Kerala Samsthana Chethu
Thozhilali Union Vs. State of Kerala
& Ors  Insc 152 (24
& P.K. Balasubramanyan
out of SLP (Civil) No.8588 of 2005] WITH
CIVL APPEAL NO. 1733 OF 2006 [Arising out of SLP (Civil) Nos.10703-10704
of 2005] S.B. SINHA, J :
Rules 4(2) and 9(10)(b) of the Kerala Abkari Shops Disposal Rules, 2002 (for short "the
Rules") are ultra vires the Abkari
Act (for short "the Act") is the question involved in these appeals
which arise out of a judgment and order dated 22.3.2005 passed by a Division
Bench of the Kerala High Court at Ernakulam
in Writ Appeal Nos. 676, 677, 680, 722 of 2004 and Writ Petition (C) Nos. 17138
of 2003 and 26918, 27105 and 37762 of 2004 whereby and whereunder
the High Court following its earlier decision in Anil Kumar v. State of Kerala [2005 (1) KLT 130] dismissed the appeals and the
Appellant herein is a federation of trade unions of toddy tappers
and workers in toddy shops situate in the State of Kerala. The Abkari
Act was enacted by the Maharaja of Cochin in the year 1902. It is a
pre-constitutional statute. It is applicable to the entire State of
Kerala. The provisions of the said Act
seek to control and regulate various categories of intoxicating liquor and
intoxicating drugs including arrack, toddy, Indian Made Foreign Liquor (IMFL),
country liquor and other types of foreign liquor.
about 1.4.1996, the State of Kerala banned the sale of arrack. A policy
decision admittedly was taken by the Labour and
Rehabilitation Department of the State of Kerala that the workers who had been
engaged in manufacture, import, export, transport, sale and possession of
arrack should be rehabilitated. The State of Kerala paid compensation at the rate of Rs. 30,000/- per worker. The said workers were also paid
benefits under the Abkari Workers Welfare Fund Board
Act. It is not in dispute that a Welfare Board has also been constituted for
the workers working in the toddy shops.
expressions "Arrack" and "toddy" have been defined in
Sections 3(6A) and 3(8) of the Act as under:
"Arrack" means any potable liquor other than Toddy, Beer, Spirits of
Wine, Wine Indian made spirit, foreign liquor and any medicinal preparation
containing alcohol manufactured according to a formula prescribed in a
pharmacopoeia approved by the Government of India or the Government of Kerala, or manufactured according to a formula approved by
the Government of Kerala in respect of patent and proprietory preparations or approved as a bona fide
medicinal preparation by the Expert Committee approved under section 68A of the
"Toddy" means fermented or unfermented juice drawn from a coconut, palmyra, date, or any other kind of palm tree;"
Section 8 of the Act dealing with trade in Arrack was amended by Act No. 16 of
1997 which came into force from 3.6.1997. The trade was banned.
18A, 24(c), 24(d) and 29(1), which are relevant for our purpose, read as under:
exclusive or other privilege of manufacture etc on payment of rentals.
It shall be lawful for the
Government to grant to any person or persons, on such conditions and for such
period as they may deem fit, the exclusive or other privilege –
manufacturing or supplying by wholesale; or
selling by retail; or
of manufacturing or supplying by wholesale and selling by retail any
liquor or intoxicating drugs within any local area on his or their payment to
the Government of an amount as rental in consideration of the grant of such
privilege. The amount of rental may be settled by auction, negotiation or by
any other method as may be determined by the Government, from time to time, and
may be collected to the exclusion of, or in addition, to the duty or tax leviable Under Sections 17 and 18.
No grantee of any privilege under
Sub-section (1) shall exercise the same until he has received a licence in that behalf from the Commissioner.
In such cases, if the Government
shall by notification so direct, the provisions of Section 12 relating to toddy
and toddy producing trees shall not apply."
Forms and conditions of licenses, etc. Every license or permit granted under this Act shall be
to such restrictions and on such conditions; and
shall be in such form and contain particulars as the Government may direct either generally,
or in any particular instance in this behalf."
