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Bar Case Judgment
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE K.SURENDRA MOHAN
THURSDAY, THE 30TH DAY OF OCTOBER 2014/8TH KARTHIKA, 1936
WP(C).No. 22195 of 2014 (Y) ----------------------------
PETITIONER(S):--------------------------
XAVIER'S RESIDENCY REPRESENTED BY ITS MANAGING PARTNER, D.RAJKUMAR THEVALLY, KOLLAM.
SRI.A.SUDHI VASUDEVANSMT.K.PUSHPAVATHI
RESPONDENTS:----------------------------
1. THE STATE OF KERALA REPRESENTED BY SECRETARY TO THE GOVERNMENT TAXES (G) DEPARTMENT, THIRUVANANTHAPURAM. 6950 001
2. EXCISE COMMISSIONER COMMISSIONERATE OF EXCISE, THIRUVANANTHAPURAM. 695 001
3. DEPUTY COMMISSIONER OF EXCISE KOLLAM. 695 001
SR. COUNSEL SRI KAPIL SIBAL SRI K P DANDAPANI, ADVOCATE GENERAL R1 to R3 BY SPL GOVERNMENT PLEADER SRI.TOM K.THOMAS
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25-09-2014,ALONG WITH CONNECTED CASES, THE COURT ON 30.10.2014 DELIVERED THEFOLLOWING:
kkj
WP(C).No. 22195 of 2014 (Y) ----------------------------
APPENDIX
PETITIONER(S)' EXHIBITS -------------------------------------
P1 - A TRUE COPY OF THE ORDER DT. 08.6.11 ISSUED TO THE HOTEL OF THE PETITIONER CLASSIFYING IT UNDER 3 STAR CATEGORY.
P2 - A TRUE COPY OF THE GO(MS) NO. 56/2014/TD DT. 02.4.14.
P3 - A TRUE COPY OF THE FL3 LICENSE RENEWED IN FAVOUR OF THE 1ST PETITIONER UP TO 31.3.15.
P4 - A TRUE COPY OF IA 9160/14 FILED BY THE GOVERNMENT IN WPC NO. 10368/14ON THE FILE OF THIS HON'BLE COURT
P5 - A TRUE COPY OF THE COMMON ORDER DT. 14.8.14 PASSED BY THIS HON'BLE COURT IN WA NO. 1131/14. WA - 1129/14 AND CONNECTED WRIT APPEALS.
P6 - A TRUE COPY OF THE GO(MS) NO. 139/14 TD DT. 22.8.14 ISSUED BY THE GOVERNMENT OF KERALA.
P7: A TRUE COPY OF FOREIGN LIQUOR (THIRD AMENDMENT) RULES 2014 BROUGHT BY NOTIFICATION BEARING SRO NO 520/2014 DATED 27.08.2014 SAID TO BE ISSUED BY GOVERNMENT OF KERALA
RESPONDENTS' EXHIBITS---------------------------------------
NIL
// TRUE COPY //
PA TO JUDGE
C.R.
K.SURENDRA MOHAN, J.---------------------------------------------
Writ Petition Nos: 22195,22203,22219,22236,22237,22238,22239,22328,22367,22369,22383,22401,22403,22410,22411,22412,22413,22414,22415,22460,22528,22774,22776,22784,22785,22786,22941,22993,23030,23033,23034,23035,23036,23081,23091,23101,23134,23167,23178,23179,23212,23249,23262,23302,23317,23323,23340,23344,23345,23353,23391,23399,23403,23446,23467,23474,23495,23513,23521,23528,23538,23568,23569,23570,23579,23638,23729,23735,23738,23740,23856,23896,23900,23986,24048,24109,24128,
24838,24926,24940, and 24958 of 2014----------------------------------------------
Dated this the 30th day of October, 2014
J U D G M E N T
On 22.08.2014, as per GOMS.No.139/2014/TD dated
22.08.2014, the Government of Kerala notified its Abkari
Policy for the year 2014-15. As per the new Abkari
Policy, only hotels having Five Star classification and
above granted by the Ministry of Tourism, Government of
India are entitled to be granted Bar licences. Thereafter,
the Foreign Liquor Rules under the Abkari Act of 1077
has also been amended, to give effect to the Abkari
Policy. Since as per the new Abkari Policy, only hotels
classified as Five Star and above are entitled to be
-:2:-W.P.(C) Nos.22195/2014 & Conn. cases
granted bar licences, all existing bar attached hotels have
been issued with notices by the Excise Commissioner
informing them that, their bar licences would stand
cancelled on the expiry of 15days of the date of such
notices. The hotels that face cancellation of their Bar
licences (FL-3 licences) have filed these writ petitions
challenging the Abkari Policy, the consequential
amendments to the Foreign Liquor Rules and the notices
issued to them, terminating their bar licences.
2. The petitioners in these writ petitions are
mostly hotels having three star classification. Three writ
petitions, W.P.(C) Nos.23391 of 2014, 23528 of 2014 and
22460 of 2014 relate to two star hotels. The hotel in W.P.
(C) No.22785 of 2014 has no star classification. The
petitioners in W.P.(C).No.22203 of 2014, 22993 of 2014,
23081 of 2014, 23179 of 2014, 23262 of 2014, 23317 of
2014, 23446 of 2014, 23569 of 2014, 22219 of 2014,
23896 of 2014, 22776 of 2014, 24048 of 2014, 23167 of
2014, 22410 of 2014, 23399, and 24926 of 2014 are filed
by hotels having either Four Star or heritage category
-:3:-W.P.(C) Nos.22195/2014 & Conn. cases
certification. W.P.(C) No.24128 of 2014 is filed by the
Kerala Bar Hotels Association and two others. The
remaining writ petitions are filed by persons conducting
three star hotels. Irrespective of their categorization into
Three Star or Four Star, Heritage etc., all the petitioners
challenge the Abkari Policy of the State and the
consequential amendments. A wide spectrum of
arguments have been put forward, attacking the
constitutionality of the Abkari Policy, alleging violation of
the fundamental rights enshrined in Articles 14 and
19(1)(g) of the Constitution, besides violation of the
parent enactment, the Rule Making power conferred on
the State by the Abkari Act and even violation of the
Rules of Business of the Government. Before addressing
the contentions advanced before me, it is necessary to
have an overview of the scenario prevalent in the State of
Kerala in relation to the trade of liquor.
The Enactments applicable and control
measures adopted.
3. The Abkari Act, 1077 is a pre-constitutional
enactment, initially passed by His Highness the Maharaja
-:4:-W.P.(C) Nos.22195/2014 & Conn. cases
of the erstwhile State of Cochin on the 5th of August 1902
as Act 1 of 1077 (Malayalam Era). The Act was later on
extended to the entire State of Kerala by Act 10 of 1967.
The Foreign Liquor Rules enacted in exercise of the
powers conferred by Sections 10, 24 and 29 of the Abkari
Act deal exclusively with the grant of licences to vend,
what is described as the Indian Made Foreign Liquour
(IMFL). Apart from the Abkari Act of 1077, there is
another enactment by name, the Prohibition Act, 1950,
which prohibits import, export, transport or possession of
any liquor or intoxicating drug, its manufacture and
dealing, including tapping of toddy from any trees, in
short, imposing total prohibition in the State of Kerala.
However, Section 2 of the said enactment has conferred
power on the Government to suspend the operation
thereof by issuing a notification. Though the Abkari
Act,1077 is stated to have been repealed with effect from
the date of coming into force of the said enactment, in
view of the specific provision made in Section 3 thereof,
the said enactment would revive on the issue of a
-:5:-W.P.(C) Nos.22195/2014 & Conn. cases
notification under Section 2 of the said Act. The State
Government has accordingly issued a notification dated
28.04.1967 (S.R.O.No.104/67) under Section 2 of the
Prohibition Act suspending the operation of the
provisions of the said Act except Sections 1,7 and 11
thereof. Consequently, the Abkari Act and the Rules
thereunder have revived and are continuing to be in
operation ever since. The provisions that are not
suspended, deal with punishments for offences. Licences
for possession, use or sale of liquor are issued under Rule
13 of the Foreign Liqour Rules.
