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PETITIONER: STATE OF MADHYA PRADESH & ORS.

       Vs.

RESPONDENT: NANDLAL JAISWAL & ORS.

DATE OF JUDGMENT24/10/1986

BENCH: BHAGWATI, P.N. (CJ) BENCH: BHAGWATI, P.N. (CJ) KHALID, V. (J)

CITATION:  1987 AIR  251            1987 SCR  (1)   1  1986 SCC  (4) 566        JT 1986   701  1986 SCALE  (2)638  CITATOR INFO :  RF         1988 SC 268  (30)  RF         1990 SC 772  (26,32)  E&R        1990 SC1737  (6)  RF         1991 SC1420  (52)  D          1991 SC1676  (72)  R          1991 SC1947  (13)  RF         1992 SC 188  (8)  RF         1992 SC 488  (2,4)

ACT:     Madhya  Pradesh  Excise Act, 1915, sections 13,  14  and 62(2)(h)  read with Rule XXII of the Madhya  Pradesh  Excise Rules  and  Rules III to V of  Distillery  Warehouse  Rules, Scope  of--Disposal  of licences of manufacture or  sale  of intoxicants--Whether  it was obligatory on the part  of  the competent  authority  to adopt the "tender  method"  failing which  the "auction", failing which again by  fixed  licence fee method and so on as prescribed in Rule XXII.     Licences--Grant of D-2 licences as per the policy  deci- sion  of the Government of Madhya Pradesh--Whether  the  li- cence granted create a monopoly in favour of the licencees.     Policy  decision  of the State to privitise  the  liquor distilleries  after careful consideration of all  the  facts emanating  from the application of the Madhya  Pradesh  Dis- tilleries  Association--Whether the High Court could  bifur- cate  it into two and strike down one part of the policy  as bad.     Industries  (Development  and  Regulation)  Act,   1951, Section 11 Whether non-obtaining a licence from the  Central Government  disentitled the setting up distilleries--Such  a plea  not  taken in the High Court--Supreme Court  will  not consider  a new plea in an appeal under Article 136  of  the Constitution.     Constitution of India,  1950, Article  14--Applicability of--Whether will apply to grant of liquor licences.     Laches in filing writ petition after the  implementation of the policy decision dated 30.12.84--Seven licences  acted upon  and  spent at least 1 to 5 crores  and  altered  their position--Whether a writ could be granted.     Practice  and Procedure--Judgment  writing-Objectionable remarks should be avoided--If any, be expunged.

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HEADNOTE:     Madhya  Pradesh Excise Act, 1915 regulates the  manufac- ture,  sale  and possession of intoxicating  liquor  in  the State of Madhya Pradesh.  2 Section  14  deals with the establishment  or  licensing  of distilleries  and warehouses. The State Government  has,  in exercise of the power conferre under section 62, made sever- al  sets of Rules. Rule II of the Rules of General  Applica- tion  made inter alia under sub-section 2(h) of  section  62 lays  down  "five  years" as the maximum  period  for  which wholesale  licences for the manufacture supply and  sale  of liquor could be granted Rule XXII provides for the manner in which  licences for the manufacture or sale  of  intoxicants shall be disposed.     There were at all material times in the State of  Madhya Pradesh  nine  distilleries for the  manufacture  of  spirit which  were  established long hack by the  State  Government under  a  licence issued by the Excise  Commissioner.  These nine  distilleries  were located at  Gwalior,  Ujjain,  Dhar Badwaha,  Chhatisgarh,  Bhopal,  Seoni,  Nowgaon  (owned  by private  individuals always) and Ratlure (owned by the  Gov- ernment).  So far as the first seven distilleries  are  con- cerned,  the  land and buildings in which they  were  housed belonged  to the State Government and originally  the  plant and  machinery also belonged to the State Government but  in course  of  time successive holders of the D-2  licences  in respect of these distilleries replaced the plant and machin- ery.  The  practice  followed by the  Excise  Department  in regard  to the working of these distilleries was  to  invite tenders  for  the wholesale supply of  country  liquor  from these distilleries and the tenderers were requested to quote their  rates for the wholesale supply of country  liquor  to the  State  Government.  Normally the  lowest  tenders  were accepted  but at times the State Government used  to  accept even  higher  tenders taking various relevant  factors  into account. The State of Madhya Pradesh was divided in  several areas and a particular area was attached to each  distillery for the wholesale supply of country liquor in that area. The person whose tender was accepted for any particular distill- ery  was given a D-2 licence for working the distillery  and also  a D-1 licence for wholesale supply of  country  liquor manufactured  in  that distillery to retail vendors  in  the area attached to the distillery. These licences in Forms D-1 and  D-2 were ordinarily issued for a period of five  years. Respondent  Nos.  5 to 11 in the writ  petition  of  Nandial Jaiswal were the holders of D-1 and D-2 licences in  respect of  these  distilleries for the period  ending  31st  March, 1986.  There  were two districts, however,  which  were  not attached  to any distillery, namely, Jabalpur and Betul  and so  far as these two districts were concerned, a licence  in Form  D-1(s) to make wholesale supply of country  liquor  to retail  vendors in these two districts was being  given  and for  the  period ending 31st March, 1986 it  was  issued  in favour  of  Sagar Aggarwal. The country liquor  required  by Sagar  Agarwal for supply to retail vendors in Jabalpur  and Betul Dis-  3 tricts  was  being obtained by him from the  Ratlam  Alcohol Plant at the rate of Rs.1.80 per proof litre but, the supply of  country  liquor  from Ratlam Alcohol  Plant  was  wholly inadequate  and  Sagar Agarwal was constrained  to  purchase country  liquor from other sources at higher price in  order to fulfil his commitment under D-1 (s) licence.

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   Since  the land and buildings in which the  distilleries were  housed belonged to the State Government the holder  of D-2  licence in respect of any particular distillery had  to pay rent for the land and buildings to the State  Government at a rate agreed upon from time to time. So far as the plant and machinery of the distillery was concerned, originally it was installed by the State Government at its own cost but in course  of time it had to be replaced and  such  replacement was allowed to be made by the holder of the D-2 licence  for the  time being. It was however a condition of  D-2  licence that  on the expiry of the period of licence, if  fresh  D-2 licence  was  not issued in favour of the  existing  licence holder, he would be bound to transfer the plant and  machin- ery  in  favour of the new licence holder at a price  to  be determined  by a Valuation Committee. Therefore, during  the period  of D-2 licence, the plant and machinery belonged  to the  licence holder for the time being. The  licence  holder was  bound to manufacture country liquor in  the  distillery for  which he was given D-2 licence and on the  strength  of D-2 licence supply country liquor so manufactured to  retail vendors  in the area attached to the distillery at the  rate quoted  in the tender and accepted by the State  Government. The  bottling  and sealing charges were also  fixed  by  the State Government from time to time and they were payable  to the licence holder by the retail vendors.     The  total  capacity of all the nine  distilleries  were only  203 lakhs proof litres but even this capacity of  pro- duction  was  not realised and the  actual  production  fell short of this capacity. The result was short supply on  many occasions  leading to loss of licence fee as well as  excise duty by the State Government.     The State Government in order to meet the requirement of the  consuming public had actually to purchase  liquor  from other States as a higher price. Moreover, the consumption of liquor  was growing from year to year and it  was  estimated that  by  the year 1991, the total  consumption  of  country liquor would be likely to be in the neighbourhood of  482.36 lakhs of proof litres and by the turn of the century it  was expected  to be in the neighbourhood of 1696.80 lakhs  proof litres.  The existing nine distilleries were  inadequate  to meet  this growing demand for country liquor.  Further  more the buildings in which these distil-  4 leries  were  housed has become old and were in a  state  of disrepair  and it was not easy for the State  Government  to maintain  them  in good condition  without  incurring  heavy expenditure  every year. The plant and machinery  were  also old  and antiquated and it was necessary to instal  new  and modern  plant  and machinery having  increased  capacity  to manufacture  country liquor. Moreover, of seems that  though the time of construction, these distilleries were away  from the city or town, what had happened was that with the growth of population and haphazard and unplanned urban development, these  distilleries had now come to be in the heart  of  the city  or own and they created health hazards  and  pollution problems. There was a demand from all sections of the public living in surrounding area to move the distilleries away  in order to avoid water and environmental pollution. It was  in these  circumstances, when the mind of the State  Government was  already exercised in respect of these matters  that  an application was made by M.P. Distillers’ Association in July 1983  for transferring these distilleries to private  owner- ship.  The members of the M.P. Distillers’  Association  who were old distillers holding D-2 licence in respect of  these distilleries  offered to invest their own funds in the  con-

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struction of new buildings and installation of latest  plant and  machinery with capacity to produce more country  liquor in conformity with the standards laid down by M.P.  Eradica- tion  of  Pollution Board for Removal of Polluted  water  by constructing  lagoons, etc., provided they were assured  D-1 licence for the area attached to their respective distiller- ies.     This  application of M.P. Distilleries  Association  was examined by the State Government at different levels,  cabi- net sub-committees, special committee headed by Shri Vijaya- vargi, spot inspections. The Cabinet, sub committee  invited representatives of the M.P. Distilleries Association,  heard them  before taking filial decision in the  matter.  Finance department’S objections and suggestions were taken note  of. At  the  cabinet  meeting held an 30th  December  1984,  the policy decision was taken to privitise liquor distilleries.     Pursuant  to  the policy decision dated  30th  December, 1984  a Letter of Intent dated 1st February 1985 was  issued by the State Government in favour of each of respondent Nos. 5  to 11 for grant of D-2 licence for the construction of  a distillery  at a new site for the purpose  of  manufacturing country  liquor with effect from 1st April 1986 in  lieu  of the existing distillery in respect of which such  respondent held D-2 and D- 1 licences for the period ending 31st  March 1986.  The Letter of Intent set out various conditions  sub- ject  to  which D-2 licence was to be granted in  favour  of each of respondent Nos. 5 to 11 in W.P. No. 3718/85 before 5 the  High Court. The licencee to whom the Letter  of  Intent was issued was required under cl. 2 of the Letter of  Intent to  construct  the distillery on the land  approved  by  the State  Government and the M.P. Pollution Board. It was  pro- vided  by cl. 12 of the Letter of Intent that  the  licensee shall  make proper arrangements for treatment  of  effluents discharge under a scheme duly approved by the M.P. Pollution Board and that any direction issued by the excise Commission in  this regard shall be binding on the licensee. Clause  14 of  the Letter of Intent stipulated that the licensee  shall he bound to complete construction of distillery and  instal- lation  of  plant and machinery as required  by  the  Excise Commissioner well before 1st April 1986.     The Letter of Intent was followed by a Deed of Agreement dated 2nd February 1985 executed by and between the Governor of Madhya Pradesh acting through the Excise Commissioner and each  of  respondent  Nos. 5 to 11. The  Deed  of  Agreement recited  that  the Letter of Intent has been issued  by  the State  Government for grant of D-2 licence for  construction of distillery for manufacture of spirit with effect from 1st April 1986. CI. 1 of the Deed of Agreement provided that the licensee  shall he bound to take land on lease for a  period of  30 years from the State Government, but this  clause  is not material because ultimately none of respondent Nos. 5 to 11 took land on lease from the State Government and each  of them  purchased his own land, the site of course  being  ap- proved by the State Government.     Pursuant to the Letter of Intent and the Deed of  Agree- ment  each  of  respondent Nos. 5 to 11  selected  with  the approval  of the State Government the new site at which  the distillery  should  be located, purchased land at  such  new site,  started constructing buildings for housing  the  dis- tillery and placed orders for purchase of plant and  machin- ery to be installed in the distillery.     This  policy decision was challenged by Nandial  Jaiswal by  filing W.P. No. 3718/85, by Sagar Agarwal by filing  his W.P.  No.  335/86 and by a firm called M/s  Doongaji  &  Co.

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during  the  course of the arguments in the two  writ  peti- tions.  All the three writ petitions were disposed of  by  a common  judgment delivered by a Division Bench of the  High, Court  consisting  of Acting Chief Justice  J.S.  Verma  and Justice  B.M.  Lal.  Both the learned  Judges,  by  separate judgments, substantially set aside the policy decision dated 30th  December, 1984. Since the decision of the  High  Court for  all  practical purposes sent against  the  respondents, they preferred Civil Appeals No. 1622 to 1639 of 1986 before the  Supreme Court by special leave. M/s Doongaji & Co.  and Nand Lal  6 Jaiswal  also, to the limited extent that they are not  suc- ceed,  filed  special leave petitions Nos.6206 and  7440  of 1986.     Allowing  CA  Nos. 1622 to 1639/86  and  dismissing  the special leave petitions, the Court,     HELD:  I. I On a plain reading of Rule XXII that  a  li- cence  for  manufacture  or sale of country  liquor  may  be disposed  of in any one of four different modes, viz.,  ten- der,  auction fixed licence fee or such other manner as  the State  Government  may by general or special  order  direct. These  four different modes are alternative to  one  another and  anyone  of them may be resorted to for the  purpose  of disposing of a licence. It is not necessary that the mode of disposal  by  tender must first be resorted to and  if  that cannot  be  acted upon, then only the mode  of  disposal  by auction  and falling that and not otherwise, the third  mode of disposal by fixed licence fee and only in the event of it not being possible to adopt the first three modes of dispos- al,  the last mode namely, "such other manner as  the  State Government may by general or special order direct" should be adopted. This is plain and incontrovertible. [17B-D]     1.2 On a plain grammatical construction of Rule XXII, it is  obvious that the Collector or an Officer  authorised  by him  in that behalf can choose anyone of the four modes  set out  in that Rule. There is nothing in the language of  Rule XXII  to justify the interpretation that an earlier mode  of disposal set out in the Rule excludes a latter mode or  that -reasons must be specified where a latter mode is adopted in preference  to an earlier one. The language of Rule XXII  in fact  militates against such construction. It is  impossible to  subscribe  to the proposition that it is  only  when  an earlier mode is not possible to be adopted for reasons to be specified, that a latter one can be followed. The  Collector or an Officer authorised by him can adopt anyone of the four modes  of disposal of licence set out in Rule XXII, but,  of course,  whichever mode be adopted, the equality  clause  of the Constitution should not be violated in its  application. [17F-H]     1.3 It is also clear from Rules III, IV and V that there are  two purposes for which a licence in Form D-2  for  con- struction and working of a distillery may be granted. It may be  granted as an adjunct to the licence in Form  D-1  under Rule IV or it may be granted as an independent licence under Rule  V  irrespective whether the grantee  holds  a  licence under  Rule V irrespective whether the grantee holds  a  li- cence  in Form D-1 or not. There are also two types  of  li- cences for wholesale  7 supply of country liquor to retail vendors, namely,  licence in Form D-1 and licence in Form D-1 (s). The licence in Form D-1 in clause 5 clearly contemplated that the holder of such licence  must  also have a licence in Form D-2. No  one  can have  a  licence in Form D-2. He must have a  distillery  in

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which  he distils country spirit in order that he should  be able  to make wholesale supply of country liquor  to  retail vendors. If for any reason he is unable to obtain licence in Form D-2 for working a distiller, no licence in Form D-1 can be given to him and if he has such licence, it would  become ineffective.  It  is for this reason that when a  person  is granted a licence in Form D-1 by the Excise Commission under Rule-III,  he  is also simultaneously granted a  licence  in Form  D-2 under Rule IV and the period of both the  licences is  co-terminus.  But, though a person cannot be  granted  a licence  in Form D-1 unless he also obtains licence in  Form D-2  the converse does not hold true. A licence in Form  D-2 can be granted to a person under Rule V even though he  does not hold a licence in Form D-1. Where a person is granted  a licence  in Form D-2 for working a distillery under Rule  V, without having a licence in Form D-1 for wholesale supply of country  liquor to retail vendors, he cannot make  wholesale supply  of  country  liquor manufactured by  him  to  retail vendors  but he can supply such country liquor to  a  person holding licence in Form D-1(s) or he can manufacture  recti- fied  spirit, denatured spirit or foreign liquor as  contem- plated in condition 3 of the licence in Form D-2. It is  not necessary  that  a person a licence in Form  D-2  must  also simultaneously have a.licence in Form D-1. [18A-F]     2.  It is undoubtedly true that the  recommendations  of the Cabinet Sub-Committee which were accepted by the Cabinet in  the  policy decision dated 30th December  1984  provided that  in the beginning, D-2 licence shall be granted  for  a period of 5 years and thereafter there shall be a  provision for its renewal and for this purpose, necessary amendment in the  M.P. Excise Act, 1915 or the Rules made under  the  Act shall be made. But, in fact no such amendment in the Act  or the  Rules  was made by the State Government  and  when  the Letter  of Intent was issued and the Deed of  Agreement  was executed  and  even thereafter, the provisions  of  the  Act remained  unamended  and  Rule II of the  Rules  of  General Application  also continued to stand in its unamended  form. It  is obvious that without an amendment of Rule II  of  the Rules  of General Application the maximum period  for  which D-2  licence  could be granted to respondent Nos.  5-11  was only  5 years and there could be no provision for  automatic renewal thereafter from year to year. It is therefore  clear that whatever might have been the original intention. it was not  effectuated by carrying out necessary amendment in  the provi- 8 sions  of  the  Act or in Rule II of the  Rules  of  General Application  and the ultimate decision of the State  Govern- ment  was  to grant D-2 licence for a limited  period  of  5 years.  The provision of renewal every year was  to  operate within  the span of 5 years itself and every year,  the  li- cence  would  be  renewable on payment  of  licence  fee  of Rs.5,000 and due fulfilment of the conditions of the licence and  the  provisions  of the Act and the Rules.  It  is  not possible to spell out from clause that the licence was to be granted  for an initial period of 5 years and thereafter  it was  liable to be renewed from year to year. The  so  called concession  made on behalf of the State Government  and  re- spondent  Nos. 5 to 11 was, therefore, really not a  conces- sion  at all but it was a stand taken in recognition of  the correct position in regard to the grant of D-2 licence.  The High  Court, was in the circumstances, right in holding  the grant  of  D-2  licence to respondent Nos. 5-11  was  for  a maximum  period of 5 years and it did not operate to  create monopoly  in their favour for an indefinite period of  time.