Power to make rules (1) The Government
may, by notification in the Gazette, either prospectively or retrospectively,
make rules for the purposes of this Act." In exercise of the said power,
the Rules were framed. After a lapse of about six years, the State inserted the
impugned Rules, inter alia directing that one arrack
worker each must be employed in all toddy shops in the following terms:
The shops so notified under sub-rule (1) above shall
be such shops as are retained after abolition of certain existing shops.
Grantees of privilege of such retained shops shall undertake to engage the
existing workers and such eligible workers of the abolished shops who were
registered with the Toddy Workers Welfare Fund Board as on 31-3-2000 and as are redeployed to their
shops. Grantee of privilege shall also undertake to engage on Arrack worker of
the abolished Arrack Shops of the State as would be allotted to his shop for
rehabilitation, on the basis of district level seniority." 9(10) In order
to ensure that the employment of workers of abolished Toddy and Arrack Shops
are protected, the licensees shall abide by the following conditions also:
*** *** (b) One Arrack Worker who has been remaining unemployed since the
abolition of Arrack Shops with effect from 1st April 1996 shall be absorbed in
the shop as may be decided by Government by observing the District level
seniority of such Arrack Workers." The validity of the said Rules was
questioned both by the holders of licences as also by
the toddy workers. The employees of the toddy shops are traditional workers. A
learned Single Judge of the High Court upheld the validity of the Rules inter alia holding:
in view of Section 18A of the Act, as control of liquor in trade is within
the exclusive domain of the State and as terms and conditions can be prescribed
for granting a licence, the impugned rules were
Section 29(2) does not contain any provision enabling the State to make such a
provision, the same would, however, come within the purview of sub-section (1)
of power of the State to frame such rules can be traced to Entries 23 and 24 of
List III of the Seventh Schedule of the Constitution of India.
Division Bench of the said High Court upheld the said conclusions of the
learned Single Judge. Only the toddy workers are in appeal before us. Mr. Ranjit Kumar, learned senior counsel appearing on behalf of
the Appellants would submit :
State in making the aforementioned rules transgressed its power of delegated
legislation as the Act does not contain any provision as regards adoption of
welfare measures to be taken by the State.
social purpose for which the said rules were made is governed by the provisions
of the Industrial Disputes Act.
the matter relating to the terms and conditions of employment of workmen is
covered by the said parliamentary legislation, the State had no competence whatsoever
to make such a rule.
power under sub-section (1) of Section 29 of the Act could be resorted to only
for the purpose of giving effect to the Act and not for a purpose de'hors the same.
entries contained in the three lists of the Seventh Schedule of the
Constitution of India enumerate only the legislative field, specifying the
sources of legislation by the Parliament and the State legislatures and in
terms thereof, the State has no power to make the concerned rule.
may be true that the State has the exclusive privilege of carrying on business
in liquor but the same would not mean that while parting with the said
privilege the State can impose any unreasonable restriction which would be violative of Article 14 of the Constitution of India.
T.L.V. Iyer, learned senior counsel appearing on
behalf of the State, on the other hand, would contend that :
of such a condition is within the domain of the State in terms of Sections 18A,
24(c), 24(d) and 29 of the Act inasmuch as while granting a licence
for sale of toddy, the State merely parts with a privilege which exclusively
vested in it and in that view of the matter if in terms of the policy decision
of the State, arrack workers were to be rehabilitated, it could direct employment
of unemployed arrack workers and, thus, there was absolutely no reason as to
why such a condition cannot be imposed while parting with the privilege by the
State in terms of Section 18A of the Act which enables the State to impose such
conditions or restrictions as it may deem fit for the purpose of grant of a licence to sell intoxicating liquor.
arrack and toddy both come within the purview of the Act, the State is entitled
to exercise its control thereover which in turn would
mean that a provision enabling the arrack workers, thrown out of employment, to
be employed in toddy shops has a reasonable nexus with the purposes of the Act
and such a provision cannot be said to be extraneous to the provisions of the
Act and would come within the purview of sub-section (1) of Section 29 thereof.
