Satyanarayan Agrawal Distilleries Pvt. Ltd. Vs. Associated Alcohols &
Breweries Ltd. & Ors  INSC 278 (10 May 1995)
S.C. (J) Sen, S.C. (J) Ahmadi A.M. (Cj) Bharucha S.P. (J) Sen, J.
1995 AIR 1686 1995 SCC (4) 563 1995 SCALE (3)710
10TH DAY OF MAY, 1995 Present:
the Chief Justice Hon'ble Mr.Justice S.P.Bharucha Hon'ble Mr.Justice Suhas C.Sen
Mr.R.K.Jain, Mr.Rajinder Sachar, Mr.A.M.Mathur, Mr.A.K.Chitale, Mr.R.N.Shukla,
Sr. Advs., Mr.Niraj Sharma, Mr.S.K.Gambhir, Mr.Vivek Gambhir, Mr.Amitabh Verma,
Mr.K.Pandey, Mr. Satish K.Agnihotri, Ms.Shashi Kiran, Ms.Anil Katiyar, Advs.
with them for the appearing parties.
following Judgment of the Court was delivered:
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.5526 OF
1995 (Arising out of S.L.P. (c) No.3725 of 1994) M/s Ramnarayan Satyanarayan Agrawal
vs. Associated Alcohols & Breweries Limited and others ....Respondents
[With Civil Appeal No.5527 of 1995 (Arising out of S.L.P. (C) No. 13534 of
appellant, Ramnarayan Satyanarayan Agrawal Distilleries Pvt.Ltd., and
Associated Alcohols & Breweries Ltd., the respondent No.1, are both
manufactures of potable alcohol. The respondent No.1 belongs to Kedia Group of
Distilleries Companies and enjoys a virtual monopoly in the manufacture of
potable alcohol in the State of Madhya Pradesh along with two other business
houses. According to the appellant, this monopoly continued until the judgment
of this Court in the case of State of Madhya Pradesh V. Nandlal Jaiswal, AIR
1987 SC 251, in which the policy decision of the State Government to grant licence
to set up new distilleries at new sites was upheld.
26th April, 1993, the Under Secretary,Government of Madhya Pradesh, Commercial
Taxation Department, issued an order to the Excise Commissioner. By this order,
the State Government granted permission to give licence in favour of the
appellant to manufacture potable alcohol in the interest of more competition.
The order was to the following effect:- "GOVERNMENT OF MADHYA PRADESH
COMMERCIAL TAXATION DEPARTMENT No. B-1-64/85/VA.KAR/5 Bhopal dated 26th April,
1993 To, The Excise Commissioner, M.P. Gwalior.
Regarding grant of DI licence to Messers Ramnarayan Satyanarayan Agrawal, Bilaspur
for manufacture of industrial alcohol.
Your memo No. 3/2/670 dated 20.4.93.
State Government grants permission for manufcture of potable alcohol in order
to encourage greater competition for issuance of licence to Messers Ramnarayan Satyanarayan
Agrawal Distilleries Pvt.Ltd., Chherka Bench, Bilaspur, which produces
accordance with earlier cases the distiller would be responsible for the other licence/permission
which they may be required to obtain from Government of India and other
departments of the State Government for the manufacture of potable alcohol.
order and in name of the Governor of Madhya Pradesh (R.S. Dubey) Government of
Madhya Pradesh Commercial Taxation Department." This was followed up by
another order, issued by the Additional Excise Commissioner on 29th April, 1993
which was as under:- "OFFICE OF THE EXCISE COMMISSIONER MADHYA PRADESH,
OTI MAHAL, GWALIOR. No. 3/2/19-83/920, Gwalior dated 29.4.93 To M/s. Ramnarayan Satyanarayan Agrawal Distilleries Pvt.Ltd.,
Chherpha Bandha, Bilaspur, Madhya Pradesh.
: Regarding grant of licence DI to M/s. Ramnarayan Satyanarayan Agrawal, Bilaspur
for manufacture of industrial alcohol.