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[37A-H]     3.1 The High Court was not at all justified in splitting the policy decision dated 30th December 1984 into two  parts and  in striking down the second part, while sustaining  the first.  The policy decision dated 30th December 1984  was  a single  integrated decision arrived at by the State  Govern- ment  taking a holistic view of all the aspects involved  in the decision and it is difficult to appreciate how the  High Court  could  sustaining one part of the policy  and  strike down  the other. Either the policy as a whole could be  sus- tained  or as a whole, it could be declared to  be  invalid, but  certainly one part could not be sustained, whatever  be the  ground and the other pronounced invalid. That would  be making  a new policy for the State Government which  it  was not competent for the High Court to do. Once the High  Court came to the conclusion that on account of delay or laches in the  filing of the writ petitions or the creation  of  third party rights in the meanwhile, the Court would not interfere with  one part of the policy decision, the court  could  not interfere  with  the second part of the policy  decision  as well.  The consequence of sustaining one part of the  policy decision  and striking down the other would not only  be  to create  a new policy for the State Government but  it  would also cause considerable hardship and injustice to the licen- sees  and also result in public mischief  and  inconvenience detrimental  to the interest of the State. Since  the  peti- tioners  were  guilty of enormous delay in filing  the  writ petitions  and  in  the intervening period,  the  rights  of respondents  Nos. 5-11 were created in that they spent  con- siderable amount of time, energy and resources and  incurred huge  expenditure in setting up the new  distilleries,  sus- taining one part of the policy decision while striking  down the other would amount to 9 creating  a  new policy for the State Government  and  would also  entail  considerable  hardship  and  inconvenience  to respondent  Nos. 5-11 and would also be detrimental  to  the interest of the State. [48H, 45F-46D]           4.  The policy decision dated 30th  December  1984 can  be given effect to without any new Rules being made  by the  State Government. There is nothing in the policy  deci- sion  dated  30th December 1984 which is  contrary  to  time Rules  made  under the Act. It is true that D-2  licence  in its  existing  form does not contemplate construction  of  a distillery and that the Rules do not seem to have prescribed the  form for a licence for constructing a distillery.  But, merely  because  the form of a licence  for  constructing  a distillery is not prescribed by the Rules, it does not  mean that such licence cannot be granted by the Excise  Authoriti es. If the form of a licence is prescribed, then, of course, such form has to be followed, but if no form is  prescribed, the  only consequence is that the licence to be  granted  by the Excise Authorities need not conform to any      particu- lar  form. Section 14 (c) of the Act clearly  provides  that the  Excise  Commissioner may license the  construction  and working  of  a distillery and there was,  therefore  nothing contrary to the Act or the Rules in the  Excise Commissioner issuing   Letter  of  Intent  in  favour  of  each  of   res pondent Nos. 5-11 granting licence for construction of a new distillery.  Rule  XXII  permits any one of  four  modes  of disposal of licence to be adopted by the Excise  Authorities and  it does not prescribe that the fourth mode  denoted  by the words "such other manner as the State Government may  by general  or  special  order  direct"  can  be  resorted   to only  if  the first three modes fail. Here  in  the  present

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case, the policy  decision dated 30th December 1984 provided that respondent Nos. 5-11 who were the existing contractors, should be granted licence to construct new distilleries  and D-1  and D-2 licences should be given to them  for a  period of  five years. for manufacturing liquor in such new  distil leries  and making wholesale supply of it to retail  vendors in the areas  attached to those distilleries. This manner of disposal of licences was clearly covered by the fourth  mode of disposal set out in Rule XXII. [50B-F]       State of Orissa & Ors. v. Harinarayan Jaiswal &  Ors., [1972] 3 SCR 784; L.G. Chaudhari v. Secretary, L.S.G. Deptt. Govt. of Bihar & Ors., AIR 1980 SC 383, referred to.       5. Supreme Court cannot permit any new plea as in this case,  that  non-obtaining a licence  under  the  Industries (Development  and  Regulation) Act, disentitles  setting  up distilleries. The foundation for this contention should have been  laid  in the writ petitions and  the  necessary  facts should  have  been pleaded in support of it.  No  such  plea having 10 been  raised  and no such facts having been pleades  in  the writ petitions, the court cannot allow this contention to he raised.  Moreover,  it  is clear from s. 11  read  with  the definitions  of "factory" and "industrial undertaking"  con- tained  in sub-sections (c) and (d) of s.3 of this Act  that licence  from  the  Central Government for  setting  up  new distilleries  would be necessary only if 50 or more  workers were  petitions.  There is nothing to show that 30  or  more workers  were going to he employed in the new  distilleries. In  fact  old  distilleries were also  working  without  any licence from the Central Government, presumably because less than 50 workers were employed in such distilleries. [52E-G]     6.  It is well settled that the power of the High  Court to issue an appropriate writ under Art. 226 of the Constitu- tion is discretionary and the High Court in the exercise  of its discretion does not ordinarily assist the tardy and  the indolent  or the acquiescent and the lethargic. If there  is inordinate  delay on the part of the petitioner in filing  a writ petition and such delay is not satisfactory  explained, the High Court may decline to intervene and grant relief  in the exercise of its writ jurisdiction. The evolution of this rule  of laches or delay is premised upon a number  of  fac- tors.  The High Court does not ordinarily permit  a  belated resort to the extra ordinary remedy under the writ jurisdic- tion  became  it  is likely to cause  confusion  and  public inconvenience  and brings in its train new  injustices.  The lights of third parties my intervene and if the writ  juris- diction  is exercised on a writ petition filed after  unrea- sonable delay, it may have the effect of inflicting not only hardship  and  inconvenience  but also  injustice  on  third parties.  When  the writ jurisdiction of the High  Court  is invoked,  unexplained  delay coupled with  the  creation  of third  party rights in the meanwhile is an important  factor which always weighs with the High Court in deciding  whether or not to exercise such jurisdiction. However, this rule  of laches  or delay is not a rigid rule which can be cast in  a straight  jacket formula, for there may he cases  where  de- spite  delay  and creation of third party  rights  the  High Court may still in the exercise of its discretion  interfere and grant relief to the petitioner. But such cases where the demand of justice is so compelling that the High Court would he  inclined  to interfere inspire of delay or  creation  of third party rights would by their very nature he few and far between. Ultimately, it would he a matter within the discre- tion  of  the Court. Ex-hypothese every discretion  must  he

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exercised fairly and justly so as to promote justice and not to defeat it. [41H-42C, F-G]     Here,  the petitioners were guilty of enormous delay  in filing the writ petitions inasmuch as during the intervening period  the rights of third parties had intervened  and  re- spondent Nos. 5-11 acting on the 11 basis of the policy decision dated 30th December, 1984,  had incurred to expenditure towards setting up the distilleries. If the policy decision dated 30th December 1984 were now  be set  aside at the instance of the petitioners it would  work immense  hardship  on the seven licensees  and  cause  grave injustice to them, since enormous amount of time, money  and energy spent by them in setting up the distilleries would be totally wasted. [41F-G, 45B]     Ramanna Daygram Shetty v. International Airport Authori- ty of India & Ors., [1979] 3 SCR 1014; Ashok Kumar Mishra  & Anr. v. Collector Raipur & Ors., [1980] 1 SCR 491,  referred to.     7.  There is no fundamental right in a citizen to  carry on trade or business in liquor. The State under its  regula- tory  power has the power to prohibit absolutely every  form of  activity  in relation  to  intoxicants-its  manufacture, storage,  export,  import, sale and possession. No  one  can claim  as against the State the right to carry on  trade  or business in liquor and the State cannot be compelled to part with  its exclusive right or privilege of manufacturing  and selling  liquor.  But when the State decided to  grant  such right  or  privilege to others the State cannot  escape  the rigour of Art. 14. It cannot set arbitrarily or at its sweet will. It must comply with the equality clause while granting the exclusive right or privilege of manufacturing or selling liquor. It is, therefore, not possible to uphold the conten- tion  of the State Government and respondent Nos. 5-11  that Art. 14 can have not application in a case where the licence to manufacture or sell liquor is being granted by the  State Government.  The  State cannot ride roughshod over  the  re- quirement of that Article. [53G-54B]     7.2  But while considering the applicability of Art.  14 in  such  a case, the court must bear in mind,  that  having regard  to  the nature of the trade-or  business  the  court would be slow to interfere with the policy laid down by  the State  Government for grant of licences for manufacture  and sale  of liquor. The Court would in view of  the  inherently pernicious nature of the commodity allow a large measure  of latitude  to the State Government in determining its  policy of regulating manufacture and trade in liquor. Moreover, the grant  of licences for manufacture and sale of liquor  would essentially  be a matter of economic policy where the  court would  hesitate to intervene and strike down that the  State Government has done, unless it appears to be plaintly  arbi- trary, irrational or mala fide. In complex economic  matters every  decision  is necessarily empiric and it is  based  on experimentation or what one may call "trial and error  meth- od" and therefore, .its validity  12 cannot  be vested on any rigid a "priori" considerations  or on the application of any straight jacket formula. The Court must  while  adjudging  the constitutional  validity  of  an executive  decision  relating to economic  matters  grant  a certain  measure of freedom or "play in the joints"  to  the executive. [54C-55C]     7.3  It is clear from c1.2 of the policy  decision  that the  State  Government envisaged the  possibility  of  other liquor contractors making similar applications for  licences

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to construct new distilleries and to manufacture and  supply liquor from such new distilleries and hence provided that if any  such applications are made, they should be disposed  of by  the  Excise  Department on merits on the  basis  of  the principles  "recommended by the sub-committee", that  is  on the basis of the same principles on which the licences  were decided  to be granted to the existing contractors.  If  any liquor  contractor  makes an application for  a  licence  to construct  a new distillery on the same terms on  which  li- cences  are granted to the existing contractor his  applica- tion  would  have to be considered on merits by  the  Excise Authorities and the Excise Authorities may, if they find the proposal  suitable, grant to such liquor contractor  licence to construct a new distillery along with D-2 licence on  the same  basis.  The  Excise Authorities may,  in  such  event, either  (i)  direct such liquor  contractor  to  manufacture ractified spirit, denatured spirit or foreign liquor in  the new distillery for the remaining period of the D- 1 and  D-2 licences of the existing contractors and thereafter consider him along with other liquor contractors for grant of D-1 and D-2 licences in respect of the new distillery or (ii) reduce and/or  alter  the  area of supply of any  of  the  existing contractors and grant D- 1 license to such liquor contractor in  respect of the carved out area. If the Cabinet  decision dated  30th  December 1984 while granting  licences  to  the existing contractors leave it open to other liquor contracts to.come in and apply for similar licences, it cannot be said that Art. 14 is violated. [56C-G]     7.4  When the State Government is granting  licence  for putting  up a new industry, it is not at all necessary  that it  should advertise and invite offers for putting  up  such industry. The State Government is entitled to negotiate with those  who have come up with an offer to set up such  indus- try. [60C]     Har  Shankar  & Ors. etc. v. Deputy  Excise  &  Taxation Commissioner  &  Ors., [1975] 3 SCR 254; R.K. Garg  etc.  v. Union of India & Ors. etc. [1982] 1 SCR 1947, referred to.     Kasturi  Lal Lakshmi Reddv v. State of J & K,  [1980]  3 SCR 1338, followed. 13     Metropolis  Theatre  Company  v. State  of  Chicago,  57 Lawyers Edition 730, quoted with approval.     8.  Judges  should not use strong and  carping  language while criticising the conduct of parties or their witnesses. They must act with sobriety, moderation and restraint.  They must have the humility to recognise that they are not infal- lible  and  any harsh and disparaging strictures  passed  by them  against any party may be mistaken and unjustified  and if so, they may do considerable harm and mischief and result in  injustice. Here, in the present case,  the  observations made  and  strictures  passed by B.M. Lal  J.  were  totally unjustified and unwarranted and they ought not to have  been made. [66G-H]     In the instant case, the words used in paras 1,9, 17  to 19  and 34 of Lal J.’s judgment are undoubtedly  strong  and highly  disparaging remarks attributing mala fides,  corrup- tion  and underheard dealing of the State  Government  which are not justified by the record. [62B]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil  Appeal Nos.  1622- 39 of 1986     From  the Judgment and Order dated 28.3.86 of  the  High

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Court of M.R. at Jabalpur in Misc. Petition Nos. 3718/85,335 & 785 of 1986.     K.  Parasaran,  Attorney General, A.M. Mathur  and  S.L. Saxena, Adv. Genl/Dy. Adv. Gent. of the State of M.P.,  G.L. Sanghi, F.S. Nariman, N.A. Modi, V.M. Tarkunde, A.B.  Divan, Dr. L.M.Singhvi, Soli J.  Sorabji, L.N. Sinha, S.N.  Kacker, Narayan  Nittar, G.S. Narayan,     Pramod Swarup, D.P.  Sri- vastava, V. Ravindra Srivastava, S.L.  Athley, R.F.  Nanman, A. Subba Rao, V.K. Munshi, I.B. Dadachanji, D.N. Misra, Shri Narain, S. Salve, L.S. Diwani, Mrs. A.K. Verma, K.K-  Sinha, A.  Mishra,  A.  Sapre, R.S. Singh and S.K.  Singh  for  the appearing parties. C.L. Sahu and Bharat Brewris for the Intervenor. The judgment of the Court was delivered by      BHAGWATI,  C  J:  These appeals by  special  leave  are directed against a judgment of the Madhya Pradesh High Court in  what has come to be known as, M.P. Liquor case,  brought before  the High Court by way of three writ petitions  under article  226 of the Constitution. Writ Petition  No.3718  of 1985 was filed by one Nandial Jaiswal  14 on  28the November 1985 while writ petition No.335 of  1986- was  filed by one Sagar Agarwal on 24th-January  1986.  Both these writ petitions were directed against the policy  deci- sion of the State of Madhya Pradesh contained in the Cabinet decision dated 30th December, 1984. The third writ petition, viz., writ petition No. 785 of 1986 was also filed challeng- ing the same policy decision of the State of Madhya  Pradesh by  a firm called M/s Doongaji & Co. but it was  filed  much later  at  a time when arguments were actually going  on  in court  in the first two writ petitions. The  respondents  in the  first  two writ petitions were not aware at  that  time that it was a writ petition which was filed by M/s  Doongaji & Co. They thought that it was merely an intervention appli- cation  since  no notice was served upon them and  they  had also no opportunity of filing an affidavit in reply to  that writ petition. All these three writ petitions were  disposed of by a common judgment delivered by a Division Bench of the High Court consisting of Acting Chief Justice J.S. Verma and Justice  B.M.  Lal.  Both the learned  Judges,  by  separate judgments, substantially set aside the policy decision dated 30th  December, 1984. Since the decision of the  High  Court for  all  practical purposes went against  the  respondents, they  preferred  Civil  Appeals Nos. 1622 to  1639  of  1986 before  this Court by special leave. M/s Doongaji & Co.  and Nand  Lal Jaiswal also, to the limited extent that they  did not  succeed,  filed special leave petitions Nos.  6206  and 7440  of 1986. That is how the present appeals  and  special leave  petitions  have come up before us. The  facts  giving rise to these appeals and special leave petitions are  mate- rial and need to be stated in some detail.     But,  before we advert to the facts, it is necessary  to set  out  the relevant provisions of Madhya  Pradesh  Excise Act, 1915 which is the statute regulating manufacture,  sale and  possession  of  intoxicating’ liquor in  the  State  of Madhya  Pradesh.  Originally, this Act was enacted  for  the former  Province of C.P. and Berar but  subsequently,  after the  coming into force of the Constitution, it was  extended to  the  State of Madhya Pradesh by M.P. Extension  of  Laws Act,  1958 and it was rechristened as M.P. Excise Act  1915. Section  2(13) of the Act defines ’liquor’ to mean  ’intoxi- cating liquor’ and to include "spirits or wine, taft,  beer, all  liquid  consisting of or containing  alcohol,  and  any substance  which the State Government may, by  notification, declare  to be liquor for the purpose" of the Act. The  term

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"manufacture" is defined in Section 2(14) to include  "every process, whether natural or artificial, by which any intoxi- cant  is  produced or prepared and also  redistillation  and every process for the rectification, flavouring, blending or coloring  of liquor". There is also the definition of  ’spi- rit’ in section 15 2(17) which provides that "spirit" means any liquor contain- ing alcohol obtained by distillation whether it is denatured or  not. Chapter IV of the Act is headed ’Manufacture,  Pos- session and Sale’ and that is the chapter with which we  the concerned in the present appeals. Section 13 provides, inter alia, that no distillery or brewery shall be constructed  or worked and no person shall use, keep or have in his  posses- sion  any  material, still utensil, implement  or  apparatus whatsoever  for the purpose of manufacturing any  intoxicant other  than taft, except under the authority and subject  to the  terms and conditions of a licence granted in  that  be- half.  It  is also obligatory under this section to  have  a licence  for  manufacture  of intoxicant  and  for  bottling liquor for sale and no intoxicant can be manufactured and no liquor can be bottled for sale without such licence. Section 14  is a material section and it may, therefore,  be  repro- duced in extenso:               14. Establishment or licensing of distilleries               and warehouses               (a) establish a distillery in which spirit may               be manufactured under a licence granted  under               section  13  on such conditions as  the  State               Government may impose;               (b) discontinue any such distillery;               (c)  licence, on such conditions as the  State               Government  may impose, the  construction  and               working of a distillery or brewery;               (d) establish or licence a warehouse,  wherein               any  intoxicant  may  be  deposited  and  kept               without  payment of duty, but subject to  pay-               ment of such fees as the State Government  may               direct; and               (e) discontinue any such warehouse               We may then refer to section 17 which provides               inter  alia that no intoxicant shall  be  sold               except under the authority and subject to  the               terms  and conditions of a licence granted  in               that  behalf. The State  Government  obviously               has  the  monopoly in regard  to  manufacture,               possession  and  sale  of liquor  as  held  in               several  decisions of this Court.  Section  18               recognises  the power of the State  Government               to  "lease to any person, on  such  conditions               and  for such period as it may think  fit  the               right--(a) of manufacturing or of supplying by               wholesale,  or of both, or (b) of  selling  by               wholesale or by retail, or (c) of  manufactur-               ing or of supplying by wholesale, or of  both,               and selling by retail, any                16               liquor or intoxicating drug within any  speci-               fied area." There are no other sections in the               Act material for our purpose until we come  to               section 62 which confers on the State  Govern-               ment  the power to make Rules for the  purpose               of  carrying  out the provisions of  the  Act.               Subsection  2(h) of section 62  provides  that               the State Government may make Rules  prescrib-