4. Earlier licences to conduct retail sale in liquor
(sale in bottles) were being auctioned by the State to
private parties on payment of a fee. The system was
subsequently changed and the privilege of conducting
retail sale in liquor was granted exclusively to the Kerala
State Beverages (Manufacturing and Marketing)
Corporation Limited (hereinafter referred to as 'the
Beverages Corporation' for short), the Kerala State Civil
Supplies Corporation Limited and the Kerala State Co-
-:6:-W.P.(C) Nos.22195/2014 & Conn. cases
operative Consumers Federation Limited. The
Corporations referred to above sell the liquor in bottles
through a wide network of retail shops located along the
length and breadth of Kerala. The Beverages Corporation
also enjoys monopoly in the wholesale business of liquor.
This is for the reason that, an FL-9 licence that entitles
the licensee to possess and sell foreign liquor in
wholesale is granted only to the said Corporation. The
persons who have been issued with a Foreign Liquor
licence under any of the categories made mention of in
Rule 13 of the Foreign Liquor Rules, can purchase the
stock of Foreign Liquor required by them, only from the
Beverages Corporation. Thus, apart from the holders of
FL-3 licences or Bars, there are various other
establishments conducting liquor business like the Beer
and Wine Parlours that are operated only by the Kerala
Tourism Development Corporation (a Government
Company), recognized Clubs with licences to serve liqour
to their members, Airport Transit Lounges licensees,
Canteens and Messes attached to Military Units, Seamen
-:7:-W.P.(C) Nos.22195/2014 & Conn. cases
and Marine Officers Clubs etc.
5. The consumption of liquor within the state has
been on a phenomenal increase, over the past many
years. The volume of liquor consumed became a cause
for concern and have been engaging the attention of the
State Government during the past few decades. The
Government have been initiating measures for regulating
the consumption of intoxicating liquor, for a number of
years now. Initially, a Distance Rule was introduced
prohibiting the location of Foreign Liquor retail shops as
well as Bar attached Hotels, in the close proximity of
Educational Institutions, Temple, Church or burial
grounds. Since people belonging to the lower strata of
the society including the labour class were found to be
the persons frequenting the Arrack shops, arrack was
banned in the state. The duty of excise on IMFL was
steeply hiked. However, the following years showed only
a tremendous spurt in the sale of liquor. The situation
has been continuing without any change, showing a
steady increase in the sale and consumption of liquor
-:8:-W.P.(C) Nos.22195/2014 & Conn. cases
every year. The efforts undertaken by the State to
reduce the consumption has failed to achieve any
significant results. There has been a public outcry with
the Prohibitionists, Women's Organisations, other Non-
Governmental organizations and voluntary bodies joining
in to blame the State Government, for not initiating
effective measures to deal with the problem. However,
the fact remains that the demand for intoxicating liquor
within the State of Kerala is phenomenal and displays an
increase with every passing year. Any attempt at curbing
consumption would have to begin with a search for the
reason for the increase in consumption. Unless the
reason is identified and measures to remedy the same,
put in place, it would not be possible to reduce the
consumption in an effective manner. A sudden non
availability of any article in demand would only induce
people to search for other alternatives or avenues to
satisfy the demand. Bootlegging, production of spurious
liquor, alternative drugs or other substances that would
satisfy the demand would appear in the market, taking
-:9:-W.P.(C) Nos.22195/2014 & Conn. cases
the place of liquor. Statistics show that the measures
already adopted, like the ban of Arrack and the
enhancement of Excise Duty on liquor have not had any
effect in stemming the demand.
6. The State of Kerala attracts a large number of
tourists every year. The State Government has been
taking efforts to develop tourism as an industry. Various
measures have been adopted, with the object of
attracting tourists, not only foreign but also domestic. It
has been recognized by the State that, good and clean
places for them to stay as well as healthy and tasty food
are necessary to attract tourists. The consumption of
alcoholic beverages with their food is a way of life in
many foreign societies. Therefore, the State recognizes
that serving of alcohol with food is necessary to promote
tourism in the state. The above objective is discernible
from the wordings of Rule 13(3) of the Foreign Liquor
Rules also.
7. Initially, bar licences used to be issued to hotels
having two star facilities. However, in the year 2007,
-:10:-W.P.(C) Nos.22195/2014 & Conn. cases
Rule 13(3) was amended to provide that, Bar licences
shall be granted to only hotels having a classification of
three star and above. At the same time, by adding a
proviso to the Rule, it was provided that all existing
licensees not having the requisite three star or above
classification, but who had been functioning as on
31.03.2007 were entitled to the renewal of their licences.
Later on, in 2011, Rule 13(3) was again amended,
disentitling three star hotels from seeking the issue of a
bar licence by providing that such licences would be
issued only to hotels classified as four star and above. At
the same time, the existing licensees were again saved by
incorporating a fresh proviso to the Rule permitting the
licences of the existing hotels to be regularised. The
policy of the Government in permitting the existing hotels
to continue though they were not maintaining the
standards of classification prescribed by the Rule and at
the same time denying fresh licences to new three star
hotels and two star hotels with proper facilities was the
subject matter of challenge before this Court. In
-:11:-W.P.(C) Nos.22195/2014 & Conn. cases
Surendra Das B. v. State of Kerala [2012(3) KHC 653]
(DB), a Division Bench of this Court held that the action
of the State in discriminating between hotels having the
same star classification (namely three star), by granting
bar licences to the existing ones and denying the same to
new hotels was discriminatory. However, on appeal, the
Hon'ble Supreme Court reversed the said decision on the
above aspect and held that, deletion of three star hotels
falls within the same genre as Two Star Hotels that were
excluded earlier. However, the action of the State in
stipulating that no new FL-3 licences shall be granted to
hotels located within a stipulated distance from an
existing hotel having FL-3 licence, that was also struck
down by this Court, was held to be bad. The Supreme
Court was informed by the State that, it had appointed a
One Man Commission for reviewing the Abkari Policy as
per a notification dated 23.01.2014. The Supreme Court
made it clear that the State Government would not deny
FL-3 licence to hotels with a classification of Four Star
and above, until the report of the one man Commission
-:12:-W.P.(C) Nos.22195/2014 & Conn. cases
was received. The One man Commission submitted its
report on 06.03.2014. The Government thereupon called
for a report from the Government Secretary, Taxation.
The said report is dated 02.04.2014. However, by that
time, the code of conduct declared by the Election
Commission on 05.03.2014, in view of the Lok Sabha
Elections that were notified, had come into force.
Therefore, the existing hotels that did not conform to the
specifications stipulated by Rule 13(3) were also
renewed, provisionally. Thereafter, the new Abkari
Policy has been formulated and on the basis thereof, the
present notices have been issued by the Excise
Commissioner proposing to cancel the licences
provisionally issued to the bar hotels, as stated above.
Contentions on behalf of the petitioners
8. According to Sri Aryama Sundaram, the learned
Senior Counsel, this is a case of deprivation of a right that
has already accrued to a citizen for the only reason that
there is a change in the Government Policy. It is pointed
out that, the nature of the right of a citizen with respect
-:13:-W.P.(C) Nos.22195/2014 & Conn. cases
to a business permitted by the State and the nature of a
right with respect to a business not permitted by the
State is different. If a particular trade or business is
completely prohibited, there cannot be any doubt that the
citizen would have no right to carry on the said business.
However, if a business is not prohibited, but permitted
either with or without regulations, every citizen has a
right to engage in such business, under Article 19(1)(g)
of the Constitution. Thus, in cases where a business is
permitted either partially or subject to regulations, every
citizen has a right to participate in the business activity.
This is for the reason that, the State has no intention to
prohibit the trade altogether. In the present case, as far
as the State of Kerala is concerned, the Preamble of the
Abkari Act shows that the enactment is intended to
consolidate and amend the law regulating import, export,
transport, manufacture, sale and possession of
intoxicating liquor and intoxicating drugs in the State of
Kerala and not prohibition. Since the object of the
enactment is only to consolidate and amend the law
-:14:-W.P.(C) Nos.22195/2014 & Conn. cases
relating to the trade in liquor, the petitioners in these
writ petitions have in addition to their fundamental right
under Article 19(1)(g), a statutory right under the Abkari
Act to conduct trade or business in liquor, subject of
course to the restrictions contained in the Act. It is the
said right that has been taken away by the present Abkari
Policy as well as the amendment that has been effected.