: The previous memo No. B-1-64/85/Va. Kar 5 dated 26.4.93 of the State
Government, Commercial Taxation Department.
reference to the aforesaid government order, permission is granted to you to
manufacture potable alcohol under the DI licence granted to you on the
condition that you would be responsible for obtaining the necessary licence.permission
from the Government of India and other departments of the State Government
according to rules applicable there to and further that you would be required
to follow all the necessary terms and conditions under the Excise Act.
Additional Excise Commissioner Madhya Pradesh." The aforesaid two orders
were passed in pursuance to the appellant's application for permission to
manufacture postable alcohol. The appellant has claimed that the order dated
26.4.93 clearly states that it shall be the responsibility of the appellant to
obtain such licence/permission, as is necessary, from any other department of
the Central Government and the State Government. All other ditilleries in
Madhya Pradesh are being run on similar terms and conditions. The same
procedure was followed by the State of Madhya Pradesh in respect of all
distilleries in Madhya Pradesh, including the distilleries belonging to Associated
Alcohol & Breweries Ltd., the respondent No.1 and Anand Kumar Kedia, the
to the appellant, the trouble started in this case when the Excise Commissioner
issued a notice dated 8.7.1993 inviting tenders for supply of country liquor in
19 supply areas of the State of Madhya Pradesh. The respondent Nos.1 and 2 did not directly submit any
tender, but another concern of the Kedia Group i.e. Castle Douglas Industries
Limited, submitted its tender. The prices tendered by the appellant and the
Castle Douglas Industries Limited were as under:- Price tendered by the
appellant Bilaspur Raipur Rs. 5.21 Rs. 5.71 Price tendered by Castle Douglas
Industries Ltd. Bilaspur Raipur Rs. 14.71 Rs. 14.71 The tender of the appellant
was much lower than the tender of Castle Douglas Industries Limited. There was
no other contender. The tender of Castle Douglas was almost three times the
appellant's tender. If the tender of Castle Douglas Industries Limited were
accepted, the Exchequer would have suffered huge loss.
failed in open competition the respondent Nos. 1 and 2 are now trying to
perpetuate their monopoly by legal process.
a writ petition was moved in the name Arvind Kashiv on 3.5.1993 (M.P. No.
1035/1993). Arvind Kashiv claimed to be a journalist interested in public
Kashiv failed to obtain ex-parte stay of acceptance of the appellant's tender.
Thereafter, the respondent Nos. 1 and 2 came out in the open and filed a writ
petition (M.P. No. 1320/1993) out of which this appeal by special leave arises.
In the writ petition, they questioned the right of the appellant to make its
tender on the following grounds:-
That the appellant only holds an authorisation from the State Government;
the State Government had no power, authority or jurisdiction in the matter of
licensing the manufacture of potable alcohol;
only the Central Government possesses such licensing authority; and
the appellant did not hold any licence from the Central Government.
held in that case by a Division Bench of Madhya Pradesh High Court that the
alcohol industry can be set up only after obtaining a licence from the
Government of India and thereafter the State shall have the control of the
industry in terms of Entry 8 of list II of the Constitution which gives power
to the State to legislate in respect of intoxicating liquor i.e. to say the
production, manufacture, possession and transport. Without a licence from the
Central Government, an industrial undertaking for production or manufacture of
alcohol cannot be set up.
regards the individual cases of respondents Nos. 4 and 5, in that writ
petition, it was held that the respondent No. 4 shall be entitled to continue
its business as before but respondent No. 5 (the appellant herein) had to
obtain a licence from the Central Government for setting up of an industry for
manufacture of potable alcohol. The Court held:
have already held above that licences for setting up of industries for
manufacture of potable alcohol and industrial alcohol has to be obtained
separately and it cannot be treated as one and the same product. Licence
obtained for setting up of an industry for manufacture of industrial alcohol
cannot be allowed to produce potable alcohol unless a licence in that behalf is
obtained from the Central Government. Therefore, whenever a unit obtains a licence
from the Government of India for setting up a plant for producing industrial
alcohol, it cannot without obtaining a licence from the Government of India,
convert that licence for producing potable alcohol, by obtaining the permission
or licence issued by the State Government." M/s. Ramnarayan Satyanarayan Agrawal
Distilleries Pvt. Ltd. has now come up in appeal by special leave before this
case of the appellant is that the provisions of the Industries Development and
Regulation) Act, 1951 (hereinafter referred to as the Act') does not apply to
an industrial unit in which less than fifty persons are employed. This
contention must be upheld. `Factory' has been defined in Section 3(c) of the
Act as under:
`Factory' means any premises, including the precincts thereof, in any part of
which a manufacturing process is being carried on or is ordinarily so carried
the aid of power, provided that fifty or more workers are working or were
working thereon on any day of the preceding twelve months; or
the aid of power, provided that one hundred or more workers are working or were
working thereon on any day of the preceding twelve months and provided further
that in no part of such premises any manufacturing process is being carried on
with the aid of power." The manufacturing process of appellant's business
establishment is being carried out by only 22 workers.
