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2001 DIGILAW 736 (KER)

Kaloor Joseph v. State Of Kerala

2001-12-12

B.N.SRIKRISHNA, M.RAMACHANDRAN

body2001
Judgment :- Srikrishna, C.J. These are two Public Interest writ petitions under Article 226 of the Constitution seeking direction to the respondent State Government and the State Excise authorities not to renew/issue Foreign Liquor 3 (Restaurant) Licence to hotels/restaurants in the State which do not have two-star facilities and are situated within the prohibited distance of 200 metres from an educational institution, temple, church, mosque or burial ground as contemplated in Rule 13 (3) of the Foreign Liquor Rules. There is a further prayer to declare that strict compliance with Rule 13 (3) of the Foreign Liquor Rules is mandatory for granting licences. There is also a writ of mandamus sought to direct the respondents to comply with the directions, certain policy decision of the Government contained in Ext. P3. 2. For a proper appreciation of the controversy, it is necessary to recount some salient facts: Liquor vending in the State of Kerala is controlled, inter alia, by the Foreign Liquor Rules (hereinafter referred to as "the rules") which are framed in exercise of the powers conferred on the State Government under the Cochin Abkari Act 1 of 1077 as amended by the subsequent laws. These Rules provides for issuing of different kinds of licences. Rule 13 (3) deals with licence to Hotel/Restaurant for sale of liquor, which is known as Foreign Liquor 3 Hotel (Restaurant) Licence ("FL3"). The rule which stands on the statute book today is the result of many changes made in the original rule on account of several policy changes of the State Government on the issue of foreign liquor vending licences. It would be instructive and useful to notice those changes. 3. (a) The Rules were framed and brought into force with effect from 1-4-1953. When the Rules were originally enacted, there was a provision made for foreign liquor vending licence (FL-3) to be issued by the Excise Commissioner with the previous sanction of the Government to any recognized hotel/restaurant run on European lines on payment of certain prescribed fee. (b) On 14-8-1981, the first paragraph of Rule 13 (3) was substituted by an amending notification. The effect of the amendment was to discontinue the practice of grant of FL 3 licence only to hotels or restaurants run on European lines. (b) On 14-8-1981, the first paragraph of Rule 13 (3) was substituted by an amending notification. The effect of the amendment was to discontinue the practice of grant of FL 3 licence only to hotels or restaurants run on European lines. (C) From 15-4-1982, a further amendment was made in Rule 13 (3) providing that a new licence shall be issued after the commencement of Foreign Liquor Rules , 1982 only to hotels and restaurants to conform to the standard of two star hotel. Hotels which had been licensed prior to 12-8-1981 were given three months time to upgrade their facilities confirming to the requirements specified in the first part of Rule 13 (3). The Excise Commissioner was given the authority to decide any dispute or doubt with regard to availability of two star facilities. (d) From 12-11-1982, a proviso was added to Rule 13 (3) of the Rules providing that, for renewal of a licence granted for the year 1982-83, it was not necessary that the hotel or restaurant should conform to the standard of a two star hotel. (e) With effect from 28-2-1986, there was a drastic change made in the Foreign Liquor Rules. Rule 13 (3) was amended, and, for the first time, a distance restriction for the grant of new licences with effect from the ensuing abkari year, i.e. 1-4-1986, was provided. The licence was not to be granted to establishments situated within the prohibited distance of certain specified institutions like educational institutions, places of worship and so on. However, there was a built in qualification in this rule that renewal of licences already granted to establishments which were in existence on the date of 1986 amendment, could be allowed subject to the condition that objections, if any, raised would be considered and decided by the Excise Commissioner. (f) On 9-1-1992, there was a further amendment made, inserting a proviso that no such licences would be issued afresh after 18th September, 1991. (g) On 18th February, 1992, sub-Rule 3 of Rule 13 was substituted and allowed the existing licenseses, who do not maintain Two Star standards time upto 30th June, 1992 to upgrade their standards to Two Star. (h) On 4-3-1993, Rule 13 (3) was further amended which omitted the provision for continuation of existing licences subject to the objection to be raised before and to be decided by the Excise Commissioner. (h) On 4-3-1993, Rule 13 (3) was further amended which omitted the provision for continuation of existing licences subject to the objection to be raised before and to be decided by the Excise Commissioner. The Rule which exists thereafter is as under: 13(3): Foreign Liquor 3 Hotel (Restaurant) Licence: Licence in this Form may be issued by the Excise Commissioner under the orders of Government in the interests of promotion of tourism in the State