Judgment This Writ Petition is filed praying to issue a Writ of Certiorarified Mandamus, calling for the records relating to the impugned order in G.O.(D) No.158 dated 28.8.2012 of the 1st respondent, confirming the order of the 2nd respondent in No.P&E-2 (4)/17127/2011 dated 10.5.2012 and quash the same and consequently direct the 2nd respondent to renew the FL-3 license issued to the petitioner hotel within a time fixed by this Hon'ble Court. 2. Heard Mrs.Narmada Sampath, learned counsel appearing for the petitioner and Mr. N. Srinivasan, learned Additional Government Pleader appearing for the respondents. 3. The facts of the case, in brief, as submitted by the learned counsel for the petitioner, are as follows:- The petitioner is a hotel situated at Hosur on the Chennai-Bangalore National Highway. The hotel consists of basement, ground floor and five upper floors and has been granted three-star classification by the Tourism and Development Department, Government of India in the year 2007 and it is being renewed from time to time. The petitioner claims to be the only hotel under the three star classification in the entire district of Krishnagiri and it serves the needs of the industrial hub at Hosur, which consists of national and international companies and as a result, it earns considerable foreign exchange for the country. The hotel attracts lot of foreign visitors and customers relating to the industries located in and around Hosur. It also caters to guests from the neighbouring metropolitan city of Bangalore. It is submitted that Hosur is a very well established industrial zone and has also developed software technology parks. 4. In the petitioner's three-star hotel, there are 109 rooms which includes six wedding-cum-conference halls in the basement. They are used by the customers for conducting marriages, marriage receptions, family get-together, conferences, industrial meet, etc. The hotel applied for and was granted licence to vend 1000 units of liquor under the FL-3 category as per the Tamil Nadu Liquor (License and Permit) Rules, 1981 in July 2007 by an order of second respondent. The petitioner claims that they purchase substantial units of liquor from the respondents every month and contribute approximately Rs.1.75 lakhs per month to the State exchequer. It also pays other taxes as applicable to the State as well as Central Government. The petitioner claims that they purchase substantial units of liquor from the respondents every month and contribute approximately Rs.1.75 lakhs per month to the State exchequer. It also pays other taxes as applicable to the State as well as Central Government. It is pleaded by the learned counsel for the petitioner that the FL-3 licence, granted in July 2007 is being renewed year after year and there is no complaint whatsoever in the past. The licence is renewed for nearly five years approximately without blemish. The hotel is subject to regular check by excise authorities regularly and no irregularity was ever noticed or alleged in the past. The licence was renewed and was never rejected any time. It is further contended by the petitioner's counsel that the hotel entertains foreigners to a great extent in the small town of Hosur. During the year February 2011 to February 2012 the total number of foreigners was near about 2000. It is likely to increase. The petitioner hotel, therefore, earns valuable foreign exchange for the country. 5. Insofar as the cause of action for the present case is concerned, petitioner's counsel submits that a customer booked the Grandeur Hall No.1 for the purpose of a family function to be held on 27.1.2012 and checked into the hotel one day prior i.e., on 26.1.2012. The bills raised in respect of the party by name K. Subramanian for staying as group in Room Nos.5016, 5020, 5021, 4021, 4022 and the corresponding bills for consumption of alcohol etc., by the said party are enclosed as documents annexed to the additional affidavit. So far as the Grandeur Hall No.1 is concerned, Bill No.99 dated 27.1.2012 for 150 covers totalling Rs.2,53,644.00 was raised as per the contract entered into by the very same party for the function to be held on 27.1.2012. According to the petitioner, all the persons of that group were Kannada speaking persons and were not the residents of Hosur. They claimed to hail from Bangalore. According to the petitioner and the staff of the hotel, the party, who had checked into the hotel along with their friends and family, had brought beer bottles said to have been purchased from Bangalore for their own consumption. This was done without notice to the management of the hotel. They claimed to hail from Bangalore. According to the petitioner and the staff of the hotel, the party, who had checked into the hotel along with their friends and family, had brought beer bottles said to have been purchased from Bangalore for their own consumption. This was done without notice to the management of the hotel. However, it appears that the Manager of the hotel, in order to avoid discomfort to the guests and customers allowed the storage of the beer bottles brought by the guests in the freezer as a measure of goodwill considering the party that was to be hosted the next day. It was purely his mistake and the management was not aware of