the face of the record.      In support  of the  contention  that  the  Commissioner acted in  violation of  the rules  of natural  justice,  the learned counsel contends that Messrs Chingleput Bottlers had a right to be heard. It is urged that there was clear breach of the  principle of  audi alteram  partem  in  as  much  as neither a  copy of the report of the Collector was furnished to  Messrs   Chingleput  Bottlers   nor  a   copy   of   the representation submitted by Messrs Majestic Bottling Company against the grant of licence to them. The argument is that a hearing where  a party does not know the case he has to meet is no  hearing at  all, while  the learned  counsel concedes that the  right  to  know  the  case  to  be  met  does  not necessarily involve any right to know the sources of adverse inference or  to confront  informants, for  in many cases it will  be   quite  proper   for  the   authority  to   employ confidential sources,  the rules  of natural justice require that the  information itself hold he disclosed so that there is a fair opportunity of meeting the case.      In  the  file  relating  to  Messrs  Majestic  Bottling Company there  is  a  representation  filed  by  J.  Balaji, managing  partner   of  Messrs  Majestic  Bottling  Company, consisting of 131 pages and was apparently handed over by J. Balaji at  the time  of hearing  before the  Commissioner on July 5,  1982. The  representation dated  July 5, 1982 is in the form  of a  petition in  continuation of the application for grant  made on June 9, 1982. Regarding Messrs Chingleput Bottlers, certain  objections are  raised to  the  grant  of licence. The  objections are formulated in a document marked Annexure ’A’.  It is alleged that the existing licensee O.H. Kumar is  ruling the show under the name and style of Messrs Three Star  Bottling   Company which is under the control of three persons,  namely, K.J.  George, M.S.  Visvambaran  and E.K. Chandrasekaran. It recites that now find- 208 ing that  O.H. Kumar could not get the present licence, they have set  up Ramabadran who has himself shown his address as care of  Messrs Three  Star Bottling  Company.  This  itself clearly shows  that the  applicant Ramabadran is a benamidar of Messrs  Three Star  Bottling Company.  In support  of the assertion that  Ramabadran is  a benamidar  of  o.H.  Kumar, there is  a copy of the judgment of the High Court of Madras in Writ  Petition No.  1239 of  1961 filed  along with other papers. In  the file  relating to Messrs Chingleput Bottlers there is a two-page note which formulates certain objections to the  grant of privilege to Messrs Chingleput Bottlers. It was obviously  handed over by J. Balaji, managing partner of Messrs  Majestic   Bottling   Company   to   the   Assistant Commissioner (Excise)  during his inspection of the blending unit or  before the  Collector before  the submission of his

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report.      We do  not think  that the  Commissioner was  under  an obligation to furnish Messrs Chingleput Bottlers with a copy of  the   report  submitted  by  the  Collector  or  of  the representation made  by Messrs  Majestic  Bottling  Company. This equally  applies to  the two-page note appearing in the file of  Messrs Chingleput Bottlers. It was quite proper for the Commissioner  to make secret and discreet inquiries from confidential sources.  There was  no duty  cast  on  him  to disclose  to  Messrs  Chingleput  Bottlers  the  sources  of adverse information  or  to  give  them  an  opportunity  to confront the  informants. Rules  of fairplay  only  ’enjoin- that Messrs Chingleput Bottlers should know the case against them. This apparently they did from the questionnaire issued by  the   Commissioner  and   the  questions   put  by   the Commissioner on July S, 1982 on the basis of the information gathered by  him. p  The Commissioner  has relied  upon  the report of  the Collector  and the conclusions reached by the Collector are  based on the statement of Ramabadran recorded by  the  Assistant  Commissioner(Excise).  Further,  at  the hearing on  July 5,  1982,  the  Commissioner  recorded  the statement  of   Ramabadran,  managing   partner  of   Messrs Chingleput  Bottlers.   There  was   no  occasion   for  the Commissioner to  have recorded  the statement  of Ramabadran over again  unless this  was to  give him  an opportunity to explain the  substance of  the report  of the  Collector  or other  information  gathered  by  him  irrespective  of  the source.      