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KHODAY DISTILLERIES LTD. V. STATE OF KARNATAKA (1995)

KHODAY DISTILLERIES LTD. V. STATE OF KARNATAKA (1995) 1 SCC 574.

FACTS:

A Bunch of appeals, special leave petition and writ petitions.challenged the constitutional validity of the (Karnataka excise (Distillery and warehouse) amendment Rules, Karnataka excise manufacture of wine from grapes, Karnataka excise(sale of indian and foreign liquors)(amendment) rules, 1989 and bottling of liquor (amendment) rules, on the ground that it adversely affect the fundamental right of the parties to carry on trade or business in liquor and were violative of Article 14, 19(1)(g),47,300-A, 301 and 304 of the constitution of India.

ISSUE:

  1. Whether a monopoly for the manufacture, trade or business in liquor can be created in favour of the state?
  2. Whether reasonable restrictions under Article 19(6) of the Constitution can be placed only by act of legislature or by a subordinate legislation as well?
  3. Does under the purview of Article 47 state is also prohibited from trade or business in potable liquor?
  4. Does power under Article 298 of the Constitution extend to trade in liquor?

REFERRED CASE LAWS:

  • Narendra Kumar v. Union of India:

The Court held that where the restriction reaches the stage of total restraint of rights, special care has to be taken by the courts to see that the test of reasonableness is satisfied i.e restraint caused by the law was more than what was necessary in the interests of the general public.

  • Cooverjee B. Bharucha v. The Excise Commissioner and the chief commissioner, Ajmer

The state has the power to prohibit trades which are illegal or immoral or injurious to the health and welfare of the public.the nature of the business, is, therefore, an important factor in deciding the reasonableness of the restrictions.

  • K Narula v. Union of india

When the state does not prohibit the trade or business in liquor, a citizen has the right to do it subject to the restrictions and limitations placed on it.

  • State of U.P.v.Synthetics and Chemicals ltd

Held that state cannot prohibit trade or business in potable liquor

 

OBSERVATION:

  • The Court has observed that a citizen has no fundamental right to trade or business in intoxication liquids and that trade or business in such liquors can be completely prohibited.
  • To subserve the interests of general public, the reasonable restrictions on the carrying on of any profession, occupation,trade,etc provide that such trade or business may be carried on exclusively by the state or by corporation owned or controlled it. Thus right conferred under Article19(1)(g) is subject to complete or partial prohibition under Article 19(6).
  • Thus Article 19(1)(g) is not absolute, it is subject to restrictions imposed by the other provisions of the constitution like Articles 19(6),47,302,303,304 and 305.
  • Since the state had exclusive right of manufacturing and selling of intoxicating liquors, the imposition of vend fee and the grant of licences to wholesale vend was within the legislative Competence of the state under Entry 8 List II.
  • Article 47 imposes duty upon the state to prohibit consumption of intoxicating drinks and products which are injurious to health except for medicinal purpose. In a situation of this nature, it is essential to strike a balance.
  • The rights protected by Article 19(1) are not absolute but qualified.the qualifications are stated in clauses (2) to (6) of Article 19.
  • The right to practise any profession or to carry on any occupation, trade, business does not extend to practising a profession or carrying on occupation which is inherently vicious and pernicious, and is condemned by all civilised societies.
  • All the cases above except the decision in k.k Narula case have unanimously held that there is no fundamental right to carry on trade or business in potable liquor sold as beverage.

 

DECISION:

  • The state’s power to regulate and to restrict the business in potable liquor includes the power to carry on such trade to the exclusion of others. Prohibition is not the only way to restrict and regulate the consumption of liquor. It can be prevented also by limiting and controlling its production, supply and consumption. The state can do so by creating in itself the monopoly of the production and supply of liquor.
  • The state can carry on trade or business in potable liquor notwithstanding that it is an intoxicating drink under Article 47 enjoins it to prohibit its consumption. When the state carries on such business, it does to restrict and regulate production, supply and consumption of liquor which is also an aspect of reasonable restriction in the interest of general public. The state cannot be said to carrying illegitimate business.
  • The power under Article 298 cannot extend to trade in liquor.This is because the Union government has no executive power to trade in a commodity which under Article 47 is enjoined to prohibit.
  • Therefore a citizen has no right to trade or business in liquor as beverage. The state can prohibit completely the trade and business since liquor as a beverage is res extra commercium. State can also create a monopoly. And can further place restrictions and limitations on such trade or business which may be in nature different from those in articles res commercium.
  • The view taken by Court in K.K Narula as well as in the second Synthesis and chemicals ltd. is not contrary.