‘Liquor trade not fundamental right’: Madhya Pradesh High Court upholds suspension of firm’s multiple licences

Liquor trade not ‘fundamental right’

• In a significant observation, the Madhya Pradesh High Court underscored that trade in liquor does not enjoy constitutional protection as a fundamental right.
• The court said that regulatory restrictions imposed by the state must be viewed through the lens of public interest and revenue considerations.
• Applying the doctrine of proportionality, the court held that the suspension of licences was a reasonable and justified response to serious violations involving fraud and loss of revenue.

Justice Vivek Agarwal ruled that the Excise Department acted within the bounds of law.

No relief for petitioners

• Concluding that the state’s action was lawful and proportionate, the court dismissed the writ petition and upheld the suspension order.
• It also rejected allegations of arbitrariness or discrimination, noting that no comparable case of differential treatment had been shown.
• Suspension order rooted in criminal convictions
• The case stems from an order dated February 4, issued by the excise commissioner, Madhya Pradesh, suspending licences held by Som Distilleries and Breweries Private Limited.
• The order followed a show-cause notice issued on February 26, 2024, after several individuals associated with the company were convicted in a criminal case.
• The high court noted that the action was triggered by a 2011 incident in which a truck carrying around 1,200 boxes of foreign liquor was intercepted on the Mhow-Neemuch road.
• Investigations revealed that the consignment was being transported using forged transit permits, leading to substantial loss of excise revenue.
• Subsequently, a trial court convicted multiple accused, including company supervisors, directors, and transport personnel under the provisions of the Madhya Pradesh Excise Act and the Indian Penal Code (IPC), including charges of cheating, forgery, and criminal conspiracy.

Petitioners challenge ‘arbitrary’ action

• Senior Advocate Naman Nagrath assisted by advocate Rahul Diwakar, appearing for the petitioner, argued that the impugned action was legally unsustainable on several grounds.
• They contended that the show-cause notice pertained to licences valid only up to March 31, 2024, and could not be extended to licences granted for subsequent years (2024–25 and 2025–26).
• They further argued that the later licences were fresh grants and not renewals, and therefore immune from earlier proceedings.
• The company also alleged violation of principles of natural justice, claiming that the show-cause notice was vague, issued jointly to separate entities, and did not clearly identify individual liability.
• Additionally, the petitioners pointed to the suspension of sentences granted by the high court in criminal appeals, arguing that the underlying convictions could not form the basis for administrative action.

State defends action

• Additional advocate general Harpreet Singh Ruprah, assisted by government advocate Manas Mani Verma, appearing for the state, opposed the plea.
• The counsel argued that the Excise Act provides broad powers to suspend or cancel licences where violations are established, including where employees or agents of the licence holder are convicted.
• The state maintained that the licences in question were not fresh grants but annual renewals subject to compliance with statutory conditions.
• It also argued that the company could not escape liability by distancing itself from the acts of its employees, especially when those acts were carried out in the course of business.

Core legal questions

The high court identified several key issues for determination:

• Whether the show-cause notice and suspension order satisfied statutory requirements under Section 31 of the Excise Act;
• Whether criminal acts of employees and agents could be attributed to the licence holder;
• Whether renewed licences could be treated as fresh grants; and
• Whether principles of natural justice were followed.

Findings: Violations established, procedure followed

• On examining the record, the court found that the show-cause notice clearly detailed the allegations, including the use of forged permits and the resulting convictions.
• It also recorded that the petitioners had submitted replies to the notice, but failed to deny the core allegations of illegal transportation.
• “Nowhere in the replies is there any explanation disputing transportation of liquor on the basis of forged permits,” the court noted, observing that this amounted to an implied admission.
• The court further held that all procedural requirements under Section 31(1-A), including recording of reasons, furnishing of grounds, and providing an opportunity of hearing, had been complied with.

Employees’ acts bind licence holder

• Rejecting a central defence raised by the petitioners, the court ruled that the Excise Act explicitly extends liability to acts committed by employees, agents, or any person acting on behalf of the licence holder.
• “The expression ‘anyone acting on his behalf’ includes even the driver and cleaner of the truck,” the court observed, holding that their conviction under the Excise Act was sufficient to justify action against the company.
• It also invoked Section 44 of the Act, which imposes vicarious liability on licence holders for offences committed by their staff unless due precautions are demonstrated.

Licence renewal not shield

• On the issue of licence renewal, the court rejected the argument that fresh licences wiped out earlier proceedings.
• It held that licences under the excise regime are subject to annual renewal contingent on compliance with statutory provisions and licence conditions.
• The court distinguished precedents cited by the petitioners, noting that the applicable rules in Madhya Pradesh explicitly provide for renewal linked to continued compliance, unlike cases involving fixed-term licences without renewal provisions.