Rules which are impugned in these appeals enable the State to direct employment
of toddy workers also who are displaced by the relocation of the toddy shops or
reduction in their number and as such the workers cannot successfully question
the validity of the Rules.
right of the State to impose conditions is recognised
by Sections 18A, 24(c) and (d) and in that view of the matter while considering
the validity of the Rules made in terms of sub-section (1) of Section 29 of the
Act, the jurisdiction of this Court should not be confined only to looking at
the object and purport of the Act as contended by the Appellants herein but
also look to the purposes which are sub-served thereby.
69 of the Act also assumes importance in this context and confers a statutory flavour on the rules made under the Act and rules validly
made in terms thereof become a part of the Act itself.
Mr. Romy Chacko, learned counsel
appearing on behalf of the Intervener would supplement the submissions of Mr. Iyer contending that the purpose of the Act must be found
out from the various provisions of the Act and not from Section 18A of the Act
or Section 24 alone. The learned counsel would contend that while parting with
the privilege, the State can impose any condition and it is for the licensee to
take it or leave it. The learned counsel would further submit that as dealing
in liquor is res-extra commercium,
as has been held by this Court in Har Shankar and Others v. Dy. Excise
and Taxation Commr. And Others[(1975)
1 SCC 737], the licensee could not have contended that the condition imposed
for grant of licence was onerous.
our attention to sub-rule (38) of Rule 7, it was urged that the licensees are
bound by all the rules which have either been passed under the Act or which may
thereafter be made thereunder or under any law
relating to Abkari Revenue which may be made in
future and, thus, the power conferred upon the State must be held to be of wide
Act was enacted to consolidate and amend the law relating to the import,
export, transport, manufacture, sale and possession of intoxicating liquor and/
or intoxicating drugs in the State of Kerala. While framing the Rules for the
purposes of the Act, the legislative policy cannot be abridged. The Rules must
be framed to carry out the purposes of the Act.
reason of Section 8 of the Act, trade in arrack was prohibited as far back as
in the year 1996. By reason of the impugned Rules, the State has not laid down
the terms and conditions for employment of a worker. The Act does not contain
any provision therefor. Under the common law as also
under the provisions of the Specific Relief Act, an employer is entitled to
employ any person he likes. It is well-settled that no person can be thrust
upon an unwilling employer except in accordance with the provisions of a
special statute operating in the field. Such a provision cannot be made by the
State in exercise of its power under delegated legislation unless the same is expressly
conferred by the statute.
is not only required to be made in conformity with the provisions of the Act whereunder it is made, but the same must be in conformity
with the provisions of any other Act, as a subordinate legislation cannot be violative of any plenary legislation made by the Parliament
or the State Legislature.
State by enacting Section 8 of the Act prohibited sale of arrack. Once such a
right to bring about prohibition, having regard to the principles contained in
Article 47 of the Constitution of India is exercised, no trade being in
existence, the question of exercise of any control thereover
would not arise. Such a power in view of Section 8 of the Act must be held to
be confined only to carrying out the provisions thereof meaning thereby, no
person can be allowed to deal in arrack and in the event, any person is found
to be dealing therewith, to take appropriate penal action in respect thereof as
4(2) and 9(10)(b) in the Rules were introduced six
years after the trade in arrack was completely prohibited. In the
aforementioned backdrop of events, the question as regard applicability of the
provisions of Sections 18A, 24(c) and (d) of the Act is required to be
construed. Section 18A of the Act recognises the
common law right of the State to part with the privilege. The State's exclusive
privilege of supply or sale of liquor is also not in question. But, we may
notice that Section 18A is an enabling provision. It was enacted evidently
having regard to Article 47 of the Constitution of India. The State while
parting with its exclusive privilege or a part thereof, may impose such
conditions but once such terms and conditions are laid down by reason of a
statute, the same cannot be deviated from.
In Har Shankar (supra) whereupon Mr.
