TLA LEGAL DIGEST

NAVIGATING THE LITIGATION WORLD

OCTOBER 2024

RECENT AWARDS & RECOGNITION

Ranked as one of the Top South India Firms 2024, “Top Corporate M&A Boutique Firm” and featured in the Asia M&A Rankings 2024

Ranked in Corporate and M&A, Private Equity and Dispute Resolution 2024-2025.

Ms. Sundari R. Pisupati, Managing Partner featured in the November edition under the prestigious segment, “Fearless Women – Who Beat the Odds”.

Apex Court Upholds the Power of States to Regulate Industrial Alcohol

On October 23, 2024, the Hon’ble Supreme Court’s Constitution Bench comprising nine judges, in State of U.P. & Ors. Vs M/s Lalta Prasad Vaish and Sons (2024 Live Law (SC) 832), held in an 8:1 majority that the States have the authority to regulate "denatured spirit or industrial alcohol."

The issue which arose for adjudication pertains to the scope of the power of the State Legislatures under Entry 8 of List II (State List) of the Seventh Schedule of the Constitution (which gives States the power to regulate the production, manufacture, possession, transport, purchase and sale of intoxicating liquor) and the meaning of the phrase “intoxicating liquor”. More specifically, the question for adjudication was whether “intoxicating liquor” in Entry 8 only includes potable alcohol, such as alcoholic beverages or also includes alcohol which is used in the production of other products.

The majority opinion authored by Chief Justice of India D.Y. Chandrachud concluded that industrial alcohol would be included in the definition of "intoxicating liquor". The majority observed that “intoxicating liquor" cannot be narrowly defined to refer only to alcohol that is safe for human consumption. It was decided that the term "intoxicating liquor" can include liquids that contained alcohol, and which can be either utilized or misused for human consumption. The public interest component of Entry 8, which aims to regulate the manufacture, sale, possession, transportation, and manufacturing of intoxicating liquors, was also noted by the majority. It was observed that alcohol is inherently a noxious substance that is prone to misuse affecting public health at large. Entry 8 covers alcohol that could be used noxiously to the detriment of public health. This includes alcohol such as rectified spirit, ENA [extra neutral alcohol] and denatured spirit which are used as raw materials in the production of potable alcohol and other products.

Justice B.V. Nagarathna, in her lone dissent, however, held that ‘industrial alcohol’ cannot be brought within the ambit of ‘intoxicating liquor’ in Entry 8. The judge said the States did not have legislative competence to regulate industrial alcohol or denatured spirit.

Multiple States had challenged the Centre’s position that it had exclusive control over industrial alcohol.

The Centre had traced its power to Entry 52 of the Union List, which said “industries, the control of which by the Union is declared by Parliament by law to be expedient in public interest”. The Centre had claimed that industrial alcohol was an ‘industry’ controlled by the Union government in public interest under a parliamentary law, Industries (Development and Regulation) Act of 1951. Such an industry was covered by Entry 52 of the Union List in the Seventh Schedule of the Constitution.

The Supreme Court held that Entry 8 was both an industry-based as well as a product-based entry in the State List. It covered the regulation of everything from the raw materials to the consumption of ‘intoxicating liquor’ and the Parliament cannot occupy the field of the entire industry merely by issuing a declaration under Entry 52 of List I.

This decision is significant in as much as it is bound to strengthen States' fiscal autonomy post-GST, enable stricter regulation to prevent illegal consumption, and emphasise States’ legislative rights in managing local public health impact.

Arbitral Tribunal is The Fulcrum and The Facilitator for Taking Evidence Under Section 27 Of Arbitration and Conciliation Act: Telangana High Court

In dismissing a Civil Revision Petition (CRP) inV. Sreenivas Reddy v. B.L. Rathnamma CRP/2401/2024, the Hon’ble Telangana High Court division bench of Justices Moushumi Bhattacharya and M.G. Priyadarshini ruled that the Arbitral Tribunal is the facilitator and the fulcrum under Section 27 of the Arbitration & Conciliation Act, 1996. The Hon’ble High Court observed that Arbitral Tribunal takes the first step in applying to the Court for assistance in the matter of taking evidence or granting approval to a party to do the same – 27(1). The Arbitral Tribunal again becomes the repository of the evidence which the Court orders under 27(3). The Arbitral Tribunal is the deciding-body with regard to the default or refusal of persons to give evidence despite being served by Court processes or being guilty of any contempt of any direction given by the Arbitral Tribunal in the conduct of arbitral process – 27(5). Finally, the Arbitral Tribunal carries the disobedience/default by way of a representation to the Court for appropriate orders – 27(5).

In the present case, the learned Arbitrator had allowed an Application filed by the petitioner/claimant for approaching the Principal Special Court at Hyderabad for seeking assistance in taking evidence before the Court under section 27 of the 1996 Act and summoning two witnesses. The petitioner then approached the Trial Court under section 27 of the 1996 Act for issuing summons and examination of the two witnesses. The Trial Court however closed the petitioner’s application and directed for re-submission of the record to the Arbitral Tribunal without enforcing the attendance of the witnesses. Consequently, the petitioner came up in revision from the Trial Court.

The Hon’ble High Court, after observing as aforesaid, held that Section 27 (5) of the 1996 Act contemplated a complaint/action only being initiated by the Arbitral Tribunal in the form of a representation to the Court and therefore, the CRP filed from the order of the Court with the prayer for setting aside the order passed by the Court was misconceived as being contrary to section 27 of the 1996 Act.

ABOUT THE FIRM

Tempus Law Associates is a full-service law firm.

Our practice areas include Corporate Law, VC, M&A Transactions, Dispute resolution, Intellectual property, and Real estate.

We at Tempus, take pride in the firm’s ability to service our clients by rendering prompt legal services of the high quality, reliability and Integrity.