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High Court Rules Haryana Wine Policy not Monopolistic

Posted: Saturday, 27 May 2017 14:30

 

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High Court Rules Haryana Wine Policy not Monopolistic

May 27: The civil Writ Petition filed by the Hotel and Restaurant Association of Haryana against the State of Haryana, Excise and Taxation Commissioner and Ashir Marketing Pvt Ltd. which was awarded the exclusive right to have the L-1BF Excise License for 2017-18 for the State of Haryana was dismissed by the High Court of Punjab and Haryana by the 2-member judgement delivered yesterday in Chandigarh, bringing relief to the State Excise Department of Haryana and Neeraj Sachdeva, the man behind Lake Forest and Ashir Marketing

Click For Large ViewThe 25-page judgement a copy of which is with delWine,  was delivered Friday by the Court of Hon’ble Chief Justice Shri S.J. Vazifdar and Hon’ble Justice Shri Anupinder Singh Grewal, in favour of the respondents and the Writ Petition by the plaintiffs was dismissed.

On the key question of whether the State had created a monopolistic situation in the Excise Policy for 2017-18, the Hon’ble Court took the view that every person had been welcome to do the bidding and therefore it could not be branded as monopolistic, given the circumstances in which the procedure was carried out. The judgment concluded as under:

‘Under the rules every member of the public who wishes to carry on trade in liquor is invited to make bids. This is the only method by which carrying on of liquor trade can be regulated. When the contract is thrown open to public auction, it cannot be said that there is exclusion of competition and thereby a monopoly is created. For all these reasons we are of opinion that the contention that the provisions of the regulation are unconstitutional as they abridge the rights of the petitioner to carry on liquor trade freely cannot be sustained. In the circumstances the writ petitions are dismissed.’

According to the court records, the petitioners had filed writ petitions, essentially challenging the provision the excise policy 2017 -18 and a rule which stipulates that only one L-1BF would be granted. L-1BF licence entitles the licensee to deal as a wholesaler in foreign liquor (BIO-Bottled in Origin). According to the petitioners, the wholesale business ought not to be entrusted only to one licensee.

Haryana State which is generally considered progressive and known for timely announcement policies, announced the Policy On 06.03.2017 effective from 1 April, 2017 to 31 March, 2018. To view things in proper perspective, the neighbouring State Delhi has still not announced the Policy for 2017-18. Last year it announced the Policy in October, extending the existing policy in the interim.

Contentious Section 9.5.1.2

Under Section 9.5.1.2 of the announced excise Policy 2017-18, ‘there will be only one wholesale license in the form of L1BF in the State for wholesale of Imported Foreign Liquor (BIO). The license will be granted by inviting e-tenders through the departmental portal in a completely secure and transparent manner. The reserve price for the lone L1BF license in the State shall be Rs 50 Crore.’ It was this clause that was challenged in principle by the petitioners who prayed to have it quashed and that the appointment of Ashir Marketing as the exclusive LIBF Licensee to be declared void.

The two justices sought and obtained a clarification from the counsels of the petitioners who confirmed that none of their members had been interesting in bidding for the tender and even if fresh tenders were invited due to not enough time given to them, they were not interested in bidding. It was also of no concern to them if a third party were to submit a higher bid. It all boiled down basically to the clause 9.5.1.2., which they averred was monopolistic and not in favour of the consumer and that the State was not authorised to do so.

Financial Commissioner applauded

The Hon’ble Court noted that ‘The Excise Policy should also aim at achieving and strengthening the long term objectives of breaking the cartels and unethical dominance of liquor mafia, broad-basing the trade by facilitating more competition, simplifying/unifying the structure of wholesale supply of liquor by giving wholesale licenses to retail licensees, establishing a transparent system of allotment of retail outlets, imposing complete check on manufacture/sale of spurious liquor, thwarting attempts of evasion of Excise levies, plugging the leakage/pilferage, optimization of revenue, creating ambience for legitimate and responsible drinking and providing good quality liquor at reasonable price to those who drink.

‘Meeting all these requirements is a matter of policy which must be left to the State and to the authorities under the Act. They are the best judges and most qualified to weigh the needs of each of the competing demands and to strike the best possible balance between them,’ observed the Hon’ble Court.

‘The Excise and Taxation Department has to give due weightage to the health and well being of the citizens of the State. At the same time, the department has also to ensure that revenue interests of the government are not compromised. Therefore, a fine balance has to be struck between the diverse interests of all the stakeholders. It is also to be simultaneously ensured that the Excise Policy has to be attractive enough for wholehearted participation of the private sector players like the manufacturers and wholesalers and retailers,’ the Hon’ble Court observed.

The Hon’ble Court seems to have implicitly applauded the Financial Commissioner of Haryana for providing provisions in the policy and the rules for a single wholesale license. The total revenue including licence fees and the levies under the Act in the previous Excise Year 2016-17 was only about Rs.22 crores whereas under the present policy, the revenue already generated is over Rs. 62 crores

Que Sera Sera

The court did not take the petitioners’ plea that the law did not allow the State Government to create monopoly in favour of a particular party. The court observed that it was not necessary for any Act of law to confer such a right or power to the government. The correct approach would be to see if there is a bar to the appointment of a sole wholesaler/sole licensee of an L-1BF License. The Court observed that the State had permitted all the eligible parties to bid for the licence, noting clearly that petitioner had not found any flaws in the bidding process. There was no evidence that any licensee had been favoured.

A Supreme Court Judgment in the case of Khoday Distilleries vs. State of Karnataka (1995) was also relied upon which had ruled, ‘When the contract is thrown open to public auction, it cannot be said that there is exclusion of competition and thereby monopoly is created.’

Anomalies must be tolerated

While conceding that the situation like the present one would create an imbalance in the working relationship of the L-1BF Licensee in that some of the vendors may get a better treatment than the others, the Hon’ble Court cited the example of a tender for a construction project by a government agency in which bids are invited through an open and transparent process. Once the contract is signed, it is up to the contractor to buy materials from any party or give preferential terms to one over the other in terms but the government cannot interfere in the process, once the matter has one out of its hands and the project is handed to a private party.

The court also noted that the importers were protected by a pertinent clause in the policy which said that L-1BF licensee shall be required to keep sufficient stock of all such brands as are demanded by the procuring licensees and all such brands as were registered with the department in2016-17.

The Judgement must come as a relief to Neeraj Sachdeva of Lake Forest/Ashir Marketing who has created a huge organisation to carry on the business throughout the State and has been already dealing in liquor and wine for over 6 weeks now and any adverse decision could have been disastrous for him and the force of 1200 people he has reportedly deployed to carry on the business as an exclusive L-1BF.

The court may not have ruled it a monopoly  in legal terms (strictly speaking, it has said that if a monopoly is created by giving an equal opportunity to everyone in the business, it is within the realm of law), the quasi- monopoly created where the negotiation power weighs in favour of the exclusive L-1BF, it would be interesting to see how the liquor and wine marketing in Haryana pans out during this financial year 2017-18. The next financial year is only 10 months away and hopefully Neeraj and Ashir Marketing understand that and have a long term vision in which the consumer and their sales are not hurt significantly.

Subhash Arora

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