9. According to the learned Senior Counsel, a
Constitutional Bench of the Hon'ble Supreme Court has in
Narula v. State of Jammu & Kashmir [AIR 1967 SC
1368] held that every citizen has a right under Article 19
(1)(g) to conduct trade or business, even in intoxicating
liquor, subject of course to the reasonable restrictions
that the State is empowered to place on the said right
under Article 19(6) of the Constitution. It is therefore
contended that, the petitioners in these cases are also
entitled to put forward a claim to carry on business in
intoxicating liquor, subject to the restrictions contained in
the Abkari Act. The Act being one intended to regulate
such trade in liquor cannot proceed to the extent of
-:15:-W.P.(C) Nos.22195/2014 & Conn. cases
altogether prohibiting the trade. Any such attempt
would amount to an unreasonable restriction under
Article 19(6). It is therefore contended that, the present
Abkari Policy as well as the amendment now introduced
constitute unreasonable restrictions on the fundamental
right of the petitioners under Article 19(1)(g).
10. It is further contended that, the State in the
present case has not introduced a total prohibition. Nor
has it excluded private participation in the business
entirely. No monopoly in favour of the State has also
been created. Therefore, the exclusion of a section of the
members of the public from conducting trade in liquor is
discriminatory, under Article 14 of the Constitution.
Conferring the eligibility to apply for bar licences only on
hotels having classification of 5 star and above, actually
identifies the said category of hotels for conferring a
benefit, to their advantage over the others doing business
in the field. The said classification bears no nexus to the
proclaimed object of achieving prohibition, for the reason
that, liquor is available freely in the FL-1 shops and other
-:16:-W.P.(C) Nos.22195/2014 & Conn. cases
establishments owned by the State.
11. The petitioners are all existing licensees. They
were being granted renewal of their licences over the
past many years. There are no complaints or allegations
against them as licensees. They have a right of renewal
granted by the Statute, provided the conditions necessary
for the purpose are satisfied. A non licence holder has a
right to apply for licence and not to be discriminated in
the matter of grant. In the present case, the existing
licensees are being discriminated in the matter of
granting renewal, by providing that, only the licensees of
hotels classified as 5 star and above would be granted
renewal. The said classification is, according to the
counsel, violative of the guarantee of equality enshrined
in Article 14 of the Constitution. The State has over the
years followed a consistent policy of renewing the
licences of the all existing licensees. Fresh applicants as
well as the existing licensees were therefore being
treated as two separate classes. By the present policy,
the existing licensees are again classified into hotels
-:17:-W.P.(C) Nos.22195/2014 & Conn. cases
having a classification of 5 star and above and those who
do not have the said classification. The said
classification, according to the learned Senior Counsel, is
unsustainable and liable to be set aside.
12. The sequence of events leading up to the
formulation of the present Abkari Policy shows that, the
State was awaiting the report of the One Man
Commission that was appointed to go into the question of
making a Comprehensive revision of the Abkari Policy
and the issue of renewals to the Bar licences already
granted. The One Man Commission has submitted its
report containing various recommendations The
Government had thereafter sought for the report of the
Government Secretary for Taxation on the question of
implementing the recommendations of the One Man
Commission. However, while formulating the Abkari
Policy 2014-15, the Government has discarded all the
recommendations of the One Man Commission as well as
the Taxation Secretary. Absolutely no reasons are stated
for not accepting the recommendations of the One Man
-:18:-W.P.(C) Nos.22195/2014 & Conn. cases
Commission. In fact, the recommendations have not even
been referred to or considered. The One Man
Commission had recommended an evaluation of the
facilities available in the hotels that were not maintaining
required standards and permitting them to upgrade their
facilities within a specified time. Having informed the
Hon'ble Supreme Court that action would be taken
against the non Standard bar hotels on the basis of the
report of the One Man Commission, the present turn
around without any reason whatsoever is, according to
the counsel, nothing but malafides in law. The present
policy, according to the learned Senior Counsel, is also
bad, not only for the reason that it is discriminatory but
for the further reason that it has not considered the
relevant materials. In fact, the policy has omitted to
consider such materials without any reason. It is
contended that this is a clear case of imposing
unreasonable restrictions under Article 19(6) on the right
under Article 19(1)(g) of the Constitution, besides being
discriminatory. The object sought to be achieved being
-:19:-W.P.(C) Nos.22195/2014 & Conn. cases
prohibition, the classification of hotels into those having
certification of five star and above and those not having
such certification, has no nexus to the object sought to be
achieved.
13. Apart from the above, it is contended that, even
assuming the policy to be valid, the action now initiated
ought to have been taken by a Plenary Legislation and not
by a Subordinate Legislation, as done in the present case.
Section 29 of the Abkari Act confers on the State, the
power to make Rules but only for the purposes of the Act.
Since prohibition is not one of the purposes of the Act,
the power under Section 29 is not available for making a
Rule to achieve prohibition. Section 69 of the Act
provides that the Rule made in accordance with the
power conferred by Section 29 of the Act shall, on
publication in the Gazette have the force of law and shall
be read as part of the Act itself. Therefore, it is
contended that, the Rule making power conferred by
Section 29 of the Act has to be strictly construed so as to
limit it to the making of Rules for carrying into effect the
-:20:-W.P.(C) Nos.22195/2014 & Conn. cases
objects of the Act alone. It is also contended by the
learned Senior Counsel that, any restriction under Article
19(6) of the Constitution can be made only by a
Legislation and not by Subordinate Legislation.
14. It is further contended that, the right to
renewal of the licence is a statutory right that is
conferred on the petitioners by Sub Rule 3 of Rule 13B of
the Foreign Liquor Rules, provided the conditions therein
are satisfied. Therefore, the petitioners have a subsisting
right to claim renewal of their licence, since the said Rule
has not been amended pursuant to the Abkari Policy
2014-15. In other words, in spite of the present Abkari
Policy, the right to claim renewal under Rule 13B
continues unscathed. The above is a right that is
available to licence holders alone in contradistinction to
the applicants for fresh licence. The above right is
capable of being enforced at law.
15. The report of the One Man Commission shows
that, after an elaborate overview of the situation in the
State as far as liquor trade is concerned, a retired Judge
-:21:-W.P.(C) Nos.22195/2014 & Conn. cases
of this Court, Justice M.Ramachandran, has
recommended measures to bring down consumption of
intoxicating liquor and to impose regulations on the
manner in which the trade is being conducted. What has
been recommended is to retain the policy of issuing bar
licences to hotels with a classification of three star and
above. With respect to the hotels that do not have the
requisite standards, they have been recommended to be
given time to upgrade their facilities and to attain the
standards of three star hotels. In the event of such
opportunity not being utilized, it has been recommended
that, their licences be revoked. In the case of existing
licencees, the recommendation is to permit them to
continue operations for the current financial year and to
refuse renewal from the coming year onwards. The
report of the Taxation Secretary has also recommended
the grant of sufficient time to a licensee to upgrade their
facilities. However, without even considering the said
recommendations, the present Abkari Policy has ignored
the recommendations. It is pointed out that, the One
-:22:-W.P.(C) Nos.22195/2014 & Conn. cases
Man Commission being not one appointed under the
Commissions of Enquiry Act, 1952, the principle that the
recommendations are not binding on the Government
cannot apply in the present case. The present One Man
Commission had been appointed in the wake of the
decision of the Division Bench of this Court in Surendra
Das B. v. State of Kerala (Supra). It was also
undertaken by the State Government before the Hon'ble
Supreme Court that no fresh licence would be issued until
the report of the One Man Commission was received. The
above submission has been noticed and recorded in State
of Kerala v. Surendra Das [2014(1) KLT 948 (SC)]. The
State having undertaken before the Hon'ble Supreme
Court to abide by the recommendations of the One Man
Commission, it cannot be permitted to ignore the said
report altogether. Even if the recommendations were not
acceptable, the policy should have contained reasons for
the rejection thereof.
16. On the basis of the above contentions it is
pointed out that, the policy is bad not only for not having
-:23:-W.P.(C) Nos.22195/2014 & Conn. cases
considered relevant materials that were available to the
Government but also for not disclosing proper or cogent
reasons. The same is therefore alleged to be arbitrary,
and discriminatory and violative of Article 14 of the
Constitution, apart from being an unreasonable
restriction on the fundamental right of the petitioners to
carry on trade or business.
