Vodabox Electromech Private Limited vs. State Of Chhattisgarh

Facts

The petitioners, North East Feed And Agro Exports Private Limited and Vodabox Electromech Private Limited, held FL-10(A) licenses and had entered into rate contracts with Chhattisgarh State Marketing Corporation Limited (CSMCL) for the supply of liquor for the period April 1, 2024, to March 31, 2025. They had paid significant license fees. Subsequently, the State Government amended Rule 8 of the Chhattisgarh Foreign Liquor Rules, 1996, effective July 11, 2024, deleting FL-10(A) and FL-10(B) licenses and deciding that the Chhattisgarh State Beverages Corporation would directly purchase liquor from registered companies. The petitioners received notices on July 1, 2024, and July 4, 2024, indicating the withdrawal of the old policy and cancellation of their contracts, leading them to challenge these actions.

Held

The Court held that the State's power to regulate and restrict the business in potable liquor implicitly includes the power to carry on such trade to the exclusion of others. Therefore, the actions of the respondent authorities in changing the policy and cancelling the contracts were not considered illegal or arbitrary. The Court noted the Supreme Court's pronouncements in Khoday Distilleries Ltd. & Others and Kerala Bar Hotels Association & Another, which affirm the State's right to establish a monopoly in the liquor trade. The Court also took into consideration the offer by the State Government to refund 50% of the license fee and compensate for the remaining stock. Consequently, the Court found no reason to interfere with the State's decision. No specific issue was left undecided, as the Court addressed the core challenge to the cancellation of the licenses and contracts.

Key Issues

1. Whether the amendment to Rule 8 of the Chhattisgarh Foreign Liquor Rules, 1996, and the subsequent policy decision to have the Chhattisgarh State Beverages Corporation directly purchase liquor, can unilaterally cancel the existing license and rate contract granted to the petitioners for the period April 1, 2024, to March 31, 2025? (Question of law, concerning contract law and administrative law principles). 2. Whether the State Government's action of cancelling the petitioners' licenses and rate contracts without their expiry is illegal, erroneous, and contrary to law, especially considering the prospective nature of statutory amendments? Petitioner's Arguments: The petitioners argued that their licenses and rate contracts, valid until March 31, 2025, could not be unilaterally cancelled. They contended that the amendment to Rule 8 was prospective and could not affect existing contracts. They also highlighted the significant investment made in infrastructure and personnel based on the awarded contracts and argued that the cancellation was illegal and contrary to the Chhattisgarh Foreign Liquor Rules, 1996, in existence at the time of contract award. They relied on the principle that statutes are generally prospective unless expressly made retrospective. Respondent's Arguments: The respondents, through the Advocate General, argued that the State has the power to regulate and restrict the business in potable liquor, which includes the power to carry on such trade to the exclusion of others. They contended that the act of the respondent authorities was not illegal or arbitrary, referencing the Supreme Court's observations in Khoday Distilleries Ltd. & Others and Kerala Bar Hotels Association & Another regarding the State's monopoly in liquor trade. They also offered to refund 50% of the license fee and take back the remaining stock.