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Analysis of Freedom to Carry on Liquor Trade: Constitutional Aspect

India with the population of 139 crore people, is the third largest market for the alcoholic beverages in the world. The total amount of the country’s population that is of legal drinking age is around 485 million, which is more than the total populations of the United States and Mexico combined.[1] Surprisingly India has many restrictions to carry a liquor business or to advertise alcohol, even the legal age for drinking differs from state to state. Article 19(1)(g) of the Constitution of India guarantees to all the citizens the right to practice any profession, or to carry on any occupation, trade or business. However, the fundamental rights are not absolute, it does carry reasonable restrictions in the interest of general public.

What are the reasonable restrictions? There is no definite test to adjudge the reasonableness of a restriction.[2] The Supreme Court has observed in State of Madras v VG Row[3], it is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract or general pattern, of reasonableness can be laid down as applicable to all cases.

Articles 19(2) to 19(6) levies limitations on the freedom guaranteed by Articles 19(1)(a) to (g). The restrictions should not be arbitrary in nature. Directive Principles of State Policy are generally used as helping hands to consider whether a restriction on Fundamental Right is reasonable or not. There have been plenty cases, judicial reviews on the question whether liquor trade is trade or not under 19(1)(g).

Basically, the matters of intrastate trade and commerce falls under the State List, which means that the states shall have exclusive powers to make laws with the respect to the matters stated in the State List, hence the Centre is excluded from legislating the matters dealing with the state list. But Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List. Controlling the industries engaged in production or manufacture of potable liquors falls under the entry 8 of state list.

In Synthetics & Chemicals Limited v State of UP AIR 1990 SC 1927, a large Bench of the court reviewing the ruling came to the conclusion that the expression intoxicating liquors means and refers to only potable liquors.[4] The entire aspect of production, manufacture, possession, fall within the exclusive domain of state and moreover the States does not have legislative power over non potable liquors under entry 8. Carrying on Liquor Trade is a Fundamental Right? By looking into the background, in 1954, in Cooverjee v Excise Commissioner, Ajmer,[5] the Supreme Court ruled that no one has the inherent right to sell intoxicating liquors in retail sale. A citizen has no such privilege. As it is business which is dangerous to the community, the state may entirely prohibit it or permit it under conditions.

The manner and extent of regulation rest within the discretion of the State. Although, in Krishan Kumar v State of Jammu Kashmir,[6] the Supreme Court viewed the aspect into the wider ambit. The Court accepted the argument that involves the position that the meaning of the expression ‘trade or business’ depends upon, and varies with, the general acceptance of the standards of morality obtaining at a particular point of time in our country.

The Court viewed that the state could not limit the scope of the right, but on the grounds of morality it could impose restrictions. With the passage of time, the judicial review lived through a fundamental change. With a completely different view from the previous case, in Khoday Distilleries v State of Karnataka,[7] the Court observed that a citizen has no Fundamental Right to trade or business in intoxicating liquors and that trade or business in such liquors can be completely prohibited.

Because of its pernicious and vicious nature, dealing in intoxicating liquors is considered to be res extra commercium. The state can create monopoly either in itself or in an agency created by it or manufacture, possession, sale and distribution of liquor as a beverage.[8] It was argued in State of Andhra Pradesh v McDowell & Company,[9] that trade in intoxicating liquors falls within the scope of Article 19(1)(g), but still the State could impose restrictions or prohibitions on the intoxicating liquor trade.

In State of Tamil Nadu v K Balu,[10] it was said that:
duties levied on sale of liquor, are an important revenue source for states but such revenue should not be collected at the cost of endangering human lives and safety.

Though in case of Ugar Sugar Works Limited v Delhi Administration,[11] it was stated that Article 14 can still be invoked if a reasonable restriction imposed on liquor trade is found to be arbitrary, irrational or unreasonable. In 2017 hotel industry suffered huge losses after the order of Supreme Court to ban sale of liquor within a distance of 500 meters from any national and state highways. The Court modified its order stating an exemption within 220 meters of any highway for small towns or municipalities where the population of people will be less than 20,000. The apex court has said trading in liquor is a privilege conferred by the state, and it must be subordinate to the need to protect road users from the menace of drunken driving.

The three-judge bench presided over by Chief Justice Khehar said that:
no individual has a vested right to obtain a licence.
There is no fundamental right to carry on business in liquor since as a matter of constitutional doctrine, Article 19(1)(g) does not extend to trade in liquor which is consistently regarded as res extra commercium (inherently pernicious).

In April 2020, the Government passed order on the prohibition of sale of liquor, due to the fear of overcrowding around India with the population of 139 crore people, is the third largest market for the alcoholic beverages in the world. The total amount of the country’s population that is of legal drinking age is around 485 million, which is more than the total populations of the United States and Mexico combined.[1] Surprisingly India has many restrictions to carry a liquor business or to advertise alcohol, even the legal age for drinking differs from state to state.