17. The counsel appearing for other petitioners,
apart from endorsing the above contentions of the
learned Senior Counsel have put forward a slew of other
contentions which are also required to be noticed.
18. According to Senior Counsel Sri.C.C.Thomas,
the present policy in so far as it has decided not to renew
the licences of existing licence holders is arbitrary and
liable to be set aside. In Secretary to Government,
T.N. v. K. VinayagaMurthy [2002(7) SCC 104], the
Government order by which a provision providing for
renewal of liquor vending licences was repealed, was set
aside and the Government directed the question of
renewal of licence to be considered. The existing licences
-:24:-W.P.(C) Nos.22195/2014 & Conn. cases
were being treated separately, as a distinct class by the
previous Abkari Policies. Therefore, it is contended that
the present attempt to deny renewal of their licences is
arbitrary and liable to be set aside. The respective
licences of the petitioners having been renewed for the
current Abkari year and licence fee having been paid in
full, in advance, it is contended that there is no
justification for terminating the privilege during the term
of the licence.
19. Learned Senior Counsel Sri.K.Ramkumar
contends that, even a policy can be interfered with,
where it is arbitrary or discriminatory. Reliance is placed
on various decisions of the Hon'ble Supreme Court in
support of the above contention. Drawing analogy from
the case in which prohibition of dancing in bars in
Bombay was found to be unsustainable, it is contended
that the liquor sold in five star hotels as well as the hotels
with lesser classification is the same. Therefore, the
classification made in the present cases for the purpose
of grant of bar licences is unreasonable.
-:25:-W.P.(C) Nos.22195/2014 & Conn. cases
20. The learned Senior Counsel also contends that
a perusal of the impugned order shows that the
cancellation of the licences of the petitioners have been
made on the orders of the Government. The Excise
Commissioner being the authority empowered to cancel
the licence, the present action is a clear case of the
authority acting under dictation.
21. With reference to the provision under which the
impugned orders have been issued, cancelling the
licences already granted, it is contended that Section 26
(e) is not attracted to the fact situation in the present
case. The conditions subject to which licences had been
granted are part of the Rules. A perusal of the conditions
would show that, there is no condition permitting
cancellation of any licence, 'at will'. It is further
contended that, since Section 26 has not been amended,
no fresh ground could be granted by an executive action.
In the absence of a condition in the licence permitting
cancellation thereof, 'at will' no such condition could also
be incorporated by an executive action. It is further
-:26:-W.P.(C) Nos.22195/2014 & Conn. cases
pointed out that the licences in these cases have been
renewed subject to the liquor policy to be formulated.
However, the said condition does not authorize
cancellation of the licence that has been granted for the
entire financial year. The petitioners are entitled to
continue their businesses till the expiry of the terms of
their licences. Relying on the licence that has already
been issued, the petitioners have upgraded the facilities
in their hotels expending crores of rupees. They have
also acquired stocks of imported foreign liquor
anticipating the sale in their hotels. The expectations of
the petitioners that they would be permitted to continue
their activity for the entire period of their licence was
legitimate. Therefore, the impugned action is also hit by
the principle of legitimate expectation. Apart from the
above, it is pointed out that, Article 163 of the
Constitution has been violated, inasmuch as, the present
Abkari Policy was not recommended by the Council of
Ministers. The Council of Ministers only ratified the
policy ex post facto.
-:27:-W.P.(C) Nos.22195/2014 & Conn. cases
22. According to Senior Counsel Sri.
O.V.Radhakrishnan, the preamble of the Abkari Act,1077
clearly states that, the Act is intended only to regulate
trade in liquor. There is no provision in the Act
permitting or authorising imposition of total prohibition.
Therefore, the proclaimed object of the present Abkari
Policy as well as the measures adopted for attainment
thereof are unsustainable, being not supported by any of
the provisions of law. A perusal of Section 29 of the
Abkari Act that confers power on the Government to
frame rules shows that, all the purposes mentioned
therein relate to regulation. There is no provision that
empowers the Government to frame rules for the purpose
of imposing total prohibition. In the absence of a specific
power, the present amendment to Rule 13(3) is
unsustainable and liable to be set aside.
23. The learned Senior Counsel further points out
that, amended rules were published in the Government
Gazette on 27.08.2014. As on the said date, the State had
no Governor for the reason that, the Governor had
-:28:-W.P.(C) Nos.22195/2014 & Conn. cases
resigned and had ceased to hold office. The resignation
takes effect instantaneously. The notification in the
gazette is purported to be issued in the name of the
Governor. Therefore, the said notification is invalid. No
ex post facto ratification is permissible in such matters.
Nor is any such ratification constitutionally recognized.
Therefore, it is contended that the explanation of the
State that the policy has been ratified, cannot be
sustained. Since Article 163 mandates that the Governor
should act only on the aid and advice of the Council of
Ministers, the present policy that was not supported by a
decision of the Council of Ministers suffers from a
constitutional illegality that is not capable of being
rectified. Apart from the above, it is contended that, the
manner in which the decision was taken, in post haste
manner justifies a presumption of malafides against the
State.
24. It is further contended that, the Rules of
Business of Government of Kerala issued under Article
166 of the Constitution have been violated. Rule 58
-:29:-W.P.(C) Nos.22195/2014 & Conn. cases
stipulates that the draft should be referred to the Law
Department, for opinion, which was not done. Rule 59(1)
has also been violated. In the absence of a valid policy
decision, the impugned action of cancelling the licence of
the petitioners cannot be sustained and is therefore liable
to be struck down.
25. The learned Senior Counsel also contends that,
the restriction contemplated by Article 19(6) could be
imposed only by means of legislation. In the present
case, the restriction is imposed by an executive action
which is not permissible. The impugned action is vitiated
by violation of the principles of Natural Justice, it is
contended. No notice was issued to the petitioners
before the licences were cancelled. The petitioners have
invested substantial sums of money acting on the
strength of the licence issued. Consequently, the
principle of promissory estoppel applies against the
action of the State in revoking the licence.
26. According to Senior Counsel Smt Indira
Jaisingh, Kerala is a state where there is already a
-:30:-W.P.(C) Nos.22195/2014 & Conn. cases
Prohibition Act in force. The State has enacted the
Prohibition Act, 1950. Section 8 of the said enactment
prohibits the manufacture, traffic in and consumption of
liquors and intoxicating drugs. The punishment for
violation of the said provision has also been provided.
Section 9 makes even being found in a state of
intoxication, punishable. With the coming into force of
the said Act, the Abkari Act 1077 stood repealed.
However, Section 2 confers power on the Government to
suspend the operation of the Act, by a notification in the
Kerala Government Gazette, with effect from a date to be
specified therein, with respect to all or any of the local
areas to which the same should supply. In exercise of the
power under Section 2 of the said Act, the Government
has issued a notification dated 28.04.1967 (SRO 104/67)
suspending the operation of the provisions of the
Prohibition Act, except Sections 1,7 and 11 in all areas to
which the said provisions were to apply. As per Section 3
of the Prohibition Act, upon issue of a notification under
Section 2, the enactments mentioned in the first schedule
-:31:-W.P.(C) Nos.22195/2014 & Conn. cases
to the said Act, along with the Rules and notifications
made thereunder would become operative and would be
in force. The Abkari Act, 1077 is one of the enactments
made mention of in the first schedule to the Prohibition
Act. Therefore, it is pursuant to the notification issued
under Section 2 of the Prohibition Act, that the Abkari
Act, 1077 has revived and is continuing to be in force. In
the above scheme of things, therefore, the field of
prohibition is occupied by the Prohibition Act, 1950
whereas, the field of regulation of trade in liquor is
occupied by the Abkari Act, 1077. If the State wanted to
bring in prohibition, it could have done so, by simply
cancelling the notification under Section 2 of the
Prohibition Act. That has not been done. Therefore, the
intention of the State is not to impose prohibition, but to
permit trade in liquor in a regulated manner. The power
to impose regulations is contained in Abkari Act, 1077.
