The Delhi High Court on 30 May dismissed a petition filed by French spirits major Pernod Ricard challenging the denial of a wholesale liquor licence, ruling that the company carries a 'criminal background' under the Delhi Excise Act and is therefore ineligible for an L-1 licence. The ruling upholds decisions by both the Excise Commissioner and the Financial Commissioner that had earlier refused the company's licence applications.

What the Court Ruled

Justice Purushaindra Kumar Kaurav held that the authorities were justified in rejecting Pernod Ricard's applications given the pending prosecution against the company in connection with the alleged Delhi excise policy scam. The Court concluded that the company, as of the date of the ruling, has a criminal background under Section 13(1)(c) of the Delhi Excise Act, 2009, and is therefore disqualified from holding an L-1 wholesale licence.

The Court also clarified that the decision-making process of the respondents was 'not arbitrary, illegal, or violative of Article 14 of the Constitution.'

Key Legal Interpretation

A central question before the Court was whether pending prosecution — absent a formal conviction — could constitute a 'criminal background' under the Act. The Court ruled that a conviction is not the only threshold. 'The condition for not being convicted of a criminal offence under Section 13(1)(c) of the Delhi Excise Act is the floor and not the ceiling for a person to not have a criminal background,' Justice Kaurav observed.

The Court further clarified that the word 'or' appearing between the expressions 'has no criminal background' and 'has not been convicted of any offence' in the provision should be read as 'and' — effectively widening the disqualification criteria beyond mere conviction.

Pernod Ricard's Arguments

Senior advocates appearing for Pernod Ricard had argued that the authorities wrongly equated pending criminal proceedings with a 'criminal background', stressing that no conviction had been recorded against the company. They contended that Section 13 only disqualifies applicants who have been convicted, and that the Financial Commissioner had effectively rewritten the law by reading pending prosecution into the eligibility conditions.

The Enforcement Directorate (ED) had initiated money laundering proceedings against Pernod Ricard in connection with alleged irregularities in the Delhi excise policy, in which the company is named as an accused. The licence applications were rejected on this basis.

What Happens Next

With the High Court dismissing the petition, the orders passed by the Excise Commissioner and the Financial Commissioner refusing the wholesale liquor licences remain in force. However, the Court granted liberty to Pernod Ricard to apply afresh for a licence if the status of the criminal proceedings pending against it changes.

This ruling comes shortly after the Competition Commission of India (CCI) ordered a detailed antitrust investigation into Pernod Ricard earlier this month over allegations that the company entered into exclusive arrangements with retailers in Delhi to promote its brands and restrict rival products in the Indian Made Foreign Liquor (IMFL) segment. The CCI's Director General has been directed to complete the probe within 90 days.