In a significant ruling, the Chhattisgarh High Court has dismissed two writ petitions filed by North East Feed and Agro Exports Private Limited (WPC No. 4226 of 2024) and Vodabox Electromech Private Limited (WPC No. 4235 of 2024) challenging the state government’s decision to procure Indian and foreign-made liquor directly from manufacturers, effectively removing middlemen from the supply chain.
The judgment was delivered by a bench comprising Chief Justice Ramesh Sinha and Justice Bibhu Datta Guru, on September 4, 2024. The petitions were argued by Mr. Manoj Paranjpe and Mr. Amrito Das on behalf of the petitioners, while the respondents were represented by Mr. Prafull N Bharat, Advocate General, along with Mr. Sangharsh Pandey, Government Advocate, and Mr. Malay Shrivastava.
Background of the Case:
The petitioners, North East Feed and Agro Exports Private Limited and Vodabox Electromech Private Limited, are companies that were previously awarded contracts to supply Indian Made Foreign Liquor (IMFL), Foreign Made Foreign Liquor (FMFL), and beer in the state of Chhattisgarh for the period from April 1, 2024, to March 31, 2025. These contracts were based on FL-10(A) licenses issued by the Chhattisgarh State Marketing Corporation Limited (CSMCL).
However, on July 11, 2024, the state government amended Rule 8 of the Chhattisgarh Foreign Liquor Rules, 1996, and decided that the Chhattisgarh State Beverages Corporation (CSBC) would directly purchase IMFL and FMFL from the manufacturers. This amendment led to the cancellation of the existing contracts and licenses.
The petitioners challenged the amendment, arguing that the cancellation of their licenses and contracts was illegal, arbitrary, and against the principles of natural justice. They sought the court’s intervention to set aside the orders dated July 1, 2024, and July 4, 2024, which implemented the new policy, and requested to be allowed to continue their supply contracts until March 31, 2025.
Key Legal Issues:
The primary legal issues before the court were:
1. Whether the state government’s amendment to the Chhattisgarh Foreign Liquor Rules, 1996, was valid and enforceable.
2. Whether the cancellation of the petitioners’ licences and contracts was arbitrary or in violation of the principles of natural justice.
3. Whether the petitioners were entitled to continue their contracts until March 31, 2025, based on the original terms.
Court’s Observations and Decision:
The High Court, while dismissing the petitions, held that the state government has the authority to regulate the sale and supply of liquor and that this power includes the right to directly procure liquor from manufacturers, thereby eliminating middlemen. The court observed:
“One cannot claim equal right to carry on the business against the State when the State reserves to itself the exclusive right to carry on such trade or business.”
The court further clarified that under Section 32 of the Chhattisgarh Excise Act, 1915, the state has the power to withdraw any license for any cause, and the petitioners could not claim a right to continue their contracts merely because of the initial license grant.
The court found no merit in the petitioners’ arguments that the amendment should not apply retrospectively, as the notification clearly stated that it was effective from July 11, 2024. Additionally, the court noted that the state had offered to refund 50% of the license fees and compensate for any remaining stock, which demonstrated the state’s willingness to mitigate any potential losses incurred by the petitioners.
The petitions were dismissed with no order as to costs. The court upheld the state’s decision to directly procure liquor from manufacturers, reinforcing the state’s authority to regulate and control the liquor trade in the public interest.