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             ing  the authority by, the form in which,  and               the  terms  and conditions on and  subject  to               which,  any licence, permit or pass  shall  be               granted  and by such rules, among  other  mat-               ters,  fix the period for which  any  licence,               permit or pass shall continue in force.                   The  State Government has, in exercise  of               the  power  conferred under section  62,  made               several sets of Rules. Rule II of the Rules of               General  Application  made  inter  aria  under               sub-section 2(h) of section 62, lays down  the               period of licence and clause (2) of this  Rule               provides: "Wholesale licences for the manufac-               ture, supply and sale of liquor may be granted               for any number of years not exceeding five, as               the State Government may in each case decide."               Rule  XXII also framed under sub-section  2(h)               of section 62 provides for the manner in which               licences  shall  be granted and  it  reads  as               follows:               "XXII. Disposal of licences-- (1) Licence  for               the  manufacture or sale of intoxicants  shall               be  disposed  of  by  tender,  auction,  fixed               licence  fee  or in such other manner  as  the               State  Government may, by general  or  special               order, direct.                         Except  where otherwise  prescribed,               licence  shall be granted by the Collector  or               by  an Officer authorised by him in  that  be-               half." Rules  III to V of the Distillery and Warehouse  Rules  also made  inter alia under sub-section 2(h) of section  62  deal with  the  subject of grant of licence and provide,  in  the following  terms, for different kinds of licences which  may be issued, viz., licences in Forms D-1, D-1(s) and D-2:               "III.  Subject  to the sanction of  the  State               Government, the Excise Commissioner may  grant               a licence in Form D-1 and Form D-1(s) for  the               wholesale  supply of country spirit to  retail               vendors.               IV.  The Collector may issue, on payment of  a               fee of Rs. 1000 a licence in Form D-2 for  the               construction  and working of a  distillery  to               any person to whom a wholesale supply  licence               has been issued.               17               V. Subject to sanction of the State Government               the Excise Commissioner may issue a licence in               Form D-2 for the construction and working of a               distillery on payment of a fee of Rs. 1000."     It  is  clear  on a plain reading of Rule  XXII  that  a licence  for  manufacture or sale of country liquor  may  be disposed  of in any one of four different modes, viz.,  ten- der, auction, fixed licence fee or such other manner as  the State  Government  may by general or special  order  direct. These  four different modes are alternative to  one  another and  any one of them may be resorted to for the  purpose  of disposing of a licence. It is not necessary that the mode of disposal  by  tender must first be resorted to and  if  that cannot  be  acted upon, then only the mode  of  disposal  by auction  and failing that and not otherwise, the third  mode of disposal by fixed licence fee and only in the event of it not being possible to adopt the first three modes of dispos- al,  the last mode, namely, ’such other manner as the  State Government  may  by general or special order  direct’.  This

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would seem to be plain and incontrovertible but Mr.  Justice B.M.  Lal  has rather curiously in his  judgment  held  that these four modes of disposal are inter-related and  "failing in one of the clauses, the next is to be acted upon and  for applying the fourth clause, it is incumbent for the State to specify the manner by general or special order and this also includes "specifying how and why the other three clauses are not  possible to be acted upon which compels to take  resort to  the fourth clause". This view taken by Mr. Justice  B.M. Lal in regard to the interpretation of Rule XXII is obvious- ly  unsustainable. It is indeed surprising how such  a  view could possibly be taken. On a plain grammatical construction of Rule XXII it is obvious that the Collector or an  Officer authorised  by him in that behalf can choose any one of  the four  modes  set out in that Rule. There is nothing  in  the language of Rule XXII to justify the interpretation that  an earlier  mode  of disposal set out in the  Rule  excludes  a latter mode or that reasons must be specified where a latter mode  is adopted in preference to an earlier one.  The  lan- guage of Rule XXII in fact militates against such  construc- tion. It is impossible to subscribe to the proposition  that it is only when an earlier mode is not possible to be adopt- ed  for  reasons to be specified, that a latter one  can  be followed. The Collector or an Officer authorised by him  can adopt  any one of the four modes of disposal of licence  set out in Rule XXII, but, of course, whichever mode be adopted, the  equality clause of the Constitution should not be  vio- lated in its application.  18     It is also clear from Rules III, IV and V which we  have set  out  above,  that there are two purposes  for  which  a licence  in Form D-2 for construction and working of a  dis- tillery  may be granted. It may be granted as an adjunct  to the  licence in Form D-1 under Rule IV or it may be  granted as an independent licence under Rule V irrespective  whether the  grantee holds a licence in Form D- 1 or not. There  are also  two types of licences for wholesale supply of  country liquor  to retail vendors, namely, licence in Form  D-1  and licence in Form D-1(s). The licence in Form D-1 in clause  5 clearly  contemplates that the holder of such  licence  must also  have a licence in Form D-2. No one can have a  licence in  Form D-1 unless he has simultaneously a licence in  Form D-2.  He must have a distillery in which he distils  country spirit  in  order that he should be able to  make  wholesale supply  of  country  liquor to retail vendors.  If  for  any reason he is unable to obtain licence in Form D-2 for  work- ing a distillery, no licence in Form D-1 can be given to him and if he has such licence, it would become ineffective.  It is  for this reason that when a person is granted a  licence in Form D-1 by the Excise Commissioner under Rule III, he is also simultaneously granted a licence in Form D-2 under Rule IV and the period of both the licences is co-terminus.  But, though  a  person cannot be granted a licence  in  Form  D-1 unless  he  also obtains licence in Form D-2,  the  converse does not hold true. A licence in Form D-2 can be granted  to a person under Rule V even though he does not hold a licence in Form D-1. Where a person is granted a licence in Form D-2 for  working  a distillery under Rule V,  without  having  a licence  in Form D-1 for wholesale supply of country  liquor to retail vendors, he cannot make wholesale supply of  coun- try  liquor manufactured by him to retail vendon but he  can supply  such country liquor to a person holding  licence  in Form  D-1(s) or he can manufacture ractified  spirit,  dena- tured spirit or foreign liquor as contemplated in  condition 3  of  the licence in Form D-2. It is not necessary  that  a

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person holding a licence in Form D-2 must also simultaneous- ly have a licence in Form D- 1.     It is in the context of these provisions of the Act  and the  Rules  that we must consider the facts  of  this  case. There  were  at all material times in the  State  of  Madhya Pradesh  nine  distilleries for the manufacture  of  spirit, which  were  established long back by the  State  Government under a licence issued by the Excise Commissioner. The names and  other particulars of these distilleries are set out  in the following table:-  19 Name of           Production     Production Distillery        capacity in    81-82        82-83                   proof litres 1. Gwalior         15 lacs      --           9 lacs 2. Ujjain          13 lacs      10 lacs      10 lacs 3. Dhar            15 lacs      9 lacs       12 lacs 4. Badwaha         20 lacs      12 lacs      14 lacs 5. Chhatisgarh     30 lacs      29 lacs      25 lacs 6. Bhopal          12 lacs      9 lacs       11 lacs 7. Seoni           20 lacs      18 lacs      19 lacs 8. Nowgaon (owned  8 lacs       3 lacs       4 lacs by private individual) Total:             133 lacs      90 lacs      104 lacs 9. Ratlam Alcohol  70 lacs       39 lacs      67 lacs Plant (owned by Govt. Total:             203 lacs      129 lacs     17 1 lacs We are concerned in these appeals with only the first  seven distilleries  since the Nowgaon Distillery has  always  been owned  and worked by a private firm and the  Ratlam  Alcohol Plant is owned by the State Government and is managed by the M.P.  State Industries Corporation and the  impugned  policy decision  dated 30th December, 1984 does not  concern  these last two distilleries. So far as the first seven  distiller- ies  are concerned, and hereafter whenever we refer to  dis- tilleries we shall be referring only to these seven distill- eries,  the  land and-buildings in which  they  were  housed belonged  to the State Government and originally  the  plant and  machinery also belonged to the State Government but  in course  of  time successive holders of the D-2  licences  in respect of these distilleries replaced the plant and machin- ery.  The  practice  followed by the  Excise  Department  in regard  to the working of these distilleries was  to  invite tenders  for  the wholesale supply of  country  liquor  from these distilleries and the tenderers were requested to quote their  rates for the wholesale supply of country  liquor  to the  State  Government.  Normally the  lowest  tenders  were accepted  but at times the State Government used  to  accept even  higher  tenders taking various relevant  factors  into account. The State of Madhya Pradesh was divided in  several areas and a particular area was attached to each  20 distillery  for  the wholesale supply of country  liquor  in that  area.  The person whose tender was  accepted  for  any particular  distillery was given a D-2 licence  for  working the  distillery and also a D-1 licence for wholesale  supply of country liquor manufactured in that distillery to  retail vendors  in the area attached to the distillery.  These  li- cences  in  Forms D-1 and D-2 were ordinarily issued  for  a period  of  five years. Respondent Nos.5 to 11 in  the  writ petition of Nandlal Jaiswal were the holders of D-1 and  D-2 licences  in  respect of these distilleries for  the  period ending 31st March, 1986. There were two districts,  however,

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which were not attached to any distillery, namely,  Jabalpur and Betul and so far as these two districts were  concerned, a licence in Form D-1(s) to make wholesale supply of country liquor  to retail vendors in these two districts  was  being given  and  for the period ending 31st March,  1986  it  was issued  in  favour  of Sagar Aggarwal.  The  country  liquor required  by Sagar Agarwal for supply to retail  vendors  in Jabalpur and Betul Districts was being obtained by him  from the  Ratlam Alcohol plant at the rate of Rs. 1.80 per  proof litre but, as will be presently seen, the supply of  country liquor  from Ratlam Alcohol Plant was wholly inadequate  and Sagar  Agarwal  was constrained to purchase  country  liquor from  other sources at higher price in order to  fulfil  his commitment under D-1(S) licence.     Since  the land and buildings in which the  distilleries were housed belonged to the State Government, the holder  of D-2  licence in respect of any particular distillery had  to pay rent for the land and buildings to the State  Government at a rate agreed upon from time to time. So far as the plant and machinery of the distillery was concerned, originally it was installed by the State Government at its own cost but in course  of time it had to be replaced and  such  replacement was allowed to be made by the holder of the D-2 licence  for the  time being. It was however a condition of  D-2  licence that  on the expiry of the period of licence, if  fresh  D-2 licence  was  not issued in favour of the  existing  licence holder, he would be bound to transfer the plant and  machin- ery  in favour of the new licence, holder at a price  to  be determined  by a Valuation Committee. Therefore, during  the period  of D-2 licence, the plant and machinery belonged  to the  licence holder for the time being. The  licence  holder was  bound to manufacture country liquor in  the  distillery for  which he was given D-2 licence and on the  strength  of D-2 licence supply country liquor so manufactured to  retail vendors  in the area attached to the distillery at the  rate quoted  in the tender and accepted by the State  Government. The  bottling  and sealing charges were also  fixed  by  the State Government from time to time and they were payable  to the licence holder by the retail vendors. It may be 21 pointed  out  that  at the material time  the  bottling  and sealing charges were fixed at 80 paise per bottle which came to Rs.3.40 per proof litre.     Now,  the total capacity of all the 9  distilleries  in- cluding Nowgaon Distillery and Ratlam Alcohol Plant was only 203  lacs proof litres but even this capacity of  production was not realised and the actual production fell for short of this  capacity. The total production of country liquor  from all  the 9 distilleries in the year 81-82 came to  only  129 lacs  proof litres and though in the year 1982-83 there  was some improvement, the total production did not go beyond 171 lacs  proof  litres.  The result was short  supply  on  many occasions  leading to loss of licence fee as well as  excise duty by the State Government. The State Government, in order to meet the requirement of the consuming public, had actual- ly  to purchase liquor from other States at a higher  price. Moreover, the consumption of liquor was growing from year to year  and it was estimated that by the year 1991, the  total consumption  to country liquor would be likely to be in  the neighbourhood of 482.36 lacs proof litres and by the turn of the  century it was expected to be in the  neighbourhood  of 1696.80  lacs proof litres. Obviously, the existing  9  dis- tilleries  were  totally  inadequate to  meet  this  growing demand  for  country liquor. Furthermore, the  buildings  in which these distilleries were housed had become old and were

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in  a state of disrepair and it was not easy for  the  State Government to maintain them in good condition without incur- ring  heavy expenditure every year. The plant and  machinery were also old and antiquated and it was necessary to  instal new and modern plant and machinery having increased capacity ’to  manufacture  country liquor. Moreover,  it  seems  that though at the time of construction, these distilleries  were away from the city or town, what had happened was that  with the  growth of population and haphazard and unplanned  urban development,  these distilleries had now come to be  in  the heart of the city or own and they created health hazards and pollution problems. There was a demand from all sections  of the public living in surrounding area to move the distiller- ies  away in order to avoid water and  environmental  pollu- tion.  It was in these circumstances, when the mind  of  the State  Government was already exercised in respect of  these matters  that  an application was made by  M.P.  Distillers’ Association in July 1983 for transferring these distilleries to  private ownership. The members of the  M.P.  Distillers’ Association  who were old distillers holding D-2 licence  in respect  of these distilleries offered to invest  their  own funds in the construction of new buildings and  installation of latest plant and machinery with capacity to produce  more country liquor in conformity with the standards laid down by M.P. Eradication of Pollution Board for  22 Removal  of  Polluted water by constructing  lagoons,  etc., provided they were assured D-1 licence for the area attached to their respective distilleries.     This  application  of M.P.  Distillers  Association  was examined  by the State Government at different  levels.  The Excise  Commissioner submitted his opinion to  the  Separate Revenue Department stating that "it would be more  appropri- ate  to  hand over the Government  distilleries  to  private ownership because thereby the Government will get additional income  from the sale of buildings, land, etc., of the  dis- tilleries and at the same time the distillers will pay  more heed to the distilleries buildings, etc., due to transfer of the  distilleries to private ownership and they will  instal the  latest  machinery and implements as a result  of  which there will be an increase in liquor production and supply of liquor as per requirement of the State Government and at the same  time  they will be liable for solving the  problem  of pollution."  The  Revenue Department,  after  obtaining  the Report  from  the Excise Commissioner  examined  the  matter carefully  from  various aspect. But  since  several  points required  consideration  such as  whether  the  distilleries should be transferred to private ownership during the period of  the subsisting contracts, and if so, what would  be  the legal  consequences and whether the distilleries  should  be allowed  to continue at the same place or should  be  trans- ferred to new sites in view of the problem of pollution  and the  question of transfer of distilleries to private  owner- ship  was  itself an important policy  issue,  the  Separate Revenue Department referred the matter to the Chief Minister with  a  suggestion that a high level  committee  should  be appointed  for the purpose of examining the various  issues. The  State  Government accordingly under the orders  of  the Chief Minister constituted a Cabinet SubCommittee consisting of Ministers of Separate Revenue Department, Major and Minor Irrigation Department, Commerce and Industry Department  and Rehabilitation  and Environment Department and  four  highly placed  officers, namely, Chief Secretary, Secretary,  Sepa- rate  Revenue Department, Secretary Finance  Department  and Excise  Commissioner  were directed to  assist  the  Cabinet

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SubCommittee.  The Separate Revenue Department  submitted  a note for the consideration of the Cabinet Sub-Committee  and this  note formulated various issues arising for  considera- tion and set-out various aspects relating to these issues so as  to form the basis for. discussion. These issues  may  be summarised as follows:               (1)  Whether  the  transfer  of  ownership  of               Government distilleries should be made  during               the  present  contract period only or  on  the               commencement of new contract?                23               (2) Necessity of spot inspection of distiller-               ies  and  survey of buildings  and  change  of               their place?               (3)  Policy  to  be adopted  for  transfer  of               buildings and lands of distilleries?               (4) Establishment of proper machine and imple-               ments  for manufacture of liquor in  the  dis-               tilleries  for  use of Mahuwa product  in  the               State?               (5)  Determination  and  question  of   fixing               prices of liquor under the new management? The  Cabinet Sub-Committee at its meeting held on 27th  June 1984  considered these issues and after discussion  came  to the conclusion that in view of the problem of pollution,  it should  first of all be examined "as to which distillery  is to be transferred from the existing site and which  distill- ery is to be maintained at the present site" and in order to determine  this question, the Cabinet Sub-Committee  consti- tuted  a Committee headed by Shri Vijayvargi Special  Secre- tary, Separate Revenue Department. The Vijayvargi  Committee was also authorised to select new sites for the distilleries which in its opinion required to be removed from the  exist- ing sites on account of the problem of pollution. The Vijay- vargi Committee thereafter made spot inspection of all the 9 distilleries  in the State and submitted its report  to  the Cabinet  Sub-Committee on 18th July 1984. This Report was  a detailed  and  exhaustive Report and it was pointed  out  in this  Report  that 5 distilleries, namely,  Bhopal,  Ujjain, Badwaha, Seoni and Bhilai were required to be removed to new sites on account of the problem of pollution, but so far  as the  remaming  two  distilleries at Gwalior  and  Dhar  were concerned,  it was not necessary to remove them  from  their present  sites, though in regard to Dhar Distillery, it  was necessary  to fix lagoon plant for removing  pollution.  The Vijayvargi  Committee also stated in its Report that it  was necessary  to make arrangement in regard to  polluted  water thrown out from Nowgaon and Ratlam Distilleries.     The  Cabinet Sub-Committee at its meeting held  on  21st July 1984 considered the Report of the Vijayvargi  Committee and  decided to accept it wholly. The Cabinet  Sub-Committee directed that an estimate of the cost involved in setting up the  Bhopal, Ujjain, Badwaha, Seoni and Bhilai  distilleries at the new sites should be worked out by the Excise  Commis- sioner as also by the M.P. Consultancy Organisa- 24 tion and the valuation of the lands and buildings of Gwalior and  Dhar  distilleries, which according to  the  Vijayvargi Report,  were  not  necessary to be shifted  to  new  sites, should  also be got done by the Collectors concerned on  the basis  of prevailing market rates. It was also  directed  by the  Cabinet  Sub-Committee  that an estimate  of  sales  of country liquor projected in the next 20 years should be  got made  and  it should also be examined  whether  such  future demand could be met by the present distilleries and on  this

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basis  how many’ distilleries in the public cooperative  and private sectors would be necessary to be established. Pursu- ant to this direction, an estimate of the cost likely to  be incurred in establishment of Bhopal, Ujjain, Badwaha,  Seoni and Bhilai distilleries at the new sites including  purchase of  land,  construction of buildings, setting up  of  modern plant and machinery and arrangement for lagoon for  polluted water  thrown out by the distilleries, was prepared  by  the Excise  Commissioner and the Report made by the Excise  Com- missioner  showed  that,  according to  this  estimate,  the likely cost would be in the neighbourhood of Rs.20 crores 60 lakhs.  The  Excise Commissioner also estimated  the  likely increase  in consumption of liquor in the next 20 years  and in  his  Report gave figures showing that at the end  of  20 years the annual requirement of liquor in the State would be 2967 lacs proof litres and that the total established capac- ity  of all the 9 distilleries taken together would  not  be sufficient  to meet this growing requirement of liquor  con- sumption. So far as the valuation of the land and  buildings of  Gwalior and Dhar distilleries was concerned,  no  report was  submitted  by the concerned Collectors until  the  next meeting of the Cabinet Sub-Committee.     The Cabinet Sub-Committee thereafter met on 10th  August 1984  and at this meeting the Cabinet Sub-Committee  consid- ered the report of the Excise Commissioner in regard to  the estimated  cost  of establishing  Bhopal,  Ujjain,  Badwaha, Seoni  and  Bhilai  distilleries at new sites  as  also  the estimated  increase in consumption ,of liquor over the  next 20  years  and  after discussing  all  the  various  related issues,  the Cabinet Sub-Committee arrived at certain  deci- sions which are set out in paragraph 3 of the proceeding  of this meeting which form part of the record. It is not neces- sary  here  to set out these decisions,  because  ultimately they  culminated in the recommendations made by the  Cabinet Sub-Committee  to which we shall presently  make  reference. But  at  this meeting the Cabinet Sub-Committee  decided  to invite representatives of the M.P.Distillers Association and to  give them a hearing before taking final decision in  the matter. The  representatives of the M.P. Distillers Association  met the 25 members of the Cabinet Sub-Committee at the meeting held  on 31st August 1984. These representatives made various sugges- tions  to  the Cabinet Sub-Committee and  these  suggestions included  inter  alia the suggestion that even  Gwalior  and Dhar  distilleries should be transferred to new sites  since the problem of pollution, though not pressing at the present moment,  was bound to arise after 5 or 7 years, but  if  the existing lands and buildings of these two distilleries  were to be transferred, such transfer should be made on the basis of their book value and not at the market price. It was also pleaded  by these representatives that if  the  distilleries were  going  to be transferred to private  ownership,   such transfers  should  be  effected  in  favour  of the existing contractors and not outsiders. Some suggestion was also made on behalf of these representatives that compensation  should be paid by the State Government, to the existing contractors for  the  expenditure incurred by them  in  construction  of roads,  molasses  collection pits,  wharehouses  etc.  These suggestions  were  considered and examined  by  the  Cabinet Sub--Committee.     Before the next meeting of the Cabinet Sub-Committee was held on 20th September 1984, a letter dated 10th Sept.  1984 was submitted by the Finance Department in which two  points

