WRIT PETITION NO. 2535 OF 2012

3rd May 2019

Petitioner Counsel: Mr. Surel Shah Mr. Prasad Dhande Mr. Amit Khairwar M/s. D.H.Law Associaties
Respondent Counsel: Mr. G.W.Mattos

Cases Cited :
Para 8: Paint and Chemical Industry Vs. Union of India, 1992 Supp(1) SCC 16
Para 29: State of T.N. Vs. P. Krishnamurthy, AIR 2006 SC 1622
Para 30: Indian Express Newspapers (Bombay) (P) Ltd., Vs. Union of India, (1985) 1 SCC 641
Para 33: Pune Municipal Corporation Vs. Promoters and Builders Association, (2004) 10 SCC 796
Para 33: K.T. Plantation Pvt. Ltd. Vs. State of Karnataka, AIR 2011 SC 3430
Para 34: M/s. Prag Ice and Oil Mills Vs. Union of India, (1978) 3 SCC 459
Para 35: Ramdas Vs. State of Maharashtra MANU/MH/2122/2016
Para 43: Bengal Immunity Vs. State of Bihar, AIR 1955 SC 661
Para 44: GVK Inds. Ltd. Vs. Income Tax Officer, (2011) 4 SCC 36

JUDGEMENT

DAMA SESHADRI NAIDU, J.

Introduction:

The State of Maharashtra, using secondary legislation, imposes conditions on how any person can deal in methanol. The petitioners, as the manufacturers and traders, challenge those conditions under the Maharashtra Poisons Rules 1972 as extra-territorial, offending the constitutional mandate under Article 245 of the Constitution of India. Do the conditions under Rule 18(2) of the Maharashtra Poison Rules 1972 have extra-territorial operation?

Facts:

To put the facts in perspective, we will first see who the parties are. In WP No.2535 of 2012, the first petitioner is a Government undertaking, the second petitioner is a manufacturer and seller of methanol, the third and fourth petitioners are dealers in methanol, and the fifth petitioner is a Government of India undertaking. On the other side are the State of Maharashtra, the first respondent; and Indian Chemical Council, the second respondent.

2. The issue in this writ petition concerns methanol; it was first added in the Schedule to the Maharashtra Poisons Rules 1972, but later removed in 1991. Again through an Amendment to the Rules in 2011—Rules 18A, 18B and 18C—the State of Maharashtra brought in that substance into the Schedule. The petitioners assail Rule 18A(2) as having extra-territorial operation, that is beyond the State of Maharashtra. According to them, this Rule affects the inter-state trade and sales to persons outside Maharashtra. That apart, the petitioners also want the Court to quash Rule 18A (2) of the Rules.

3. The petitioners plead that in the wake of substantial loss of life because of spurious-liquor consumption, the Government of Maharashtra issued a draft notification in 2006 to include methanol as a poison under the Maharashtra Poisons Rules, 1972. Remedially, the Government, through the amendment, wanted to compel the sellers to add denaturants and bitterants to methanol before it was sold. But its use in pharmaceutical industry stands exempted from this regiour. The petitioners claim that though the second petitioner had submitted its objections to the draft notification of Amendment, it heard nothing till 2011.

4. About December 2011, the FDA authorities inspected the second respondent’s business premises, as part of their raids on chemical industries, “to check compliance” with the amended rules and ‘poison’ licenses. Maintaining that the petitioners had been unaware of the amendment till December 2011, they filed this writ petition in 2012, questioning the departmental action and the very Rule 18A (2) as well.

WP No. 2153 of 2012:

5. The second respondent—Indian Chemical Council—in WP No.2535 of 2012 is the petitioner in this writ petition, the earlier of the two. This writ petition sets out identical-fact situation; it seeks identical relief, too. In fact, in the other writ petition, the petitioners aver that they have claimed no relief against Indian Chemical Council, the second respondent. That is, the second respondent in WP No.2535 of 2012 is the petitioner in WP No.2153 of 2013 having no conflict of interest with the petitioners in the first writ petition.