The provisions of the said Act therefore cannot be
employed to impose prohibition. The power to frame
Rules under the Act is conferred, for the purpose of
-:32:-W.P.(C) Nos.22195/2014 & Conn. cases
giving effect to the objects of the enactment. Any Rule
made for the purpose of imposing prohibition would be
ultra vires the rule making power as well as the scope of
the Act itself for the reason that, the object of the Act is
only to regulate and not to prohibit. The present Abkari
Policy that proclaims the object of imposing prohibition
cannot therefore be introduced in exercise of the Rule
making power under the Abkari Act, 1077.
27. In view of the fact that, there is no prohibition
in the State or a monopoly in favour of the Sate, the
citizen also has a right to carry on trade in liquor. The
said right has been recognized by the Hon'ble Supreme
Court. It is further contended by the learned Senior
Counsel that the right of a citizen under Article 19(1)(g)
has to be understood as being subject to the reasonable
restrictions that the State has been permitted to impose
under Article 19(6), in the context of the duty cast on it
by Article 47, to bring about the prohibition of
consumption of intoxicating drinks and drugs which are
injurious to health. Since the State has not imposed
-:33:-W.P.(C) Nos.22195/2014 & Conn. cases
prohibition nor created a monopoly in the trade for itself,
the policy of selective permission to private individuals,
presupposes a corresponding right in the citizen to claim
opportunity to carry on the trade. The said right has
been denied by the present Abkari Policy. In the present
case, the restrictions imposed have no nexus to the object
that is sought to be achieved, namely to raise the health
of the people. The policy classifies the citizens on the
basis of their paying capacity. A person who has the
financial capacity to pay is permitted to consume
intoxicating liquor which is available only in 5 star hotels,
there is no justification for the said classification. The
One Man Commission report has recommended grant of
FL-3 licence to hotels with a classification of 3 star and
above. The object of the Abkari Act being only to permit
and regulate the trade, cannot justify the imposition of
total prohibition.
28. With respect to the power under Section 26(e)
of the Abkari Act, the provision has to be read down by
construing the same ejusdem generis. Reliance is placed
-:34:-W.P.(C) Nos.22195/2014 & Conn. cases
on the Constitutional Bench decision of the Supreme
Court in Olga Tellis v. Bombay Municipal
Corporation [AIR 1986 SC 180] to contend that, the
restriction imposed, to be sustainable should satisfy the
test of being, just, fair and reasonable, the soul of natural
justice being fair play in action. The present policy does
not satisfy the above vital requirement. It is further
contended that, the Abkari Policy is arbitrary though it
proclaims that it is to promote tourism, the policy is in
fact against tourism. The rule proclaims tourism as its
objective, but restricts the facility of bar only to five star
hotels. The statistics show that, the bulk of the tourists
frequenting the State do not belong to the five star
category. There is a total lack of application of mind to
any of the above aspects, by the framers of the policy,
rendering the same arbitrary and liable to be set aside.
29. Senior Counsel Sri.P. Ravindran referred to the
provisions of the Abkari Act to contend that Section 15A,
15B and 15C only seeks to impose restrictions on the
manner in which the trade in liquor is to be carried on.
-:35:-W.P.(C) Nos.22195/2014 & Conn. cases
Section 24 mandates that every licence or permit granted
under Act shall be in the prescribed forms. The form of
FL-3 licence incorporates the conditions subject to which
the licence is granted. Clause 1 specifically provides that
sale of foreign liquor is permissible only to the residents
of the hotels, for the use of such residents or their guests
or casual visitors partaking in meals. The conditions
stipulate the quality of liquor to be sold, prohibits
drunkardness, rioting or gambling within the premises
and provides that no liquor shall be sold for removal
outside the hotel. The liquor is permitted to be sold only
along with meals. Restrictions are imposed with respect
to the timings during which the Bar could be kept open.
Section 18A empowers the State to grant exclusive
privilege for the manufacture of liquor. No restriction
has been imposed on any of the above powers. The
manufacture, wholesale trade as well as retail sale
through Beverages Corporation are permitted to be
continued without any restriction.
30. It is further contended that, the power to grant
-:36:-W.P.(C) Nos.22195/2014 & Conn. cases
a licence to an applicant stands exhausted on the grant of
the licence. The power to cancel a licence is contained in
Section 26 of the Act. The said power can be exercised
only on one of the grounds specified therein. All the
grounds mentioned in Section 26 refer to violation of one
or the other conditions of the licence. Only sub clause 'e'
provides for cancellation or suspension of the licence 'at
will'. The above provision has to be read down, in the
context of the other grounds that are mentioned. In the
present case, the notice of termination has been issued,
acting under dictation. It is pointed out that, Rule 13(3)
even after the present amendment proclaims that bar
licences are issued, for the promotion of tourism. The
said object would not be served by limiting the grant of
bar licences to five star hotels alone.
31. Senior Counsel Sri Ramesh Babu concedes that
no citizen has a fundamental right under Article 19(1)(g)
of the Constitution to trade in liquor. The right is only a
qualified right subject to Article 19(6). However,
according to the counsel, the present policy is violative of
-:37:-W.P.(C) Nos.22195/2014 & Conn. cases
Article 14 of the constitution not only because the
classification made is unreasonable, bearing no nexus to
the object sought to be achieved, but for the further
reason that the policy is arbitrary. Though the State has
proclaimed its intention to impose prohibition, while
proposing to cut down the number of outlets of the
Beverages Corporation at the rate of 10% every year,
there is no proposal to reduce the number of five star
hotels. Apart from five star hotels, there are other
categories of Foreign liquor licencees, like Beer and Wine
Parlour licencees, club licenees etc. There is no proposal
to restrict the grant of licences to any of the said
categories. Therefore, the effect of the policy is only to
create a monopoly in liquor trade in favour of five star
hotels. Creation of such a monopoly, in favour of private
parties is neither permissible nor sustainable in law. The
policy has not been fully carried over to the amended
Rule 13(3) of the Foreign liquor Rules for the reason that,
there is no provision even in the amended Rule to phase
out the outlets of the Beverages Corporation. According
-:38:-W.P.(C) Nos.22195/2014 & Conn. cases
to the counsel, the object sought to be achieved being
safeguarding of the health of the persons who frequent
the bars, confining the same to five star hotels alone
would not achieve the said objective. The decision of the
Supreme court in the case of Bombay Dancing Bars is
relied upon to contend that there is no difference in the
nature of activity carried on in five star hotels and in
hotels having lesser star classifications.
32. Senior Counsel Sri. K.P.Satheesan points out
that, the Kerala Consumer Federation ('Consumerfed' for
short) to which FL-I retail licences are granted is a co-
operative society. Therefore, there is no justification for
not granting such licences to other private parties.
According to the Senior Counsel, sale and consumption of
foreign liquor within the precincts of a bar hotel are
subjected to closer regulation than a similar sale from a
retail shop conducted by the Beverages Corporation. In a
bar hotel, liquor is permitted to be sold only along with
the food. It is stipulated that the cost of liquor be billed
along with the food. Closure of such establishments
-:39:-W.P.(C) Nos.22195/2014 & Conn. cases
would leave the consumers free to purchase liquor in
bottles and to consume it indiscriminately and without
any control, wherever they may choose to consume the
same. The said course would only lead to more law and
order problems. It would not in any case result in a
reduction in the consumption of liquor, since the same is
freely available for purchase from the FL-1 shops. The
restriction now imposed would therefore be only counter
productive.
33. Senior Counsel Sri T.A. Shaji contends that, no
action under article 47 has been initiated by the State in
the present Abkari Policy. This is for the reason that, the
consumption of liquor has in no way been restricted. A
restriction has been placed only on the trade in liquor
through bar hotels. The said restriction does not and
cannot achieve the object of reducing consumption, in
any manner.
34. Senior Counsel Sri. S.Sreekumar representing
the four star hotels points out that there are only 33 four
star hotels in the state, whereas five hotels number only
-:40:-W.P.(C) Nos.22195/2014 & Conn. cases
20. The four star hotels are frequented only by the
financially well to do sections of the society. Four star
and five star hotels are grouped together for the purposes
of classification by the Ministry of Tourism, Government
of India. The only difference between a five star hotel
and a four star hotel is the existence of a swimming pool,
with marginal variations in the dimensions of the rooms.