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were raised by the Finance Department. One was that  "trans- fer  of distilleries should be made by getting the  compara- tive  bids  offered and it should be given  to  the  highest bidder"  and  the other was whether on transfer  to  private ownership  the distillers "would be required to  obtain  any permission  under the Industries Development and  Regulation Act  and if permission is not granted, whether  any  problem would  arise  out of it." The Cabinet Sub-Committee  at  the meeting  held  on 20th September 1984  discussed  these  two points  and  so’far as the first point  was  concerned,  the Cabinet  Sub-Committee  came  to the  conclusion  that  "the transfer of distilleries should be made only to the  present contractors and their present supply area should be attached with them" and with regard to the second point, the  Cabinet Sub-Committee  felt that since the distilleries  which  were going to be established at the new sites were in lieu of the present  distilleries,  it may not be  necessary  to  obtain fresh  licence under the Industries Development and  Regula- tion Act but if fresh licence was required, it should be the responsibility  of  the distillers to obtain the  same.  The Cabinet  Sub-Committee  also took  various  other  decisions which are set out in paragraph 4 of the proceedings of  this meeting held on 20th September 1984. It is not necessary  to reproduce  these decisions, but it may be pointed  out  that the  request of the representatives of the  M.P.  Distillers Association  that the land and buildings of the Gwalior  and Dhar distilleries may be transferred at  26 book  value  and not at market value was  rejected  and  the Cabinet Sub-Committee decided that the transfer should be at the  prevailing  market price.  The  Cabinet  Sub-Committee, however,  agreed  that "if any distiller wants a  change  of place in the future, the decision about it would be taken by the Separate Revenue Department". The Cabinet  Sub-Committee also  recommended  that an agreement should be  executed  in writing between the distillers and the Excise Department  in which it should be provided that on the construction of  the distillery and the installation of the plant and  machinery, the  distiller  shall be entitled to obtain D-2  licence  in respect  of the distillery. It was decided at  this  meeting that the draft Report of the Cabinet Sub-Committee shall  be finalised  in  accordance with the decisions  taken  at  the various meetings of the Cabinet Sub Committee.      The Report of the Cabinet Sub-Committee was  thereafter finalised  and after setting out the history of the  discus- sions  that preceded the preparation of the Report, it  pro- ceeded  in  paragraph 17 to make the  following  recommenda- tions:               A. Transfer of ownership of distilleries               (1) All the Government distilleries should  be               transferred to the contractors concerned whose               contracts  are  current for the  periods  from               1.7.1981 to 31.3.1986.               (2)  The present buildings, lands  of  Gwalior               and Dhar Distilleries should be transferred as               per  the  price of the  present  market  rates               reported  by the Committees formed  under  the               Chairmanship  of  the  Regional  Commissioners               after receiving the same from the distilleries               and no concession should be given therein.               (3)  There  should be an  agreement  with  the               Distillers  who are allotted lands for  estab-               lishing  distilleries at the new sites to  the               effect  that the Government will be  bound  to               ’issue them D-2 licence after the construction

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             of buildings and fitting of plant, on fulfill-               ing all terms and conditions.               B.  Allotment  of lands  for  construction  of               distilleries at the new places                         (4) Generally a principle should  be               accepted in connection with the price of  land               to be allotted to the distillers at those               27               five  places  whose  distilleries  are  to  be               transferred  at  any other place that  if  the               land to be allotted is a Government land,  its               market value plus 20% of its market price  and               the amount so arrived at should be treated  as               the  premium  of that land and on  that  basis               ground rent should be fixed as per rules.  The               land should be given on 30 years’ lease.               (5)  If the land to be allotted is a  non-Gov-               ernment land and if it is to be allotted after               acquisition,  then as a result of  acquisition               the  compensation to be paid plus 20% and  the               amount  that  would be arrived  at  should  be               treated  as  premium of that  land  and  after               taking  ground  rent  as per  rules  the  land               should be given on 30 years’ lease.               (6)  The directions of the Industries  Depart-               ment  in  connection with  allotment  of  land               should also be kept in view.               (7)  No financial aid should be given  by  the               Government  to the distillers for  payment  of               premium, etc., of the land.               (8) If the land allotted is used for any other               purpose  than  the  purpose for  which  it  is               allotted, the land would auto matically  stand               diverted  to  the  State  Government.  Such  a               provision  should  be made in  the  terms  and               conditions of the lease deed.               C.  Letter  of Intent, for grant of D.  2  Li-               cences               (1)  D-2 licences should be granted  alongwith               letter  of intent only to those distillers  to               whom  land  is allotted  for  construction  of               distilleries.  The  Sub-Committee  also  feels               that the distilleries to be constructed at the               new  sites  shall be in lieu  of  the  present               distillery. Therefore, this will not be neces-               sary  to  obtain  licences  from  the  Central               Government. But, for any other reason, if  any               licence is compulsory under the rules, Acts of               the  Government of India or the State  Govern-               ment, the distiller shall be liable to  obtain               it.  The  State  Government  will  send  their               applications   with  recommendations  to   the               Government of India.               D.  Construction of Lagoon, etc.,  for  making               arrangement for passing water from  distiller-               ies                28               (11) It will be obligatory for the  distillers               while constructing the distilleries to observe               the standards fixed by the M.P. Eradication of               Pollution  Board  for  removing  the  polluted               water  and the environment clean and  to  con-               struct Lagoon, etc. for the same.               (12) It should also be mentioned in the letter               of  intent  that  the  distillers  shall  make

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             similar  arrangement in the distilleries  that               would  be  transferred to  the  distillers  at               their present site only. Without such arrange-               ment  D-2 licence should not be given  to  the               distillers.               E.  Construction  of Laboratories  for  Liquor               test               (13)  The  distillers  shall  be  compulsorily               required to construct- a laboratory for exami-               nation  of liquor in the distillery.  It  will               also  be compulsorily required to construct  a               laboratory  for examination of liquor  in  the               distillery. It will be compulsory to construct               laboratory for liquor test in the distilleries               which are to be transferred to the  distillers               at the existing spot only.               F.  Arrangement for manufacturing liquor  from               Mahuwa               (14) The plants for manufacturing liquor  from               Mahuwa  also  should  be  established  by  the               distillers   for  manufacturing  liquor   from               Mahuwa in all the distilleries in the State so               that,  if  it is necessary, liquor  should  be               manufactured  from Mahuwa and the Mahuwa  pro-               duced  in  the State should be  properly  used               within  the  state only and  they  should  get               reasonable ,price for the Mahuwa purchased  by               them  at the support price of MARPED  or  Vano               Upaj  Vyaper Sangh. For each distillery  71/2%               liquor  should be manufactured from Mahuwa  of               its total productive capacity and it should be               mentioned in D-2 licence.               G. Period of D-2 licences               (15) In the beginning D-2 licence  (Distillery               Licence) should be granted for five years  and               thereafter there should be a provision for its               renewal. Necessary amendment in the Excise Act               or Rules for the same should be made.               29               H. Fixation of liquor price                (16)   The Sub-Committee was apprised of  the               system  of fixation of cost of liquor  in  the               State  of  U.P., West Bengal  and  Maharashtra               States.  Prices  fixed  in  Uttar  Pradesh  by               calling  tenders whereas in Maharashtra  under               Eythule  Alcohol  Price Control Order  on  the               recommendation  of the State  Government,  the               prices  of liquor are fixed by the  Government               of  India.  In West Bengal,  for  fixation  of               prices  a Committee is formed consisting of  a               Chartered  Accountant a cost Accountant and  a               Senior  Officer of the Excise  Department.  In               the opinion of the committee, prima facie, the               system  being adopted in the West  Bengal  was               found  more scientific and appropriate and  it               was  recommended to adopt this method.  Action               be taken after obtaining necessary details  in               connection  with  this system  and  after  the               distilleries are transferred to private owner-               ship, the prices should be fixed every year."               (17)  On  transfer to private  ownership,  the               rates proposed by the Committee to be  brought               into  effect  from 1.4. 1986 should  be  fixed               finally after discussing the same between  the               State Government and the distillers. Till  the

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             final rates are not fixed the present rates of               the  distilleries shall be maintained as  they               are and after that only it should be  adjusted               against the new rates.               (18) The present system of connecting the area               of  supply for each distillery shall be  main-               tained  in future also as it is. It  would  be               proper to maintain the present right of reduc-               tion or increase in the supply regions of  any               distillery    which   is   with   the    State               Government/Excise Commissioner, as it is.               I.  Control of Excise Department on  the  Dis-               tilleries               (12)  Even after the transfer of  distillaries               to private ownership, there should be  control               of the Excise Department over them as per  the               present  system  and for this purpose  if  any               amendment  is  found necessary, it  should  be               made in the Excise Act/Rules. The Finance Department, however, submitted a Report  raising 5 30  points  against the recommendations made in the  Report  of the Cabinet Sub-Committee. These points were answered by the General Administration Department in the summary prepared by it for submission to the Cabinet. These points together with the  answers given by the General Administration  Department may be reproduced as follows: "Point No.1                         The  distilleries  which are  to  be               transferred  to  the private  distilleries  on               account of the problem of pollution, it is not               proper to transfer to them the land and build-               ings. Answer                         In  this connection it is  pertinent               to  note  that the Cabinet  Sub-Committee  has               only  reommended transfer of Gwalior and  Dhar               distilleries   to  the  existing   distillers.               Looking  to  the problem of  pollution,  other               five distilleries have been recommended to  be               transferred  at the new sites and  their  con-               struction  and  establishment in  the  private               ownership. Hence, the question of transfer  of               land and buildings of these distilleries  does               not  arise.  It is clear that  the  lands  and               buildings  of  the present  five  distilleries               will  be of the State Government and they  can               be used for Government purposes. So far as the               transfer of Gwalior and Dhar distilleries  and               their  lands and buildings are concerned,  the               said distillers have made applications to  the               State  Government  that they  also  intend  to               establish  distilleries at the new  sites.  If               the  State  Government  decides  to  establish               these distilleries at other places, the  ques-               tion  of  transfer of lands and  buildings  of               these distilleries does not arise. Point No. 2               A  serious  thought  should be  given  to  the               question that the State Government should give               an  undertaking  to the  distillers  that  the               State  Government shall purchase  liquor  from               them  for ever and for that purpose no  tender               will be invited.

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Answer               With regard to this point, it would be  proper               to make               31               mention  of the fact that the distillers  whom               the land will be allotted for the construction               of new distilleries, they will only be granted               D-2  licence  and letters of  intent  will  be               issued in that regard. D-2 licence is  granted               for  the manufacture of liquor. D-  1  licence               relates  to the supply and rates of the  same.               According  to  the  present  arrangement,  the               State  Government purchase liquor  from  those               contractors  who are granted licences for  the               same  and in case of any short supply  on  ac-               count of some reason, liquor is imported  from               other States. This arrangement should also  be               made for future also. As far as the ceiling of               tender  is  concerned, it is  with  regard  to               rates  of  liquor. On this point, a  note  has               been given against point Nos.4 and 5. Point No. 3               As  there  is a possibility  of  increases  of               consumption  of  liquor  in  future,  and  the               increased  quantity of liquor will have to  be               purchased  by  the State Government  from  the               present  contractors,  that  will  amount   to               monopoly  system and the contractors  may  put               the State Government into trouble at any time.               For this purpose. the State Government  should               possess a right of granting D-2 licence to any               other distiller. Answer                         In  this  connection, it  should  be               mentioned  that  during the existence  of  the               contract.  if  there  is an  increase  in  the               consumption  of liquor the supply of the  same               is done by the               contractors or from outside. This  arrangement               shall  be continued in future also. As for  as               grant  of D-2 licence to other  distillers  is               concerned, it will be given to them  according               to the requirement. The Sub-Committee has  not               made such a recommendation that apart from the               existing distillers, no other person should be               granted D-2 licence.                         Here  a question may arise  that  on               the  conferral of private rights on  the  dis-               tilleries and in case of absence of favourable               conditions or difference of opinion about  the               fixation  of prices of liquor. the  distillers               taking  advantage of their proprietory  rights               may not close the distilleries? Ordinarily, no               such imagination can be made because after                 32               investing such a huge amount the intention  of               the  distillers is to gain profits.  For  that               purpose,  their effort would be to  constantly               run  the distilleries and for meeting such  an               eventuality some arrangement should be made in               the  agreement that could be entered with  the               distillers  so  that the distilleries  can  be               taken over the State Government. Point No. 4               The Sub-Committee has recommended that for the

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             supply of liquor the rates of the same may  be               fixed by a Committee consisting of a Chartered               Accountant,  a  cost accountant and  a  senior               Officer of the Excise Department. The  Finance               Department has suggested that in this  Commit-               tee, representatives of the Finance Department               and  the Separate Revenue Department  and  the               representative  of  the  Separate   Department               should  be  its Chairman which would  fix  the               rates on the basis of principles. Answer                         This suggestion is capable of  being               accepted. It may be pertinent to mention  here               that  the  Sub-Committee was apprised  of  the               different systems adopted by different  States               with regard to supply rates. The Sub-Committee               has  recommended the system prevalent in  West               Bengal  because  the Sub Committee  felt  that               this  system is more scientific and  fit.  The               Sub  Committee has also mentioned  that  after               obtaining   further  information  about   this               system,  action  should  be  taken  and  after               transfer  of  the  distilleries  into  private               ownership  the  prices should be  fixed  every               year.  Presently,  the prices  of  liquor  are               fixed for a period of five years. Point No. 5                         There  should be  competition  which               can be achieved through tender system.  Hence,               for  fixing  prices, tender system  should  be               adopted and nobody should be given to say that               the rates have been fixed arbitrarily. Answer               As  mentioned  in  recommendation  No.  17  of               the"Sub               33               Committee  dated 1.4.86, the rates to be  made               effective  from 1.4.86 will be proposed  by  a               Committee which will be given effect to  after               discussion   (negotiations)  with  the   State               Government and the distillers. The Sub Commit-               tee  has also made a recommendation that  till               the  time the final rates are not fixed,  till               that  period the respective distilleries  will               maintain  their existing rates and after  that               they will adjust against the new rates. Hence,               it  will  be clear that according to  the  new               system  fixation  of prices will be  fixed  by               calling tenders. For the present supply rates,               tenders  are invited and on that  basis  after               negotiations  with  the distillers  the  final               rates are fixed."     The  summary  alongwith the Report of  the  Cabinet  Sub Committee and all other papers and proceedings leading  upto the making of the Report were all placed before the  Cabinet at the meeting held on 30th December 1984 when the following decision was taken:               "1.  Looking to different angles of  the  sub-               ject, the recommendations of the Cabinet  Sub-               Committee should be endorsed.               2.  If some such similar matters are  put  up,               the department on the basis of the  principles               should take decisions."     Pursuant  to  this policy decision dated  30th  December 1984  a Letter of Intent dated 1st February 1985 was  issued

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by the State Government in favour of each of respondent Nos. 5 to 11 for grant of D-2 lincence for the construction of  a distillery  at a new site for the purpose  of  manufacturing country  liquor with effect from 1st April 1986 in  lieu  of the existing distillery in respect of which such  respondent held D-2 and D- 1 licences for the period ending 3 1st March 1986.  The Letter of Intent set out various conditions  sub- ject  to  which D-2 licence was to be granted in  favour  of each of respondent Nos. 5 to 11. Clause (1) of the Letter of Intent prescribed the following condition:                     1. (a) The licence shall be granted  for               a  period of five years commencing  from  1-4-               1986,  subject to the payment of licence  fees               of Rupees Twenty Five thousand in advance  and               such  security  as may be  prescribed  by  the               Excise  Commissioner  for  due  observance  of               rules, and conditions of licence.               (b)  It  will  be the  responsibility  of  the               licensee to obtain                34               a  licence/permission, if any required by  the               State Government or Government of India.                      (c)  The licence shall be further  sub-               ject  to renewal every year’ on payment  of  a               licence  fees of Rs. Five thousand in  advance               and  subject to due observance of  the  provi-               sions of the Excise Act and rules made  there-               under and conditions of the licence. The  licensee  to whom the Letter of Intent was  issued  was required under Clause 2 of the Letter of Intent to construct the distillery on the land approved by the State  Government and  the M.P. Pollution Board. It was provided by Clause  12 of the Letter of Intent that the licensee shall make  proper arrangements  for treatment of effluents discharge  under  a scheme  duly approved by the M.P. Pollution Board  and  that any  direction  issued by the Excise  Commissioner  in  this regard  shall be binding on the licensee. Clause 14  of  the Letter of Intent stipulated that the licensee shall be bound to  complete construction of distillery and installation  of plant  and machinery as required by the Excise  Commissioner well before 1st April 1986.     The Letter of Intent was followed by a Deed of Agreement dated 2nd February 1985 executed by and between the Governor of Madhya Pradesh acting through the Excise Commissioner and each  of  respondent  Nos. 5 to 11. The  Deed  of  Agreement recited  that  the Letter of Intent has been issued  by  the State  Government for grant of D-2 licence for  construction of distillery for manufacture of spirit with effect from 1st April 1986. Clause 1 of the Deed of Agreement provided  that the  licensee  shall be bound to take land on  lease  for  a period  of  30  years from the State  Government,  but  this clause is not material because ultimately none of respondent Nos.  5 to 11 took land on lease from the  State  Government and each of them purchased his own land, the site of  course being approved by the State Government. Clause 2 of the Deed of Agreement is rather material and it may be reproduced  in full:--                         "The  Govt. shall be bound to  sanc-               tion D-2 licence in favour of the Licensee who               has been granted letter of intent to  manufac-               ture  spirit w.e.f.  1-4-86 in lieu of  CHHAT-               TISGARH  DISTILLERY  situated  at   INDUSTRIAL               ESTATE BHILAI for a period of 5 years  subject               to  renewal every year on payment  of  Licence               Fee  Rs.5,000  and on due  fulfilment  of  the