The learned  Judges repelled  the contention  of Messrs Chingleput Bottlers that the Commissioner acted in breach of the rules  of natural justice by his failure to furnish them with a copy of the 209 report  of   Collector  on  the  ground  that  there  is  no fundamental right  in a  citizen to  carry on  any trade  in liquor. According  to them, the Commissioner under the Rules performs an administrative function and having regard to the requirements of  r. 5  of the Rules, and in view of the fact that Messrs  Chingleput Bottlers  had neither  a legal right nor a  legal expectation  that they  would  be  granted  the privilege all  that was  required was  that the Commissioner should act fairly in dealing with the application and not in a capricious or arbitrary manner. On the material an record, the Learned  Judges held  that they  were satisfied that the Commissioner acted fairly and reasonably and not arbitrarily or capriciously  in coming  to the  conclusion  that  Messrs Chingleput Bottlers  had not  made the  application on their own behalf,  but benami  for others  and in  rejecting their application for the privilege for setting up a blending unit for  arrack  Incidentally,  they  pointed  out  that  Messrs Chingleput Bottlers did not specifically make a grievance of the fact  in the  writ petition  that principles  of natural justice had not been complied with. It is a fundamental rule of law  that no decision must be taken which will affect the rights of any person without first giving him an opportunity of putting forward his case.      There has ever since the judgment of Lord Reid in Ridge v Baldwin,  supra, been considerable fluctuation of judicial opinion in England as to the degree of strictness with which the rules  of natural  justice should be extended, and there is growing awareness of the problems created by the extended application of principles of natural justice, or the duty to act fairly,  which tends  to  sacrifice  the  administrative efficiency and despatch, or frustrates the object of the law in question.  Since this  Court had  held that  Lord  Reid’s

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judgment in  Ridge v.  Baldwin would  be  of  assistance  in deciding questions  relating to  natural justice,  there  is always "the  duty to  act judicially"  whenever the rules of natural justice  are  applicable.  There  is  therefore  the insistence upon the requirement of a "fair hearing".      In the  light of the settled principles, we have to see whether the  Commissioner acted  in breach  of the  rules of natural justice or fairplay in passing the impugned order.      There  is   authority  for   the  proposition  that  an authority or  body need  not observe  the rules  of  natural justice where its decision, although final, relates not to a ’right’ but  to a  ’privilege or  licence’ In  a  number  of recent decisions, the Courts have, while extending 210 the protection  of natural justice in the former category of claims, denied  such protection  to the latter category. All that is  emphasized in  such cases  is that the applications must be  considered fairly.  In R.V.  Gaming Board for Great Britain ex  parte Bneaim  & Khaida  the Court of Appeal held that in  refusing a  certificate for  reasons concerning the character and  suitability of the applicants, the Board must act fairly and obey the broad principles of natural justice. In fact,  it was  held that  they had done so since they had given the  applicants full  opportunity to  know and contest the case against them, even though they had not revealed the sources of  their information  or given  their  reasons.  It follows that  the right  to know the case to be met does not necessarily involve  any right to know the source of adverse information or to confront the informants, for in some cases it would  be  quite  proper  for  the  authority  to  employ confidential sources.      The Master of Rolls referred to the contention advanced by counsel  appearing for the applicants that they ought not to be  deprived of  the chance to get licence for the gaming business without  knowing the  case they  had to  meet.  The counsel criticized  especially the  way in  which the  Board proposed to keep that confidential information and relied on some words  of his  in R. Surinder Singh Kanda v. Government of the Federation of Malayaa where he had said:           "That the  Judge or whoever has to adjudicate must      not hear  evidence or  receive representation  from one      side behind the back of the other."      Lord Denning  rejected the contention by observing that ’the counsel  had put his case too high’. The learned Master of Rolls then observed:           "It is  an error  to regard  Crockford’s as having      any right  of which  they are being deprived. They have      not had  in the  past, and they have not now, any right      to play  these games  of chance-roulette, cheminde-fer,      baccarat and  the like  for their own profit. What they      are really  seeking is a privilege-almost, I might say,      a franchise-to carry on gaming 211      for profit,  a thing  never hitherto  allowed  in  this      country. It is for them to show that they are fit to be      trusted with it."      In Brren v. Amalgameted Engineering Union. Lord Denning said:           "If a  man seeks  a privilege  to which  he has no      particular claim-such as an appointment to some post or      other- then he can be turned away without a word."      The Master  of Rolls  went on  to say  that nonetheless statutory and  in some cases domestic bodies must act fairly and this  may involve  a hearing.  although it  is not clear from the  judgment whether the duty applies where an initial