6. As both the writ petitioners, between the same sets of adversaries, raise common questions of law and fact, we have proposed to dispose them of through a common judgment.

Submissions:

Petitioners’:

7. The petitioners’ counsel submits that Methanol is widely used in chemical and pharmaceutical industries, and the first and the second petitioners are the largest manufacturers in the State of Maharashtra. As the local production is limited, the State imports much of this substance, the State turnover being about 1,000 crore rupees.

8. The learned counsel contends that the State has no power to regulate the the trade in Methanol affecting persons outside the State, nor can it affect interstate trade or commerce. So the Notification No.DRG2006/1006/CR 659/06/DRUGS 2, dated 21st January 2011, is ultra vires, as was held in Goodwill Paint and Chemical Industry v. Union of India, 1992 Supp(1) SCC 16. The Government’s directive to the manufacturers and the traders “to change the substance of methanol by adding natural colours, smell, chemical purity, and so on, as well as regulate the possession for sale is ultra”. The impugned notification, according to the learned counsel, has no nexus with purpose for which it was notified.

9. The learned counsel also contends that the Government has acted in haste and in utter disregard for the objections the petitioners have raised. Instead of compelling the people concerned to add colourants and bitterants, the State must have maintained checks and balances in the form of seizures, searches, and so on to prevent adulteration or illicit use of the substance. According to him, adding colorants or bitterants makes methanol impure and unfit for most industrial purposes.

10. When the Union Government has been proposing to use methanol on a large scale by allowing it to be fuel for ships, the State Government should not have restricted the traders in Maharashtra from freely dealing in it. It leads to loss to State exchequer and a dent to the business industry, contends the learned counsel.

11. The learned counsel has also contended that even under Rule 18A(2), addition of coloring agent or bitterant in methanol does not apply to pharmaceutical and bulk drug industries, though it is used extensively in both the fields. Thus, people bent on abusing this substance can still obtain it without the colourant and bittarant either from these pharma industries or from outside.

12. Finally, the learned counsel contends that there are many other harmful substances—for example, thinners, benzene, gasoline—unregulated, though they are more harmful. Singling out Methanol, according to the learned counsel, is discriminatory.

First Respondent’s:

13. The learned Government Pleader has, at length, narrated about the spurious-liquor tragedies occurred a couple of decades ago. According to him methanol is the culprit, for it indistinguishably gets mixed with illicit liquor and proves itself to be a perfect adulterant. He has also referred to judicial directives in writ petitions, including PILs, by this Court, besides drawing our attention to Parthasarathy Committee and its findings. In that context, he has submitted that adding colorant, taste modifiers, and so on is based on the Parthasarathy Committee’s recommendations and judicial directives.

14. If Rule 18A were quashed, submits the learned Government Pleader, methanol would be sold colorless and odourless; it could easily be used by unscrupulous elements or by accident. And that could lead to tragedy and unprecedented human loss, conjectures the learned Government Pleader. So he urges this Court to dismiss the writ petitions.

15. Heard Mr.Surel Shah appearing for the petitioners and Mr.G.W.Mattos, learned AGP appearing for the State.

Discussion:

16. As the petitioners plead, in 1972 methanol was added to the list of poisons in the Maharashtra Poisons Rules, 1972. Later, the Government of Maharashtra issued a notification to replace the existing schedule to the Rules with a schedule containing only seven chemicals as poisons. And methanol was removed from the list.

17. But in 1991 there was a hooch tragedy—‘chhaya bar’—killing many people who drank illicit liquor, followed by another hooch tragedy later. It has led to much litigation and the Government’s course correction, as well. The Government-appointed Parthasarathy Committee has suggested ways and means to curb the illicit liquor trade, and this Court, then, required the Government to consider the Committee’s recommendations.