Chacko placed reliance, it was stated:
"Auctions for granting the right to sell country liquor for the year 1968-69
were initially held in various districts of Punjab on or about March
8, 1968 in
pursuance of conditions of auction framed on February 19, 1968. Those auctions became ineffective
by reason of a judgment dated March 12, 1968 of a Division Bench of the High
Court of Punjab and Haryana in Civil Writ No. 1376 of
1967 (Jage Ram v. State of Haryana).
Following an earlier judgment in Bhajan Lal v. State of Punjab the High Court took the view that
the licence fee realised
through the medium of auctions was really in the nature of "still-head
duty" and that the licensees could not be called upon by the Government to
pay still-head duty on the liquor quota which, under the terms of auctions,
they were bound to lift but which in fact was not lifted by them." The
said decision has no application to the fact of the present case, as therein
this Court was concerned with a different question. It is, furthermore, not in
dispute that Article 14 of the Constitution of India would be attracted even in
the matter of trade in liquor.
State of M.P. and Others v. Nandlal Jaiswal and Others [(1986) 4 SCC 566], this Court opined:
State under its regulatory power has the power to prohibit absolutely every
form of activity in relation to intoxicants its manufacture, storage, export, import, sale
and possession. No one can claim as against the State the right to carry on
trade or business in liquor and the State cannot be compelled to part with its
exclusive right or privilege of manufacturing and selling liquor. But when the
State decides to grant such right or privilege to others the State cannot
escape the rigour of Article 14. It cannot act
arbitrarily or at its sweet will. It must comply with the equality clause while
granting the exclusive right or privilege of manufacturing or selling liquor.
It is, therefore, not possible to uphold the contention of the State Government
and Respondents 5 to 11 that Article 14 can have no application in a case where
the licence to manufacture or sell liquor is being
granted by the State Government. The State cannot ride roughshod over the
requirement of that article." In Khoday
Distilleries Ltd. and Others v. State of Karnataka and Others [(1995) 1 SCC 574], a
Constitution Bench of this Court upon referring to a large number of decisions
summed up its findings in the following terms:
For the same reason, the State can create a monopoly
either in itself or in the agency created by it for the manufacture,
possession, sale and distribution of the liquor as a beverage and also sell the
licences to the citizens for the said purpose by
charging fees. This can be done under Article 19(6) or even otherwise.
For the same reason, again, the State can impose limitations and restrictions
on the trade or business in potable liquor as a beverage which restrictions are
in nature different from those imposed on the trade or business in legitimate
activities and goods and articles which are res commercium. The restrictions and limitations on the trade
or business in potable liquor can again be both under Article 19(6) or
otherwise. The restrictions and limitations can extend to the State carrying on
the trade or business itself to the exclusion of and elimination of others
and/or to preserving to itself the right to sell licences
to do trade or business in the same, to others.
When the State permits trade or business in the potable liquor with or without
limitation, the citizen has the right to carry on trade or business subject to
the limitations, if any, and the State cannot make discrimination between the
citizens who are qualified to carry on the trade or business." While
imposing terms and conditions in terms of Section 18A of the Act, the State
cannot take recourse to something which is not within its jurisdiction or what
is otherwise prohibited in law. Sub-sections (c) and (d) of Section 24 of the
Act provide that every licence or permit granted under
the Act would be subject to such restrictions and on such conditions and shall
be in such form and contain such particulars as the Government may direct
either generally or in any particular instance in this behalf. The said
provisions are also subject to the inherent limitations of the statute. Such an
inherent limitation is that rules framed under the Act must be lawful and may
not be contrary to the legislative policy. The rule making power is contained
in Section 29 of the Act. At the relevant time, sub-section (1) of Section 29
of the Act provided that the government may make rules for the purpose of
carrying out the provisions of the Act which has been amended by Act No. 12 of
2003 with effect from 1.4.2003 empowering the State to make rules either prospectively
or retrospectively for the purposes of the Act.
power, therefore, was to make rules only for the purpose of carrying out the
purposes of the Act and not de'hors the same. In
other words, rules cannot be framed in matters that are not contemplated under
the Act. The State may have unfettered power to regulate the manufacture, sale
or export-import sale of intoxicants but in the absence of any statutory
provision, it cannot, in purported exercise of the said power, direct a
particular class of workers to be employed in other categories of liquor shops.
