Supreme Court Upholds Commissioner’s Authority, Sets Aside High Court’s Remarks in Liquor License Case (2019)

Date of the Judgment: January 7, 2019

Citation: 2019 INSC 17

Judges: Abhay Manohar Sapre, J., Indu Malhotra, J.

Can a High Court, while reviewing an order of an administrative authority, issue directions on how that authority should behave and pass orders in the future? The Supreme Court of India addressed this question in a recent case involving liquor license holders and the State Excise Department. The core issue revolved around whether the High Court overstepped its bounds by making adverse remarks against the Commissioner of State Excise and issuing anticipatory directions regarding future orders. The Supreme Court bench, comprising Justices Abhay Manohar Sapre and Indu Malhotra, overturned the High Court’s decision to the extent of expunging the adverse remarks and anticipatory directions.

Case Background

The case involves multiple appellants, who are liquor license holders in Mumbai, and the State Excise Department. On August 10, 2018, the State Excise Department registered a First Information Report (FIR) against the appellants for allegedly undertaking home delivery of liquor based on telephonic orders and for other violations of the Maharashtra Prohibition Act, 1949 (M.P. Act). Consequently, their liquor shops were sealed on August 11, 2018. The Collector (Excise) issued show cause notices on August 27, 2018, to the appellants, citing breaches of license conditions and violations of the M.P. Act, and directed them to explain why their licenses should not be suspended or cancelled under Section 54 of the M.P. Act. The appellants responded to these notices. On September 5, 2018, the Collector (Excise) passed an interim order to de-seal the shops, subject to certain conditions. The Superintendent of State Excise, Mumbai, appealed this order to the Commissioner of State Excise, who stayed the Collector’s interim order on the same day. On September 10, 2018, the Collector (Excise) passed a final order directing the licensees to pay Rs. 50,000 as compounding fees. The Superintendent of State Excise again appealed to the Commissioner, who stayed this order on September 17, 2018. Aggrieved by the order dated September 17, 2018, the appellants filed writ petitions before the High Court of Judicature at Bombay.

Timeline

Course of Proceedings

The appellants challenged the sealing orders and the Commissioner’s order before the High Court of Judicature at Bombay. The High Court quashed the sealing order of August 11, 2018, and the ex-parte interim order of September 17, 2018, passed by the Commissioner. The High Court directed the Commissioner to decide the appeals on merits in accordance with the law. However, the High Court also made adverse remarks against the Commissioner and issued directions for her to act properly in the future and to exercise restraint in her powers. Additionally, the High Court directed that if the Commissioner passes any adverse orders against the appellants, such orders should not be enforced for four weeks from the date of communication. The appellants filed an appeal before the Supreme Court, challenging the High Court’s decision to send the matter back to the same Commissioner. The Commissioner also filed an appeal, seeking expungement of the adverse remarks made against her by the High Court.

Legal Framework

The case primarily concerns the interpretation and application of the Maharashtra Prohibition Act, 1949 (M.P. Act), particularly Section 54, which deals with the suspension or cancellation of licenses. The Bombay Prohibition (Appeal) Rules, 1953, particularly Rule 6, which mandates a reasonable opportunity of hearing before the appellate authority passes an order, is also relevant. The core issue revolves around the extent of the appellate authority’s powers and the High Court’s supervisory jurisdiction over such authorities. The M.P. Act provides for the licensing, regulation, and control of the manufacture, sale, and consumption of liquor in the state of Maharashtra. The relevant sections of the M.P. Act cited in the judgment are: Sections 23, 24, 65(a)(e), 73, 74, 81, 83 and 90 of the M.P. Act which deal with various offences related to prohibition and Section 54 of the M.P. Act which empowers the licensing authority to suspend or cancel licenses.

Rule 6 of the Bombay Prohibition (Appeal) Rules, 1953 states:

“6. Procedure for hearing. – The appellate authority shall fix a date for hearing the appeal and shall give notice thereof to the appellant and the original authority against whose order the appeal is preferred. The appellate authority may, before passing orders in the appeal, call for such further information or record as it may deem necessary. The appellate authority shall give a reasonable opportunity of hearing to the appellant before passing orders in the appeal.”

Arguments

Appellants (License Holders):

• The appellants argued that the High Court should have transferred the appeals to another appellate authority due to the adverse remarks and strictures passed against the Commissioner. They expressed apprehension that they would not receive a fair trial if the same Commissioner heard their appeals.
• They contended that the Commissioner’s conduct, including issuing oral directions and passing ex-parte interim orders, demonstrated bias against them.
• They relied on the fact that the High Court had previously made adverse remarks against the Commissioner in another case.

Respondents (State and Excise Authorities):

• The respondents argued that the ex-parte interim orders were necessary due to the emergent situation created by the sale of liquor through home delivery and online orders, which violated the license conditions.
• They submitted that Rule 6 of the Bombay Prohibition (Appeal) Rules, 1953, only requires a reasonable opportunity of hearing before the final order is passed in the appeal, and not before passing interim orders.
• They argued that the High Court’s observations were unwarranted and should be expunged.