18. As a result, in 2006 the Government issued a draft notification to list methanol as a poison and proposed that the seller is required to add denaturants and bitterants to methanol before it was sold. This requirement would not apply if the substance were to be used in pharmaceutical industry. The second petitioner claims to have filed its objections against this draft notification. Eventually, the State of Maharashtra amended its Poisons Rules, 1972; it added Rule 18A, besides a couple more. The amended Rules were notified on 21st January 2011. When the government authorities began to enforce this notification, the petitioners filed these writ petitions, assiling Rule 18A(2) as ultra vires. They wanted the Court to quash Rule 18A (2) and the Notification, too. They contended, in essence, that any denaturants or bitterants would damage or affect methanol, which then would lose its purity as a chemical and drive methanol-based industry to a closure. They do, of course, assert that the Rule is extra-territorial.

19. So the case revolves around methanol; it needs an overview, with as little jargon as possible. Alternatively called methyl alcohol, wood alcohol, or wood spirit, it was formerly produced by the destructive distillation of wood. Now the modern method of methanol preparation involves direct combination of carbon monoxide gas and hydrogen in the presence of a catalyst. Predominantly biomass is used for methanol production.

20. Pure methanol, according to Encyclopedia Britannica, is an important material in chemical synthesis. Its derivatives are used in great quantities for building up a vast number of compounds, among them are many important synthetic dyestuffs, resins, pharmaceuticals, and perfumes. It is also used in automotive antifreezers and rocket fuels, besides as a general solvent. Methanol is also a high-octane, clean-burning fuel—a potentially important substitute for gasoline in automotive vehicles. The methanol derived from wood is used chiefly for rendering industrial ethyl alcohol unfit to drink.

21. It is not a poison per se, but its abuse makes it one. As methanol is a poisonous substance under the Maharashtra Poisons Rules, 1972, we will examine those Rules, besides examining the Poisons Act, 1919, under which those Rules came into being.

22. The Poisons Act 1919 consolidates and amends the law regulating the importation, possession, and sale of poisons in India. Section 2 of the Act prescribes the powers of the State Government “to regulate possession for sale and sale of any poison.” By rules, a State can regulate “within the whole or any part of the territories under its administration” the possession for sale and the sale, whether wholesale or retail, of any specified poison. And this regulatory power may encompass (a) the grant of licences to possess any specified poison for sale; (b) the classes of persons to whom such licences may be granted; (c) the classes of persons to whom any such poison may be sold; (d) the maximum quantity of any such poison which may be sold to any one person; (e) the maintenance by vendors of any such poison of registers of sales, and so on; (f) the safe custody of such poisons and the labelling of the vessels, packages, and so on; and (g) the inspection and examination of any such poison when possessed for sale by any such vendor.

23. Under Section 3, the power “to prohibit importation into the States of any poison except under licence” lies with the Central Government. And the power under Section 4 “to regulate possession of any poison in certain areas, however, lies with the State Government. It may regulate the possession of any specified poison; besides, it has punitive powers, too.

24. Section 8 of the Act is a residuary provision on delegation of legislative power. Besides any other power the State Government has to make rules under other sections, it may under Section 8 make rules generally to carry out the purposes and objects of this Act, except those under Section 3; that is, “power to prohibit importation into the States of any poison except under licence.”

25. Rule 18A holds the key. So let us examine it:
l8A. Ascertaining use of Methanol (Methyl Alcohol) at the time of sale:
1. A licencee who desires to sell Methanol (Methyl Alcohol) to anyone shall first ascertain the use of that substance for which the purchase is being made. This shall be done by verifying the licence issued to the purchaser by the Licensing Authority in Form A.
2. Except when the Methanol (Methyl Alcohol) is being purchased for the manufacture of drugs as certified by the local Food and Drugs Administration, a licencee shall not sell Methanol (Methyl Alcohol) to any person, unless the same is, before the sale thereof, mixed with one gram of methylene carmine and four grams of denatonium saccharide to every one hundred litres of Methanol (Methyl Alcohol).

26. This provision presupposes that the seller has a licence under the Rules. The licensee must ascertain to what use the purchaser intends to put this substance to. And this ascertainment must be based on the licence the purchaser holds. Under sub-rule (2), unless methanol is used for pharmaceutical purpose, the licensee should sell it by mixing it with one gram of methylene carmine and four grams of denatonium saccharide to every one hundred litres of Methanol.

