Patna HC Orders BSBCL to Pay Manufacturer for Unsold Liquor Destroyed Under Prohibition Policy

The Patna High Court held that payment for liquor supplied pursuant to valid orders could not be denied merely because the stock remained unsold and was destroyed following the State’s prohibition policy. Therefore, the court directed the Bihar State Beverage Corporation Limited (BSBCL) to release the dues along with interest.

The petitioners were M/s Spicy Beverage Pvt. Ltd. and M/s Globus Spirits Ltd., both engaged in the manufacture and supply of country liquor in Polyethylene Terephthalate bottles under licences issued in Excise Form 27. The dispute arose from tenders issued by the State Government inviting manufacturers to supply country liquor exclusively to the BSBCL, a State undertaking functioning as the sole wholesaler.

Under the tender conditions and the licences granted, the petitioners were required to supply liquor strictly against Orders for Supply issued by the BSBCL and were prohibited from selling to any other entity. During March 2016, even after the State notified its decision to enforce complete prohibition with effect from 01.04.2016, the Excise Commissioner directed the petitioners to continue supplies to various depots of the BSBCL, with a clear stipulation that failure to supply would result in cancellation of licences.

The petitioners complied with these directions and supplied substantial quantities of liquor to different depots. However, a portion of the supplied stock remained unsold and was destroyed on 31.03.2016 in accordance with the prohibition policy. The BSBCL subsequently declined to pay for the unsold quantities, contending that its liability extended only to liquor actually sold.

The petitioners’ representations seeking payment of the sale value of the unsold but supplied liquor were rejected by the Managing Director of the BSBCL through orders, giving rise to the present writ petitions.

The appellants contended that the supplies made pursuant to valid Orders for Supply constituted completed sales to the BSBCL, which acted as the sole wholesaler under the statutory framework. It was argued that neither the tender conditions nor the licence in Excise Form 27 imposed any obligation on the manufacturer to ensure retail sale of the liquor. Further, submitted that the rejection orders were founded on provisions of the Liquor Sourcing Policy of 2008-09, several clauses of which had already been struck down by the High Court.

The respondents contended that the BSBCL functioned only as a facilitator and distributor and bore no responsibility for ensuring sale of the liquor supplied. It was argued that under the prohibition policy, unsold stock destroyed on 31.03.2016 did not amount to an outright sale, and therefore no payment was due for such quantities.

The Division Bench comprising Justice Rajeev Ranjan Prasad and Justice Sourendra Pandey set aside the impugned orders passed by the Managing Director of the BSBCL. The Court held that the reasoning adopted by the BSBCL was based on irrelevant considerations and misconceived reliance on a defunct policy.

The Bench observed that the tender conditions and the licence in Excise Form 27 clearly established a sale by the manufacturer to the Corporation upon supply against Orders for Supply. There was no contractual or statutory requirement casting responsibility on the manufacturer to ensure retail sale. The Court observed that the BSBCL was a wholesaler in the State of Bihar.

Further, noted that the supplies were made under compulsion of statutory directions issued by the Excise Commissioner, and non-supply would have attracted penal consequences. The Court ruled that subsequent non-sale or destruction of stock due to policy decisions could not defeat the manufacturers’ right to payment for liquor already supplied.

Accordingly, the Bihar State Beverage Corporation Limited was directed to pay the admitted dues for the supplied quantities along with interest at the rate of six percent per annum from 01.04. 2016 until the date of payment, within two months from receipt of the judgment.