M J Antony: Intoxicating questions

OUT OF COURT

The liquor licensing policy of states has come in for review by a larger Constitution bench.

Seventeen years after a seven-judge Constitution bench tried to settle questions regarding the competing powers of the central and state governments in the matter of regulating liquor trade, the Supreme Court last week decided to reopen the whole issue. One reason for undertaking this colossal task is that the earlier judgement had overlooked a still earlier precedent set in 1956. Such is the state of infallibility and finality in judicial decisions.

The liquor trade has provided heady litigation over the decades ""not only because of the money, political clout and muscle power linked to this field of commerce, but also due to the complexity of laws. Apart from the constitutional prescription to strive to bring about total prohibition, there are overlapping entries in the seventh schedule of the Constitution which refer to commerce in intoxicating drinks.

Then there are a few provisions in the Industries (Development and Regulation) Act which deal with it as an industry. Add to this the crates of legal conundrums contributed by the Supreme Court and high court judgements. This legal cocktail would make the head of any sobre judge turn.

The most common issue on which legal complications arise is the grant of licences for manufacture, distribution and sale of denatured spirit and potable alcohol. Denatured spirit is used for industrial purposes. Alcohol is destroyed and converted chemically into other products such as ether and polythene. Then there are industries which use denatured spirit where alcohol is used directly like varnishes. The third kind of common use is the noxious variety which is consumed by people in the form of arrack or Indian-made foreign liquor. The authorities have not been able to control the denaturing, renaturing and human consumption of spirit.

Now these issues have to be examined by a Constitution bench consisting of at least nine judges. The Supreme Court has framed six questions seeking answers from the larger bench in State of UP vs Lalta Prasad Jain and asked the Chief Justice to form the bench. It all started when some dealers in UP challenged the levy of licence fee by the state government. They moved the Allahabad high court, which struck down the levy stating that legislation with regard to denatured spirit was outside the power of the state legislatures. It also directed the government to refund the amounts collected from the licencees. Therefore, the government moved the Supreme Court.

Some of the key provisions involved may be noticed. Section 2 of the IDR Act states that the Centre can take control of industries if it is expedient in public interest to do so. Section 18-G empowers the central government to secure the equitable distribution and availability at fair prices of articles relatable to any scheduled industry. 'Fermentation industry' is one of them. Entry 52 of the Union List in the Constitution confirms this. However, Entry 8 in the State List mentions the production, possession, transport, purchase and sale of intoxicating liquors. Entry 33(a) of the Concurrent List includes trade in the production, supply and distribution of products in any industry where the control is given by Parliament to the Centre in public interest.

The state government successfully convinced the Supreme Court in the latest case that its judgement in Synthetics & Chemicals Ltd vs State of UP (1990) had several contradictions which were not noticed till now. Moreover, the 1956 judgement in Tika Ramji vs State of UP, which had dealt with the present issues had not been noticed by the Constitution bench which decided the Synthetics & Chemicals case. These factors weighed with the present bench when it referred six questions to a larger Constitution bench. It said that if the interpretation of Section 18-G of the IDR Act made in the Synthetics & Chemicals case was allowed to stand, it would neutralise the provisions of Entry 33(a) of the Concurrent List.

The esoteric nature of the questions ensures that the larger bench, whenever it is set up, would have a tough time distilling them. Examples: Does Section 2 of the IDR Act have any impact on the field covered by Section 18-G or Entry 33 of List III of the Seventh Schedule of the Constitution? In the absence of any notified order by the Centre under Section 18-G, is the power of the state to legislate in respect of matters enumerated in Entry 33 ousted?

The answers are not likely to come too soon as the Constitution bench has just concluded its marathon three-month hearing in the OBC reservation case.