The Bihar High Court’s Prohibition Judgment: Key Constitutional Issues – I: Excessive Delegation and Ultra Vires

In a landmark judgment handed down yesterday (Confederation of Indian Alcoholic Beverage Companies vs State of Bihar, Civil Writ No. 6675/2016), a division bench of the Patna High Court struck down the Bihar government’s notification imposing total prohibition in the state, as well as Section 19(4) of the Bihar Excise Act of 1915, which was the statutory provision under which the notification was passed. Justice Navaniti Prasad Singh wrote a detailed judgment, with which the Chief Justice concurred on all points apart from whether the right to drink alcohol was protected under Article 21 of the Constitution, as a facet of the right to privacy. The case itself threw up a host of fascinating constitutional questions, which merit close scrutiny. In Part I, I will examine the Justice Singh’s reasoning striking down the Act and Notification on grounds of excessive delegation, conflict with policy, and ultra vires. In Part II, I will analyse the disagreement between Justice Singh and the Chief Justice on the question of fundamental rights. Part III will be a guest post on the issue of punishment.

Section 19(4) of the Bihar Excise Act, as it originally stood, read as follows:

“Notwithstanding anything contained in the foregoing Sub-sections, the Local Government may, by notification, prohibit the possession of any person or class of persons, either in the Province of Bihar and Orissa or in any specified local area, of any intoxicant , either absolutely, or subject to such conditions as it may prescribe.”

On 31st March 2016, Section 19(4) was amended to read:

Notwithstanding anything contained in this Act and the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the State Government may by notification, absolutely prohibit the manufacture, bottling, distribution, sale, possession or consumption by any manufactory, bottling plant, license holder or any person in the whole State of Bihar or in any specified local area in respect of all or any of the intoxicant s either totally or subject to such conditions as it may prescribe.”

The same day, the Government issued a notification banning distribution, sale, consumption etc. of country liquor. A few days later, it issued another notification [“the impugned notification”], which extended the ban to foreign liquor (and thus made prohibition absolute):

“Notification No. 11/Nai Utpad Niti-01.03/2016-1485, dated 5th April, 2016. – In exercise of the powers conferred under Section 19(4) of the Bihar Excise Act, 1915 (as amended by Bihar Excise (Amendment) Act, 2016), the State Government hereby imposes ban on wholesale or retail trade and consumption of foreign liquor by any license holder or any person in the whole of the State of Bihar with immediate effect.”

The petitioners’ first prong of attack was that the phrase “any person” under Section 19(4) of the Excise Act did not contemplate “all persons“, and that therefore, the Notification was ultra vires. To substantiate this, they relied upon judgments of the pre-Independence Federal Court, which had interpreted the pre-amended Section 19(4) in this manner. This contention was swiftly rejected by Justice Singh, since those judgments had expressly held that because the term “any person” was immediately qualified by “class of persons“, it was not intended to include “all persons” within its ambit. The 2016 amendment to Section 19(4), however, had removed the term “class of persons” altogether. Consequently, it could no longer be held that on a plain reading, “any person” could not include “all persons“. This aspect of the judgment is self-evidently correct, and needs no comment.

This brought Justice Singh to the second argument: that of excessive delegation. He relied extensively upon the classic judgment of the Supreme Court in Hamdard Dawakhana vs Union of India to draw a distinction between conditional legislation (which left the determination of the time, place, and manner of the legislation to become effective upon the delegated authority), and delegated legislation (in which the legislature provided broad policy guidelines, and allowed the delegated authority to fill in the gaps). The key test for the validity of delegated legislation – as observed by the Court in Hamdard Dawakhana – was that it should not amount to abdication of the legislative function. In Dawakhana, the Court had invalidated Section 3(d) of the Drugs and Magical Remedies Act, which used the term “or any other disease or condition which may be specified in rules made under this Act”, on the basis that there was no legislative guidance on how these “diseases” were to be selected. Armed with this, the Justice Singh was then able to find:

