Regulating Industrial Alcohol | Judgement Summary

Definition of ‘intoxicating liquor’

At the heart of the case is the issue of whether “intoxicating liquor”, as mentioned in Entry 8 of the State List refers only to potable alcohol or also includes industrial alcohol. In Synthetics & Chemicals Ltd v State of Uttar Pradesh (1989), a seven-judge bench had held that “intoxicating liquor” referred to potable alcohol, “liquor which is consumable by human beings as it is.”. The finding squarely placed industrial alcohol outside of the scope of the state governments’ powers. 

At the very outset of Lalta Prasad, before delving into the “Analysis” section, CJI D.Y. Chandrachud outlined the differences between “rectified spirit” (95% alcohol, used for pharmaceuticals, cosmetics and home-made liquors), “Extra Neutral Alcohol” (highly purified form of ethanol used as a base for potable liquor, perfumes and mouthwashes) and Absolute Alcohol (99% alcohol used in pharmaceuticals, cosmetics and chemical manufacturing). He pointed out that these were all different types of industrial alcohol and that they are sometimes used to make beverages. Further “denaturants” can be added to any of these types of alcohol to make it completely non-consumable.

“In view of this complexity, where the materials for the preparation of potable alcohol are also used for the preparation of other products, a simplistic classification of ‘potable’ and ‘non-potable’ alcohol cannot be made for the purposes of this judgement” the Chief wrote. 

Next, the majority examined the Supreme Court’s decisions in F.N. Balsara v State of Bombay (1950) and Southern Pharmaceuticals v State of Kerala (1981). 

In F.N. Balsara, the Court had overturned the Bombay High Court’s decision to hold that various provisional enactments and the Government of India Act of 1935 suggested that the definitions of liquor and intoxicating liquor be read to include all liquids containing alcohol and not just those that are potable. The Court had also referred to Article 47 of the Constitution to hold that “the word ‘liquor’ must be given a wide meaning to include “all alcoholic liquids which may be used as substitutes for intoxicating drinks, to the detriment of health.”

In Southern Pharmaceuticals, the Court followed the precedent set in F.N. Balsara that “preparations which contain alcohol will be covered by the phrase ‘intoxicating liquor’ in Entry 8 to prevent its ‘noxious use’.” These two judgements, the majority wrote, showed that the phrase “intoxicating liquor” in Entry 8 of the State List was read expansively, “beyond the narrow definition of alcoholic beverages that produce an ‘intoxicating effect’ upon consumption.”

Dissent: Justice B.V. Nagarathna held that F.N. Balsara and Southern Pharmaceuticals must be understood in their limited context of prohibition measures. They only dealt with the meaning of “intoxicating liquors” against its popular meaning “alcoholic beverages” and not against its usage to include industrial alcohol. These judgements clarified that in the context of prohibition of “intoxicating liquor” as a beverage, production of alcohol used for medicinal and toilet preparation as well as “industrial alcohol” or non-potable alcohol could not be prohibited. 

Four approaches to test the definition of “intoxicating liquor” 

The majority tested the merits of four key approaches to determine the meaning of “intoxicating liquor”. 

The approaches are:

1. Identifying the legislative meaning
2. Examining the legislative history
3. The common parlance test
4. The principle of workability 

First, the Court warned that reviewing the legislative meaning of a phrase in dispute over the other interpretative tools should only be used when the legislative meaning is not too wide from the popular meaning of the phrase. This principle of interpretation, they said, should be “used cautiously by courts,” such that the entries in the Seventh Schedule are “conferred the widest meaning possible.” The reason—legislative entries limit the scope and powers of the legislative bodies that they govern. To interpret a phrase for its legislative meaning, the phrase must have a definite and precise meaning in law, must be defined so unanimously, and must not be too far from its popular meaning. 

Both petitioners and respondents had relied on pre-constitutional laws to trace the contexts in which the phrase “intoxicating liquor” had been used. The bench found that “none of the pre-constitutional statutes have defined the phrase ‘intoxicating liquor’ for it to have acquired a legal meaning.” “The definition of one part of the expression in statutes cannot be used to interpret expressions that are used to indicate a collective meaning, particularly when the common parlance definition starkly varies,” the majority held.