to Hotels or Restaurants conforming to the standard of Two Star and Higher classifications, owned or run by the Kerala Tourism Development Corporation Limited (KTDC) and India Tourism Development Corporation Limited (ITDC) and also to hotels having rating of Three Stars and higher classifications, Heritage and Resort hotel as well as classified restaurants where the privilege of sale of foreign liquor in such Hotels or Restaurant, has been purchased on payment of an annual rental of Rs. 12,00,000 (Rupees Twelve lakhs only). But no such licence shall be issued to Hotels or Restaurants which are located within 200 metres from an educational institution, temple, church, mosque or burial ground. However the distance restrictions will not be applied to the bar licences now in force for hotels of 3 star and higher classification. Those hotels other than private one having rating of Four Stars and above will also be exempted from the distance restrictions in conducting bars, in the interests of promotion of tourism in the State. In the case of private hotels of the above category no such licence shall be issued for conducting bars if they are located within 50 metres (Fifty meters only) from any Educational Institutions, Temples, Churches, Mosques, Burial grounds or Scheduled Caste/Scheduled Tribe Colonies. The existing licensees who do not maintain Two Star standards will be allowed time upto 30-6-1992 to upgrade their standards to Two Star. Their licence will be renewed till that date. Failure to upgrade the standard of those hotels would lead to cancellation of licence and for feiture of rental paid by them. Licenses shall have no claim for compensation. The applicant shall produce from the Abkari Workers' Welfare Fund Inspector a certificate of the effect that he has remitted before the date of application for the licence/renewal of licence, the arrears of contributions, if any payable upto 31st day of December of the preceding year. Licenses shall have no claim for compensation. The applicant shall produce from the Abkari Workers' Welfare Fund Inspector a certificate of the effect that he has remitted before the date of application for the licence/renewal of licence, the arrears of contributions, if any payable upto 31st day of December of the preceding year. The question whether a hotel or restaurant conforms to the standard of Two Star Hotel shall be determined in accordance with the specifications for classification of Star Hotels issued by the Department of Tourism and in case of doubt or dispute, the decision of the Excise Commissioner shall be final. The cost of liquor shall be billed along with the cost of meals. The cost of liquor shall be shown separately in the bill and the duplicate copies thereof shall be retained for inspection by the Officers of the Excise Department. The licenses shall purchase his supplies of Foreign Liquor only from such FL9 Licensees in the State as may be permitted by the Excise Commissioner: Provided that where the Commissioner is satisfied that the conditions specified in this sub-rule are not capable of being imposed on restaurants situated in airports, railway stations and such other places he may, with the previous sanction of Government relax any of the said conditions or impose any new conditions. Note: (1) "Church" means a public place where prayer is offered by Christians. "Educational Institution" means schools or colleges under the control of the State Education Department of Central Board of Education and which has been duly recognized by the Government. "Mosque" means public place where prayer is offered by Muslims. "Temple" means a place of public and religious worship by Hindus were deity is installed under a building and includes a mutt also: Provided that any structure on the road side pavement or in a compound of a private building with or without deity shall not be considered as a Temple, Church, Mosque: Provided further that if any Educational Institution/Temple/Church/Mosque or Burial Ground comes into existence subsequent to the grant of licence, it shall not disentitle such bar attach hotels for continuance. Note (2): In calculating the distance, the basis will be shortest pathway/lane/street/road generally used by the public and the same will be measured from gate to gate. Note (2): In calculating the distance, the basis will be shortest pathway/lane/street/road generally used by the public and the same will be measured from gate to gate. Provided that renewal of the licences of Bar Hotels which did not/do not functionon the expiry of valid licence can be permitted on payment of an additional rental of Rs. 25,000 (Rupees twenty five thousand only) for each year of defunction, over and above the annual rental for the year of renewal, subject to the observance of other rules in this regard." 