it at all. 6. On 27.1.2012, the Assistant Commissioner of Prohibition and Excise, Krishnagiri made a surprise inspection of the hotel and found that 203 numbers of beer bottles without Tamil Nadu Government labels and batch numbers, but with the wordings "not for sale in Maharashtra but for sale in Karnataka only" were stored in the freezer and they were seized and handed over to the Inspector of Police, Enforcement Wing. A case was booked under the Tamil Nadu Prohibition Act on the same day and the criminal case is going on. As a result, the Commissioner of Prohibition and Excise issued a show-cause notice dated 15.3.2012 calling upon the petitioner to show cause as to why the licence should not be cancelled on the ground that the licensee had violated the licence conditions and the provisions of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981. Fourteen days time was granted for giving an explanation. The petitioner, it appears, filed the reply dated 21.3.2012 on 22.3.2012. A personal hearing was granted on 17.4.2012 and an order came to be passed by the Commissioner of Prohibition and Excise on 10.5.2012 in Proceedings No. P&E 2 (4)/17127/2011 dated 10.5.2012. The proceedings refer to four documents in reference column and the said order is extracted hereunder for better clarity:- 1. From the District Collector, Krishnagiri Letter No.378/2011, dated 27.01.2012. 2. This office show causes Notice No. P&E@(4)17127/2011, dated 15.03.2012. 3. Explanation of Tvl. Renaaisancce Grand Hotel, Letter dated 21.03.2012. 4. This office Hearing Notice No. P&E 2(4)/17127/2011, dated 09.04.2012. Order: In the reference first cited, the District Collector, Krishnagiri has reported that during the inspection of the licensed premises of Tvl. 2. This office show causes Notice No. P&E@(4)17127/2011, dated 15.03.2012. 3. Explanation of Tvl. Renaaisancce Grand Hotel, Letter dated 21.03.2012. 4. This office Hearing Notice No. P&E 2(4)/17127/2011, dated 09.04.2012. Order: In the reference first cited, the District Collector, Krishnagiri has reported that during the inspection of the licensed premises of Tvl. Renaaissancce Grand Hotel, Hosur, Krishnagiri District a holder of FL.3 Licence bearing No.18/2007-2008 by Assistant Commissioner (Excise) Krishnagiri on 27.01.2012, certain bottles had been seized without Tamil Nadu Government excise labels and batch numbers. The seized bottles belong to other States namely Karnataka and the bottles were handed over to the Inspector of Police enforcement wing, Hosur and a case had also been registered in case No.54/2012 on 27.01.2012. 2. Subsequently a show cause notice has been issued to Tvl. Renaaissancce Grand Hotel, Hosur for the above said violation vide this office letter 2nd cited. 3. In the reference 3rd cited the Proprietor of the above said hotel has given his explanation that on 20.01.2012 one marriage party has booked fifteen double room along with the marriage hall for two days occupation. The marriage party people were mostly Kannada speaking and they were residents of Bangalore City, which is nearer to Hosur. The marriage party organizers had brought with them some cases of beer beverage to be issued to the marriage celebrants. In order to serve the beverage cold, the marriage organizers requested the manager of the bar to put the beer bottle in cold storage for which our hotel Manager obliged. The Manager was not aware that such acts were not permissible in the rules, and those bottles were only seized by the excise officials on 27.01.2012 during the inspection. He also requested that not a single bottle of other State IMFL either brandy or whisky was seized by the excise officials at the time of inspection and also stated that he had no motive in keeping the beer bottles in the bottle cooler manufactured in other States except to oblige the marriage party to serve them better. 4. In this office letter 4th cited, the licensee was directed to appear before the Commissioner of Prohibition and Excise for personal hearing on 17.4.2012. During the personal hearing the licensee has reiterated the same explanation given earlier for the show cause notice issued to him. 5. 4. In this office letter 4th cited, the licensee was directed to appear before the Commissioner of Prohibition and Excise for personal hearing on 17.4.2012. During the personal hearing the licensee has reiterated the same explanation given earlier for the show cause notice issued to him. 5. The report of the District Collector, Krishnagiri and the explanation of the licensee were perused and the issue was examined in detail. It is a serious violation committed by the licensee that cannot be brooked and taken lightly and especially in a border-sensitive area abutting Karnataka. The bottles had been sourced from the neighbouring State obviously, whereas the original production State appears to be Maharashtra. This is a grave infringement of licence condition defeating the very purpose of protecting the commercial interest of TASMAC. Hence the violations are held proved beyond any doubt and it is hereby ordered to cancel the FL.3 licence bearing No.18/2007-2008 issued to this Hotel under rule 22(1) of Tamil Nadu Liquor (L&P) Rules, 1981. It is concurrently ordered to forfeit the entire Security Deposit, in this case as a suitable penalty for the transgression." 