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application is  being considered  or only  where an existing privilege is being terminated.      In Mcinnes  v. Onslow  Fane &  Anr.2 Megarry,  V.C. has drawn a  distinction between  initial applications for grant of licence  and the  revocation, suspension  or  refusal  to renew licences  already granted. The learned Vice-Chancellor says  that   there  is  a  substantial  distinction  between ’application cases’ and ’forfeiture cases’. He observes that while an  applicant for grant of licence has neither a right to such a grant nor a reasonable expectation that such grant would be  made in his favour, but cancellation or forfeiture of an  existing licence  or refusal  to  renew  a  licences, involves a  right to a hearing as the applicant has what may be called ’reasonable expectation’. Megarry, V.C. dealt with the question  whether the grant or refusal of licence by the Board of  Control is  subject to  any requirement of natural justice or  fairness which  would be enforced by the courts. In dealing  with the nature of the right to claim a licence, he said  that it  was nothing  but a  privilege.  The  three distinct categories can best be discerned in his own words:           "First,  there   are  what   may  be   called  the      forfeiture cases.  In these,  there is a decision which      takes away  some existing right or position, as where a      member of  an organization  is expelled or a licence is      revoked. Second,  at the  other extreme  there are what      may be  called the  application cases.  There are cases      where  the   decision  merely   refuses  to  grant  the      applicant the  right or position that he seeks, such as      membership 212      of the  organization, or  a licence to do certain acts.      Third, there  is an intermediate category, which may be      called the  expectation cases,  which differ  from  the      application cases  only in  that the applicant has some      legitimate expectation  from what  has already happened      that  his   application  will  be  granted.  This  head      includes cases where an existing licence holder applies      for a  renewal of  his licence,  or  a  person  already      elected   or   appointed   to   some   position   seeks      confirmation from some confirming authority.      The learned  Vice-Chancellor went  on to say that there was a  substantial distinction  between forfeiture cases and application cases. In forfeiture cases, there is a threat to take something  away for  some reason.  In such  cases,  the right to  an unbiased  tribunal, the  right to notice of the charges and  the right  to be heard in answer to the charges which were the three features of natural justice are plainly apt. In  application cases,  on the  other land,  nothing is being taken  away, and in all normal circumstances there are no charges, and so no requirement of an opportunity of being heard in  answer to  the charges.  Indeed, there  is the far wider and  less defined questions of the general suitability of  the   applicant  for   membership  or   a  licence.  The distinction is  well recognized,  for in general it is clear that the  Courts will require natural justice to be observed for  expulsion   from  a   social  club,  built  not  on  an application for  admission to  it. The intermediate category i.e. Of the expectation cases, may at least in some respects be regarded  as being  more akin  to forfeiture  cases  than application  cases;   for  although  in  form  there  is  no forfeiture but  merely an attempt at acquisition that fails, the legitimate  expectation of  a renewal  of the licence or con formation  of the  membership is  one which  raises  the question of  what it  is  that  has  happened  to  make  the applicant unsuitable for the membership or licence for which

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he was previously thought suitable.      In such cases, Megarry, V.C. felt that much help cannot be  had   from  discussing   whether  ’natural  justice’  or ’fairness’ was  the more  appropriate term. He observes that if one expects that natural justice is a flexible term which impose, different  requirement in  different  cases,  it  is capable of  applying appropriately  to the  whole   range of situations  indicated  by  the  terms  such  as  ’judicial,’ ’quasi-, judicial’  and ’administrative’. The content of the "duty to  act fairly’  did not  impose on  the Board to give either oral hearing to the 213 applicant or  to disclose  the case against him nor was . it under any   obligation  to give  reasons for a decision. The learned Judge  then  went  on  to  say  that  there  was  no obligation for the Board to give the applicant even the gist of the  reasons  while  they  refused  his  application,  or proposed to do so, and added.           The concepts of natural justice and the duty to be      fair must  not be allowed to discredit themselves while      ranking unreasonable  requirements and  imposing  undue      burdens."      In such  cases; the right to hearing has been denied on the  ground   that  the  claim  or  interest  or  legitimate expectation is  a more  ’privilege or  ’licence’. This is in consonance with the decision of a Constitution Bench of this Court in  Kishan Chand  Arora  v.  