4. A group of writ petitions, being O.P. No. 1358 of 1992 along with connected cases were filed in this Court challenging the validity of the above amended Rule 13 on various grounds. These Original Petitions were disposed of by a judgment of the learned Single Judge of this Court on 11th June 1996. It was agreed between the petitioners and respondents therein as under: (1) Government have absolute right and jurisdiction to increase the rental fixed for issue of licence and the challenge made by them against such increase in rental is withdrawn. It is, therefore, declared that the Government is justified in increasing the rental for different types of licences for various years and no interference is called for by this Court on that issue. (2) Whether the hotels and restaurants have to be upgraded to keep the two-star facilities to get a licence or renew the licence under Foreign Liquor Rules would be decided by the Government and till such decision is being taken by the Government, the two-star facilities directed to be provided by the Government for grant or renewal of a FL-3 licence would not be implemented or insisted. (3) So also, regarding the distance rule, viz. whether the distance rule provided under the Kerala Abkari Act and the Rules framed thereunder would be applicable or insisted in respect of the existing hotels and restaurants also would be taken by the Government, the notifications and the orders issued by the Government making the existing hotels and restaurants within the scope of distance rule will not be implemented or insisted upon." 5. The learned Single Judge disposed of the Original Petitions directing the petitioners to abide by the decision to be taken by the Government regarding the increase in rental for different types of licences and directed that such increased rate should be paid. The learned Single Judge disposed of the Original Petitions directing the petitioners to abide by the decision to be taken by the Government regarding the increase in rental for different types of licences and directed that such increased rate should be paid. With regard to the application of distance rule to the existing hotel, the judgment records as under. "So also, regarding the distance rules, viz. whether the distance rule provided underthe Kerala Abkari Act and the Rules framed thereunder would be applicable or insisted in respect of the existing hotels and restaurants also would be taken by the Government, the notifications and the orders issued by the Government making the existing hotels and restaurants within the scope of distance rule will not be implemented or insisted upon." With the aforesaid order, the Original Petitions were disposed of. Continued on 12th December, 2001: As a result of the said judgment, there was a virtual order of status quo ante with regard to the persons who had applied for FL-3 licence for the year 2000-01. The State Government and the Excise authorities, therefore, did not implement Rule 13(3) of the Rules and permitted the existing licences to continue their business by even accepting the licence fee for the year 2000-01. 7. Some time in February 2001, the State Government announced its Excise Policy for the current year 2001-02. Apparently, the State had not been able to take a decision according to what it had submitted before the learned Single Judge (Joseph, J.) while disposing of the group of writ petitions. Consequently, even for the year 2001-02, instructions were issued to theExcise authorities to renew the existing licences for FL-3 without insisting on the conditions in Rule 13 (3) of the Rules. A number of existing licensees have deposited the requisite fees and even obtained renewal of FL3 licence for the year 2001-2002. They have been continuously doing their business during this period. 8. On 27-3-2001, one of the present writ petitions, O.P. No. 10660/2001, was moved as a public interest litigation in which, inter alia, the crucial prayer is for a writ of mandamus to direct the state Government to implement Rule 13(3) of the Rules and not to grant ad hoc exemption therefrom by executive orders. 8. On 27-3-2001, one of the present writ petitions, O.P. No. 10660/2001, was moved as a public interest litigation in which, inter alia, the crucial prayer is for a writ of mandamus to direct the state Government to implement Rule 13(3) of the Rules and not to grant ad hoc exemption therefrom by executive orders. When notice in this petition was served on the State Government, the State Government filed a counter affidavit dated 7th December, 2001, through the Under Secretary, Taxes (A) Department. In paragraph 3 of the counter, it is stated that, based on the directions given in the judgment of Joseph, J. (Ext. P1), the Government had examined the provisions of Foreign Liquor Rules in detail and considered various aspects pertaining to the issue of FL3 licence to Hotels/Bars/Restaurants. After setting out the amended rule 13(3), it was maintained that this rule was in accordance with the policy of the Government as at present. In paragraph 4, the Government categorically asserts as under: "4. After examining the above Rule Government have decided that there is no change required in the above rule and all licensees shall abide by the Rules existing now. Therefore, any licence violating the rules will have to be cancelled. The existing licences prior to the introduction of distance restrictions or higher Star Classification were expected to change over to places in accordance with the rules or upgrade their facilities to come in consonance with the existing rules." Finally, it is prayed that the petitions may be dismissed. 