Patna High Court strikes down Bihar liquor ban
Shares of liquor companies see a spike
In a jolt to Bihar Chief Minister Nitish Kumar, the Patna High Court on Friday decided to set aside his government’s antiliquor law. Kumar, ever since his government enforced prohibition in the state in April this year, has travelled to large parts of India praising the virtues of prohibition and has made it his political calling card as he looks at 2019 Lok Sabha elections.
In a jolt to Bihar Chief Minister Nitish Kumar, the Patna High Court on Friday decided to set aside his government’s anti-liquor law. Kumar, ever since his government enforced prohibition in the state in April this year, has travelled to large parts of India, praising the virtues of prohibition and has made it his political calling card as he looks at the 2019 Lok Sabha elections.
A division bench of the court, comprising Chief Justice Iqbal Ahmed Ansari and Justice Navaniti Prasad Singh, quashed the April 5 notification of the state government that had put a stop to consumption and sale of alcohol in the state. The high court’s decision comes just days before the Kumar-led government, which is a coalition comprising his Janata Dal (United), Lalu Prasad’s Rashtriya Janata Dal and the Congress, was all set to notify the new and stricter prohibition law in the state.
In recent months, Kumar has implored the Uttar Pradesh government to impose prohibition in that state and asked Prime Minister Narendra Modi that he should encourage Bharatiya Janata Party (BJP)-ruled states to ban liquor, just as it is banned in the PM’s home state of Gujarat. Kumar has maintained that crime rates have seen a sharp drop in Bihar after the liquor ban. His government, however, has also been criticised for the draconian imposition of the law and the recent hooch tragedy in Gopalpur in August in which at least a dozen people died. Shares of liquor companies rallied on Friday soon after the court’s decision. United Spirits, Radico Khaitan, Tilaknagar Industries and United Breweries (Holdings) each gained around seven per cent. All liquor stocks saw a spurt in trading volumes. In comparison, the benchmark Sensex ended flat on Friday.
Abneesh Roy, senior vice-president, Edelweiss Securities, said the Patna HC’s revocation is a positive for liquor stocks and could trigger rerating in the sector. “Although Bihar accounts for a mere two-three per cent of sales, the move is a big sentimental positive. Investors were worried that more states would follow Bihar on the liquor ban. This coupled with Kerala’s decision to change the liquor policy will help ease concerns. Some benefits are also expected to be given to liquor in the Goods and Services Tax (GST) regime. This could lead to re-rating in these stocks,” he said.
Giving its verdict on a writ challenging the liquor ban filed by the Confederation of Indian Alcoholic Beverage Companies and Spirits and Wines Association of India, the court said: “The underlying idea of the New Excise Policy was that total prohibition would be brought about gradually and in a phased manner. This policy, nowhere, contemplates immediate and complete prohibition on consumption of alcohol.”
“Everyone, including the state government, proceeded with the assurance that the sale of Indian Manufactured Foreign Liquor (IMFL) would continue in urban areas. Then the state government did a U-turn through a notification, which can’t be sustained,” said the court.
Last year, the state government had announced it intended to bring prohibition in a phased manner. In the first phase, which was implemented from April 1, the state government imposed a complete ban on composite and country liquor, while IMFL was to be sold through government-owned shops and only in urban areas. However, seeing an enthusiastic support for complete prohibition, the CM declared Bihar a dry state on April 5.
The order comes as the state government was preparing to unveil the Bihar Prohibition and Excise Bill -2016. This was expected to have stricter provisions, such as possible arrest of all members of a family if a liquor bottle is found in a house. Under this law, all sections are nonbailable where only courts can grant bail. If the Bill were to come into effect, only special courts would have the authority to try cases related to violation of the Bihar Prohibition Law.
Asked about the impact of the HC’s decision, the state government said it was waiting for a copy of the court’s order. “I can’t say anything about the matter right now as we are yet to receive the verdict’s copy. We will study it and then decide the future course of action,” Excise Commissioner A K Das told Business Standard.