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             conditions  of the licence and the  provisions               of  M.P.  Excise Act 1915 and the  Rules  made               thereunder."                35 It  was provided by Clause 4 of the Deed of  Agreement  that the licensee shall be bound to manufacture country spirit in the distillery from mahuwa also and the country spirit  made from mahuwa shall not be less than 7.5% of the total produc- tion  in  the distillery. So far as the pricing  of  country liquor made from mahuwa, khandsari molasses or mill molasses was concerned, Clause 6 of the Deed of Agreement provided as follows:--               "The rate of country spirit made from  Mahuwa,               Khandsari  molasses or mill Molasses shall  be               determined  every year by the State  Govt.  on               the basis of the recommendation of the commit-               tee  constituted  by the State Govt.  in  this               behalf. The cost price so determined shall  be               final and binding on the Licensee." The other clauses of the Deed of Agreement are not  material and we need not refer to them in detail beyond merely  stat- ing  that they were introduced in the Deed of  Agreement  in conformity  with  the policy decision  dated  30th  December 1984.     Pursuant to the Letter of Intent and the Deed of  Agree- ment  each Of respondent Nos.5 to 11 selected with  the  ap- proval  of  the State Government the new site at  which  the distillery  should  be located, purchased land at  such  new site,  started constructing buildings for housing  the  dis- tillery and placed orders for purchase the plant and machin- ery to be installed in the distillery. Some of the plant and machinery  started arriving and it began to be installed  in the  distillery. There was some dispute between the  parties as  to how much amount each of respondent Nos. 5 to  11  had expended  by  the time the first writ petition  came  to  be filed  by  Nand Lal Jaiswal but it could  not  be  seriously contested that considerable amount of money had already been spent  by  respondent Nos. 5 to 11 in acquiring  land,  con- structing  buildings. placing orders for purchase  of  plant and  machinery and taking other necessary steps before  28th November  1985  when Nand Lal Jaiswal filed the  first  writ petition.  There is evidence to draw that considerable  more progress  had been made by respondent Nos. 5 to 11  in  this direction  by the time the second writ petition came  to  be filed by Sagar Agarwal. Each of them had, on a  conservative estimate, spent over one or two crores of rupees by the time Nand  Lal Jaiswal and Sagar Agarwal filed these  writ  peti- tions  challenging the policy decision dated  30th  December 1984. On the filing of these writ petitions, an  application for stay was made but it was rejected by the High Court with the  result  that the work of  setting  up  the.distilleries continued 36 space and the distilleries were almost complete by the  time decision  came  to be given by the High Court  disposing  of these writ petitions.     When  the  writ petitions were argued  before  the  High Court,  one of the questions seriously debated  was  whether under  the  policy decision dated 30th  December  1984,  D-2 licence was to be granted to each of respondent Nos.5 to  11 only  for  a limited period of 5 years commencing  from  1st April  1986 or it was to be granted for a minimum period  of five years with a clause for automatic renewal from year  to year  after  the expiration of the period of five  years  so that all other persons would be totally excluded from enter-

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ing  the field and a monopoly would be created in favour  of respondent  Nos.5 to 11 for all time to come so far  as  D-2 licence  for  manufacturing  liquor in  the  distillery  was concerned. The petitioners relied on clause 1 of the  Letter of Intent in support of their contention that a monopoly was sought to be created in favour of respondent Nos.5 to 11 for maufacturing liquor in the distilleries respectively set  up by  them by granting D-2 licence which was  renewable  every year  after the expiration of the initial period of 5  years without  any limitation of time and this was  clearly  arbi- trary and irrational so as to be violative of Article 14  of the  Constitution.  This  contention was  negatived  by  the Division  Bench  and particularly by Acting  Chief  justice, J.S.  Verma  in view of the categorical  statement  made  on behalf  of  the State Government by  the  learned  Advocate- General as also by the learned Advocates appearing on behalf of  respondent  Nos.5 to 11 that under the  policy  decision dated  30th  December, 1984, D-2 licence was to  be  granted only for a maximum period of 5 years "subject to its renewal within  the period of 5 years on the terms  and  conditions" mentioned  in the Letter of Intent and "there was no  under- taking on the part of the State Government" to grant, by way of renewal or otherwise D-2 licence after the expiry of  the period  of  5  years commencing from  1st  April  1986.  The learned  Attorney General, appearing on behalf of the  State Government,  as  also  the learned  advocates  appearing  on behalf  of  respondent Nos.5-11, reiterated the  same  stand before  us namely, that there was no commitment on the  part of  the  State Government to grant D-2  licence  beyond  the maximum  period of 5 years and that the provision in  regard to  renewal  from year to year was to  operate  within  this period  of 5 years. The learned counsel appearing on  behalf of the petitioners, however, urged that this concession made on  behalf of the State Government and  respondent  Nos.5-11 was  of no avail, since it was contrary to the terms of  the policy  decision dated 30th December 1984 and the  provision in  the Letter of Intent and, in any event, the validity  of the policy decision dated 30th December 1984 could be tested only  37 on  its own terms and if it was otherwise invalid, the  con- cession made on behalf of the State Government and  respond- ent  Nos.5-11 could not save it. We do not think  that  this contention urged on behalf of the petitioners is well-found- ed.  It is undoubtedly true that the recommendations of  the Cabinet Sub-Committee which were accepted by the Cabinet  in the  policy decision dated 30th December 1984 provided  that in the beginning, D-2 licence shall be granted for a  period of 5 years and thereafter there shall be a provision for its renewal  and  for this purpose, necessary amendment  in  the M.P. Excise Act, 1915 or the Rules made under the Act  shall be made. But, it is significant to note that no such  amend- ment  in the Act or the Rules was made by the State  Govern- ment  and when the Letter of Intent was issued and the  Deed of  Agreement was executed and even thereafter,  the  provi- sions of the Act remained unamended and Rule II of the Rules of  General Application also continued to stand in its  una- mended form. It is obvious that without an amendment of Rule II  of the Rules of General Application, the maximum  period for which D-2 licence could be granted to respondent  Nos.5- 11  was  only 5 years and there could be  no  provision  for automatic  renewal  thereafter  from year to  year.  It  is; therefore, clear that whatever might have been the  original intention, it was not effectuated by carrying out  necessary amendment in the provisions of the Act or in Rule II of  the

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Rules  of General Application and the ultimate  decision  of the State Government was to grant D.2 licence for a  limited period  of 5 years. This would also seem to be clear  beyond doubt  if we examine closely clause 2 of the Deed of  Agree- ment. This clause provided in terms clear and explicit  that the State Government shall be bound to grant D-2 licence  to the  licensee  "for a period of 5 years subject  to  renewal every year on payment of licence fee of Rs.5,000 and on  the fulfilment  of the conditions of the licence,and the  provi- sions  of  the  M.P. Excise Act, 19 15 and  the  rules  made thereunder?,. Obviously the provision of renewal every  year was  to operate within the span of 5 years itself and  every year,  the licence would be renewable on payment of  licence fee of Rs.5,000 and due fulfilment of the conditions of  the licence  and the provisions of the Act and the Rules. It  is not possible to spell out from this clause that the  licence was  to  be  granted for an initial period of  5  years  and thereafter  it was liable to be renewed from year  to  year. This  so called concession made on behalf of the State  Gov- ernment and respondent Nos.5-11 was, therefore, really not a concession at all but it was a stand taken in recognition of the correct position in regard to the grant of D-2  licence. The  High Court was, in the circumstances, right in  holding that the grant of D-2 licence to respondent Nos.5-11 was for a maximum period of 5 years and it did not operate to create monopoly in their favour for an indefinite period of time. 38     The  High  Court and particularly the  Judgment  of  the Acting Chief Justice J.S.Varma with Justice B.M. Lal divided the policy decision dated 30th December 1984 into two parts. The  first part according to the High Court related "to  the grant for construction Of the new distilleries by the exist- ing contractors" and the other part related "to the grant of licence for manufacture and wholesale supply of liquor  with effect  from 1st April 1986 to the existing  contractors  on construction  of new distilleries by them". The  High  Court first took up for consideration the question of validity the first  part  and held that having regard to  the  inordinate delay  in the filing of the writ petitions  no  interference was  "called  for with the grant to this extent".  The  High Court observed and we are quoting here in full what the High Court  has said in regard to the first part since that  con- tains  the  finding  of the High Court on  the  question  of delay:--               "In  our opinion, the delay in bringing  these               petitions  to challenge the grant made to  the               existing  contractors who are  respondents  in               these  petitions for construction of  the  new               distilleries, is not adequately explained and,               therefore,  it  would not  be  appropriate  to               interfere with the grant to this extent  since               at this stage, particularly when the construc-               tions by the respondents are nearly  complete.               We  have,  therefore, reached  the  conclusion               that without expressing any opinion about  the               validity  of the scheme relating to the  grant               only to the existing contractors for construc-               tion of the new distilleries, no  interference               with the grant to this extent alone should  be               made  in these petitions on the  short  ground               that there is unexplained delay in challenging               the  grant to this extent in  these  petitions               and  during  the intervening period,  the  new               distilleries  have almost been  completed,  if               not wholly completed and any interference with

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             the grant to this extent will result in  need-               less complications. For this reason alone,  we               decline to examine the validity of grant  made               in  favour  of  the respondents  only  to  the               extent  it permits them to construct  the  new               distilleries.  In  our opinion, the  facet  of               promissory  estoppel  relied  on  against  the               petitioners  on the basis of their conduct  is               applicable only to this extent." The  High Court then proceeded to consider the  question  of validity  of  the second part relating to the grant  of  li- cences  for  manufacture  and wholesale  supply  of  country liquor  to the existing contractors and held that this  part of the policy decision dated 30th December 1984 contra-  39 vening  Artide  14  of the Constitution  and  was  therefore liable to be struck-down as invalid. The High Court took the view that the existing contractors cannot be said to consti- tute  a distinct class by themselves so that grant  of  D-1, D-2 licences to them for manufacture and wholesale supply of country  liquor to the exclusion of other persons  could  be justified  under  the equality clause of  the  Constitution. Though  the High Court did not say so in express  terms  the view  taken  by  it seem to be that the grant  of  D-1,  D-2 licences given thrown open for all intending applicants  and no one should have been excluded from consideration for  the grant  which means that the proposed grant of D-1,  D-2  li- cences should have been advertised so that one and all could compete for the grant by filing their tenders or by  bidding at  an  auction. The High Court in this view set  aside  the grant  of  D-1, D-2 licences to respondent Nos.5 to  11  but since  there  are  no other distilleries  apart  from  those constructed  by  respondent Nos.5 to 11 and  country  liquor under  D-1, D-2 licences could be manufactured and  supplied only  from those distilleries, the High Court evolved a  new formula  namely, that the persons to whom D-1, D-2  licences may  be granted on the basis of tender or auction should  be entitled  to take over the distilleries constructed  by  re- spondent  Nos.5  to 11 at a proper value  assessed  by  the. State  Government.  The High Court accordingly  allowed  the writ petitions to this limited extent and directed that each party  shall  bear and pay its own costs of the  writ  peti- tions. The questions is whether this view taken by the  High Court is correct.     Before  we  proceed to consider this  question,  we  may point out that Acting Chief Justice, J.S. Verma, who  deliv- ered  the main judgment in the writ petitions, did not  make any comments against the conduct of the State Government  in granting to the existing contractors the right to  construct distilleries  and manufacture and make wholesale  supply  of country  liquor from such distilleries but merely  proceeded to  invalidate what he called the second part of the  policy decision  dated  30th December 1984 on the  ground  that  it violated  Article 14 of the Constitution. But  Justice  B.M. Lal  delivered  a separate concurring opinion  and  in  this opinion,  he  made  certain  observations  which  have  been strongly objected to by the learned Attorney General appear- ing  on behalf of the State of Madhya Pradesh. It is  neces- sary  to set out in extenso what the learned Judge has  said in  this connection because an application has been made  to us  by the learned Attorney General that  the  objectionable remarks made by the learned Judge should be expunged:               "This  new mischievous device gives  scope  to               respondents                40

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             No.5  to 11 to monopolize the entire trade  of               liquor  distillery in Madhya Pradesh and  also               make  the  State  dance at  their  tips  while               fixing the rates according to their wishes.                        However, it appears that the sinister               of  under-hand  dealing of the  agreement  has               persuaded  the  State Government to  make  the               statement before this court during the  course               of  second  day of arguments, that  they  have               reduced  the  period of  the  agreement  dated               2.2.1985  from 30 years to a mere of  5  years               period i.e. w.e.f. 1.4.86 to 31.3.1991 with no               condition  of renewing it  thereafter  without               adhering  to  the  provisions  of  rule   XXII               (Supra). By making this statement at the  bar,               I  presume that, the State is trying to  mini-               mise  the extent of depletion of public  reve-               nue,  but  still  the loss of  56  crores,  as               argued by Shri Venugopal, continues if licence               in  D-1  form is granted  to  the  respondents               Nos.5 to 11 even for a period of five years.                         Making  any relaxation in  contracts               illegally  arrived at by  violating  statutory               provisions  of rule XXII (Supra)  which  gives               abnoxious  smell of malafide involving  public               revenue  in crores, then, in my opinion,  even               for a moment it cannot be allowed to stand  in               the eye of law.                         It  appears  that  by  reducing  the               period of 30 years to a mere five years  peri-               od, the State still wants to extend benefit to               respondents 5 to 11, so that the amount so far               spent  by them in working out the contract  in               approaching the concerning authorities of  the               State  may  be  compensated.  Why  this  undue               favour  is being tried to be extended  to  the               respodents  Nos.5 to 11, speaks in  itself  in               volume and is really a matter of the domain of               the State Government.                         The  facts  relating to  under  hand               dealing  brought  to  our  notice  during  the               course  of arguments by pointing out from  the               record are so startling." These are undoubtedly strong and highly disparaging  remarks attributing mala fides, corruption and underhand dealing  to the State Government. Are they justified by the record, is a question which we have to consider. We  may  first consider the question of laches or  delay  in filling the 41 writ  petitions because that is the question which has  been decided  by the High Court against the petitioners  and  the petitioners  have challenged the correctness of the  finding reached by the High Court of this point. The policy decision impugned  in  the writ petitions was  taken  30th  December, 1984.  The Letter of Intent was issued in favour of each  of respondent Nos. 5 to 11 on 1st February 1985 and the Deed of Agreement  was  executed on 2nd February 1985. Each  of  re- spondents nos. 5 to 11 thereafter proceeded to purchase land where  the new disilleries were to be located  and  incurred large  expenditure  in purchase of such  land  and  security deposit  in a fairly large amount was also paid by  each  of respondents Nos.5 to 11. Thereafter civil construction  work for  putting  up the distillery buildings was  entrusted  to reputed  builders  and various steps were taken by  each  of

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respondents   Nos.5   to   11   for   obtaining    requisite permission/consent  from  Madhya Pradesh  Pradushan  Nivaran Mandal.  The  construction of the distillery  buildings  was started and in many cases considerable progress was made  in the  construction.  Each of respondents Nos. 5  to  11  also placed orders for plant and machinery and this too  involved considerable amount of expenditure. All this had to be  done with  quick despatch because the distilleries were  required to  be ready for production by 1st April 1986. Each  of  re- spondent  Nos. 5 to 11 worked indefeatably, ceaselessly  and in  all earnestness and spent considerable time, energy  and resources  in setting up the distilleries at the  new  sites and by the time the writ petitions  came to be filed each of respondent Nos. 5 to  11 had  spent at least Rs. 1.5 crores it not more, on  acquisi- tion of land, purchase of plant and machinery,  construction of  distillery buildings and other incidental and  ancillary expenses.  The  first writ petition was filed  by  Nand  Lal Jaiswal  on  28th November, 1985 about 11 months  after  the date-of the impugned policy decision, while the second  writ petition  came  to be filed by Sagar Agarwal even  later  on 24th  January 1986 and the third writ petition of M/s  Doon- gaji & Co. was filed when the hearing of the first two  writ petitions was actually going on in the High Court. There can be no doubt that the petitioners were guilty of gross  delay in  filing  the writ petitions with the result that  by  the time  the writ petitions came to be filed, respondent  Nos.5 to 11 had, pursuant to the policy decision dated 30th Decem- ber 1984, altered their position by incurring huge  expendi- ture towards setting up the distilleries.     Now, it is well settled that the power of the High Court to  issue an appropriate writ under article 226 of the  Con- stitution  is discretionary and the High Court in the  exer- cise of its discretion does not ordinarily assist the  tardy and  the indolent of the acquiescent and the  lethargic.  If there is inordinate delay on the part of the petitioner in 42 filing a writ petition and such delay is not  satisfactorily explained, the High Court may decline to intervene and grant relief in the exercise of its writ jurisdiction. The  evolu- tion  of  this rule of laches or delay is  premised  upon  a number of factors. The High Court does not ordinarily permit a belated resort to the extraordinary remedy under the  writ jurisdiction  because  it is likely to cause  confusion  and public inconvenience and bring in its train new  injustices. The  rights of third parties may intervene and if  the  writ jurisdiction  is excercised on a writ petition  filed  after unreasonable delay, it may have the effect of inflicting not only hardship and inconvenience but also injustice on  third parties.  When  the writ jurisdiction of the High  Court  is invoked,  unexplained  delay coupled With  the  creation  of third  party rights in the meanwhile is an important  factor which always weighs with the High Court in deciding  whether or  not  to exercise such jurisdiction. We do not  think  it necessary to burden this judgment with reference to  various decisions  or this Court where it has been  emphasised  time and  again  that where there is inordinate  and  unexplained delay and third party rights are created in the  intervening period,  the High Court would decline tO interfere, even  if the State action complained of is unconstitutional or  ille- gal. We may only mention in the passing two decision of this Court one in Ramanna Dayaram Shetty v. International Airport Authority  of India & Ors., [1979] 3 SCR 1014 and the  other in  Ashok  Kumar Mishra & Ant. v. Collector Rajput  &  Ors., [1980]  1  SCR 491, We may point out that in  R.D.  Shetty’s