“The first thing to be noticed is that except for Section 19 (4) of the Act, there is no legislative enactment in the Act, which would indicate the circumstances and the conditions, whereunder total prohibition could be notified by the State Government as a delegatee. A reading of Section 19 (4) of the Act would show that it authorizes the State Government to issue notification absolutely prohibiting various activities, either in the whole of the State or in specified local areas, in respect of all or any of the intoxicants, either totally or subject to such conditions as may be prescribed. There is no legislative guideline at all discernible from the Act in relation to the aforesaid delegation.” (paragraph 85.11)

What particularly weighed with Justice Singh was that Section 19(4) belonged to the Bihar Excise Act of 1915, which was primarily about “permitting, facilitating and regulating manufacture, storage and sale of intoxicants and for collection of excise revenue” (paragraph 85.14), and not about imposing prohibition. Indeed, there was a separate Bihar prohibition act of 1937, which had never been used, indicating clearly that prohibition as a subject was meant to be dealt with by a separate law altogether. This allowed the Court to hold that Section 19(4), in its present form, amounted to impermissible delegation, and was therefore void – along with the notification issued under it.

Justice Singh then considered the interaction between Section 19(4), the notification, and the Bihar government’s “New Excise Policy” of 2015. The New Excise Policy, which had been notified on 21.12.2015, had introduced the goal of total prohibition in Bihar, and it was following this that Section 19(4) was amended. The Court’s analysis of the interaction between the three legal instruments is a little curious. After finding that the NEP’s purpose was to achieve prohibition in a phased manner starting with the prohibition only of country liquor, Justice Singh then held that consequently, the notification was ulta vires and arbitrary because it extended the prohibition to foreign liquor as well (paragraph 86.21). In doing so, he followed the judgments of the Supreme Court in State of Bihar vs Suprabhat Steels Ltd and Secretary, Ministry of Chemicals and Fertilisers vs Union of India, both of which had held that a government policy, once approved by the cabinet and notified, acts as a subsequent self-limitation of powers – i.e., it is not open to the government – on the pain of arbitrariness – to entirely disregard an existing policy that it had already committed itself to, via notification.

However, a close reading of both these judgments raises some doubts about their applicability to the present case. The Supreme Court’s judgment in State of Bihar vs Suprabhat Steels is laconic and confusing; however, a perusal of the High Court judgment (which was appealed by the State of Bihar to the SC) reveals that a key issue was never argued. Paragraph 14 of the High Court’s judgment states:

“In course of his submission the learned Advocate General submitted that the Notification of 4th April, 1994 amounted to a change of policy by the Government. This was objected to by the petitioners, and they challenged the State to produce material to show that the Government had consciously changed its policy by incorporating such a condition. However, ultimately the learned Advocate General did not proceed on the basis that the Government had changed its policy, and submitted that the Notification dated 4th April, 1994 was not inconsistent with the policy decision.”

In other words, the entire argument before the High Court and Supreme Court in Suprabhat Steels was conducted on the question of whether the impugned Notification was or was not consistent with prior policy. Similarly, in Cipla, the debate was about whether the placement of certain drugs in the Schedule to the Drug Pricing Order was consistent with the government’s own Drug Pricing policy.

In the present case, however, circumstances were different. After the New Excise Policy of 2015, which planned to introduce prohibition in a phased manner, starting with the banning of country liquor, the Bihar assembly amended Section 19(4) of the Excise Act that – as we saw above – allowed for complete prohibition, and drew no distinction between country and foreign liquor. What stronger evidence could there be for a change in policy? Justice Singh attempted to get around this by holding that the amended Section 19(4) was intended to give effect to the New Excise Policy, and that consequently, Notifications issued under it must also conform to the Policy. That argument, however, is simply belied by the text of 19(4), which is substantially broader than the Policy. And when the text is clear, is it open to the Court to go behind the language and to the intent of the framers, in order to derive an implied limitation upon its language?