9. It is contended for the petitioners that the specifid order by the learned Single Judge (Joseph, J.) while disposing of the writ petitions was to operate only during the period required by the Government to re-examine the policy issue and take a decision thereon. It is urged that the counter affidavit filed by the State Government on 7th December, 2001 in no uncertain terms states that, the policy has been re-examined and the Government is of the view that Rule 13 (3) as it stand on the statute book needs no amendment and no change is required therein. If this be the stand of the Government, petitioners contend that there is no valid reason for the Government not to implement the rule as it stands today. 10. The learned counsel for the additional third respondent, Kerala Bar Hotels Association, Sri. If this be the stand of the Government, petitioners contend that there is no valid reason for the Government not to implement the rule as it stands today. 10. The learned counsel for the additional third respondent, Kerala Bar Hotels Association, Sri. S.V.S. Iyer contends that the history of the amendments carried out to Rule 13(3) would indicate that, at one point of time, i.e. when the amendments were carried out in 1986, the State Government itself, being conscious of the fact that a number of Hotels/Bars/Restaurants had invested large capital for upgrading them upto two star facility as required under the Rule, would suddenly be thrown our of business if the new policy of distance restriction was applied. Consequently, when the rule was amended in 1986, it contained a provision that existing licensees would be permitted to continue business in the same location, unless there was a specific objection, in which case they would be dealt with on a case basis by the excise authorities. Mr. Iyer contends that, between 1986 to 2001, whatever objections could have been raised were either raised and disposed of, or must be deemed to have been waived. Consequently, despite the manner in which Rule 13 (3) stands today, the rule cannot displace the existing licenses from doing business at the existing premises. Alternatively, it is urged that renewal of existing licences cannot be denied by implementing the distance restriction in their cases. It is the submission of the learned counsel that such an implied exemption or modification in favour of the existing licensees must be read in the Rule itself, against the legislative background, and, if such an implied exemption in favour of the existing licensees is not read therein, the rule itself would be invalid, as abridging vested rights. 11. Mr. Ramkumar, learned counsel appearing for additional respondent No. 6, another bar licensee, contends that, upon a proper interpretation of the rule, the licence issued in favour of respondent No. 6 is not liable to be cancelled, or refused to be renewed, as the case of the 6th respondent squarely falls within the parameters of Rule 13 (3) of the Rules for grant of licence, in view of the fact that 6th respondent has upgraded her restaurant to the required star facility. 12. It is not necessary for us to express any opinion on the contentions urged by Sri. 12. It is not necessary for us to express any opinion on the contentions urged by Sri. S.V.S. Iyer or Mr. Ramkumar. We are not unmindful of the chequered history of these writ petitions. Though, at one stage, when the validity of Rule 13(3) as it stands today was challenged, because of the undertaking given by the State Government before Joseph, J., the larger issue of the validity of the rule was not gone into, as the Government agreed to reconsider the issue and take a fresh decision. The Government having reconsidered and taken a decision not to change the policy or not to amend the Rules, it would be perfectly open to the existing licensees to challenge the validity of the Rule on any ground permissible in law, if they so desire. We are unable to examine such a challenge in the present petitions at the instance of the existing licensees, who were merely respondents in the present petitions. In any event, as on today, the Government has categorically stated that it has taken a decision and made its stand explicit by its counter affidavit. The situation contemplated in Ext. P1 judgment of Joseph, J. has occurred, and therefore, the status quo must now come to an end. As far as the contention of Mr. Ramkumar is concerned, it is not necessary for us to express any opinion thereupon too. If and when the rule is sought to be implemented against the additional 6th respondent, or any other similarly situated existing licensee, it is open to them to point out the relevant facts because of which he/she is entitled to have the licence renewed. Any order made by the Government, if erroneous, can be challenged in appropriate proceedings. 