The sale of liquor through four star and five star hotels
within the state accounts only for a small, miniscule
percentage of the total liquor sold in the state. There has
never been any complaint against the functioning of four
star hotels or with respect to the manner in which liquor
was sold or consumed in the premises of such hotels at
any time. Nor was the category of four star hotels
targeted for any type of restriction, at any time by the
State. At no time was there any proposal to impose
restrictions on the four star hotels. Therefore, the
present policy of not granting bar licences to four star
hotels is without any justification whatsoever.
35. According to the counsel, four star, five star
-:41:-W.P.(C) Nos.22195/2014 & Conn. cases
and heritage hotels form a class by themselves.
Therefore, the present policy that singles out five star
hotels alone for the purposes of conferring a benefit is
arbitrary and discriminatory. The decision in State of
Kerala v. Surendra Das (supra) is relied upon to
contend that the Hon'ble Supreme Court has proceeded
on the basis that two star and three star hotels stand on a
different footing in comparison to the four star and other
higher classification hotels under the Tourism Policy of
the Government of India. All the restrictions that were
sought to be imposed at that time concerned two star and
three star hotels. Therefore, the petitioners as well as
other four star hotels expected that their licences would
be renewed. The terms of reference made to the One
Man Commission by G.O.(MS) 12/13/T.D. dated
23.01.2013 also related only to the manner of functioning
of two star hotels, with no reference to the higher
category hotels like four star and five star. The report of
the One Man Commission, particularly paragraph 44 is
relied upon to contend that there is no justification
-:42:-W.P.(C) Nos.22195/2014 & Conn. cases
whatsoever for denying bar licences to hotels with four
star classification. It is contended that, the classification
on the basis of which bar licences have been denied to
four star hotels is discriminatory and violative of Article
14 of the Constitution.
36. Advocate N.N.Madhu takes strong exemption to
the action of the Government in not accepting and not
even referring to the opinions of the Taxation Secretary
as well as the report of the One Man Commission. The
Taxation Secretary has recommended that hotels having
three and four star classifications could be granted
renewal of licence. With respect to the bars that do not
conformed to the standards, the recommendation was
that, they should be given time to upgrade their facilities.
The recommendations of the Excise Commissioner are
also on similar terms. The recommendation regarding
refusal to grant licence was limited to those hotels that
do not have two star classification. According to the
counsel, as stated in the reply affidavit filed by the
petitioner represented by him, the total sales have only
-:43:-W.P.(C) Nos.22195/2014 & Conn. cases
increased after the closure of the bars. Apart from bar
hotels there are about five thousand toddy shops vending
toddy in the State. There are other categories of
establishments to which licences for sale of liquor are
granted. Therefore, the policy cannot achieve the desired
objective. It is further contended that, no mass
cancellation of licences, as done in the present case, is
envisaged under Section 26(e) of the Abkari Act.
37. Sri. George Poonthottam, Advocate, points out
on behalf of a four star hotel that, closure of bars has not
resulted in any reduction in the consumption of liquor, as
the statistics show. The bars constitute only 33% of the
outlets vending liquor within the state. By closure of the
bars, what has happened is that the sale has shifted to
FL-1 retail outlets. According to the counsel, there are
17 manufacturing units producing liquor within the state.
One unit is owned by the state. No attempt has been
made to reduce production. The entire sale of liquor both
wholesale and retail is conducted through outlets run by
the Beverages Corporation. There is no restriction on the
-:44:-W.P.(C) Nos.22195/2014 & Conn. cases
production or sale of liquor. Therefore, the availability of
liquor within the state is in no way affected by the
present policy. Consequently, the consumers are left free
to satisfy their requirements by taking recourse to the
other outlets. A further contention raised is that, even as
per the amended provision, the FL-3 licences are issued
with the object of promoting tourism. The said object has
been lost sight of while formulating the present policy.
The middle class tourists who patronize the State and
form the bulk of the tourist inflow, cannot afford bars that
are available in five star hotels. It is therefore pointed
out that, there is no nexus between the present policy and
the object, being promotion of tourism, that is sought to
be achieved.
38. Yet another contention raised is that, the policy
has not been framed after proper consideration of the
relevant issues or after due deliberations. It is contended
that a decision had been taken initially to renew all the
licences but, the same was subsequently given the go by.
The above aspect would be revealed by the Government
-:45:-W.P.(C) Nos.22195/2014 & Conn. cases
files. The Rules of business made under Article 166 of
the Constitution has not been complied with. As per Rule
44 of the Rules, a proposal has to originate from the
Department concerned and the Finance Ministry has to
consent. In the present case the procedure has not been
complied with.
39. It is further contended that the Tourism sector
accounts for a total inflow of Rupees four thousand crores
annually, to the State. Considering the potential for the
growth of tourism in the State, investments of crores of
Rupees have been made by various persons. Financing
Agencies have also funded many of the projects. The
State Bank of India has disbursed a whopping Rupees
Nine hundred crores to various establishments while the
Kerala Financial Corporation has advanced Rs.570
crores. The establishments that received the funds would
run into problems and would have to be eventually closed
down. Corporate meetings and conferences both national
and international that were expected to be conducted at
various scenic locations within the State have started
-:46:-W.P.(C) Nos.22195/2014 & Conn. cases
getting cancelled. They are shifted to other places like
Goa and Sree Lanka. The above vital aspect has not
engaged the attention of the policy makers. The policy to
confine bar licences to only five star hotels has come as a
bolt out of the blue to the entire tourism industry,
wreaking havoc and losses.
40. Advocate P. Chandrasekhar places reliance on
the Prohibition Act, 1950 and the Notification of 1967
suspending the provisions thereof, to point out that the
situation that was recognized, taken note of and accepted
by the State Government continues to exist till this date.
The situation has not changed in any manner. Prohibition
can be imposed only under the said Act, after
withdrawing the notification of 1967.
41. The trade in liquor is subject to two types of
controls in the State namely, regulation of the provisions
of the Abkari Act, 1077 and prohibition by the Prohibition
Act, 1950. Though the Prohibition Act has repealed the
regulatory enactment, the provisions thereof have been
revived by the notification of 1967 that has suspended the
-:47:-W.P.(C) Nos.22195/2014 & Conn. cases
Prohibition Act. The present attempt to introduce
prohibition through regulation, is according to the
counsel, unsustainable. The further contention of the
counsel is that, the licencee had a legitimate expectation
that the privilege granted to him by the licence would
continue at least till the expiry of the term thereof.
Therefore, the present cancellation of the licence before
the expiry of the term is absolutely unwarranted. The
legitimate expectation of the petitioner should have been
taken into account as a relevant factor by the authority
while arriving at the decision. Only where there is an
overriding public interest can the legitimate expectation
be superseded. In the present case, there is no
overriding public interest. Nor, is there any urgency in
the present case, since the professed object of the State
is only to impose prohibition over a period of ten years.
42. It is the case of the counsel that, the present
policy is unsustainable applying proportionality principle
also. The Court is the primary reviewing authority as
regards proportionality. The Courts in India have been
-:48:-W.P.(C) Nos.22195/2014 & Conn. cases
employing both the Proportionality Test as well as the
Wednesbury Principle in judicial review. In the light of
the above principles, what has to be proved is whether
the measure imposed was really necessary, whether it
has a legitimate nexus to the object and whether there
was a lesser measure that could have been adopted to
achieve the same result. A process of balancing would
have to be undertaken where the hardship as well as the
benefits are balanced to arrive at a conclusion as to
whether the impugned action could be sustained.
43. It is contended by the counsel that, the
legitimate expectation is only one facet of unfairness. In
the present case, the report of the One Man Commission
has arrived at its conclusions after a study in depth of the
situation prevailing in the State. The State Government
was waiting for the report of the One Man Commission as
well as the recommendations of the Taxation Secretary,
to formulate its Abkari Policy. The Abkari Policy does not
evidence a consideration of the said documents. There is
no evidence that prohibition is necessary. The report of
-:49:-W.P.(C) Nos.22195/2014 & Conn. cases
the One Man Commission has been simply ignored. None
of the stake holders have been consulted or taken into
confidence. Therefore, it is contended that the policy
document is a total contradiction in terms.
44. Advocate Saiby Jose Kidangoor has put forward
a further contention that, production of wine in the State
has been treated separately and is permitted by a
separate set of rules that govern such activity. With the
existence of toddy shops and various other
establishments not only producing but also selling liquor,
the proclaimed object of prohibition cannot be achieved
by the measures now adopted.