27. Rule 18B, on the other hand, allows the authorities to confiscate the methanol from any person possessing it without licence. And the persons, firms, or companies already in business of methanol, according to Rule 18C, must obtain licence within ninety days. The petitioners contend that Rule 18A has extra-territorial impact. Has it? We shall examine.

28. But before we examine Rule 18A of the Rules, we must also determine the scope of adjudication, for the petitioners want us to judicially invalidate that provision.

29. In State of T.N. v. P. Krishnamurthy, AIR 2006 SC 1622, the Hon’ble Supreme Court has set out the circumstances under which the repugnancy of subordinate legislation can be determined, by holding thus:
“15. There is a presumption in favour of constitutionality or validity of a subordinate legislation and the burden is upon him who attacks it to show that it is invalid. It is also well recognised that a subordinate legislation can be challenged under any of the following grounds:
1. (a) Lack of legislative competence to make the subordinate legislation.
2. (b) Violation of fundamental rights guaranteed under the Constitution of India.
3. (c) Violation of any provision of the Constitution of India.
4. (d) Failure to conform to the statute under which it is made or exceeding the limits of authority conferred by the enabling Act.
5. (e) Repugnancy to the laws of the land, that is, any enactment.
6. (f) Manifest arbitrariness/unreasonableness (to an extent where the court might well say that the legislature never intended to give authority to make such rules).”

30. Indeed, a piece of subordinate or secondary legislation does not carry the same degree of immunity as is enjoyed by a statute passed by a competent legislature. Subordinate legislation may be questioned on any of the grounds on which plenary legislation is questioned. In addition, it may also be questioned because it does not conform to the statute under which it is made. It may further be questioned because it is contrary to some other statute. That is because subordinate legislation must yield to plenary legislation. It may also be questioned on the ground that it is unreasonable-unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary. So held the Supreme Court in Indian Express Newspapers (Bombay) (P) Ltd., v. Union of India, (1985) 1 SCC 641.

31. In fact, the learned author C.K. Thakker in his celebrated commentary, Administrative Law4, has culled out from the ratio of Indian Express Newspapers the grounds of attack on the delegated legislation as under:
1. Where parent Act is unconstitutional;
2. Where parent Act delegates essential legislative functions;
3. Where delegated legislation is inconsistent with the parent Act;
4. Where delegated legislation is inconsistent with general law;
5. Where delegated legislation is unconstitutional;
6. Where delegated legislation is arbitrary;
7. Where delegated legislation is unreasonable;
8. Where delegated legislation is mala fide;
9. Where delegate further delegates (sub-delegation);
10. Where delegated legislation excludes judicial review; and
11. Where delegated legislation operates retrospectively [without express or implied sanction].

32. Indeed, the petitioners assert that the second respondent filed its objections against the proposed amendment, as the Government itself invited objections to the draft amendment of the Rules. In that context, they complain that the Government did not hear the second petitioner; it disregarded the objections. So we should be examining whether the hearing of objections is a prerequisite even if the Government is acting in its legislative—secondary though—capacity. The answer is not far to seek.

33. In Pune Municipal Corporation v. Promoters and Builders Association, (2004) 10 SCC 796, the Supreme Court has held that delegated legislation cannot be questioned for its violating the principles of natural justice in its very making, unless the Statute itself provides for that requirement. It has further been held that a provision for 'such inquiry as it may consider necessary' by a subordinate legislating body is generally an enabling provision, to facilitate the subordinate legislative body to secure relevant information, from any source. And it is not intended to vest any right in anybody. Later, in K.T. Plantation Pvt. Ltd. v. State of Karnataka, AIR 2011 SC 3430, the Supreme Court’s another coequal Bench has held that delegated legislation, beng legislative in character, cannot be questioned on the ground of its violating the principles of natural justice, especially in the absence of any statutory requirement.