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case  (supra), even though the State action was held  to  be unconstitutional  as  being violative of Article 14  of  the Constitution,  this  Court refused to grant  relief  to  the petitioner  on  the ground that the writ petition  had  been filed  by  the petitioner more than five  months  after  the acceptance of the tender of the fourth respondent and during that period, the fourth respondent had incurred considerable expenditure, aggregating to about Rs. 1.25 lakhs, in  making arrangements for putting up the restaurant and the snack bar of course, this rule of laches or delay is not a rigid  rule which . can be cast in a straitjacket formula, for there may be  cases  where despite delay and creation of  third  party rights  the  High  Court may still in the  exercise  of  its discretion  interfere  and grant relief to  the  petitioner. But, such cases where the demand of justice is so compelling that  the High Court would be inclined to interfere  inspite of’delay  or creation of ,third party rights would by  their very nature be few and for between. Ultimately it would be a matter within the discretion of the Court ex-hypothese every discretion  must  be exercised fairly and justly  so  as  to promote justice and not to defeat it. Here, obviously, there was considerable delay on the part of the 43 petitioners  in filing the writ petitions and in the  inter- vening  period, respondent Nos.5 to 11 acquired  land,  con- structed distillery buildings, purchased plant and machinery and  spent considerable time, money and energy towards  set- ting up the distilleries. These circumstances would, in  our opinion,  be  sufficient to disentitle  the  petitioners  to relief under Article 226 of the Constitution. The  petition- ers however contended that they were not aware of the policy decision dated 30th December 1984 nor had they any knowledge of the fact that the right to construct distilleries and  to manufacture  and supply wholesale country liquor  from  such distilleries was granted to the existing contractors and  it was only when they came to know about this that they immedi- ately  proceeded  to  file the writ petitions.  Now,  it  is difficult to believe that the petitioners were not aware  of the policy decision dated 30th December 1984. The considera- tion  of  this matter started as far back as July  1983  and there were prolonged and wide ranging deliberations  lasting several months, coupled with spot inspections by the  Vijay- vargi  Committee and the Excise Department and it was  after considerable  discussion  and deliberation that  the  policy decision  was’ arrived at on 30th December 1984.  The  peti- tioners were, on their own showing,  liquor  contractors by profession  and  they  were "associated  with the trade of country liquor in  the  State since the last several years" and it would be wholly unreal- istic  and  naive to suppose that the petitioners  were  not aware of the change in the policy which was being  discussed at  various  levels over a period of almost  12  months  and which  was ultimately brought about by the  policy  decision dated 30th December 1984. Those who are in the liquor  trade would  immediately  know what is happening and  whether  any change  is taking place in the policy in regard to grant  of licences  for  manufacture and wholesale supply  of  country liquor. It is also difficult to believe that the peti- tioners  did not know that new distilleries were being  con- structed at new sites by respondent Nos.5 to 11. The reigned ignorance  of the petitioners is completely exposed  by  the letter  dated 1st April 1985 addressed by Sagar  Agarwal  to the Commissioner of Excise where it has been stated categor- ically:--

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             "I have learnt that in order to prevent pollu-               tion  the Government has taken a  decision  to               transfer  the  distilleries from  the  densely               populated areas and to establish them in areas               having  less  thinner  population.  Government               deserves to be congratulated for this decision               in the face of pollution prevailing throughout               the world.               For this work existing distillers have taken a               decision               44               to  construct  new distilleries at  their  own               cost  and  they are  being  granted  long-term               permanent type licences for the same.  Besides               this, the existing supply areas would be  kept               in tact with existing distillers." This letter clearly shows that Sagar Agarwal very well  knew about the policy decision dated 30th December 1984 and  that he  was aware that Iong-term permanent licences  were  being granted  to  the existing contractors for  constructing  new distilleries and operating the same. It may also be  pointed out  that there was considerable publicity in newspapers  in regard  to  the construction of new  distillery  at  village Khapri  in Chhatisgarh area and information to  that  effect appeared  in  the  issues of Yugdhar dated  7th  June  1985, Navbharat  dated 8th June 1985 and Amrit Sandesh. There  was also  information in regard to transfer of the Badawah  dis- tillery to village Khodi in the issue of Nai Dunia published from  Indore on 12th July 1985. Of course,  the  petitioners have  stated in their affidavits that they did not see  this newspaper  publicity  but it is difficult  to  accept  their statement. We may also point out that, apart from the letter dated  1st April 1985, there was also another  letter  dated 25th  September 1985 addressed by Sagar Agarwal to the  Com- missioner  of Excise where he made a specific  reference  to the  policy  decision dated 30th December 1984  which  shows that in any event, Sagar Agarwal knew specifically about the policy decision as far back as 25th September, 1985 and  yet no  action  was taken by him until 24th  January  1986.  M/s Doongaji & Company also knew by April 1985 that the distill- eries  were being given ’permanently’ to the  existing  con- tractors, vide their letter dated 12th April 1985  addressed to  the Chief Secretary, Government of U.P. The next  letter in point of time, namely, that dated 17th May 1985 addressed by M/s Doongaji & Company to the Prime Minister, also  shows that M/s Doongaji & Company were aware by this time that the distilleries were being given ’permanently’ to the  existing contractors. M/s Doongaji & Company addressed another letter to  the  Prime Minister on 7th November 1985 in  which  they once again complained that the distilleries were being  made ’permanent’ to the existing contractors. Now if Sagar  Agar- wal  and  M/s Doongaji & Company knew as far back  as  April 1985  that  the  distilleries were being  given  in  private ownership  to the existing contractors, it is  difficult  to believe  that  Nand Lal Jaiswal who is also  in  the  liquor trade  for  years  did not known about it.  In  fact,  every person in the liquor trade would have know about this change in policy which had been made by the State Government  under the  policy  decision dated 30th December 1984.  We  do  not therefore  see any reason to up set the finding of the  High Court that the petitioners were guilty of 45 enormous delay in filing the writ petitions and that in  the meanwhile,  during  the intervening period,  the  rights  of third parties had intervened in that respondent Nos.5 to 11,

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acting on the basis of the policy decision dated 30th Decem- ber  1984, had incurred huge expenditure towards setting  up the distilleries. If the policy decision dated 30th December 1984  were now to be set aside at the instance of the  peti- tioners, it would work immense hardship on respondent Nos. 5 to  11  and cause grave injustice to  them,  since  enormous amount of time, money and energy spent by them in setting up the  distilleries  would be totally wasted.  Obviously,  re- spondent Nos.5 to 11 would not have proceeded with the  work of setting up the distilleries by spending considerable time and  energy  and  incurring huge expenditure,  if  the  writ petitions  had  been filed in time, for in that  event  they would  have known that they would be running a serious  risk of  losing time, money and resources in case the writ  peti- tions  were allowed. But since no writ petitions were  filed by  any liquor contractors challenging the  policy  decision dated  30th  December  1984 for well nigh  over  10  months, respondent Nos.5 to 11 could not be blamed for embarking  on the  task  of setting up the distilleries  pursuant  to  the policy  decision dated 30th December 1984. It would be  most inequitous  now  to tell respondent Nos. 5 to 11  that  they policy decision dated 30th December 1984 was unconstitution- al  and void and that all the time and energy spent and  the enormous  expenditure  incurred by them in  setting  up  the distilleries is therefore futile and they cannot be  permit- ted to enjoy its benefits.     The High Court however, fell into an error in  splitting up  the  policy decision dated 30th December 1984  into  two parts,  one part relating to the grant for  construction  of new  distilleries by the existing contractors and the  other part  relating to the grant of licences for manufacture  and wholesale  supply of liquor to the existing  contractors  on construction of new distilleries by them and in holding that delay  on  the part of the petitioners in  filing  the  writ petitions disentitled them to relief in respect of only  the first part ’and not in respect of the second. The High Court took  the view that by reason of the delay in filing of  the writ  petitions, the petitioners could not be  permitted  to assail  the grant made to the existing contractors for  con- struction  of  new distilleries but so far as the  grant  of licences for manufacture and wholesale supply of liquor from the  new  distilleries was concerned. the challenge  to  the same  was not precluded by the doctrine of laches  or  delay and taking this view, the High Court proceeded to hold  that the  grant of licences for manufacture and wholesale  supply of liquor made to the existing contractors was violative  of the equality clause of the Con- 46 stitution.  This  view  taken by the High Court  is  in  our opinion  plainly erroneous. The policy decision  dated  30th December 1984 was a single integrated decision arrived at by the  State  Government  taking a holistic view  of  all  the aspects  involved  in the decision and it  is  difficult  to appreciate how the High Court could sustain one part of  the policy  and  strike down the other. Either the policy  as  a whole could be sustained or as a whole, it could be declared to  be  invalid, but certainly one part could  not  be  sus- tained,  whatever  be the ground and  the  other  pronounced invalid.  That  would be making a new policy for  the  State Government which it was not competent for the High Court  to do.  Once  the  High Court came to the  conclusion  that  on account  of delay or laches in the filing of the writ  peti- tions  or  the creation of third.party rights in  the  mean- while,  the Court would not interfere with one part  of  the policy  decision,  the Court could not  interfere  with  the

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second part of the policy decision as well. The  consequence of  sustaining one part of the policy decision and  striking down the other would not only be to create a new policy  for the  State Government but it would also  cause  considerable hardship  and injustice to respondent Nos. 5 to 11 and  also result  in public mischief and inconvenience detrimental  to the interest of the State.     In the first place, under the policy decision dated 30th December  1984, new distilleries were to be  constructed  by the  existing  contractors, not with a view to  making  them available  for manufacturing liquor to any other person  who might  give a more acceptable bid or tender for D-1 and  D-2 licences in the open market, but in order that the  existing contractors  who put up the new distilleries should be  able to manufacture liquor and make wholesale supply of it  under D-1 and D-2 licences to be granted to them for a period of 5 years.  The  grant of D-1 and D-2 licences to  the  existing contractors for a period of 5 years for manufacturing liquor in the new distilleries constructed by them and supply it in wholesale  to  retail vendors, was an integral part  of  the policy  decision  dated 30th December 1984. If D-1  and  D-2 licences were not be granted to the existing contractors but they were to be disposed of by auction or tender to any  one who offers the most favourable rate, why should the existing contractors or for the matter of that any one, spend so much time, energy and resources and incur so much expenditure for constructing  the distilleries. Obviously the inducement  to the  existing contractors for constructing new  distilleries at enormous cost was that they would be granted D- 1 and D-2 licences at least for a period of 5 years. Otherwise, we  do not see why they should agree to construct new  distilleries spending  so  much time and energy and incurring  such  huge expenditure. Moreover, according to 47 the  policy  decision  dated 30th December  1984,  the  rate chargeable  for  supply of liquor manufactured  in  the  new distilleries  was to be determined from year to year  by  an Expert  Committee appointed by the State Government, but  if such rate were to depend on the bid which may be made at the auction or tender and obviously the auction or tender  could take place only at the end of 3 or 5 years and not from year to year--the entire policy of rate fixation laid down by the State  Government would be set at naught. What would  happen in effect is that the old policy which was being followed up to 31st March 1986 and which was sought to be changed by the State  Government would be revived but now the  distilleries forming  the subject matter of that policy would not be  the old distilleries of which the land and building belonged  to the State Government and the plant and machinery was subject to  transfer  at a valuation but the new  distilleries  con- structed  by the existing contractors with their own  monies and resources under the Letter of Intent dated 1st  February 1985  and  the Deed of Agreement dated  2nd  February  1985, neither  of  which  provided for transfer of  the  land  and building or the plant and machinery to any other person  who might be granted D-1 and D-2 licences as a result of auction or  tender. The entire policy of the State  Government  con- tained in the policy decision dated 30th December 1984 would be  frustrated  and  a new policy would be  made  out  which patently the High Court has no jurisdiction or power to do.         Secondly, it is obvious that respondent Nos. 5 to 11 took tremendous trouble by way of acquiring land, construct- ing buildings, purchasing and installing plant and machinery and  procuring and  utilising large resources in setting  up new distilleries with a view to working them and manufactur-

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ing liquor for wholesale supply at such rate or rates as may be  fixed  by the Expert Committee appointed  by  the  State Government.  Now if D-1 and D-2 licences are not granted  to them but are disposed of through auction or tender to anoth- er  person the entire effort put in by them would be  wasted and  they would be disappointed of a legitimate  expectation created  by  the policy decision dated  30th  December  1984 which remained unchallenged for a period of over 10  months. There  can  be no doubt that this would  cause  considerable hardship  and  inconvenience  to respondent Nos.  5  to  11. Moreover,  it is difficult to see how D-1 and  D-2  licences could be disposed of in favour of the most acceptable bidder or tenderer, when  such bidder or tenderer has no distillery in which he can manufacture liquor. D-1 licence, as we  have pointed  out above, cannot be granted to a person  who  does not  hold D-2 licence and the grant of D-2  licence   postu- lates  that a distillery would be available to the  licencee where he 48 can  work  for manufacturing liquor. Here, barring  the  new distilleries which are being set up by respondent Nos. 5  to 11  and  the Ratlam and Nowgaon distilleries, there  are  no other  distilleries  in the State of  Madhya  Pradesh  where liquor  can be manufactured and hence D-1 and  D-2  licences cannot be granted to any person other than respondent Nos. 5 to 11, unless the new distilleries constructed.by respondent Nos. 5 to 11, are transferred to such other person either by agreement  or after acquisition by the State Government.  We can plainly rule out the possibility of any agreement on the part of respondent Nos. 5 to 11 to transfer the new distill- eries  to any other person to whom D-1 and D-2 licences  may be granted by the State Government and the only  alternative left  open  to the State Government would  therefore  be  to acquire the new distilleries. But that would again frustrate the policy of the State Government to transfer the  distill- eries  to  private  ownership and the old  policy  would  be revived,  though  in a different garb. Moreover,  the  State Government would have to produce over 40 crores of rupees by way of compensation for the acquisition of the new  distill- eries and that would be a heavy drain on the public revenues which might otherwise be used for developmental and  welfare activities. Further more, the entire process of  acquisition would take considerable time, may be years, and during  this period, there would be no production of liquor and the State Government  would have to purchase liquor from  outside  the State at higher prices in order to satisfy the demand of the consuming  public, resulting in loss of licence fee as  well as  excise  duty.  Even if the person to whom  D-1  and  D-2 licences  may be granted agrees to set up a new  distillery, it would take considerable time and during the period  taken up  in  the construction of the new  distillery,  the  State Government  would lose revenue. Of course, it may  be  urged that if respondent Nos. 5 to 11 are not granted D-1 and  D-2 licences  but such licences are granted to any other  person or  persons who offer a more acceptable bid or  tender,  re- spondent  Nos. 5 to 11 would be constrained to transfer  the new  distilleries  to such other person or  persons  because otherwise  the new distilleries in their hands would  remain idle  investment. But the State GOvernment cannot  wait  for such chance to materialise and in the meanwhile, lose public revenue.     We  have therefore no doubt that the High Court was  not at  all justified in splitting up the policy decision  dated 30th  December 1984 into two parts and in striking down  the second  part, while sustaining’ the first. The Policy  deci-

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sion  dated  30th December 1984 was  one  integrated  policy decision and it could either be sustained or struck down  as a whole. We must accordingly hold that since the petitioners were 49 guilty of enormous delay in filing the writ petitions and in the  intervening period, the rights of respondents Nos 5  to 11  were created in that they spent considerable  amount  of time, energy and resources and incurred huge expenditure  in setting  up the new distilleries and sustaining one part  of the  policy  decision while striking down  the  other  would amont to creating a new policy for the State Government  and would also entail considerable hardship and inconvenience to respondent Nos. 5 to 11 and would also be detrimental to the interest of the State, it would be unjust. and inequitous to grant relief to the petitioners against the policy  decision and the petitioners must in the circumstances be held to  be disentitled  to relief in respect of the policy decision  in its entirity. On this ground alone we would dismiss the writ petitions and allow the appeals of the State Government  and respondent Nos, 5 to 11.     But since considerable arguments were advanced before us in regard to the validity of the policy decision dated  30th December 1984 with reference to Article 14 of the  Constitu- tion, we shall proceed to consider this question- It  would, however, be convenient if we first examine two minor conten- tions  urged  on behalf of M/s. Doongaji & Co. as  they  are relatively  unimportant and can be briefly disposed of in  a few words. The first contention raised by the learned  coun- sel  appearing on behalf of M/s. Doongaji & Co. was that  it was not competent to the State Government to give effect  to the policy decision dated 30th December 1984 until after the publication  of  Rules made for that purpose  under  section 62(2)  (h) of the Act. The learned counsel pointed out  that D-2  licence in its existing form does not  contemplate  any construction  licence at all: it is only a licence to  manu- facture  liquor and not a licence to construct a  distillery and  hence without publishing Rules relating to licence  for construction of a distillery, the State Government could not implement  the  change of policy under the  policy  decision dated  30th December 1984. This argument was  elaborated  by the learned counsel by putting forward the following conten- tion  which  we may reproduce in his own words:  "Rule  XXII contemplates  the  disposal of licences  either  by  tender, auction or fixed licence fee or in such other manner as  the State Government may by general or special order direct.  It does not enable the State Government without publishing  the rules  to licence construction and working of  a  distillery under a changed policy: i.e. a policy which does not involve tender, auction or fixed licence fee. Any other construction would-render  the  last clause of Rule XXII as  ultra  vires section 62(2)(h) and section 63 read with section 7(c)." The learned counsel also urged that "the decision of the Cabinet in a meeting of the 50 Cabinet is not an Order" within the meaning of Rule XXII and since  no order under that Rule was produced, the Letter  of Intent and the Deed of Agreement were without the  authority of  law  as being in contravention of that Rule. We  do  not think this contention has any substance. It is a  contention of  despair.  It is difficult to understand why  the  policy decision dated 30th December 1984 cannot be given effect  to without  any new Rules being made by the  State  Government. There is nothing in the policy decision dated 30th  December 1984  which is contrary to the Rules made under the Act.  It

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is  true  that  D-2 licence in its existing  form  does  not contemplate construction of a distillery and that the  Rules do  not seem to have prescribed the form for a  licence  for constructing a distillery. But, merely because the form of a licence  for constructing a distillery is not prescribed  by the  Rules, it does not mean that such a licence  cannot  be granted by the Excise Authorities. If the form of a  licence is  prescribed,  then, of course, such form has to  be  fol- lowed, but if no form is prescribed, the only consequence is that  the  licence to be granted by the  Excise  Authorities need  not conform to any particular form. Section  14(c)  of the  Act clearly provides that the Excise  Commissioner  may license  the  construction and working of a  distillery  and there  was,  therefore, nothing contrary to the Act  or  the Rules in the Excise Commissioner issuing Letter of Intent in favour of each of respondent Nos. 5-11 granting licence  for construction  of  a new distillery. Rule XXII,  as  we  have already  pointed out, permits any one of four modes of  dis- posal of licence to be adopted by the Excise Authorities and it  does not prescribe that the fourth mode denoted  by  the words  "such  other manner as the State  Government  may  by general or special order direct" can be resorted to only  if the  first three modes fail. Here, in the present case,  the policy  decision  dated  30th December  1984  provided  that respondent  Nos.  5-11, who were the  existing  contractors, should be granted licence to construct new distilleries  and D-  1 and D-2 licences should be given to them for a  period of five years for manufacturing liquor in such new  distill- eries and making wholesale supply of it to retail vendors in the  areas  attached to those distilleries. This  manner  of disposal of licences was clearly covered by the fourth  mode of disposal set out in Rule XXII. We fail to understand  why any  further  Rules were necessary to be made by  the  State Government  in order to give effect to this policy  decision arrived  at by the State Government on 30th December,  1984. The fourth mode of disposal set out in Rule XXII was, in our opinion,  sufficient to permit disposal of licences  in  the manner  set out in the policy decision dated  30th  December 1984.  The  argument that there was no  general  or  special order  made by the State Government pursuant to  the  policy decision dated 30th December 1984 which would bring the case within the 51 fourth mode set out in Rule XXII is equally futile. When the policy  decision dated 30th December 1984 was arrived at  by the  State  Government itself, there could be  no  need  for separate  general or special order to be made by  the  State Government  in that behalf. This would seem to be  clear  on principle, but we find that there is a dedsion of this Court in  State  of Orissa & Ors. v. Harinarayan Jaiswal  &  Ors., [1972]  3  SCR 784 where the same view  has  been  accepted. There,  the  section  which came up  for  consideration  was section  29 of the Bihar and Orissa Excise Act,  1915.  Sub- section (2) of this section provided that the sum payable to the  State  Government in consideration of the grant  of  an exclusive  privilege  to manufacture and  supply  or  liquor shall  be  determined as follows: "by calling tender  or  by auction or otherwise as the State Government may, by general or special order, direct." The State Government adopted  the method of selling the exclusive privilege by private negoti- ations and this was challenged on behalf of the  petitioners on  the ground that the Government could sell the  exclusive privilege by private negotiations only if an order was  made under  section  29  sub-section (2) that  the  privilege  in question  shall be sold by private negotiations and no  such