Rules in terms of sub-section (1) of Section 29 of the Act, thus, could be
framed only for the purpose of carrying out the provisions of the Act. Both the
power to frame rules and the power to impose terms and conditions are,
therefore, subject to the provisions of the Act. They must conform to the
legislative policy. They must not be contrary to the other provisions of the
Act. They must not be framed in contravention of the constitutional or
In Ashok Lanka and Another v. Rishi Dixit and Others [(2005) 5 SCC 598], it was held:
We are not oblivious of the fact that framing of rules is not an executive act
but a legislative act; but there cannot be any doubt whatsoever that such
subordinate legislation must be framed strictly in consonance with the
legislative intent as reflected in the rule-making power contained in Section
62 of the Act." In Bombay Dyeing & Mfg.
Co. Ltd. v. Bombay Environmental
Action Group & Ors. [2006 (3) SCALE 1], this Court has stated the law in the following
policy decision, as is well known, should not be lightly interfered with but it
is difficult to accept the submissions made on behalf of the learned counsel
appearing on behalf of the Appellants that the courts cannot exercise their
power of judicial review at all. By reason of any legislation whether enacted
by the legislature or by way of subordinate legislation, the State gives effect
to its legislative policy. Such legislation, however, must not be ultra vires the Constitution. A subordinate legislation apart
from being intra vires the Constitution,
should not also be ultra vires the parent Act under
which it has been made. A subordinate legislation, it is trite, must be
reasonable and in consonance with the legislative policy as also give effect to
the purport and object of the Act and in good faith." In Craies on Statute Law, 7th edition, it is stated at page
initial difference between subordinate legislation (of the kind dealt with in
this chapter) and statute law lies in the fact that a subordinate law-making
body is bound by the terms of its delegated or derived authority, and that
courts of law, as a general rule, will not give effect to the rules, etc., thus
made, unless satisfied that all the conditions precedent to the validity of the
rules have been fulfilled. The validity of statutes cannot be canvassed by the
courts, the validity of delegated legislation as a general rule can be. The
will require due proof that the
rules have been made and promulgated in accordance with the statutory
authority, unless the statute directs them to be judicially noticed;
in the absence of express statutory
provision to the contrary, may inquire whether the rule-making power has been
exercised in accordance with the provisions of the statute by which it is
created, either with respect to the procedure adopted, the form or substance of
the regulation, or the sanction, if any, attached to the regulation
: and it follows that the court may reject as invalid and ultra vires a regulation which fails to comply with the statutory
essentials." In G.P. Singh's Principles of Statutory Interpretation, Tenth
Edition, it is stated at page 916:
"Grounds for judicial review. Delegated legislation is open to
the scrutiny of courts and may be declared invalid particularly on two grounds:
of the Constitution; and
of the enabling Act. The second ground includes within itself not only cases of
violation of the substantive provisions of the enabling Act, but also cases of
violation of the mandatory procedure prescribed. It may also be challenged on
the ground that it cannot be said to be in conformity with the statute or
Article 14 of the Constitution or that it has been exercised in bad faith.
limitations which apply to the exercise of administrative or quasi-judicial
power conferred by a statute except the requirement of natural justice also
apply to the exercise of power of delegated legislation. Rules made under the
Constitution do not qualify as legislation in true sense and are treated as
subordinate legislation and can be challenged in judicial review like delegated
with the laying requirement or even approval by a resolution of Parliament does
not confer any immunity to the delegated legislation but it may be a
circumstance to be taken into account along with other factors to uphold its
validity although as earlier seen a laying clause may prevent the enabling Act
being declared invalid for excessive delegation." In Clariant International Ltd. & Anr.