45. Advocate Roy Chacko contends that Rule 36 of
the Foreign Liquor Rules confers unguided and
unchannelised powers on the authorities. As per the said
rule, the Excise Commissioner has been empowered to
revoke any licence after giving 15 days notice. The said
provision according to the counsel is arbitrary. While
formulating the present Abkari Policy, no provision has
been made for rehabilitation of the section of workers
-:50:-W.P.(C) Nos.22195/2014 & Conn. cases
who would be rendered jobless, consequent upon the
implementation thereof. It is further contended that, the
present amendment made pursuant to the Abkari Policy
is ultra vires the Rule making power of the State under
Section 29 of the Abkari Act. According to the Counsel,
there is no justification for permitting a bar in a five star
hotel, when it is permissible for five star classification to
be granted to a hotel even if it does not have a bar.
46. According to Sri. R.Harikrishnan, there is no
substantial difference between the facilities offered by
four star and five star hotels. The rates at which liquor is
sold in both the categories of hotels also vary only
marginally. Both the categories of hotels have all along
been grouped together as homogenous class. There is no
justification for treating them separately for the purpose
of denying to four star hotels the facility of a bar licence.
It is also pointed out that, the report of the One Man
Commission has taken note of the problem of migrant
workers and referred to the orderly behavior of people
within the premises of bar hotels. However, the report
-:51:-W.P.(C) Nos.22195/2014 & Conn. cases
has not been considered while formulating the policy.
47. According to Senior Counsel Sri. C.Ramesh
Chander, the present policy is arbitrary and liable to be
set aside. It is pointed out that five star hotels are
available only in a few districts of the State of Kerala. At
the same time, tourist destinations of importance are
spread all over the state. Confining bar facility only to
five star hotels would adversely affect the future
prospects of development of tourism in the State. The
consequence would be to render jobless not only the
persons working in the liquor trade but also people
working in the tourism sector. Substantial loss of
Revenue to the State Exchequer is also a certain
consequence.
48. Advocate Sivan Madathil points out that the
present Abkari policy is in direct conflict with Section
13A of the Abkari Act. Section 24 describes the forms
and conditions of licence. Section 29 confers power on
the State to frame rules. Section 69 according to the
counsel is unconstitutional. Rule 36 confers unguided
-:52:-W.P.(C) Nos.22195/2014 & Conn. cases
power on the Excise Commissioner to revoke a licence
and is unconstitutional, according to the counsel. The
present cancellation of licence is violative of Article 14. It
is contended that, the present Abkari Policy has been
framed without any consultation with the stake holders.
Strong exception is taken by the counsel to the manner in
which the policy has been formulated, without the aid and
advice of the Council of Ministers. There is no provision
to ratify a decision as purportedly done in the present
case. Ratification of a policy issued by the Government,
ex post facto, is unsustainable.
Contentions on behalf of the State
49. The contentions made on behalf of the
petitioners are refuted on behalf of the State by pointing
out in the first place that, the question as to whether bar
licences should be issued to the petitioners or to any
other persons is a matter of policy of the Government.
Judicial interference with matters of policy is limited and
confined to situations where there are compelling
circumstances justifying such intervention. In the
-:53:-W.P.(C) Nos.22195/2014 & Conn. cases
present case, there are no such compelling
circumstances. According to Senior Counsel Sri.Kapil
Sibal who represents the State, the State has a duty,
which is a fundamental duty under Article 47 of the
Constitution, to bring about prohibition of the
consumption of intoxicating drinks and drugs which are
injurious to health. In the face of the constitutional duty
cast on the state, the present State action cannot be
characterized as unjustified or uncalled for. The State is
only striving to discharge its fundamental duty.
According to the learned Senior Counsel, no citizen has a
fundamental right to trade in liquor. Article 19(1)(g) read
with Article 19(6) and Article 47 of the Constitution
obligates the State to initiate action with a view of reduce
consumption of liquor.
50. The present policy is one intended to reduce
consumption of liquor in public places. It is for the said
reason that, the consumption of liquor in bar hotels have
been banned. The policy would put pressure on the
persons who frequent the bars to restrict their
-:54:-W.P.(C) Nos.22195/2014 & Conn. cases
consumption to the confines of their homes, thereby
subjecting their activity to the influence of their family
members. The said restriction is absolutely in tune with
the object of prohibition which the State wants to
ultimately achieve.
51. Reliance is placed on the Constitutional Bench
decision of the Supreme Court Khoday Distilleries Ltd
v. State of Karnataka [(1995) 1 SCC 574] to contend
that trade in liquor is objectionable and no citizen has a
fundamental right to trade in liquor. The power of
control of the State is intended to protect the society.
Any State law made with the object of imposing
prohibition has to be viewed as a legislation made in
discharge of the fundamental duty of the Sate under
Article 47 of the constitution. The right to conduct trade
or business varies in scope and content depending on the
substance in which such trade is proposed to be
undertaken. In the case of a substance that is res
commercium, the citizen would have greater freedom.
Whereas his right would be considerably restricted, if the
-:55:-W.P.(C) Nos.22195/2014 & Conn. cases
substance in which the trade is proposed, is res extra
commercium. The State has a duty to protect the public
from deleterious substances. Intoxicating liquor being a
substance that is res extra commercium, it is contended
that, any restriction on a trade in the said substance
would have to be viewed as a restriction made in
discharge of the Constitutional duty under Article 47.
52. With respect to the contentions put forward
alleging discrimination against the petitioners, it is
pointed out by Senior Counsel Sri. Kapil Sibal that, the
Abkari Act does not classify hotels into two star, three
star or four star. The classification is made by the
Ministry of Tourism, Government of India. The said
classification was only adopted as a method of
differentiation among the various categories of hotels by
the State. Initially, the two star hotels were excluded.
The action was challenged before the Courts, but was
found to be in order. Thereafter, three star hotels were
excluded, the said action was also sustained. By
confining bars to only hotels having five star
-:56:-W.P.(C) Nos.22195/2014 & Conn. cases
classification, the opportunities to consume intoxicating
liquor available to youngsters and students are reduced
substantially. The major consumption of liquor takes
place in hotels classified as two, three and four stars. As
a consequence of the present policy, the consumption of
liquor in public places would be limited to five star hotels
alone. The people who frequent five star hotels form a
very limited category and the consumption of such
establishments also is not substantial.
53. The fact that the liquor is available freely in the
retail outlets does not militate against the policy for the
reason that, no measure to curtail the sale of liquor in
bottles has been adopted. The restriction is limited to
consumption of intoxicating liquor in public places. For
the only reason that, liquor is being sold in bottles from
retail shops, the validity of the present policy is not
affected in any way.
54. The refusal of the State to renew licenses of the
bar hotels does not affect their business in any manner.
It is only their bars that would have to be closed down.
-:57:-W.P.(C) Nos.22195/2014 & Conn. cases
Their hotels with the other avenues of business like
restaurants, lodging etc, could be continued without any
restriction. If their contention is that, the bars were the
major source of their income, the said fact would justify
the State action, for the reason that closure of such bars
would definitely reduce liquor consumption. If the bars
were not their main source of revenue, they are not
seriously affected by the closure of their bars. Either way,
their complaint lacks substance.
55. With respect to the decision of the Hon'ble
Supreme Court in the Bombay Dancing Bars case, relied
upon by the counsel for the petitioners, it is pointed out
that the dictum in the said case has no application to the
facts of the present case. The ban in the said case was to
find a solution to the malady of obscene dancing and
other criminal activities. Attempt to ban such activity had
prevented all types of dance performances. It was the
unqualified ban that was found to be unsustainable by the
Supreme Court. The dictum in the said case has no
application to the facts of the present case for the reason
-:58:-W.P.(C) Nos.22195/2014 & Conn. cases
that it is only the consumption of intoxicating liquor in
public places that include bars, that has been stopped.
According to the counsel, the present policy is only part
of a consistent policy that was being pursued by the State
from 2002 onwards. Therefore, the present measure is
not a sudden decision but a decision at which, the State
has arrived in a phased manner, over a period of 12
years. Since the petitioners do not have a right to trade
in liquor, they cannot question the present policy. The
fundamental right to conduct trade or business or the
freedom of industrial trade and commerce
constitutionalised by Article 301 to 304 are not applicable
in respect of a trade in liquor. It is for the said reason
that the various restrictions imposed by the State on the
trade have been sustained by the Apex Court over the
years.