the appellant's business undertaking cannot be treated as a factory nor an
`industrial undertaking' as defined under Section 3 (d) of the Act.
`industrial undertaking' means any undertaking pertaining to a scheduled
industry carried on in one or more factories by any person or authority
including Government." The requirement to obtain a licence in Section 11
is in respect of `any new industrial undertaking'. If the manufacturing
establishment of the appellant is not a factory and consequently not an
industrial undertaking as defined in the Act, the appellant cannot be compelled
to obtain a licence under Section 11 which is as under:- "11. Licensing of
new industrial undertakings-
person or authority other than the Central Government, shall, after the
commencement of this Act, establish any new industrial undertaking, except
under and in accordance with a licence issued in that behalf by the Central
that a Government other than the Central Government, may with the previous
permission of the Central Government, establish a new industrial undertaking.
(2) A licence
or permission under sub-section (1) may contain such conditions including, in
particular, conditions as to the location of the undertaking and the minimum
standards in respect of size to be provided therein as the Central Government
may deem fit to impose in accordance with rules, if any, made under Section
30." By the Industries (Development and Regulation) Act, 1951, by virtue
and provision of Section 2, the industries specified in the First Schedule of
the Act, have been brought under the control of the Union. Item 26 of the First Schedule refers to
Fermentation Industries and is as under:
products of fermentation industries." Chapter III of the Industries Act
deals with `
OF SCHEDULED INDUSTRIES'.
this Chapter, it has been laid down in Section 10 that existing industrial
undertaking will have to be registered in the prescribed manner. Section 11
lays down that no person or authority shall, after the commencement of the Act,
establish any new industrial undertaking without a licence issued in that
behalf by the Central Government.
the appellant nor the Castle Douglas Industries Limited has been registered as
an existing industrial undertaking under Section 10 of the Act, nor any licence
has been issued to either of these undertaking under Section 11 of the Act. If
the contention of the respondent No. 1 is to be accepted, then the distilleries
run by them will have to be closed down, as they have no right to manufacture
industrial or potable alcohol.
been contended on behalf of the respondence that even though they have not
obtained a licence under Section 11 of the Act, they have applied for
permission to carry on business (COB) to Government of India and their
application has been registered. That, however, is not the same thing as having
a licence under Section 11 of the Act. If the provisions of the Act are
strictly enforced, the respondents will have no right to carry on business of
as the appellant is concerned, it has been stated in the appeal before this
court as well as in the affidavit filed in the court below, that they employ
not more than 22 persons in their factory. Section 10 of the Act requires the
owner of every existing industrial undertaking to get the undertaking
registered in the prescribed manner.
Section 11 of the Act lays down that no person or authority other than the
Central Government shall establish any new industrial undertaking, except under
and in accordance with a licence issued in that behalf by the Central
Government. The question is whether the appellant is an `industrial
undertaking' as defined in the Act. If at any premises fifty or more workers
are working with the aid of power or one hundred or more workers are working
without the aid of power, then that place will be treated as a `factory'. In
order to be an `industrial undertaking', as defined in the Act, it must be an
undertaking carried on in `one or more factories'.
instant case, since the appellant does not employ more than 22 persons, its
place of manufacture cannot be regarded as a `factory'. Consequently, his
business organisation cannot be treated as an `industrial undertaking', as
defined in the Act. The appellant's undertaking does not come within the
mischief of the Act and the appellant cannot be required to obtain a licence in
order to carry on business of manufacturing potable alcohol.