vs. Securities & Exchange Board of India [(2004) 8
SCC 524], this Court observed:
When any criterion is fixed by a statute or by a policy, an attempt should be
made by the authority making the delegated legislation to follow the policy
formulation broadly and substantially and in conformity therewith. [See Secy.,
Ministry of Chemicals & Fertilizers, Govt. of India v. Cipla
23, SCC para 4.1.) We may notice that in State of Rajasthan
& Ors. vs. Basant Nahata [(2005) 12 SCC 77 : AIR 2005 SC 3401], it was
pointed out :
contention raised to the effect that this Court would not interfere with the
policy decision is again devoid of any merit. A legislative policy must conform
to the provisions of the constitutional mandates. Even otherwise a policy
decision can be subjected to judicial review" In B.K. Industries &
Others v. Union of India & Others [(1993) Supp. 3 SCC
621], this Court clearly held that a delegate cannot act contrary to the basic
feature of the Act stating:
words'so far as may be' occurring in Section 3(4) of
the Cess Act cannot be stretched to that extent.
Above all it is extremely doubtful whether the power of exemption conferred by
Rule 8 can be carried to the extent of nullifying the very Act itself. It would
be difficult to agree that by view of the power of exemption, the very levy
created by Section 3(1) can be dispensed with.
so would amount to nullifying the Cess Act itself.
Nothing remains thereafter to be done under the Cess
Act. Even the language of Rule 8 does not warrant such extensive power. Rule 8
contemplates merely exempting of certain exciseable
goods from the whole or any part of the duty leviable
on such goods. The principle of the decision of this Court in Kesavananda Bharati v. State of
Kerala applies here perfectly. It was held
therein that the power of amendment conferred by Article 368 cannot extend to
scrapping of the Constitution or to altering the basic structure of the Constitution.
Applying the principle of the decision, it must be held that the power of
exemption cannot be utilised for, nor can it extend
to, the scrapping of the very Act itself. To repeat, the power of exemption
cannot be utilised to dispense with the very levy
created under Section 3 of the Cess Act or for that
matter under Section 3 of the Central Excise Act." The law that has, thus,
been laid down is that if by a notification, the Act itself stands affected;
the notification may be struck down.
the terms and conditions which can be imposed by the State for the purpose of
parting with its right of exclusive privilege more or less has been
exhaustively dealt with in the illustrations in sub-section (2) of Section 29
of the Act. There cannot be any doubt whatsoever that the general power to make
rules is contained in sub-section (1) of Section 29. The provisions contained
in sub-section (2) are illustrative in nature. But, the factors enumerated in
sub-section (2) of Section 29 are indicative of the heads under which the
statutory framework should ordinarily be worked out.
Section 18A nor sub-sections (c) and (d) of Sections 24 of the Act confer power
upon the delegatee to encroach upon the jurisdiction
of the other department of the State and take upon its head something which is
not within its domain or which otherwise would not come within the purview of
the control and regulation of trade in liquor. The conditions imposed must be
such which would promote the policy or secure the object of the Act. To grant
employment to one arrack worker in each toddy shop in preference to the toddy
workers neither promotes the policy nor secures the object of the Act. It is
not in dispute that the purport and object of such rules is to rehabilitate the
former employees of arrack shops. Rehabilitation of the employees is not within
the statutory scheme and, thus, the Rules are ultra vires
the provisions of the Act.
State of Kerala and Others v. Maharashtra
Distilleries Ltd. and Others [(2005) 11 SCC 1], this Court took notice of the
provisions of Section 18A of the Act. It was held that the State had no
jurisdiction to realise the turn over tax from the
manufacturers in the garb of exercising its monopoly power. It was held that
turn-over tax cannot be directed to be paid either by way of excise duty or as
a price of privilege.
said decision, therefore, is an authority for the proposition that the State
while implementing the purposes of the Act must act within the four- corners
thereof. It may be true that all types of intoxicating liquors including
'toddy' are subject matter of control but the power to control has been
arbitrarily exercised. Whereas in the case of Arrack, the trade has totally
been prohibited, the trade in toddy has merely been subjected to the control
within the purview of the provisions of the Act.
as trade in toddy is concerned, the toddy workers not only act in the shops,
some of them are also toddy tappers. It requires a specialised skill. They form a different class. Even
assuming that both toddy and former arrack workers belong to the same class,
the rehabilitation of arrack workers who had been thrown out of employment
because of an excise policy on the part of the State, do not have any
reasonable nexus with the purpose of the Act, namely, the prohibition of grant
of excise licence in relation to the trade in arrack.