Dissent: Having reviewed the same set of laws, Justice B.V. Nagarathna found that “intoxicating liquors” was used in “administration for assessment and regulation of consumption of spirits in provinces in pre-independence India from the point of view of collection of revenue.” She found that a “consumption-oriented meaning” was given to “intoxicating liquors.” This “consumption” was concerned only with direct consumption, the act of drinking. 

Majority: Next, the bench reviewed the legislative history of the phrase. The Court referred to the Devolution rules under the Government of India Act of 1919 and its evolution to the 1935 Act, including the White Paper (1931) on the proposals for Indian Constitutional Reform and the Report of the Joint Select Committee on Indian Constitutional Reform. They held that “an analysis of the evolution of the legislative entries relating to alcohol does not provide an unambiguous interpretation.” The references, they said, indicate that the framers of the Constitution were aware of the differences between drinking alcohol and alcohol used as a raw material. However, “there is no clear answer to whether ‘intoxicating liquor’ includes both,” they held.

Dissent: Justice B.V. Nagarathna held that Constitution framers “were not engaged in a theoretical task of demarcating legislative fields” but assigned fields of law intentionally and specifically to the Union and the states. One must not, she said, interpret Entry 8 of the State List such that states may regulate industries in the First Schedule of the IRDA. As the framers chose to phrase it as “intoxicating liquor”, the “contours of interpretation” must be concerned with just that “rather than the entire industry concerning alcohol.” 

Majority: Unlike for three of the four approaches, CJI D.Y. Chandrachud did not dedicate a separate section to discuss the common parlance test. In discussing the other approaches, however, the majority noted that precedents do not “[limit] the scope of the phrase to the common parlance meaning of ‘intoxicating beverages’” which “means liquor which causes intoxication, that is, which causes someone to lose control.”

Finally, on the workability or the “harmonious interpretation” test, the bench went straight to the Constitution. They pointed out that the Constitution contains three phrases—“intoxicating liquor”, “alcoholic liquor for human consumption” and “intoxicating drinks”. Inferring from the way they have been used in taxing entries and regulatory entries, the Bench found that the phrases “alcoholic liquor for human consumption” and “intoxicating drink” are used in the context of direct and literal consumption. 

In contrast, the bench noted, “intoxicating liquor” refers to the “‘production, manufacture, possession, transport, purchase and sale of intoxicating liquors’ and beyond.” They also found that the framers of the constitution had consciously used “alcoholic” and “intoxicating” as adjectives for liquor in different places. The Bench interpreted this to mean that alcoholic liquor referred to the alcoholic content, whereas intoxicating liquor referred to its effect. Thus, any liquor that could have an intoxicating effect would fall under Entry 8 of the State List. They also found that the effect-based framing of the Entry showed that it was meant to include “liquor which has an impact on health.”

Based on this understanding, the Bench rejected the state of Uttar Pradesh’s submission that “intoxicating liquor” must be interpreted to mean any liquid containing alcohol. If this were to happen, the Bench wrote, Entries would overlap, making them redundant and unworkable. For instance, hand sanitiser would fall under Entry 8 of the State List for containing alcohol as well as Entry 19 of the Concurrent List which deals with “drugs”. “Since the Entry must be read widely, it will then cover everything relating to the production of the drug, substantially reducing the scope of Entry 19 because other products of the pharmaceutical and cosmetic industry will be covered by Entry 8,” the majority held. 

Synthetics & Chemicals overruled

In Synthetics & Chemicals, the Court had relied on Article 47 and Entry 6 of the State List (public health and sanitation; hospitals and dispensaries) to hold that states only had the power to make laws to prohibit potable liquor in the interest of public health, and to regulate the misuse of industrial alcohol for drinking. 

The majority in this case saw that there was indeed an overlap between the regulation of “intoxicating liquor” under Entry 8 and “public health” under Entry 6 of the State List. However, it clarified that this did not mean that states’ power could only be recognised under Entry 6, if its powers under Entry 8 were taken away by a declaration in a Union law. “Such an interpretation, as held above, would completely tilt the federal balance in the favour of Parliament,” they held.

