Liquor Trade Not A Fundamental Right; Suspension Of Licence Valid When Proportionate & Within Statutory Framework: Madhya Pradesh High Court
The High Court held that trade in liquor does not enjoy protection as a fundamental right, and administrative action taken under the Excise Act, when proportionate and in conformity with statutory provisions, cannot be interfered with.
The Madhya Pradesh High Court has held that the business of liquor does not constitute a fundamental right under the Constitution, and that regulatory action taken by authorities under the Madhya Pradesh Excise Act, 1915, when tested on the doctrine of proportionality and found to be within the statutory framework, does not warrant interference.
The Court was hearing a writ petition under Article 226 challenging the suspension of multiple excise licences issued to the petitioners on allegations of transportation of foreign liquor through forged permits and consequent criminal convictions of persons associated with the licensee.
A Bench of Justice Vivek Agarwal observed: “liquor business is not a fundamental right and secondly, when the test of proportionality is applied, then on that touchstone also, decision of the authority being within the framework of the Excise Act and the Rules framed thereunder, cannot be faulted with.”
Senior Advocate Naman Nagrath appeared for the petitioners, while Additional Advocate General Harpreet Singh Ruprah represented the respondents.
Background
The petitioners, companies engaged in the distillation and manufacture of liquor, challenged the order of the Excise Commissioner suspending their licences. The action was initiated pursuant to a show cause notice based on a criminal case involving the transportation of foreign liquor based on forged permits, leading to the conviction of employees, directors, and other persons connected with the licensee.
It was contended that the show cause notice had lost its efficacy with the expiry of the licence period and grant of fresh licences, that a common notice was issued to distinct entities, and that the action violated principles of natural justice. The petitioners also relied upon judicial precedents to contend that their rights under Article 14 were infringed.
The State, opposing the petition, submitted that the licences were subject to statutory conditions and renewal, and that convictions of persons acting on behalf of the licensee attracted provisions of Section 31 of the Excise Act. It was further contended that adequate opportunity of hearing had been afforded and that the action was justified in view of the gravity of the misconduct.
Court’s Observation
The Court examined the scope of Section 31 of the Madhya Pradesh Excise Act, 1915, which empowers the authority to cancel or suspend a licence where the holder, his servants, or persons acting on his behalf are convicted of offences under the Act or other laws relating to revenue. It further analysed Sub-section (1-A), which mandates recording of reasons, furnishing of material, and affording an opportunity of hearing before such action.
On a detailed scrutiny of the show cause notice and the impugned order, the Court held that the statutory requirements were duly complied with. It observed: “when show cause notice… and the impugned order… are tested on the touchstone of the provisions contained in Sub-section (1-A) of Section 31… then it is evident that show cause notice… fulfils all the three requirements.”
The Court further found that the show cause notice contained detailed allegations relating to the transportation of liquor without valid permits, use of forged permit books, and conviction of persons associated with the petitioners, thereby satisfying the requirement of recording reasons and furnishing material.
Rejecting the contention of violation of Article 14, the Court held: “The petitioners have not brought any case where any other licence has been dealt with in any different manner… No case of hostile discrimination is also made out.”
The Court emphasised that the doctrine of proportionality must be applied while examining administrative action. Referring to decisions such as Belfast City Council v. Miss Behavin' Ltd (2007) 3 All ER 1007 and Huang v. Secretary of State for the Home Department (2007) 4 All ER 15, it held that proportionality requires balancing of competing interests and assessing whether the measure adopted is reasonable and justified in the circumstances.
Applying this test, the Court held that the action of suspension of licences, in light of the established allegations of use of forged permits and resulting loss of revenue, was proportionate and justified.
The Court also held that under Section 31(1)(c), the acts of servants or persons acting on behalf of the licensee bind the licensee itself, and their conviction would attract consequences under the Act. It further noted that Section 44 of the Act extends criminal liability of licensees for acts of their employees unless due diligence is established.
Dealing with the argument that the licences were fresh grants, the Court held that under the relevant Rules, licences are subject to renewal and compliance with statutory conditions, and therefore, earlier violations cannot be disregarded. It distinguished the judgment in N.S. Shethna on this basis.
The Court also reiterated the settled principle that fraud vitiates all acts, relying on Commissioner of Customs (Preventive) v. Aafloat Textiles (I) Pvt. Ltd. (2009) 11 SCC 18, and held that use of forged permits justified the action taken by the authorities.
Conclusion
The High Court held that the action of suspension of licences conformed with the provisions of the Madhya Pradesh Excise Act, 1915, and the Rules framed thereunder, and did not violate Article 14 of the Constitution.
Accordingly, the writ petition was dismissed, and the order of the Excise Commissioner was upheld.
Cause Title: Som Distilleries Private Limited & Ors. v. State of Madhya Pradesh & Ors. (Neutral Citation: 2026:MPHC-JBP:24006)
Appearances
Petitioners: Senior Advocate Naman Nagrath with Rahul Diwakar, Advocate
Respondents: Harpreet Singh Ruprah, Additional Advocate General, with Manas Mani Verma, Government Advocate, Senior Advocate Sanjay K. Agrawal, with Nitesh Kumar Barman, Advocate