If a policy decision is taken, the consequences therefor
of the workers, being not a part of the legislative policy for which the Act
was enacted, we are of the opinion that by reason thereof, the power has not
been exercised in a reasonable manner. Rehabilitation of the workers is not one
of the objectives of the Act.
submission of Mr. Iyer that there exists a distinction
between carrying out the provisions of the Act and the purpose of the Act, is not relevant for our purpose. The power of delegated
legislation cannot be exercised for the purpose of framing a new policy. The
power can be exercised only to give effect to the provisions of the Act and not
de'hors the same. While considering the carrying out
of the provisions of the Act, the court must see to it that the rule framed therefor is in conformity with the provisions thereof.
to the provisions of Articles 39, 42 and 43 of the Constitution of India by the
learned counsel for the Respondent is misconceived. While exercising the power
of rehabilitation, the State did not take recourse to the provisions of Article
47 of the Constitution of India.
matter might have been different if the State took a decision in exercise of
its executive power in consonance with the legislative policy of the State as
also for the purpose of giving effect to Articles 39, 42 and 43 of the
Constitution of India. But, herein, the State was exercising a specific power
of delegated legislation.
to Section 69(1) of the Act is again misconceived. Only a rule validly made
will have a statutory flavour. If a rule is not
validly made, the question of its being interpreted in the same manner as if
enacted or as if the same is a part of the statute,
would not arise.
Hotel Balaji and Others v. State of A.P. and Others [1993 Supp (4) SCC 536],
whereupon Mr. Iyer placed reliance, it is stated:
necessity and significance of the delegated legislation is well accepted and
needs no elaboration at our hands. Even so, it is well to remind ourselves that
rules represent subordinate legislation. They cannot travel beyond the purview
of the Act. Where the Act says that rules on being made shall be deemed
"as if enacted in this Act", the position may be different. (It is
not necessary to express any definite opinion on this aspect for the purpose of
this case.) But where the Act does not say so, the rules do not become part of
the Act." The said decision runs counter to the position in the present
case. Mr. Chacko has referred to Rule 7(38) of the
Rules. For the reasons stated hereinbefore, reference to sub-rule (38) of Rule
7 which mandates the licensee to be bound by the rules made under the Act is
fallacious as rules contemplated thereunder would
mean a valid rule and not a rule which has been made de'hors
High Court, furthermore, in our opinion, is not correct in tracing the
legislative power of the State to Entries 23 and 24 of the List III of the
Seventh Schedule of the Constitution of India. The legislative field contained
in the Seventh Schedule of the Constitution of India provides for field of
plenary power of the legislature but what a legislature can do, evidently, a delegatee may not, unless otherwise provided for in the
rights and liabilities of a workman would fall within the purview of the
provisions of the Industrial Disputes Act. What is the right of a workman in
case an industry is closed is governed by Section 25(FFF) and/ or Section 25(J)
of the Industrial Disputes Act.
State while pursuing its social object or policy may do something to rehabiliate the workers affected by the ban but the same
would not mean that the State can thrust such employees upon an unwilling
employer. It, furthermore, would not mean that the State can rehabilitate one
set of workers at the cost of the other.
employees in the arrack shops had already been paid an amount of Rs. 30,000/- as compensation and other benefits under the Abkari Workers Welfare Fund Board Act. We are informed that
they have also been paid a sum of Rs. 2000/- each in
1997. If they became entitled to any other benefit, the State may provide the
same as a part of welfare policy but not in pursuit of an excise policy.
matter can be considered from another angle.
an employer gives employment to a person, a contract of employment is entered
into. The right of the citizens to enter into any contract, unless it is expressly
prohibited by law or is opposed to public policy, cannot be restricted. Such a
power to enter into a contract is within the realm of the Indian Contract Act.