Dissent: Justice B.V. Nagarathna gave nine reasons why Synthetics & Chemicals only needed a correction and did not need to be overruled. She called for the deletion of the words “both potable and” in paragraph 84 of AIR version of the reported judgement, which held that “licences to manufacture both potable and non-potable alcohol is vested in the Central Government.”

1. She found that the judgement was right in limiting states’ power to regulate industrial alcohol only in cases of misuse and effect on public health. 
2. Further, in light of Article 254(1) of the Constitution, she found that the judgement “correctly considered the significance of insertion of Section 18G to the IDRA which is a Parliamentary Law.” Article 254(1) stipulates that Union law prevails when there is any inconsistency between laws made by Parliament and State Legislatures. 
3. Synthetics & Chemicals was right to declare the field occupied under Entry 52 of the Union List and Entry 33 of the Concurrent List through 18G of the IRDA. Any contrary view would have a “cascading effect” and weaken the Union’s power over the industries in the First Schedule of the IRDA. 
4. Synthetics & Chemicals was able to identify the importance of giving Parliament control over certain industries in public interest. “The critical importance of scheduled industries in the Indian economy must not be lost sight of,” she wrote.
5. If Synthetics & Chemicals is overruled, states could regulate scheduled industries with their powers in the Concurrent List, defeating the purpose of the First Schedule of the IRDA.
6. If states are allowed to regulate scheduled industries, there would be “haphazard development” of these industries. 
7. Synthetics & Chemicals keeps in mind the framers’ intention to have “uniform development” in the economy.
8. “The principle of federal balance must yield to the doctrine of Parliamentary supremacy” as per Article 246.
9. Mere scope of misuse does not place complete control of industrial alcohol with the state governments, and Synthetics & Chemicals was right to only place public health concerns under the states’ ambit. 

Balancing federal powers

The second broad issue was whether the Union government’s power under Entry 52 of the Union List (to control any industry through a declaration of Parliament) supersedes states’ power (to control the industry of intoxicating liquor) under Entry 8 of the State List. 

Majority: The majority held that “even if a broad meaning is given to the word ‘industry’ in Entry 52, it will not impact the decision in this case because Entry 8 is the specific entry which applies to the industry of intoxicating liquor.” In exercising its power under Entry 52 of the Union List, “Parliament cannot occupy the field of the entire industry merely by issuing a declaration under Entry 52 of List I.” Such a declaration will limit the competence of state legislatures only to the extent that is clarified in the law made by the Union. 

Dissent: Justice B.V. Nagarathana noted that the statement of objectives of IRDA explains that “the whole object of taking control of such industries by the Union [is] for ensuring uniformity in their development.” Section 2 allows the Union to take control of industries listed in the First Schedule of the IRDA “in the public interest”. She found that Section 2 read with Entry 52 of the Union List gave the Union government the power to “occupy the field of the entire industry by merely issuing a declaration.”

Further, she pointed out that the inclusion of “Fermentation Industries” under the First Schedule, which has been defined to include alcohol “other than potable alcohol” squarely places industrial alcohol in the Union’s ambit. 

The scope of states’ power under the Concurrent List

Majority: The Court found no need to clarify whether Section 18G of the IRDA allows the Union to occupy the field under Entry 33 of the Concurrent List in this case, as it had already placed industrial alcohol within the scope of states’ law-making powers. 

Dissent: Justice B.V. Nagarathana went into detail on the connection between Section 18G of the IRDA and its impact on Entry 33 of the Concurrent List. She wrote that the scope of states’ power under Entry 33 has to be read in the context of Entry 52 of the Union List. 

“The mere insertion of Section 18G to the IDRA implies that the Parliament has intended to occupy the field.” As long as “Fermentation Industries” remain in the First Schedule of the IRDA, she held that state governments lack power to legislate on industrial alcohol under Entry 52 of the Union List or Entry 33 of the Concurrent List.