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order  having  been made by the State Government,  the  sale effected by the State Government was invalid. This challenge was negatived by Hegde, J., speaking on behalf of the  Court in the following words:               "In  the  cases of public auctions or  in  the               case  of calling for tenders, orders from  the               Government   directing  its  subordinates   to               notify  or hold the auctions or call for  ten-               ders  is  understandable. Public  auctions  as               well as calling for tenders are done by subor-               dinate  officials.  Further due  publicity  is               necessary  in adopting those methods.  To  re-               quire the Government to make an order that  it               is going to sell one or more of the privileges               in question by negotiating with some one is to               make  a mockery of the law. If the  Government               can enter into negotiation with any person, as               we think it can, it makes no sense to  require               it to first make an order that it is going  to               negotiate with that person. We must understand               a   provision  of  law   reasonably.   Section               29(2)(a) does not speak of any order. It  says               that "the State Government may, by general  or               special  order direct". The direction  contem-               plated  by  that provision is a  direction  to               subordinate  officials. It is  meaningless  to               say that the Government should direct itself." This  decision provides a complete answer to the  contention urged on 52 behalf  of M/s. Doongaji & Co. based on the language of  the last  clause  of Rule XXII. It is true that  what  has  been produced  before the Court by way of policy  decision  dated 30th December 1984 is the decision of the Cabinet and if its production  had  been  objected to on behalf  of  the  State Government, a question would perhaps have arisen whether  it is barred form the scrutiny of the Court under clause (3) of Article  163 of the Constitution. But, it has been  produced by the petitioners without any objection on the part of  the State  Government  and  once it is produced,  the  Court  is entitled to look at it and it clearly contains the  decision of the State Government and must be held to fall within  the last  clause of Rule XXII. This view finds complete  support from the decision of this Court in L.G. Chaudhari v.  Secre- tary, L.S.G. Deptt., Govt. of Bihar & Ors., AIR 1980 SC 383.     The learned counsel appearing on behalf of M/s  Doongaji & Co. also raised another contention based on the provisions of the Industries (Development & Regulation) Act, 1951.  The argument of the learned counsel was that respondent Nos.  5- 11  were not entitled to set up new distilleries at the  new sites  without obtaining a licence from the Central  Govern- ment under Section 11 of this Act and since there was  noth- ing  to  show  that they had obtained  such  licence  before setting up the new distilleries, their action in setting  up the new distilleries was illegal and could not give rise  to any  rights  in their favour. But, this contention  is  also unsustainable.  In the first place, no such  contention  was raised  in the writ petitions and neither the State  Govern- ment nor respondent Nos. 5-11 had any opportunity of answer- ing  such contention. This contention is based on facts  and we  cannot permit the petitioners to raise it for the  first time in the present appeals. The foundation for this conten- tion  should  have been laid in the writ petitions  and  the necessary  facts should have been pleaded in support of  it. No  such  plea having been raised and no such  facts  having

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been  pleaded  in the writ petitions, we cannot  allow  this contention  to be raised before us. Moreover, it is  obvious from  section 11 read with the definitions of ’factory’  and ’industrial  undertaking’ contained in sub-sections (c)  and (d)  of section 3 of this Act that licence from the  Central Government  for setting up new distilleries would be  neces- sary  only  if 50 or more workers would be working  in  such distilleries  and here in the present writ petitions,  there is nothing to show that 50 or more workers were going to  be employed  in the new distilleries. We were told at  the  Bar that in fact old distilleries were also working without  any licence from the Central Government, presumably because less than  50  workers were employed in such  distilleries.  This contention of the learned counsel on behalf of M/s  Doongaji & Co. must also, therefore, be rejected. 53    That  takes us to the next contention urged on behalf  of the  petitioners  in regard to the validity  of  the  policy decision  dated 30th December 1984 tested with reference  to Article  14 of the Constitution. The High Court, of  course, declined to interfere with what it called the first part  of the  policy  decision on account of laches or delay  on  the part of the petitioners but came to the conclusion that  the second  part  of the policy decision was  violative  of  the equality  clause.  The High Court observed that  the  policy decision  dated 30th December 1984 "in so far as it  relates to  the  grant  of licences for  manufacture  and  wholesale supply  of country liquor  ........  contravenes Article  14 of  the  Constitution  and interference to  that  extent  is called  for". The argument which found favour with the  High Court  was,  and that is the argument which  was  reiterated before  us  on behalf of the petitioners,  that  the  policy decision dated 30th December 1984 that licence to  construct new  distilleries should be given only to the existing  con- tractors and D-1 and D-2 licences to manufacture and  supply it  in wholesale to retail dealers liquor in such  new  dis- tilleries  should be granted to them alone to the  exclusion of  other  liquor  contractors without  holding  auction  or inviting often which would give an opportunity to all liquor contractors  interested in setting up new  distilleries  and manufacturing and supplying liquor to complete for the grant of such licences, was arbitrary and irrational and there was no valid justification for selectively preferring the exist- ing  contractors  to other liquor contractors for  grant  of such licences. This contention, plausible though it may seem at  tint blush, is, in our opinion, wholly untenable.  There are  two very effective answers to it given by  the  learned Attorney General and the learned counsel for Respondent Nos. 5-11 and we shall immediately proceed to discuss them.     But, before we do so, we may at this stage  conveniently refer  to a contention of a preliminary nature  advanced  on behalf  of  the State Government and  respondent  Nos.  5-11 against  the applicability of Article 14 in a  case  dealing with  the grant of liquor licences. The contention was  that trade or business in liquor is so inherently pernicious that no one can claim any fundamental right in respect of it  and Article  14 cannot therefore be invoked by the  petitioners. Now, it is true, and it is well settled by several decisions of  this Court including the decision in Har Shanker &  Ors. etc. v. Deputy Excise & Taxation Commissioner & Ors., [1975] 3 SCR 254 that there is no fundamental right in a citizen to carry  on trade or business in liquor. The State  under  its regulatory power has the power to prohibit absolutely  every form  of activity in relation to  intoxicants--its  manufac- ture,  storage, export, import, sale and possession. No  one

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can claim as against the 54 State the right to carry on trade or business in liquor  and the  State  cannot be compelled to part with  its  exclusive right or privilege of manufacturing and selling liquor.  But when  the State decides to grant such right or privilege  to others the State cannot escape the rigour of Article 14.  It cannot act arbitrarily or at its sweet will. It must  comply with the equality clause while granting the exclusive  right or  privilage  of manufacturing or selling  liquor.  It  is, therefore,  not  possible to uphold the  contention  of  the State  Government and respondent Nos. 5-11 that  Article  14 can  have  no  application in a case where  the  licence  to manufacture  or  sell liquor is being granted by  the  State Government.  The  State cannot ride roughshod over  the  re- quirement of that Article.     But,  while considering the applicability of Article  b, in such a case, we must bear in mind that, having regard  to the nature of the trade or business, the Court would be slow to interfere with the policy laid down by the State  Govern- ment  for  grant of licences for. manufacture  and  sale  of liquor.  The Court would, in view of the  inherently  perni- cious  nature  of  the commodity allow a  large  measure  of latitude  to the State Government in determining its  policy of  regulating, manufacture and trade in  liquor.  Moreover, the  grant  of licences for manufacture and sale  of  liquor would  essentially be a matter of economic policy where  the court  would hesitate to intervene and strike down what  the State  Government has done, unless it appears to be  plainly arbitrary,  irrational  or  mala fide. We  had  occasion  to consider the scope of interference by the Court under  Arti- cle 14 while dealing with laws relating to economic  activi- ties in R.K. Garg etc. v. Union of India & Ors. etc.  [1982] 1 SCR 947. We pointed out in that case that laws relating to economic  activities should be viewed with greater  latitude than  laws touching civil rights such as freedom of  speech, religion,  etc. We observed that the legislature  should  be ,allowed some play in the joints because it has to deal with complex problems which do not admit of solution through  any doctrinaire or strait-jacket formula and this is particular- ly  true in case of legislation dealing with  economic  mat- ters,  where,  having regard to the nature of  the  problems required to be dealt with, greater play in the joints has to be  allowed to the legislature. We quoted with approval  the following  admonition  give by Frankfurter, J. in  Morey  v. Dond, (354 US 457):               "In the utilities, tax and economic regulation               cases,  there  are good reasons  for  judicial               self-restraint  if not judicial  deference               to legislative judgment. The legislature after               all  has the affirmative  responsibility.  The               courts have only the power to destroy, not  to               reconstruct. When these are added               55               to the complexity of economic regulation,  the               uncertainty,  the  liability  to  error,   the               bewildering conflict of the ’experts, and  the               number of times the judges have been overruled               by  events-self-limitation can be seen  to  be               the path to judicial wisdom and  institutional               prestige and stability." What we said in that case in regard to legislation  relating to  economic matters must apply equally in regard to  execu- tive action in the field of economic activities, though  the executive decision may not be placed  on as high a pedestial

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as  legislative judgment in so far as judicial deference  is concerned.  We  must  not forget that  in  complex  economic matters  every  decision is necessarily empiric  and  it  is based  on  experimentation or what one may call  ’trial  and error method’ and, therefore, its validity Cannot be  tested on any rigid a ’priori’ considerations or on the application of any straight-jacket formula. The court must while adjudg- ing  the  constitutional validity of an  executive  decision relating  to  economic matters grant a  certain  measure  of freedom  or  play  in the ’joints’ to  the  executive.  "The problem  of Government" as pointed out by the Supreme  Court of the United States in Metropolis Theatre Company v.  State of  Chicago, 57 Lawyers Edition 730 "are practical ones  and may  justify, if they do not require, rough  accommodations, illogical, it may be, and unscientific. But even such criti- cism  should not be hastily expressed. What is best  is  not discernible,  the  wisdom of any choice may be  disputed  or condemned. Mere errors of Government are not subject to  our judicial review. It is only its palpably arbitrary exercises which can be declared void." The Government, as was said  in permian  Basin Area Rate cases 20 Lawyers Edition (2d)  312, is  entitled  to  make pragmatic adjustments  which  may  be called  for  by particular circumstances. The  Court  cannot strike down a policy decision taken by the State  Government merely  because it feels that another policy decision  would have been fairer or wiser or more scientific or logical. The Court can interfere only if the policy decision is  patently arbitrary,  discriminatory or mala fide. It is  against  the background  of these observations and keeping them  in  mind that we must now proceed to deal with the contention of  the petitioners based on Article 14 of the Constitution.     The  first answer to the contention of  the  petitioners is,  and  this  in our opinion is a fatal  answer,  that  no liquor contractors have in fact been excluded from consider- ation under the policy decision dated 30th December 1984. It is undoubtedly true that, on the application of the existing contractors,  the State Government decided to grant to  them licences  to construct new distilleries in lieu of  the  old distilleries in 56 Gwalior, Ujjain, Dhar, Badwaha, Chattisgarh, Bhopal Seoni as also to give them D-1 and D-2 licences to manufacture liquor in  such  new distilleries and to sell it  in  wholesale  to retail vendors in the respective areas attached to such  new distilleries and it might appear on a superficial reading of the policy decision dated 30th December 1984 that the entire cake  was  handed over to the existing contractors  and  all other liquor contractors were left out and they were  denied an  opportunity  of asking for similar  licences.  But  this view, in our opinion, is based on a misreading of the policy decision  dated 30th December 1984. It ignores clause  2  of the  policy  decision which clearly provides that  "if  some such  ’similar  matters are put up, the  department  on  the basis  of  the principles recommended by  the  Cabinet  Sub- Committee  should  take decisions". It is  clear  from  this clause  that the State Government envisaged the  possibility of other liquor contractors making similar applications  for licences  to construct new distilleries and  to  manufacture and  supply  liquor  from such new  distilleries  and  hence provided that if any such applications are made, they should be  disposed  of by the Excise Department on merits  on  the basis  of the principles "recommended by the  Sub-Committee" that  is, on the basis of the same principles on  which  the licences were decided to be granted to the existing contrac- tors. It is therefore impossible to see how it can at all be

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contended that other contractors were excluded from  consid- eration  for the grant of licences for new distilleries.  If any liquor contractor makes an application for a licence  to construct  a new distillery on the same terms on  which  li- cences  are granted to the existing contractor his  applica- tion  would  have to be considered on merits by  the  Excise Authorities and the Excise Authorities may, if they find the proposal  suitable, grant to such liquor contractor  licence to construct a new distillery along with D-2 licence on  the same  basis.  The  Excise Authorities may,  in  such  event, either  (1)  direct such liquor  contractor  to  manufacture rectified spirit, denatured spirit or foreign liquor in  the new  distillery for the remaining period of the D-1 and  D-2 licences of the existing contractors and thereafter consider him along with other liquor contractors for grant of D-1 and D-2 licences in respect of the new distillery or (2)  reduce and/or  alter  the  area of supply-of any  of  the  existing contractors and grant D-1 licence to such liquor  contractor in  respect of the carved out area. If the Cabinet  decision dated  30th  December 1984 while granting  licences  to  the existing contractors leaves it open to other liquor contrac- tors to come in and apply for similar licences, it is diffi- cult  to  see how the challenge based on Article 14  can  be sustained. This  view taken by us is sufficient to dispose of the  con- tention 57 based  on  Article  14. But apart from this  answer  to  the contention  which  has found acceptance with  us,  there  is another  answer which is equally strong and cogent.  Let  us consider  the circumstances under which the policy  decision dated  30th  December 1984 came to be  taken.  The  proposal which ultimately culminated in the policy decision was first initiated  in July 1983 by the M.P. Distillers  Association, which  was of course an association of existing  distillers, making a representation to the State Government for privati- sation of the distilleries. The situation which prevailed at that  time in regard to the distilleries was quite  disturb- ing. Whatever might have been the position at the date  when the distilleries were constructed, considerable human  habi- tation  had  grown around them over the years  and,  barring Gwalior  and Dhar distilleries, all the  other  distilleries were  in  thickly populated localities and even  so  far  as Gwalior and Dhar distilleries were concerned, it was  appre- hended  that within 5 or 7 years they would also be  in  the same  unhappy situation. The result was that the working  of the  distilleries at the old sites was causing serious  air, water and environmental pollution. The note prepared by  the separate  Revenue  Department for the consideration  of  the Cabinet  Sub-Committee as also the Report of the  Vijayvargi Committee clearly showed that there was considerable air and water pollution on account of dirty water flowing out of the distilleries and fouling air and water. There was not enough space at the old sites for constructing lagoons for  removal of the polluted water coming out of the distilleries. It was therefore  necessary  to transfer the  distilleries  to  new sites  which would be away from human habitation and.  where the  distilleries could be constructed keeping in  mind  the standards  fixed  by the M.P. Pradushan Nivaran  Mandal  for removal  of polluted water and keeping the environment  dean and wholesome. Moreover, the total capacity of the  distill- eries including Ratlam Alcohol plant and Nowgaon  distillery was  only 203 lakhs proof litres and even this  quantity  of production  was not being reached largely on account of  old plant and machinery. The result was short supply of  country

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liquor leading to loss of licence fee as well as excise duty on the part of the State Government. Moreover, the estimated consumption  of liquor in the State was likely to be  around 482.36  lakhs proof litres by the year 1991 and by the  turn of the century it was expected to reach the startling figure of  1696.80  lakhs proof litres. The  existing  distilleries were obviously incapable of meeting this growing demand  for country liquor. The plant and machinery of the  distilleries had became antiquated and worn out and the licensees for the time  being had no incentive to replace it by  modern  plant and machinery. The buildings in which the distilleries  were housed  had  also become old and dilapidated and  the  State Government was not in a position to 58 maintain them in good condition and obviously the  licencees for  the time being were also not interested in keeping  the buildings in good state of repair because the buildings  did not belong to them. It was therefore absolutely essential to construct  new  distilleries  with  modern   technologically advanced plant and machinery at new sites where there  would be no problem of air or water pollution. The question was as to  how  this should be done whether  the  new  distilleries should  be  constructed by the State Government  or  whether they  should be placed in the private sector.  The  proposal made by M.P. Distillers Association was that the  distiller- ies  should  be transferred to private  ownership  and  they offered to take over the existing distilleries. The  Cabinet SubCommittee considered this question in all its aspects and reached  the conclusion that it would be better  to  entrust the  construction  of the new distilleries  to  the  private sector rather than ask the State Government to do so.  There are  four  very good reasons why the  Cabinet  Sub-Committee took this view. In the first place, the distilleries were in private ownership in almost all the States barring the State of M.P. and there was no reason why the State of M.P. should not  fail  in  line with what was  happening  in  the  other States. Secondly, the State Government would have to  invest about Rs.50 crores, in any event more than Rs.40 crores,  if the  State Government had to construct and cut up  new  dis- tilleries.  This  large amount would  become  available  for other  developmental and welfare programme, if,  instead  of the  State Government the private sector was entrusted  with the  task of construction of new distilleries. Thirdly,  the State  Government  would not have to,  incur  any  recurring expenditure  on maintenance of the buildings and  the  plant and  machinery, because in the event of construction of  the new  distilleries being entrusted to private  entrepreneurs, maintenance  of  buildings as well as  plant  and  machinery would  become their responsibility and moreover  they  would have  real interest in keeping and maintaining them in  good condition.  And lastly, the land and buildings in which  the distilleries were then housed would become available to  the State  Government  for sale and, situated as  they  were  in thickly  populated areas, they would fetch a  very  handsome price  which would go to augment the resources of the  State Government.  The State Government for these reasons  thought it  desirable  that  the construction  of  new  distilleries should  be in the private sector and, after discussion  with the M.P. Distillers Association the State Government decided to  entrust  the  construction of new  distilleries  to  the existing  contractors who had already offered to  take  over the distilleries.     There was also one other factor which, according to  the State  Government and respondent Nos. 5 to 11, weighed  with the State