However, Justice Singh then also held the notification to be void on the much more straightforward ground of ulta vires. Before we consider the argument, it is important to dispel a confusion that might arise on a reading of paragraphs 87 – 87.08. At various points, Justice Singh seems to switch between holding that the Notification is ultra vires, and that Section 19(4) itself is ultra vires. Particularly confusing is paragraph 87.03, where he observes:

“I may also refer to certain judgments, where Courts have held that a legislation has an object and if it is sought to be extended beyond the object, the legislation would be open to challenge. The first decision, I would refer to is the case of M.C.V.S. Arunachala Nadar and others Vs. State of Madras and others, (AIR 1959 Supreme Court 300), wherein in paragraph 5 of the reports, this is what their Lordships have noted, the relevant part whereof is quoted hereunder: “5. ……..In order to be reasonable, a restriction must have a rational relation to the object, which the legislature seeks to achieve and must not go in excess of that object…….””

As a statement of law, the first sentence is plainly incorrect, since the legislative object is to be derived from the text of the legislation itself. Invalidating one provision of an Act because it goes against the legislative object would be tantamount to invalidating a provision of the original Constitution because it violates the basic structure. Arunachala Nadar does nothing to support Justice Singh’s case, since it was on a different issue entirely – that of the reasonableness of restrictions under Article 19.

Eschewing Paragraph 87.03, however, the core of Justice Singh’s argument was that the Notification was ultra vires because it went beyond the legislative object. Going into the history of the Act, it noted that the purpose of the Act had always been to “for regulating the manufacturing, trade and business of intoxicating liquor and for augmenting State revenue”, and never for imposing prohibition. After surveying case law on the point, he then held that:

“Section 19 (4) of the Bihar Excise Act, 1915, could only be used for furtherance of the object of the said Act and not to abrogate the Act itself. In other words, the power, conferred on the executive under Section 19 (4), cannot be used by the executive to be a self destruct switch to kill the legislation itself.”

The problem with this argument, however, is that if the Notification was valid in terms of the amended Section 19(4), then it clearly could not be held to be ultra vires because, in a broader sense, it went beyond the legislative object. In other words, Justice Singh had to make an argument that despite its clear textual wording – allowing the government to prohibit any person from undertaking “manufacture, bottling, distribution, sale, possession or consumption” of intoxicating substances – the amended Section 19(4) – in light of the Act as a whole – was subject to an implied limitation that did not permit the imposition of absolute prohibition. This he did not do; and none of the cases that he cited endorsed the proposition that, in case of a seeming conflict between overall legislative object and a single section of the legislation, delegated action that conformed to the single section could nonetheless be invalidated on the ground of ultra vires. This is, of course, subject to the assumption that there could be a conflict between legislative provisions. I would submit, rather, that provisions like Section 19(4) are better understood as carving out exceptions to the overall legislative object (excise) for certain, specified substances. If the Excise Act was to be understood in this way, then the argument on ultra vires would no longer hold.

Consequently, and with respect, it is my view that while Justice Singh was correct on his reading of the amended Section 19(4), as well as his holding that the Section suffered from the vice of excessive delegation, he was incorrect in holding the Notification void for conflict with the New Excise Policy, as well as for holding it to be ultra vires. The outcome, of course, remains correct.

(In the next post, we shall discuss the Court’s approach towards fundamental rights.)

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2 Comments

Filed under excessive delegation, Ultra Vires

2 responses to “The Bihar High Court’s Prohibition Judgment: Key Constitutional Issues – I: Excessive Delegation and Ultra Vires

  1. Pingback: Weekly Roundup- September 27-October 4, 2016 – Centre for Constitutional Law, Policy, and Governance

  2. Hi, couple of queries.

    On the point of ultra vires, would it have been okay, according to you, if 19(4) itself (instead of the impugned notification passed under it) was declared ultra vires the statute, being found to fall foul of the legislative object of the statute?

    Also, when you say “that provisions like Section 19(4) are better understood as carving out exceptions to the overall legislative object (excise) for certain, specified substances”, you are suggesting a reading down by the court of 19(4), right? Because the bare text of the provision obviously suggests more than just an exception for specific substances.

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