34. Before us, the petitioners have also contended that the amended Rule 18A has no nexus with the legislative intent; they reckon the amendment serves no purpose. In this context, it pays to refer to a seven-Judge Bench decision of the Supreme Court in M/s. Prag Ice and Oil Mills v. Union of India, (1978) 3 SCC 459. Their Lordships have held that legislative action can be declared unconstitutional only if it is patently arbitrary, discriminatory, or demonstrably irrelevant to the policy which the legislature may adopt. Prag Ice and Oil Mills has further held that Court ought not to, in such matters, interfere so long as the exercise of Governmental power is broadly within a "zone of reasonableness". The Courts should not, cuations Prag Ice and Oil Mills, embark upon an examination of the minute details of the secondary legislation, lest the Court should be exceeding its powers.

35. In fact, earlier a Division Bench of this Court in Ramdas v. State of Maharashtra MANU/MH/2122/2016, comprising one of us (B. R. Gavai J), has exhaustively surveyed the adjudicatory ambit of judicial invalidation of subordinate legislation by referring, among other things, to the above precedents. It has eventually held on facts that “it will not be open for this Court to question the inquiry conducted by the Authority, while exercising its legislative powers to find out as to whether the enquiry was not as full as it might have been.” The only permissible inquiry would be, Ramdas holds, whether the inquiry as contemplated under the provisions was in fact conducted by it. Here, we reckon the 1972 Rules mandate no enquiry or prehearing.

Extra-Territoriality of Rule 18A(2):

36. The petitioners’ next contention is the extra-territoriality of the impugned Rule. In that context, we may refer to a couple of constitutional provisions. Article 245 (1) of the Constitution empowers Parliament to make laws for the whole or any part of the territory of India. But the Legislature of a State may make laws for the whole or any part of that State alone. No law made by Parliament shall, however, be questioned on the ground that it would have extra-territorial operation. Yet, a State—as a constituent of the Union, with no sovereignty—has no such immunity.

37. In other words, a State Legislature has no legislative competence to make laws having extra-territorial operation; a State can legislate effectively only for its own territory; a State law can affect persons, properties, or things within the State and not outside the State. Thus, a State law is not immune from challenge in a Court on the ground of extra-territorial operation. Put differently, a State law having operation outside the State is not valid.

38. To decide whether a State law has an extra-territorial operation, the doctrine of territorial nexus is invoked. The doctrine of territorial nexus is applied to find out whether a particular State law has extraterritorial operation. It signifies that the object to which the law applies need not be physically located within the territorial boundaries of the State, but what is necessary is that it should have a sufficient territorial connection with the State. If there is a territorial nexus between the subject matter of the Act and the State making the law, then the statute in question is not regarded as having extra-territorial operation.

39. Durga Das Basu in his magnum opus Constitution of India, Lexis Nexis, volume 12 has noted that though the jurisdiction of a State Legislature is, prima facie, confined to persons and objects within the territorial limits of its State, this jurisdiction extends, as it were, by the application of nexus. This means, once a State Legislature, competent to legislate regarding a particular subject, has some connection with a person, object, or activity within its territorial limits, the application or operation of the Act may extend to persons, objects or activities (as the case may be) outside the State. If there is a territorial nexus between the person/ property, subject matter of the Act and the State seeking to comply with the provisions of the Act, then the state cannot be considered as having extra-territorial operation. Sufficiency of territorial connection involves consideration of two elements: the connection must be real and not illusory, and the liability sought to be imposed under the Act must be relevant to that connection. The Act has to satisfy the principles of territorial nexus which are essentially discernible from the factual application of the provisions of the Act.

40. The learned author has further observed that “whether in a given case there is sufficient territorial nexus is a question of fact and it is for the Courts of decide whether the ‘territorial nexus’ being put forward as the basis of the application of the law is ‘sufficient or not’. It is of no importance on the question of validity that the liability imposed is or may be altogether disproportionate to the territorial connection.” In other words, if the connection is sufficient as satisfying the two elements mentioned above, the extent of such connection affects merely the policy and not the validity of the legislation.

41. As held in Shrikant Bhalchandra Karulkar v State of Gujarat, (1994) 5 SCC 459 there is no general formula defining what territorial connection or nexus is sufficient or necessary for applying a State law to a particular object. Sufficiency of the territorial connection involves consideration of two elements: (a) the connection must be real and not illusory; and (b) the liability sought to be imposed under the Act must be pertinent or relevant to that connection.