argument was advanced on behalf of the respondent that potable alcohol cannot
be made without manufacturing industrial alcohol in the first place. Industrial
alcohol has to be the base for manufacture of potable alcohol. Entry 8, List II
relates to `intoxicating liquors, that is to say, the production, manufacture,
possession, transport, purchase and sale of intoxicating liquors'. It is clear
from this Entry that the production and manufacture of intoxicating liquors
will fall within the jurisdcition of the State.
step that is necessary to be taken for production or manufacture of
intoxicating liquor falling within Entry 8, List II can be taken by the
appellant with the permission of the State Government. The appellant is not an
`industrial undertaking', as defined in Section 3(d) of the Industries
(Development and Regulation) Act. No Special licence from the Central
Government is necessary for the appellant for this purpose. In course of the
argument apart from Section 11, nothing could be shown by the respondents which
requires the appellant to obtain a licence from the Central Government for
manufacturing potable alcohol.
fortified in the view we have taken by a judgment of this Court in the case of
State of Madhya Pradesh
V. Nandlal Jaiswal
(supra). In that case, an argument was advanced that the respondents were not
entitled to set up new distilleries without obtaining a licence from the
Central Government under Section 11 of the Act. Since there was nothing to show
that they had obtained such a licence before setting up the new distilleries,
their action in setting up the new distilleries was illegal. This contention
was repeled by this Court on the ground that no such plea had been raised in
the court below. It was held by P.N. Bhagwati, C.J.:- "Moreover, it is
obvious from Section 11 read with the definitions of `factory' and `industrial
undertaking' contained in sub-sections (c) and (d) of Section 3 of this Act
that licence from the Central Government for setting up new distilleries and
here in the present writ petitions, there is nothing to show that 50 or more
workers were going to be employed in the new distilleries. We were told at the
Bar that in fact old distilleries were also working without any licence from
the Central Government presumably because less than 50 workers were employed in
such distilleries. This contention of the learned counsel on behalf of M/s. Doongaji
& Co. must also, therefore, be rejected." On behalf of the
respondents, it was contended that this judgment cannot be treated as good law
any more, in view of the decision of this Court in the case of Synthetics and
Chemicals Ltd. V. State of U.P. (1990) 1 SCC 109. In that case the question was
whether vend fee in respect of industrial alcohol levied by different State
Legislatures was valid. The question, whether a `factory' employing less than
50 workers can be treated as an `industrial undertaking' under the Industries
(Development and Regulation) Act, did not come up for consideration in that
case at all. The Act has imposed restrictions and framed regulations in respect
of industrial undertakings, as defined by that Act. The undertaking of the
appellant does not come within the ambit of that definition. It cannot be said
that the appellant cannot operate its distillery without acquiring a licence as
laid down by Section 11 of the Act.
that view of the matter, it is held that the appellant does not require a licence
under Section 11 of the Industries (Development and Regulation) Act to
manufacture potable alcohol. Their bid pursuant to the tender floated by the
State Government to manufacture potable alcohol will have to be considered in
accordance with law.
appeal, therefore, must succeed.
have noted earlier in the judgment the wide disparity in price in the tender
made by the appellant and Castle Douglas Industries Limited. Having failed in
open competition, the respondents Nos. 1 and 2 invoked the writ jurisdiction
first indirectly, and thereafter directly, to frustrate the appellant's bid to
secure the contract. They have successfully frustrated the effort of the
appellant to obtain the contract by this process so far. Their attempt has now
failed. Costs must follow the event. Having to regarding to the facts, we have
decided to award exemplary costs in this case.
appeal is allowed. The respondents Nos.1 and 2 will pay costs assessed at Rs.
20,000/- (Rupees twenty thousand only) to the appellant.
No. 5 of 1995 in S.L.P. (C) No.3725 of 1994 The above I.A. is also disposed of
APPEAL NO. 5527 OF 1995 (Arising out of S.L.P.(C) No. 13534 of 1994) Leave
view of our judgment in Civil Appeal No. 5526 of 1995 (arising out of S.L.P.
(C) No. 3725 of 1994), no further order need to be passed in the above case.