Article 19(1)(g) of the Constitution of India guarantees to all the citizens the right to practice any profession, or to carry on any occupation, trade or business. However, the fundamental rights are not absolute, it does carry reasonable restrictions in the interest of general public. What are the reasonable restrictions? There is no definite test to adjudge the reasonableness of a restriction.[2]

The Supreme Court has observed in State of Madras v VG Row[3], it is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract or general pattern, of reasonableness can be laid down as applicable to all cases. Articles 19(2) to 19(6) levies limitations on the freedom guaranteed by Articles 19(1)(a) to (g). The restrictions should not be arbitrary in nature. Directive Principles of State Policy are generally used as helping hands to consider whether a restriction on Fundamental Right is reasonable or not.

There have been plenty cases, judicial reviews on the question whether liquor trade is trade or not under 19(1)(g). Basically, the matters of intrastate trade and commerce falls under the State List, which means that the states shall have exclusive powers to make laws with the respect to the matters stated in the State List, hence the Centre is excluded from legislating the matters dealing with the state list. But Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.

Controlling the industries engaged in production or manufacture of potable liquors falls under the entry 8 of state list. In Synthetics & Chemicals Limited v State of UP AIR 1990 SC 1927, a large Bench of the court reviewing the ruling came to the conclusion that the expression intoxicating liquors means and refers to only potable liquors.[4] The entire aspect of production, manufacture, possession, fall within the exclusive domain of state and moreover the States does not have legislative power over non potable liquors under entry 8.

Carrying on Liquor Trade is a Fundamental Right?

By looking into the background, in 1954, in Cooverjee v Excise Commissioner, Ajmer,[5] the Supreme Court ruled that no one has the inherent right to sell intoxicating liquors in retail sale. A citizen has no such privilege. As it is business which is dangerous to the community, the state may entirely prohibit it or permit it under conditions. The manner and extent of regulation rest within the discretion of the State.

Although, in Krishan Kumar v State of Jammu Kashmir,[6] the Supreme Court viewed the aspect into the wider ambit. The Court accepted the argument that involves the position that the meaning of the expression ‘trade or business’ depends upon, and varies with, the general acceptance of the standards of morality obtaining at a particular point of time in our country. The Court viewed that the state could not limit the scope of the right, but on the grounds of morality it could impose restrictions.

With the passage of time, the judicial review lived through a fundamental change. With a completely different view from the previous case, in Khoday Distilleries v State of Karnataka,[7] the Court observed that a citizen has no Fundamental Right to trade or business in intoxicating liquors and that trade or business in such liquors can be completely prohibited. Because of its pernicious and vicious nature, dealing in intoxicating liquors is considered to be res extra commercium. The state can create monopoly either in itself or in an agency created by it or manufacture, possession, sale and distribution of liquor as a beverage.[8]

It was argued in State of Andhra Pradesh v McDowell & Company,[9] that trade in intoxicating liquors falls within the scope of Article 19(1)(g), but still the State could impose restrictions or prohibitions on the intoxicating liquor trade. In State of Tamil Nadu v K Balu,[10] it was said that:
duties levied on sale of liquor, are an important revenue source for states but such revenue should not be collected at the cost of endangering human lives and safety. Though in case of Ugar Sugar Works Limited v Delhi Administration,[11] it was stated that Article 14 can still be invoked if a reasonable restriction imposed on liquor trade is found to be arbitrary, irrational or unreasonable.

In 2017 hotel industry suffered huge losses after the order of Supreme Court to ban sale of liquor within a distance of 500 meters from any national and state highways. The Court modified its order stating an exemption within 220 meters of any highway for small towns or municipalities where the population of people will be less than 20,000. The apex court has said trading in liquor is a privilege conferred by the state, and it must be subordinate to the need to protect road users from the menace of drunken driving.

The three-judge bench presided over by Chief Justice Khehar said that no individual has a vested right to obtain a licence. There is no fundamental right to carry on business in liquor since as a matter of constitutional doctrine, Article 19(1)(g) does not extend to trade in liquor which is consistently regarded as res extra commercium (inherently pernicious).

In April 2020, the Government passed order on the prohibition of sale of liquor, due to the fear of overcrowding around the liquor stores and violation of social distancing norms. The Union list does not deal with the epidemics and public health, it falls under the concurrent list for the prevention of spreading of disease. The Disaster Management Act (DMA) comes the wide range of powers of the Central government to prevent damage and disaster. In the relation to the prohibition of liquor trade in lockdown, the state’s powers under the DMA are subject to the supervision and control of the Centre.

End-Notes:
  1. https://nolasia.net/india-is-the-worlds-second-largest-country-and-its-love-of-alcohol-is-even-larger/
  2. MP Jain, Indian Constitutional Law 1053, (8th edition)
  3. State of Madras v VG Row, AIR 1952 SC 196 : 1952 SCR 597
  4. MP Jain, Indian Constitutional Law 557, (8th edition)
  5. AIR 1954 SC 220
  6. AIR 1967 SC 1368
  7. 1995 1 SCC 574
  8. MP Jain, The Indian Constitutional Law 1111, (8th edition)
  9. AIR 1996 SC 1627
  10. 2017 2 SCC 281
  11. AIR 2001 SC 1447, 1452??
Written By - Riddhi Kapadni, FY LLB, MIT WPU School Of Law, Pune

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