42. In relation to a taxing statute, the Supreme Court, in the early constitutional days, has held the sale or purchase need not take place within the territorial limits of the State. Broadly speaking, local activities of buying or selling carried in the State in relation to local goods would be sufficient basis to sustain the taxing power of the State, provided, of course, such activities ultimately result in concluded sale or purchase to be taxed.

43. In Bengal Immunity v. State of Bihar, AIR 1955 SC 661 a seven-Judge Bench of the Supreme Court has held that the words "extra-territorial operation" are used in two different senses: first, laws regarding acts or events which take place inside the State but have operation outside; second, laws with reference to the nationals of a State in respect of their acts outside. In its former sense, the laws are strictly speaking intra-territorial though loosely termed 'extra-territorial'. Thus, under article 245(1), it is within the competence of the State Legislatures to enact laws with extra-territorial operation in that sense. The words "laws with extra-territorial operation" in article 245(2) must be understood, Bengal Immunity holds, in their second and strict sense as having reference to the laws of a State for their nationals in respect of acts done outside the State. Otherwise, the provision would be inconsistent as regards laws enacted by States.

44. The power of the judiciary to invalidate laws that are ultra vires flows from its essential functions, Constitutional structure, values and scheme. Indeed, it is to ensure that the powers vested in the organs of the State, observes the Supreme Court in GVK Inds. Ltd. v. Income Tax Officer, (2011) 4 SCC 36 are not being transgressed and that they are being used to realise a public purpose that subserves the general welfare of the people. It is one of the essential defences of the people in a constitutional democracy.

How Do the Rules Operate?

45. Section 8 of the Act mandates that “every power to make rules conferred by this Act shall be subject to the condition of the rules being made after previous publication.” It also lays down in sub-section (3) that “all rules made by the Central Government or by the State Government under this Act shall be published in the Official Gazette and on such publication shall have effect as if enacted in this Act.”

46. Rule 18 A conditions the sale of methanol: the licensed seller must ascertain from the prospective purchaser the intended use of the substance. And this can be done by the licensee's verifying the purchaser's license. Besides that, under subrule (2), the licensed seller must mix one gram of methylene and four grams of denatonium saccharide in every one hundred litres of methanol.

47. The petitioners have questioned the presumed extra-territoriality of Rule 18 A (2). But we fail to see how the sub-rule impinges on the Executive's delegated legislation—more particularly on account of any extra- territoriality.

48. In fact, if at all there are any provisions that concern sale and purchase, they are Rules 3 and 10. Rule 3 mandates that "unless exempted from the operation of these Rules under the provisions of the Act, no person shall possess for sale or sell, whether by wholesale are retail, any poison, except under license granted by the licensing authority in Form A.” Besides that, Rule 10 prescribes the persons to whom poisons may be sold. Subject to the provisions of these Rules, a licensee may sell any poison to any person if he (a) is a licensee or holds a permit in Form B; (b) is personally known to the licensee or is identified to satisfaction; (c) is over the age of 18 years; (d) is not wandering mendicant; (e) appears to be any census. It also prevents the sale of poison beyond the quantities specified in the permit.

49. Even in Goodwill Paint and Chemical Industry, a decision the petitioners have relied on, the challenge is to Section 55 of Poisons Act, 1919. The petitioners challenged its validity on the ground that it allows the authorities to brand any substance ‘poison’. The Supreme Court has that inherent dangerous consequences following trade of poison justified restriction placed by Act.

50. Thus Rule 3 and Rule 10 deal with the sale and purchase of any poisonous substance, including methanol. Those provisions have not been assailed.

Conclusion:

51. Under these circumstances, we fail to see how Rule 18A(2) of the Maharashtra Poison Rules, 1972, falls foul of the Executive’s legislative, albeit delegated, competence. By no stretch can we hold that it has any extraterritorial operation.
We, therefore, dismiss both the writ petitions as devoid of any merit. No order on costs.