Commissioner of State Excise:

• The Commissioner argued that the High Court’s adverse remarks and strictures against her were not justified and should be expunged.
• She submitted that the ex-parte interim orders were necessary in the emergent situation arising from the violation of license conditions.
• She contended that the High Court’s directions on how she should behave and pass orders were unnecessary and interfered with her judicial independence.

Issues Framed by the Supreme Court

1. Whether the High Court was justified in not directing the transfer of the two appeals from the Commissioner of State Excise to some other Commissioner or any other competent appellate authority under the M.P. Act for their disposal on merits?
2. Whether the High Court was justified on the facts arising in the case in making adverse remarks and passing strictures against the Commissioner of State Excise?
3. Whether the High Court was justified in issuing directions in anticipation, ordering a stay of the operation of an adverse order against the Writ Petitioners, even prior to it being passed by the Commissioner of State Excise in the pending appeals?

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities:

Judgment

How each authority was viewed by the Court?

✓ Awani Kumar Upadhyay vs. High Court of Judicature of Allahabad & Ors., (2013) 12 SCC 392*: The Supreme Court followed the guidelines laid down in this case, which caution higher courts against making disparaging remarks against judicial/administrative officers unless it is essential for the decision of the case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to maintain the judicial independence of appellate authorities and to ensure that High Courts do not overstep their supervisory jurisdiction. The Court emphasized that adverse remarks and strictures should be avoided unless absolutely necessary for the decision of the case and that pleas of bias must be substantiated with substantial material. The Court also highlighted that interim orders, including ex-parte orders, are within the powers of appellate authorities, and such orders do not automatically constitute bias. The Court was also concerned that the High Court had issued anticipatory directions which interfered with the judicial independence of the appellate authority.

Fact:Law Ratio

Logical Reasoning:

The Court’s reasoning was based on the principle that a higher court must not interfere with the functioning of lower judicial or quasi-judicial bodies unless there is a clear violation of law. The Court emphasized that the High Court should have confined itself to the legal aspects of the case and not delved into the conduct of the Commissioner unless it was absolutely necessary for the decision. The Court also noted that the High Court had issued directions in anticipation, which was not permissible under law.

The Supreme Court emphasized the importance of maintaining a balance between the supervisory jurisdiction of the High Court and the independence of appellate authorities. The Court held that the High Court should not have made adverse remarks against the Commissioner without sufficient evidence of bias and should not have issued directions that could be seen as interfering with the appellate authority’s decision-making process.

The Court quoted, “The reasoning assigned by the Courts to strike down or uphold the action/order impugned in the lis must always be confined to legal grounds, and none else.” to emphasize the importance of legal reasoning in judicial decisions. The Court also stated, “The plea of alleged “bias” against the appellate authority is a plea permissible in law to impugn the action/order. However, such a plea has to be founded on substantial material qua the officer concerned who acts in a quasi-judicial capacity.” highlighting the need for substantial evidence to support claims of bias. Further, the court said, “It is a trite law that merely because an order is adverse to a litigant, it would not by itself constitute a plea of bias against the authority/Court qua the aggrieved.” to clarify that adverse orders do not automatically imply bias.

The Court did not find any alternative interpretations that would justify the High Court’s actions. The Court’s final decision was based on the need to uphold the principles of judicial independence and the importance of confining judicial decisions to legal grounds.

Key Takeaways

• High Courts should avoid making adverse remarks against judicial or quasi-judicial authorities unless absolutely necessary for the decision of the case.
• Plea of bias against an authority must be supported by substantial material.
• Appellate authorities have the power to pass ex-parte interim orders, and such orders do not automatically constitute bias.
• High Courts should not issue directions in anticipation of an order by an appellate authority, as it interferes with the judicial independence of the appellate authority.
• Judicial decisions should be confined to legal grounds and not based on personal opinions or conduct of the authorities.

Directions

The Supreme Court directed that the two pending appeals (212/2018 and 221/2018) will now be heard and decided by the Commissioner of State Excise on merits, in accordance with the law, and without being influenced by any observations made by the Supreme Court or the High Court in the impugned order. The appeals are to be adjudicated preferably within three months from the receipt of the order passed by the Supreme Court.

Development of Law

The ratio decidendi of the case is that higher courts must exercise restraint when reviewing orders of lower courts or quasi-judicial bodies. The Supreme Court clarified that adverse remarks and anticipatory directions by High Courts can be seen as an overreach of their supervisory jurisdiction and an interference with the judicial independence of appellate authorities. This judgment reinforces the principle that judicial decisions must be based on legal grounds and that pleas of bias must be substantiated with concrete evidence. This decision does not change the existing law but clarifies its application in the context of administrative and appellate proceedings.

Conclusion

In conclusion, the Supreme Court dismissed the appeals filed by the liquor license holders and allowed the appeal filed by the Commissioner of State Excise. The Court upheld the Commissioner’s authority to hear the pending appeals, expunged the adverse remarks and strictures passed by the High Court against the Commissioner, and set aside the High Court’s anticipatory directions. The Supreme Court’s decision emphasizes the importance of judicial restraint, the need for substantial evidence when alleging bias, and the independence of appellate authorities in the Indian legal system.