13. Considering the matter from all angles, we are of the view that the State Government has no choice but to implement Rule 13(3) as it stands today. There is, however, one more question, more of justice than application of law, which engages our attention. If, at the time when the rule was challenged by the batch of writ petitions before Joseph, J. the learned Single Judge had dismissed the writ petitions without giving any relief, and turned down the challenge to the rule, the Government would have implemented the rule then and there. If, at the time when the rule was challenged by the batch of writ petitions before Joseph, J. the learned Single Judge had dismissed the writ petitions without giving any relief, and turned down the challenge to the rule, the Government would have implemented the rule then and there. Unfortunately, we find that when this petition came up for admission on 29th March, 2001, a Division Bench of this Court (per Balasubramanyan & Hassan Pillai, JJ.) granted an interim direction to the State authorities not to renew/issue FL-3 licence to hotels/restaurants in the State which did not have Two Star facilities and were situated within the prohibited distance of 200 metres from an educational institution, temple, church, mosque or burial ground, as contemplated in Rule 13(3) of the Rules, pending hearing and disposal of the petitions. This interim relief came to be subsequently confirmed by an order made on 11th April, 2001. The existing licensees, being aggrieved by the interim order, moved the Supreme Court by three Special Leave Petitions challenging the interim order. All the Special Leave Petitions were disposed of by a common order on 8th October, 2001 by setting aside the interim order of the Division Bench with a direction to dispose of the pending writ petitions, preferably within three months of the date of the order, making it clear that the Supreme Court was not expressing any opinion on the merits of the pending writ petitions. Consequently, on and from 8th October, 2001, the situation contemplated in Ext. P1 judgment of Joseph, J. revived, as the interim orders wereset aside. Hence, the status quo ante has continued till today. 14. Thus, continuously from 1986 till today, Rule 13(3) has not been implemented strictly. As far as the current abkari year (2001-2002) is concerned, the licences have already been issued to the existing licensees after accepting the requisite fees therefore. These licences are valid upto 31st March, 2002. In these circumstances, though we are of the view that the State Government is required to implement Rule 13(3) in view of its categorical stand before us, in the interests of Justice, we think that the implementation should be deferred till the commencement of the next abkari year from 1-4-2001. We feel this to be just for another reason also. 15. It was urged by the learned counsel for Kerala Bar Hotels Association, Sri. We feel this to be just for another reason also. 15. It was urged by the learned counsel for Kerala Bar Hotels Association, Sri. Iyer, that, notwithstanding the categorical stand taken by the State Government in paragraph 4 of the counter affridavit, the additional respondent No. 3 and its members are hopeful of persuading the State Government to see reason, particularly when no representations were called for, nor a hearing was given to the members of the additional respondent No. 3, before taking a rigid stand on the policy. While we express no opinion as to whether the State Government is bound to hear the existing licensees represented by Mr.S.V.S. Iyer, or whether the State Government is entitled or bound to again change its stand in the matter of amendment of the Rule, we shall give atleast some breathing time to the existing licensees to file representations with the State Government and hope for the best. Conversely, if the State Government once again declines to change its stand, it would be open to the additional third respondent and its members to seek their remedies in law. 16. There are cases where the existing licenses are willing to relocate at other places beyond the prohibited distance. We are informed that by reason of Rule 24 of the Rules, they cannot do it, unless the Excise Authorities grant permission. This is another matter in which the Excise Authorities should look into the difficulties seriously. If the Government decides not to make an amendment (as it has informed the Court currently) then the existing licensees should atleast be given an opportunity for running the business at some other place by exercising the power under Rule 24 of the Rules. For this also, some more time would be required. Hence, on an overall assessment, it would be preferable that the implementation of Rule 13(3) of the Foreign Liquor Rules should be deferred till 31-3-2002. In the result, we make the following order: In view of the stand taken before the court, the State Government shall implement Rule 13(3) of the Foreign Liquor Rules, 1953 as amended upto date, with effect from 1-4-2002. The Excise Authorities shall consider the application for re-location if made by the existing licensees under Rule 24 of the Foreign Liquor Rules. It is preferable that applications for renewal of licence are disposed of latest by 15th March, 2002. The Excise Authorities shall consider the application for re-location if made by the existing licensees under Rule 24 of the Foreign Liquor Rules. It is preferable that applications for renewal of licence are disposed of latest by 15th March, 2002. With the above directions, the Original Petitions are disposed of. No order as to costs.