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59 Government  in arriving at the decision to entrust the  con- struction  of new distilleries to the  existing  contractors instead of inviting offers by advertisement and that  factor was  that  the  licences of the  existing  contractors  were coming  to an end on 31st March, 1986 and it  was  therefore necessary  that  the new distilleries should  be  ready  for manufacture of liquor before 1st April, 1986. The  construc- tion of new distilleries was a time-consuming job because it involved  selection  of appropriate land,  approval  of  the authorities  to the land selected, entrustment  of  contract for  construction  to a competent contractor,  obtaining  of sanction of the municipal and other authorities to the plans acquisition  of  materials  and  construction  of  buildings placing of orders for modern sophisticated plant and machin- ery  and  installation of such plant and  machinery  in  the distilleries. This whole process was bound to take consider- able  time and the State Government could not  therefore  be faulted if they negotiated with the existing contractors who had  come  forward with a positive offer and  entrusted  the construction of new distilleries to them so that they  could be ready for manufacture by 1st April 1986. Moreover it  may be  noted that no other person with experience of working  a distillery  had come forward with an offer to set up  a  new distillery.  It  is not possible to believe  that  when  the existing  contractors  who were members of  M.P.  Distillers Association had made an offer to the State Government to set up  new  distilleries  and  considerable  deliberations  and detailed  enquiries were going on at the highest  level  for deciding whether the new distilleries should be handed  over to  the private sector and negotiations were actually  being carried  on  with the M.P. Distillers  Association  in  that behalf  the other liquor contractors were not aware  of  any such proceedings. Even after the policy decision dated  30th December, 1984 was reached by the State Government,  neither Nandial Jalswal nor M/s Doongaji & Co. made any  application for  grant of licence to construct a new distillery  on  the same  terms on which licences were decided to be granted  to the existing contractors. It is true that Sagar Aggarwal did make an offer but it may be noted that in the first place he was  at no time a D-2 licencee and he had no  experience  of working a distillery and secondly, his main interest was  in having D-1(S) licences for Jabalpur and Betul districts.  It is  also significant that while taking a decision  to  grant licences to the existing contractors to put up new  distill- eries, the State Government did not wish to create a monopo- ly  in  favour  of the existing contractors  and  the  State Government therefore, when entering into the Deed of  Agree- ment,  limited the duration of D-2 licence to be granted  to each of the existing contractors to five years and also left it  open to other distillery contractors to come in  on  the same terms. In fact the learned Attorney General 60 frankly  stated that if M/s Doongaji & Co. made an  applica- tion  for  a licence to construct a new  distillery  on  the basis as others, his application would be considered by  the State Government. We fail to appreciate how in these circum- stances it can at all be contended that the policy  decision dated 30th December, 1984 taken by the State Government  was arbitrary or irrational so as to be violative of Article  14 of the Constitution.     We may also point out that when the State Government  is granting licence for putting up a new industry, it is not at all necessary that it should advertise and invite offers for putting  up such industry. The State Government is  entitled

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to  negotiate with those who have come up with an  offer  to set  up such industry. This principle was clearly  and  une- quivocally  accepted  by this Court in Kasturi  Lal  Lakshmi Reddy  v. State of Jammu & Kashmir, [1980] 3 SCR 1338  where contracts  entered into by the state Government  with  three manufacturers  giving them the right to set up factories  in the State for the manufacture of rosin, turpentine and other derivatives  and making available to them an assured  supply of 4,000, 3,500 and 8000 metric tonnes of rosin per year  by giving them tapping contract were challenged as violative of Article 14 of the Constitution on the ground that the  State Government had not issued any advertisement inviting  offers for  award of tapping contract or stating that  the  tapping contract  would be given to any party who would be  prepared to put up a factory for manufacture of rosin, turpentine and other  derivatives within the State and thereby equality  of opportunity  to  compete for obtaining  such  contracts  was denied to other persons. This Court speaking through one  of us (Bhagwati, J., as he then was) pointed out:-                     "The pre-dominant purpose of the  trans-               action was to ensure setting up of a factor by               the 2nd respondents as part of the process  of               industrialisation  of the State and since  the               2nd respondents for that purpose. If the State               were giving tapping contract simplicitor there               can  be no doubt that the State would have  to               auction  or  invite tenders for  securing  the               highest  price,  subject, of  course,  to  any               other  relevant overriding  considerations  of               public  weal or interest, but in a  case               like  this where the State is  allocating  re-               sources  such as water, power,  raw  materials               etc. for the purpose of encouraging setting up               of  industries  within the State,  we  do  not               think the State is bound to advertise and tell               the people that it wants a particular industry               to be set up within the State and invite those               interested to come up               61               with proposals for the purpose. The State  may               choose  to  do so, if it thinks fit and  in  a               given situation, it may even turn to be advan-               tageous  for  the State to do so, but  if  any               private  party  comes  before  the  State  and               offers to set up an industry, the State  would               not be committing breach of any constitutional               or legal obligation if it negotiates with such               party  and  agrees to  provide  resources  and               other facilities for the purpose of setting up               the industry. The State is not obliged to tell               such  party; "Please it. I will  first  adver-               tise, see whether any other offers are  forth-               coming and then after considering all  offers,               decide  whether  I should let you set  up  the               industry".  It  would be most  unrealistic  to               insist on such a procedure  ...............The               State must be free in such a case to negotiate               with  a  private entrepreneur with a  view  to               inducing him to set up an industry within  the               State and if the State enters into a  contract               with such entrepreneur for providing resources               and other facilities for setting up an  indus-               try, the contract cannot be asailed as invalid               so  long  as the State had  acted  bona  fide,               reasonably  and  in public  interest.  If  the

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             terms  and conditions of the contract  or  the               surrounding circumstances show that the  State               has  acted  mala fide or out  of  improper  or               corrupt  motives  or in.order to  promote  the               private  interests of some one at the cost  of               the  State, the Court will undoubtedly  inter-               fere  and strike down State action  as  aribi-               trary,  unreasonable  or  contrary  to  public               interest.  But so long as the State action  is               bona  fide and reasonable, the Court will  not               interfere merely on the ground that no  adver-               tisement  was given or publicity made or  ten-               ders invited." Here,  in the present case, the pre-dominant purpose of  the policy  decision  dated 30th December, 1984  was  to  ensure construction and setting up of new distilleries with  modern technologically  advanced plant and machinery at  new  sites where there would be no possibility of air and water  pollu- tion and if for achieving this purpose the State  Government considered the offer of the existing contractors and negoti- ated  with  them  and ultimately decided to  grant  to  them licences  for construction of new distilleries on the  terms and conditions set out in the recommendations of the Cabinet sub-Committee  it  is difficult to see how, in view  of  the decision  in  Kasturi Lal Lakshmi Reddy’s case  (supra)  the State Government could be said to have acted arbitrarily  or capriciously in violation of Article 14 of the Constitution. The con- 62 tention  of the petitioners based on Article 14 of the  Con- stitution must therefore stand rejected.     Before we part with this case we must express our strong disapproval  of  the observations made by B.M.  Lal,  J.  in paragraph 1,9, 17, 18, 19 and 34 of his concurring  opinion. The  learned  Judge made sweeping  observations  attributing mala  fides, corruption and underhand dealing to  the  State Government. These observations are in our opinion not at all justified by the record. In the first place it is  difficult to appreciate how any such observation could be made by  the learned Judge without any foundation for the same being laid in the pleadings. It is true that in the writ petitions  the petitioners used words such as ’mala fide’, ’Corruption’ and ’corrupt practice’, but the use of such words is not enough. What is necessary is to give full particulars of such  alle- gations  and  to set out the material facts  specifying  the particular person against whom such allegations are made  so that he may have an opportunity of controverting such  alle- gations.  The requirement of law is not satisfied in so  far as  the pleadings in the present case are concerned  and  in the absence of necessary particulars and material facts,  we fail  to see how the learned Judge could come to  a  finding that the State Government was guilty of factual mala  fides, corruption  and under-hand dealings. The learned  Judge  ob- served that amount was spent by respondent Nos. 5 to 11  "in working  out the contract in approaching the  concerned  au- thorities of the State". This observations carried a  direct allegation that money passed from respondent Nos. 5 to 11 to "the concerned authorities" for getting the licences. But no such allegation was at any time made by the petitioners  and when the petitioners did not make any such allegation in the pleadings, nor even stated as to which authority took monies by  way of illegal gratification, it is difficult to  under- stand  how  the learned Judge could possibly  make  such  an observation. The petitioners also did not make any  specific imputation of under hand dealing in the writ petitiones  and

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yet  the learned Judge inexplicably came to  the  conclusion that the State Government was guilty of ’sinister  underhand dealing’.  The  learned Judge was clearly not  justified  in doing so.     But,  quite apart from this objection based on  lack  of proper  and adequate pleading, we think that even on  merits the observations made by B.M. Lal, J. were clearly  unjusti- fied. There is not an iota of evidence to establish or  even as much as to indicate that the State Government was actuat- ed by any collateral purpose or was guility of any ’sinister underhand dealing’ or was prompted by any currupt motive  in reaching the policy decision dated 30th December, 1984. 63 What the learned Judge has said is based entirely on conjec- ture and suspicion and approach which does not go well  with judicial  disposition  of a case. There  are  two  important factors which throw considerable light in determining wheth- er  a policy decision is mala fide or motivated by  improper considerations.  One  relates to the manner  and  method  of reaching  the policy decision and the other to  the  circum- stances  in which the policy decision is taken and the  con- siderations  which have entered into the making of it.  Now, it  is  dear from the detailed statement of facts  which  we have  given  at the commencement of this judgment  that  the entire  process  commencing with the representation  of  the M.P. Distillers’ Association in July 1983 and culminating in the policy decision dated 30th December 1984 was spread over a  period  of about 17 months and it included  gathering  of information,  on-spot inspection of the sites,  collegiality of  deliberations, candour of inter-departmental and  intra- departmental communication and a dialectical interaction  of different  multilateral viewpoints. The policy decision  was an informed and reasoned decision arrived at after  detailed inquiries, fact-finding efforts and reports spreading over a period  of more than a year and a half. Several queries  and issues  were  raised by the Finance  Department  boldly  and fearlessly  and  these  queries and issues  were  fully  and frankly dealt with, clarifications were given and the entire matter  was  fully considered. There was no attempt  at  any stage  of  suppress  discussion and debate or  to  avoid  or side-track or push under the carpet any doubts or  questions raised by any of the parties involved in the  deliberations. It  is  also significant that the policy  decision  was  not arrived  at  by a single individual in the  secrecy  of  his chamber but it was by the entire Cabinet and it was based on the  recommendations made by the Cabinet SubCommittee  which was  composed  of four Ministers.assisted by  officers  from different  departments belonging to the highest scholars  of the  civil  service. It may also be noted that  the  Cabinet Sub-Committee  considered the matter from different  angles, obtained relevant information, sent a Committee of  officers for  spot  inspection, took stock of the valuation  and  the likely  investment, reviewed the problem and worked out  the solution  and made its recommendations to the  Cabinet.  The entire proceedings of the Cabinet Sub-Committee were  before the Cabinet including the reasons for which the  recommenda- tions were made and it was after considering these recommen- dations  that the Cabinet reached the policy  decision.  The entire proceedings show that there was complete openness  of discussion  and  deliberation. There was  no  suddenness  of decision, no impulsive caprice or arbitrariness in  reaching the  decision. The policy decision was plainly and  avowedly an informed and institutionalised decision and the manner in 64 which  it  was  reached is clearly indicative  that  it  was

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neither  mala fide nor guided by any corrupt  or  collateral considerations.     We have already discussed the circumstances under  which the  policy  decision dated 30th December, 1984 came  to  be made. We need not repeat what we have said in the  preceding paragraphs  in regard to the making of the  policy  decision and the circumstances under which it was made. These circum- stances plainly and unmistakably point to the bona fides  of the policy decision. It is not possible to discern any  mala fides  or any improper or corrupt motive on the part of  the State  Government  in reaching the policy  decision.  It  is significant  to note that the State Government did not  con- cede whatever was demanded by the existing contractors.  The existing  contractors wanted the land and buildings  of  the existing distilleries to be transferred to them at a  valua- tion  but  the Cabinet Sub-Committee did not agree  to  this suggestion and insisted that the existing contractors  would have  to acquire land at new sites, construct buildings  for setting  up new distilleries, and the land and buildings  in which the existing distilleries were housed would come  back to  the  State  Government. The  Cabinet  Subcommittee  also insisted  on the existing contractors to make the  necessary arrangements for removing air and water pollution in the new distilleries  as also to construct a laboratory with  modern equipment.  The  State Government also changed the  mode  of rate fixation. Originally the rates for supply of liquor  to the retail vendors were fixed on the basis of tenders  every five  years with the result that the rates accepted  by  the excise authorities on the basis of the tenders continued  to prevail  for a period of five years. Now it is a fallacy  to assume  that the lowest rates quoted by the tenderers  would necessarily  be the cheapest and the best. If the  tenderers form  a syndicate they can push up the rates for  supply  of liquor  and in fact it is obvious from the rates which  were accepted by the excise authorities for the five year period, 1st April, 1981 to 31st March, 1986, that these were not the most  reasonable rates. The Cabinet Sub-Committee  therefore felt  that  the system of rate fixation  prevalent  in  West Bengal  was  the  most beneficial to  the  State  Government because it provided for rate fixation by an expert Committee which  would take into account the escalation or  de-escala- tion in the price of raw materials, varying labour cost  and fluctuating  market  conditions every year and arrive  at  a reasonable rate, fair both to the licencee and to the  State Government.  The  Cabinet-Committee also did  not  recommend taking over of the plant and machinery of the old distiller- ies  from  the existing contractors against payment  of  its value  with  the  result that the old  plant  and  machinery remained with the existing contractors and obviously it 65 would  have no value because they would not be able to  sell it  to any one and it would be dead junk in their hands  and the  price paid by them to the out-going licences  would  be totally  lost. It is indeed difficult to see how it  can  at all  be said that in making its recomendations, the  Cabinet Sub-Committee  was  guilty of any mala  fides  or  underhand dealing  or was actuated by any corrupt motive. The  Cabinet merely  accepted  the  recomendations made  by  the  Cabinet SubCommittee and in fact when the deed of Agreement came  to be  executed with each of the existing contractor the  State Government actually introduced a provision that D-2 licences would  be  given  only for a period of five  years.  We  are therefore unable to appreciate how B.M. Lal, J. could possi- bly pass strictures against the State Government attributing mala  fides, under-hand dealing and corruption to the  State

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Government.     We  may also in this connection refer to  an  allegation made by Sagar Aggarwal that by reason of the policy decision dated 30th December. 1984 the State Government would incur a loss  of about Rs. 56 crores. This allegation did  not  find favour with Acting Chief Justice J.S. Verma but it seemed to have impressed B.M. Lal, J. because he categorically  stated in  paragraph 17 of his concurring opinion that even if  D-1 licences were granted to respondent Nos. 5 to 11 only for  a period  of  five years the State Government would  suffer  a loss  of Rs. 56 crores. We find it difficult  to  understand how  B.M. Lal, J. could possibly come to a  conclusion  that the  State  Government would be incurring a loss of  Rs.  56 crores by the policy decision dated 30th December, 1984. The figure of Rs. 56 crores was arrived at by Sagar Aggarwal  on the  assumption that if instead of granting licence  to  the existing  contractors  to  construct  new  distilleries  and giving them D-1 and D-2 licences for a period of five years, D- 1(S) licence was granted to him for the entire  territory of the State of Madhya Pradesh and he was able to get liquor from  the Ratlam Alcohol plant at the rate of Rs.  1.80  per proof  litre  in sufficient quantity so as ’to  be  able  to supply liquor to retail vendors in the entire State he would be  able  to save for the State Government a sum of  Rs.  56 crores on the basis that otherwise a rate of Rs. 4 per proof litre  would  be charged by the existing  contractors.  This assumption  is,  in  our opinion, wholly  unfounded.  It  is totally  absurd  and  chimerical. In the  first  place,  the Ratlam  Alcohol plant was unable to supply the  requirements of  even Jabalpur and Betul districts and during the  period ending  31st March 1986 Sagar Aggarwal himself had  to  pur- chase liquor from outside at higher rates in order to satis- fy the requirements of these two districts for which he held D-1(S) licence. ’If that be so, how could Ratlam 65 Alcohol  plant  which could not produce more  than  60  lakh proof litres at the outside, possibly supply liquor for  the whole of the territory of the State. If Ratlam Alcohol plant could be made to supply the requirement of the entire  State there would be no need for any other distillery at all.  But obviously the capacity of the Ratlam Alcohol plant was  very limited  and it was not able to achieve production on up  to this  capacity.  Secondly, it was decided  that  the  Ratlam Alcohol  plant would manufacture only ractified  spirit  for making  masala  liquor  which was  more  popular  and  which brought greater revenue to the State and obviously therefore Ratlam  Alcohol plant could not be available  for  producing ordinary  liquor for supply to the retail vendors.  Thirdly, it  is difficult to understand how the learned  Judge  could assume that Sagar Aggarwal would continue to get liquor from Ratlam  Alcohol  plant  at the rate of Rs.  1.80  per  proof litre.  The rate for supply of liquor by the Ratlam  Alcohol plant would naturally depend upon varying market conditions. And lastly we fail to understand how the learned Judge could proceed  on  the assumption that a rate of  Rs.4  per  proof litre  would be fixed by the Export Committee for supply  of liquor  by the existing contractors from the new  distiller- ies.  We do not know what rate would be fixed by the  Expert Committee. That would depend upon diverse considerations and of course one of the considerations would certainly be  that Sagar Aggarwal had offered minus 2.31 rupees per proof litre while  taking  D-1(S) licences for Jabalpur and  Betal  dis- tricts.  The  figure of Rs.56 crores put  forward  by  Sagar Aggarwal  and  accepted  by the learned  judge  was  clearly hypothetical  and  based on assumptions which  were  totally

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unwarranted.  We  do not think that the  learned  Judge  was right  in observing that the public exchequer would incur  a loss  of  Rs.56  crores by the policy  decision  dated  30th December,  1984 and that the policy decision  was  therefore vitiated by mala fides or under-hand dealing or improper  or corrupt motive.     We may observe in conclusion that Judges should not  use strong and carping language while criticising the conduct of parties  or  their witnesses. They must act  with  sobriety, moderation  and  restraint. They must have the  humility  to recognise  that  they are not infallible and any  harsh  and disparaging strictures passed by them against any party  may be mistaken and unjustified and if so, they may do consider- able harm and mischief and result in injustice. Here, in the present case, the observations made and strictures passed by BM.  Lal,  J. were totally unjustified and  unwarranted  and they ought not to have been made. 67     We must therefore hold that the High Court was in  error in allowing the writ petitions even to a limited extent.  We accordingly  allow the appeals of the State  Government  and respondents Nos. 5 to 11 and dismiss the writ petitions. The special leave petitions of M/s. Doongaji & Co. and Nand  Lal Jaiswal  will also stand dismissed. We would however on  the facts  and circumstances of the present case make no  orders as to costs. S.R.                       Appeals  allowed  and   Petitions dismissed. 68