Khoday Distilleries Ltd v. State of Karnataka

Khoday Distilleries Ltd v. State of Karnataka

DATE OF JUDGMENT: 19/10/1994

COURT: Supreme Court of India

JUDGES: Venkatachalliah M.N Verma, Jagdish Saran Sawant, P.B. Ramaswamy, K., Jeevan Reddy B.P

REFERENCE: 1995 SCC (1) 574

PARTIES

Petitioner: Khoday Distilleries Ltd

Respondent: State of Karnataka

SUBJECT: The judgment revolves around the question of whether citizens enjoy a fundamental right to trade or carryon business in liquor under Article 19(1)(g) of the Constitution?

FACTS: The petitioners in the present case fall under 3 categories, whose right to carry on trade and business in liquor was restricted either by judicial pronouncement or by legislation.

1. Those who filed an SLP after being aggrieved by the decision of the HC where the validity of the following legislations was challenged:

• Karnataka Excise (Distillery and Warehouse) (Amendment) Rules, 1989,
• Karnataka Excise (Manufacture of Wine from Grapes) (Amendment) Rules, 1989,
• Karnataka Excise (Brewery) (Amendment) Rules, 1989,
• Karnataka Excise (Sale of Indian and Foreign Liquors) (Amendment) Rules, 1989
• Karnataka Excise (Bottling of Liquor) (Amendment) Rules, 1989

2. The second category are those who were aggrieved by the decision of the Kerala HC, where the Court upheld the validity of the State government’s order to cancel all foreign liquor licences issued under Rule 13(3) of the Kerala Foreign Liquor Rules, 1974 to Hotels, Restaurants and Tourist Homes.

3. The third category involves the petitions that were dismissed by the Andhra Pradesh HC upon holding the validity of the following legislations:

a. Andhra Pradesh Foreign Liquor and Indian Liquor Rules, 1970

b. A.P (Regulation of Wholesale Trade, Distribution and Retail Trade in Indian Liquor and Foreign Liquor, Wine and Beer) Act, 1993

IMPORTANT PROVISIONS:

The Indian Constitution:

• Article 136(1): Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India
• Article 19(1)(g): to practise any profession, or to carry on any occupation, trade or business
• Article 47: The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and, in particular, the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health

ISSUES:

1. Whether citizens enjoy a fundamental right to trade or carry on business in liquor under Article 19(1)(g) of the Constitution?

JUDGEMENT:

The petitioners contended that,

• If the law on the subject is considered to be law under Article 19(6), it has to be on the basis that a citizen had got a fundamental right to trade in liquor. If the law is that a citizen has no fundamental right, then Article 19(6) cannot be applied because the said Article applies only to those rights which a citizen possesses. What a citizen cannot do under Article 19(1), the State cannot do under Article 19(6).
• A State cannot do an activity which is forbidden by the Directive Principles of State Policy which in the present case is Article 47.
• Entry 51 of List II under 7^th Schedule states that, “Duty of Excise on intoxicating liquor for human consumption” which means that, unless a complete exclusion is brought under Article 47, right to carry on trade, business in liquor is guaranteed.
• Substances like tobacco which are more harmful to health than alcohol and they are being sold freely while the restrictions apply only for liquor sale.

The respondents cited the following judgments and presented their justification.

• In State of Bombay v. EN. Balsara wherein the Court held that, total prohibition on potable liquor would be reasonable.
• In Cooverjee B. Bharucha v. Excise Commissioner and the Chief Commissioner it was held that, it cannot also be denied that the State has the power to prohibit trades which are illegal or immoral or injurious to the health and welfare of the public. Laws prohibiting trades in noxious or dangerous goods or trafficking in women cannot be held to be illegal as enacting a prohibition and not a mere regulation. The nature of the business is, therefore, an important element in deciding the reasonableness of the restrictions.
• In State of Assam v. A.N. Kidwai, Commissioner of Hills Division the Court held that, no person had any absolute right to sell liquor, and the purpose of the Act and the Rules was to control and restrict the consumption of intoxicating liquors, such control and restriction being obviously necessary for the preservation of public health and morals, and to raise revenue.

Upon hearing the parties to the case, the Court held that, Article 19(1)(g) does not entitle citizens to carry on trade or business in activities which are immoral and criminal and in articles or goods which are obnoxious and injurious to health, safety and welfare of the general public. In other words, all those which fall within the category of res commercium are reasonable restrictions under Article 19(1)(g).  These restrictions are issued by the State in pursuance of its obligation under Article 47 and hence cannot be called in question before the Court. Therefore, the Court clarified that, right to carryon trade or business under Article 19(1)(g) is not an absolute right and hence the citizens cannot enjoy right to trade in liquor.