It has not been and could not be contended that a contract of employment in the
toddy shops would be hit by Section 23 of the Indian Contract Act. So long as
the contract of employment in a particular trade is not prohibited either in
terms of the statutory or constitutional scheme, the State's intervention would
be unwarranted unless there exists a statutory
interdict. Even to what extent such a legislative power can be exercised would
be the subject matter of debate but in a case of this nature there cannot be
any doubt that the impugned rules are also contrary to the provisions of the
Indian Contract Act as also the Specific Relief Act, 1963.
In Pearlite Liners (P) Ltd. v. Manorama
Sirsi [(2004) 3 SCC 172], it is stated:
is a well-settled principle of law that a contract of personal service cannot
be specifically enforced and a court will not give a declaration that the
contract subsists and the employee continues to be in service against the will
and consent of the employer. This general rule of law is subject to three well-recognised exceptions:
a public servant is sought to be removed from service in contravention of the
provisions of Article 311 of the Constitution of India;
a worker is sought to be reinstated on being dismissed under the industrial
a statutory body acts in breach of violation of the mandatory provisions of the
statute" Furthermore, a person may not have any fundamental right to trade
or do business in liquor, but the person's right to grant employment or seek
employment, when a business is carried on in terms of the provisions of the licence, is not regulated.
placed by the learned counsel on C.M. Joseph and Others v. State of
Kerala and Others [(2001) 10 SCC 578] is
again mis-placed. Therein, Rule 6(39) of the Rules
was held to be suffering from no infirmity and it is in that situation it was
held that as the said rule was in existence at the time when licence was granted, the licensee could not be allowed to
impugn the same. We are not concerned with the right of the licensee but the
right of the workmen.
Solomon Antony and Others v. State of Kerala and Others [(2001) 3 SCC 694], this Court again held
that the contractors were liable to pay the duty on even unlifted
portion of the designated quantum of rectified spirit having regard to the
binding nature of the contract.
it or leave it" argument advanced by Mr. Chacko
is stated to be rejected. The State while parting with its exclusive privilege
cannot take recourse to the said doctrine having regard to the equity clause
enshrined under Article 14 of the Constitution of India. The State must in its dealings must act fairly and reasonably. The
bargaining power of the State does not entitle it to impose any condition it
Hindustan Times and Others v. State of U.P. and Another [(2003) 1 SCC 591],
wherein one of us was a member, this Court observed:
"The respondents being a State, cannot in view of the
equality doctrine contained in Article 14 of the Constitution of India, resort
to the theory of "take it or leave it". The bargaining power of the
State and the newspapers in matters of release of advertisements is unequal.
Any unjust condition thrust upon the petitioners by the State in such matters,
in our considered opinion, would attract the wrath of Article 14 of the
Constitution of India as also Section 23 of the Indian Contract Act. See
Central Inland Water Transport Corpn. Ltd. v. Brojo Nath
Ganguly and Delhi Transport Corpn. v. D.T.C. Mazdoor
Congress. It is trite that the State in all its activities must not act
arbitrarily. Equity and good conscience should be at the core of all
governmental functions. It is now well settled that every executive action
which operates to the prejudice of any person must have the sanction of law.
The executive cannot interfere with the rights and liabilities of any person
unless the legality thereof is supportable in any court of law. The impugned
action of the State does not fulfil the
aforementioned criteria." We, however, accept the submission that Rule
4(2) of the Rules must be held to be ultra vires in
its entirety as even that part of it, vis-`-vis, the
toddy workers, is not severable. Hence Rule 4(2) is declared ultra vires in its entirety.
the reasons aforementioned, the impugned judgment cannot be sustained. It is
set aside accordingly. The appeals are allowed. No costs.