Refund of Licence Fees in Bihar Liquor Ban: Supreme Court's Final Verdict

The liquor ban imposed by the Bihar government led to multiple legal battles over refunds of licence fees and other financial disputes. One such case, involving multiple liquor manufacturers such as M/S Riga Sugar Co. Ltd., M/S Welcome Distilleries Pvt. Ltd., M/S Shipra Beverage Pvt. Ltd., and M/S K.M. Sugar Mills Ltd., was decided by the Supreme Court of India. The case centered around the question of whether the Bihar government was liable to refund the licence fee and other charges imposed on liquor manufacturers during the period when their premises were sealed or when they were unable to operate due to government actions.

Background of the Case

Several liquor manufacturing companies had entered into agreements with the Bihar government for the exclusive privilege of manufacturing and supplying country liquor. However, following the implementation of Bihar’s new Excise Policy in 2016, which imposed a total prohibition on liquor manufacturing and sale, these businesses suffered heavy financial losses. Many of them had their premises sealed and their licenses suspended, allegedly without due process.

As a result, the affected companies approached the Patna High Court, which ruled in their favor and ordered the Bihar government to refund the licence fee and other differential charges for the period during which their premises were sealed or their licences were suspended.

Arguments of the Petitioner (State of Bihar)

The State argued that as per Section 42(4) of the Bihar Excise Act, the licensees had no right to claim compensation or refund upon cancellation or suspension of their licenses.
It further claimed that the liquor manufacturers had violated their agreements by failing to maintain the minimum guaranteed supply, manufacturing substandard liquor, and failing to pay due penalties.
The State also maintained that the High Court erred in clubbing all cases together despite the facts being different in each instance.

Arguments of the Respondents (Liquor Manufacturers)

The liquor manufacturers contended that their premises were unlawfully sealed without prior notice, violating principles of natural justice.
They pointed out that the Bihar government had unilaterally suspended their licenses and implemented the prohibition policy without offering them any recourse.
They also relied on the High Court’s previous judgment, which had declared such sealing orders illegal and had granted relief in similar cases.

Supreme Court’s Observations and Judgment

The Supreme Court, in its detailed judgment, ruled partially in favor of both parties:

The Court upheld the High Court’s decision that liquor manufacturers whose premises were unlawfully sealed without prior notice were entitled to a refund of their licence fee and differential amount.
However, it overturned the High Court’s judgment in cases where the liquor manufacturers were found to have violated their licence conditions, such as manufacturing substandard liquor or failing to meet the supply requirements.
In such cases, the Court held that the Bihar government was justified in sealing the premises and suspending the licenses.

In one of the key observations, the Court held, “Since orders of cancellation and suspension are punitive, the licensee should be given an opportunity before the license is canceled or suspended.”

Accordingly, the Supreme Court allowed some appeals by the Bihar government while dismissing others, effectively upholding the principle that government actions must comply with legal due process.

This judgment provides clarity on the rights of businesses affected by regulatory changes and reaffirms the need for authorities to follow due process when taking punitive actions against businesses.

Petitioner Name: The State of Bihar.
Respondent Name: M/S Riga Sugar Co. Ltd., M/S Welcome Distilleries Pvt. Ltd., M/S Shipra Beverage Pvt. Ltd., M/S K.M. Sugar Mills Ltd..
Judgment By: Justice L. Nageswara Rao, Justice Hemant Gupta.
Place Of Incident: Bihar.
Judgment Date: 18-10-2019.

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Download Judgment: The State of Bihar vs MS Riga Sugar Co. L Supreme Court of India Judgment Dated 18-10-2019.pdf

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