56. It is the further contention of the learned
Senior Counsel that, Section 29 of the Abkari Act confers
power on the State to frame rules. Section 69 provides
that such rules would have the force of law. In other
-:59:-W.P.(C) Nos.22195/2014 & Conn. cases
words, the rules so made would become part of the
enactment. Therefore, the amendment presently made
also has become the part of the enactment by the force of
Section 69. Section 26(e) confers power on the Excise
Commissioner to cancel the licence where the conditions
thereof permitting such cancellation, apply. The
provisions of the FL-3 licence contains such a condition.
Therefore, the cancellation of the licences of the
petitioners is in order. Rule 26 of the Foreign Liquor
rules also confers power on the Excise Commissioner to
cancel the licence after giving 15 days notice. Such
notice has been given. Therefore, the cancellation in
these cases is proper.
57. The learned Senior Counsel further points out
that the FL-3 licenses issued to the petitioners had been
renewed only provisionally. Though the Abkari Policy
was being formulated at the beginning of each financial
year, the present Abkari Policy could not be formulated at
that time for the reason that, the Lok Sabha elections had
been notified and the Model Code of Conduct
-:60:-W.P.(C) Nos.22195/2014 & Conn. cases
promulgated by the Election Commission was in force. In
view of the above peculiar situation, as per Government
Order dated 02.04.2014, permission was granted for
renewal of the existing bar licenses, provisionally and
subject to the Abkari Policy to be formulated later. It was
in accordance with the said Government Order that the
licenses of the petitioners were renewed. It is specifically
stipulated that the licenses were renewed only
provisionally and subject to the Abkari Policy to be
formulated. Though the petitioners had paid the licence
fee for the entire financial year and the State had
received such payment, the petitioners very well knew
that the renewal was only provisional and subject to the
Abkari Policy that was awaited. Therefore, they very well
knew that they had no right to continue their operations
for the entire financial year. For the above reason, it
cannot be said that they were taken by surprise. The
provisional licence that was granted, was liable to be
cancelled, on the basis of the stipulations contained in the
Abkari Policy that has come into force. Therefore, the
-:61:-W.P.(C) Nos.22195/2014 & Conn. cases
present cancellation is not on any one of the grounds that
are mentioned in Section 26. Since the power of
cancellation is available to the Excise Commissioner in
view of Section 26(e) and also in view of the conditions
subject to which the licence was provisionally granted,
the same was cancelled after complying with the mandate
of Rule 36 of Foreign liquor Rules. The action is fully
justified.
58. The learned Senior Counsel further submits
that the recommendations of the One Man Commission as
well as those of the Taxation Secretary were not binding
on the Government. They were only recommendatory in
nature and the Government was at liberty to take its own
decision while formulating the policy. It was not
necessary for the Government to justify its policy with
reasons for the reason that, what is framed was its policy.
The policy is one that has been made mention of in its
Election Manifesto. Therefore, according to the learned
Senior Counsel, the contentions of the petitioners are
only to be rejected and the writ petitions dismissed.
-:62:-W.P.(C) Nos.22195/2014 & Conn. cases
Reply on behalf of the petitioners
59. In reply, Senior Counsel Sri Aryama Sundaram
points out that, since the Government Policy is aimed at
prohibiting drinking in public places, it has to be
examined whether the policy can achieve the said
purpose. There are absolutely no allegations in the policy
that any problems are created by the hotels classified as
two, three and four star. The production and availability
of liquor in the market remains unaltered. There is also
no restriction in increasing the production of liquor on
the basis of demand. Only one avenue has been singled
out for closure that is the bar hotels. The bar hotels
represents the smallest avenue of consumption of liquor.
The major avenues are retained and left untouched. The
citizen has a right to carry on business in liquor, he also
has a right not to be discriminated in the manner of
placing restrictions on the exercise of the said right.
60. A perusal of the policy shows that the same is
silent with respect to the mischief that is sought to be
remedied. The issue has not even been addressed though
-:63:-W.P.(C) Nos.22195/2014 & Conn. cases
it is claimed that the policy is intended to achieve
prohibition. The materials obtained by the State for the
purpose of formulating its policy have neither been
referred to or considered. On the contrary, the materials
available in the present case viz, the report of the One
Man Commission as well as the report of the Taxation
Secretary do not justify the policy. Therefore, the policy
is arbitrary.
61. According to the counsel, the petitioners have
been subjected to discrimination in the matter of
enforcing controls on their trade. The classification does
not protect any public interest, in view of the fact that,
even on implementation of the policy, the availability of
liquor would continue unaffected. Therefore, there is no
justification for the classification. It is the further
contention of the counsel that, an executive action cannot
enforce the restriction contemplated by Article 19(6) of
the constitution. A fundamental right can be denied only
by a plenary legislation and not by an executive action.
The petitioners being existing hotels had right of renewal
-:64:-W.P.(C) Nos.22195/2014 & Conn. cases
of their licences that has been denied to them without any
justification. Therefore, according to the learned Senior
Counsel, the writ petitions are only to be allowed.
Contentions of the Prohibitionists
62. Apart from the above contentions raised by the
petitioners and the respondent State, the protagonists of
prohibition who have got themselves impleaded, pro bono
publico, have also addressed the Court supporting the
Abkari Policy. Advocate Basil Attipetty has referred to
the evil effects of excess consumption of alcohol.
According to the counsel, the fact that investments
running to crores of rupees have been made does not
confer any right on a person to conduct trade in liqour. It
is the settled position of law that no citizen has a right to
trade in liquor. The counsel referred to the liquor
tragedies that had occurred in the State, in the past and
contended that only complete prohibition could root out
the malady of consumption of alcohol. The licences of the
petitioners were renewed only on provisional basis and
subject to the Abkari Policy. Therefore, the cancellation
-:65:-W.P.(C) Nos.22195/2014 & Conn. cases
thereof cannot be found fault with.
63. Advocate Johnson Manayani also draws my
attention to the evil effects of the use of alcohol. The
social problems created by excess drinking, of families
driven to the streets by the profligacy of the bread winner
also was narrated in justification of the present policy.
64. Advocate Kaleeswaram Raj justifies the
termination of the Bar licences by pointing out that, since
the action was on the basis of the policy that has been
formulated, no notice was necessary. In view of the
amendments made, incorporating the policy into the
amended Rule 13(3), the policy has acquired the status of
a legislation. Therefore, the principles of Natural Justice
have no application. According to the counsel, therefore,
no interference with the Abkari Policy is either called for
or necessary. The writ petitions are only to be dismissed.
Does the citizen have a right to trade in
potable liquor?
65. Since it has been argued before me that the
petitioners have a fundamental right to trade in liquor, I
shall address the same first. Potable Alcohol is nothing
-:66:-W.P.(C) Nos.22195/2014 & Conn. cases
but diluted ethyl alcohol having a chemical formula
C2H5OH. Ethyl Alcohol is a versatile chemical, capable
of being put to a wide variety of uses in the field of
industry as well as medicine. Of course it is also capable
of being consumed as an intoxicant, in its diluted form.
The fact that Ethyl Alcohol is capable of being put to a
variety of uses, has been recognized in our Constitution
itself. It is for the said reason that the constitutional
duty in Art.47 has been limited to bring about
prohibition of consumption of intoxicating drinks,
except for medicinal purposes. Thus, consumption for
medicinal purposes has been exempted. The power to
legislate on Ethyl Alcohol has been divided among the
Centre and the States. As per the Seventh Schedule,
Entry 8, list II, the States have been conferred with
legislative competence only over intoxicating liquors that
is to say production, manufacture, possession, transport,
purchase and sale of intoxicating liquors. Similarly as per
Seventh Schedule, Entry 51, list II, the power to levy
duties of excise on alcoholic liquors for human
-:67:-W.P.(C) Nos.22195/2014 & Conn. cases
consumption alone is conferred on the states. The
above division of powers is clear from Entry 84, list 1
Seventh Schedule, by which the Centre has been
conferred with power to levy duties of excise on tobacco
and other goods manufactured in India except,
inter alia, alcoholic liquors for human consumption.
Therefore, the power of the State to legislate in respect of
alcohol is confined t
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