M/S KHODAY DISTILLERIES LTD. ETC. versus STATE OF KARNATAKA AND ORS.

Citation: [1995] SUPP. 6 S.C.R. 759 · Decided: 15-12-1995 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Dismissed

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Judgment (excerpt)

MIS KHODAY DISTILLERIES LTD. ETC. 
A 
v. 
STATE OF KARNATAKA AND ORS. 
DECEMBER 15, 1995 
[J.S. VERMA, K. RAMASWAMY AND SUJATA V. MANOHAR, JJ.} 
J3 
Constitution pJ India, 1950 : Article 14. 
Excise Rules compelling manufacturers to sell liquor to specified. 
Government company only-Government company facing some problems in C 
discharge of its duties-Held : does not render the roles providing for licence 
arbitrary or violative of Article 14-Export of liquor outside India or to other 
States-Loss of rebate in excise duty-No violation of article 14-Rules apply 
to all persons similarly situated-No discrimination in the traditional sense. 
Excise Laws : 
Kamataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968: 
Rule 3 (H)--Distributor Licence-To be issued only to a State owned com-
pany-Creatlon of monopoly-Does not take the licence outside the ambit of 
rule-making authority. 
Kamataka Excise Act, 1965 : 
Section 71-Amended Rules-Within the scope of delegated authority. 
Andhra Pradesh (Foreign Liquor and Indian Liquor) Rules, 1970: 
Rules 4(2) and 11(2)-Fee for approval of labels on bottles of liq-
uor-Enhancement of-From Rs. 100 toRs. 25,00G-Approval to be obtained 
every ye~ee constitutes only small percentage of total tumove,-Imposl-
tion cannot be considered exhorbitant or wholly arbitrary. 
D 
E 
F 
A distributor licence was prescribed for the first time under Rule G 
3(11) of the amended Karnataka Excise (Sale of Indian and Foreign 
Liquors) Rules, 1968. The licensee was required to establish not less than 
one depot in each district within the State or within that part of the State 
where it proposed to distribute or sell such liquor. The rule provided that 
a distributor licence should be issued only to such company owned or H 
759 
760 
SUPREME COURT REPORTS (1995] SUPP. 6 S.C.R. 
A 
controlled by the State Government as the State Government might 
specify. The licensees were required to sell the liquor only to a holder of a 
distributor licence. The holder of such a licence could only be a company 
owned or controlled b!' the State Government. The State Government had 
specified Mysore Sales International Ltd. (MSIL) as a company so 
B specified and had granted it to the distributor licence. 
In the state of Andhra Pradesh, fee for the approval of any one 
variety of labels to be affixed on bottles of liquor was either enhanced from 
Rs. 100 to Rs. 25000 or a fee of Rs. 25000 for approval of lables was 
introduced for the first time under Rules 4(2) and 11(2) of the Andhra 
C Pradesh (Foreign Liquor and Indian Liquor) Rules, 1970. The approval 
had to be obtained every year. 
The appellants challenged the validity of the Karnataka rules 
prescribing a distributor licence and also enhancement of fees for the 
approval of labels under the Andhra Pradesh Rules before the High Courts 
D which repelled the challenge. Aggrieved by the High Courts' judgments the 
appellants preferred the present appeals. 
On behalf of the appellants it was contended that by compelling them 
to sell liquor only to MSIL their fundamental right:; under Article 19(1) (g) 
E of the constitution were violated; that the Rules were ultra vires because 
they went beyond the scope of the delegated authority; that there was no 
legislative policy prescribed by the Karnata!;a Excise Act, 1965 for a 
distributor licence; that the Rules were arbitrary, unreasonable and 
caused undue hardship and hence violative of Article 14 of the Constitu-
tion; that the rules were manifestly arbitrary because their purpose was to 
F 
stop evasion of excise duty; that MSIL was not competent to discharge its 
obligations and did not have the necessary infrastructure; that there was 
hardship relating to excise duty; and that the enhancement of the fee for 
approval of labels from Rs. 100 to Rs. 25,000 had been sudden,·exhorbitant, 
highly arbitrary and hence violative of Article 14 of the Constitution. 
G 
H 
On behalf of the respondents it was contended that the Government 
company was bound to purchase the liquor if there was demand from the 
wholesalers; that the Government company was expected to act bonafide; 
and that MSIL had the necessary infrastructure. 
Dismissing the appeal, this Court 
KHODAYDISTILLERIES LTD. v. STATE 
761 
HELD: 1.1. The protection of Article 19(1)(g) of the Constitution is A 
not available to the appellants. 
Khoday Distillen·es Ltd. & Ors. v. State of Kamataka & Ors., [1995] 1· 
sec 57 4, relied on. 
1.2. A distributor

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