Commissioner  of  Police, Calcutta following  the judgment  of the  Privy  Council  in Nakkuda Ali v. M.F.De S. Jayaratne’s case.      It is beyond the scope of the present judgment to enter into a  discussion on  the  apparent  conflict  between  the decision .  Of the  Privy Council  in Nakkuda Ali’s case and the observation  of Lord  Reid in  Baldwin’s case.  It would appear that  the long line of cases beginning with Baldwin’s case and  ending with  D’arcy Ryan’s  case are cases dealing with  interference  with  property  rights,  deprivation  of membership of  professional or  other non-statutory  bodies, dismissal  from   office,  imposition   of   penalties   and deprivation of  advantages etc.  Both the  Privy Council  as well as  this Court  have required  strict adherence  to the rules of  natural justice  where a  public authority or body has to  deal with rights. But the principle that there was a duly to  observe the  audi alteram partem rule may not apply to cases  which relate  not to  rights or legal expectations but to mere privilege or licence.      lt is  now  well-settled  that  while  considering  the question of breach of the principles of natural justice, the Court should not proceed as if there are inflexible rules of natural justice  of universal application. Each case depends on its own circumstances. Rules of natural justice vary with the varying  constitutions of statutory bodies and the rules prescribed by the legislature under which they have to act. 214      There is nothing in the language of r.7 of the Rules to suggest  that  in  refusing  to  grant  the  privilege,  the Commissioner is  obliged  to  act  ’judicially’.  The  order refusing a  licence under r.7 is purely an administrative or executive order and is not open to appeal or revision. There is no  lis between  the Commissioner  and the  person who is refused such  privilege. The  power of  refusal  of  licence unlike the  power to  grant  is  not  subject  to  any  pre- condition.      It must follow that the grant of a liquor licence under r.7 of  the Rules  does not involve any right or expectation but it  is a  matter  of  privilege.  The  Commissioner  was

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therefore under no obligation either to disclose the sources of information  or the  gist of the information that he had. All that  was required  was that  he should  act fairly, and deal with the applications without any bias, and not in an . arbitrary or capricious manner.      There is no suggestion of any mala fides on the part of the Commissioner  or the  State Government. The Commissioner heard both  the parties after he had an inquiry made through the collector  to adjudge their suitability for the grant of the licence. The Commissioner had issued a questionnaire and had  the   material  collected   by   the   Collector.   The Commissioner was  entitled to  act  on  the  report  of  the Collector and  also on other material gathered by him during the course of the inquiry. There is no requirement under the Act for  a confronted  hearing like the hearing contemplated between rival  claimants for  the grant  of a stage carriage permit  under  the  Motor  Vehicles  Act,  1939  into  their respective merits  and demerits. The Commissioner separately heard both  the parties  and had  their statements  recorded with respect  to all  the relevant aspects It cannot be said that the  Commissioner in  dealing with the applications did not act fairly in not furnishing a copy of the report of the Collector or in taking a representation from Messrs Majestic Bottling Company.,      The High Court could not have in proceedings under Art. 226 of  the Constitution  interfered with the impugned order of the  Commissioner merely  because on a reappraisal of the evidence it  might have come to a contrary conclusion. There was no error of jurisdiction on the part of the Commissioner nor was the impugned order vitiated by any error apparent on the  face   of  the  record.  The  finding  reached  by  the Commissioner that  the application made by Messrs Chingleput Bottlers was not made bona fide on their own 215 account but  as benanmi  for others  is a  finding based  on appreciation A of evidence. The Commissioner was entitled to rely upon  the facts  found by  the  Collector.  It  may  be pointed out that the Collector’s report is entirely based on the statement  of V.  Ramabadran, managing partner of Messrs Chingleput Bottlers.  The High Court was therefore justified in dismissing  the appeal  preferred  by  Messrs  Chingleput Bottlers.      In the  result,  the  appeal  preferred  by  the  State Government must  succeed and  is allowed.  The judgment  and order passed  by the  High Court  for the issue of a writ or mandamus directing the Commissioner of Prohibition & Excise, Madras is  set  aside  and  the  case  is  demanded  to  the Commissioner for a decision afresh according to law. For the reasons  stated,  the  appeal  filed  by  Messrs  Chingleput Bottlers must fail and is dismissed.      There shall be no order as to costs. S.R.                             C.As. 11970-71/83 dismissed                                     and C.A.11972/83 allowed 216