7. Consequent to the order of cancellation of FL-3 licence and the forfeiture of security deposit as penalty, the petitioner hotel's application for renewal of FL-3 licence dated 23.2.2012 was kept pending. The petitioner, however, filed an appeal against the order of the Commissioner of Prohibition and Excise before the Secretary to Government, Prohibition and Excise, the first respondent on 22.5.2012. Petitioner/Appellant in the appeal relied on the copies of the following documents, five in number, before the Government:- (i) Form FL.3 under Rule 17, 19 & 23 issues vide letter R. Dis. P&E 2(4)/5889/2007 dated 13.7.2007. (ii) Fly leaf of the licensee (under Rule 48) from the Commissioner of Prohibition and Excise dated 13.07.2007. (iii) Fly leaf of the licensee-Renewals given by the Commissioner of Prohibition and Excise (iv) Proceeding of the Commissioner vide P&E 2(4)/17127/2011 dated 10.05.2012 (v) Copies of the Functions booking/Function Prospectus/Copies of bills of the hotel functions to submit that the alleged breach is not by the hotel management, but by customers from other State. The records were filed in support of this plea. 8. Additional grounds were also raised on 18.6.2012 before the first respondent. The records were filed in support of this plea. 8. Additional grounds were also raised on 18.6.2012 before the first respondent. A specific plea has been taken in the additional grounds that the original authority referred to a report of the District Collector dated 27.1.2012, but had failed to furnish a copy of the same to the petitioner-appellant. The said report of the District Collector is the basis of the order for cancellation and forfeiture and, therefore, there is gross violation of the principles of natural justice, as the nature of report is not known to the petitioner and the petitioner did not have the opportunity to rebut the same. It was also pleaded that the licence was due to expire on 31.3.2012 and the application for renewal was filed on 21.2.2012 and a sum of Rs.4 lakhs was also remitted. However, the original authority-Commissioner of Prohibition and Excise chose to cancel the licence which had already expired and, therefore, there is non application of mind by the authority while passing the said order. These additional grounds taken are in addition to the grounds already taken in the main appeal inter alia contending that the liquor bottles were as per the stock register and subject to surprise checks by the officers of Prohibition and Excise Department and there was no need to bring beer bottles from other State. That the goods seized did not belong to the petitioner-hotel, but they were brought by the guests for their own consumption without the knowledge of the management. The plea was on bona fides while alleging mala fides on a particular officer as cause of action for the excise raid and consequent action. 9. Since the appeal was not disposed of expeditiously, a writ petition was filed to dispose of the appeal in W.P.No.17070 of 2012. This Court, by order dated 4.7.2012, in paragraph-5, passed the following order: "5. Heard the learned counsel on either side and perused the documents available on record. There is no dispute that the petitioner filed appeal dated 28.05.2012 to the respondent and the same is pending without orders. The specific grievance of the petitioner is that the inordinate delay in the disposal of the appeal would cause serious hardship to the petitioner. Heard the learned counsel on either side and perused the documents available on record. There is no dispute that the petitioner filed appeal dated 28.05.2012 to the respondent and the same is pending without orders. The specific grievance of the petitioner is that the inordinate delay in the disposal of the appeal would cause serious hardship to the petitioner. Considering the facts and circumstances of the case, in the interest of justice, the respondent is directed to take up the appeal dated 28.05.2012, consider the same and pass orders in accordance with law within a period of three weeks from the date of receipt of a copy of this order." 10. In view of the above, the Government took up the matter and disposed of the appeal and passed an order in G.O.(D) No.158, Home Prohibition & Excise (VIII) Department dated 28.8.2012 and the said order reads as follows:- Read: 1. Appeal petition submitted by Thiru U. Santhanam Pillai, Proprietor, Tvl. Rennaissancce Grand Hotel, Hosur, Krishnagiri District through his Counsel, dated 22.05.2012. 2. Government Letter No.12496/H, P & E (VIII)12-1, dated 25.05.2012. 3. Appeal petition to raise additional grounds submitted by Thiru U. Santhanam Pillai, Proprietor, Tvl. Rennaissancce Grand Hotel, Hosur, Krishnagiri District through his Counsel, dated 18.06.2012. 4. Government D.O. Letter No.12496/H,P&E(VIII)/12-2, dated 20.06.2012. 5. From the Commissioner of Prohibition and Excise Letter No.P & E 2(4)/17127/2011, dated 29.06.2012. 6. From the Hon'ble High Court of Madras, order dated 04.07.2012 in W.P.No.17070/2012. Tvl. Rennaissancce Grand Hotel, Hosur was a three star Hotel in Krishnagiri District with a holder of FL3 Licence bearing No.18/2007-2008. The Assistant Commissioner (Excise), Krishnagiri, during his inspection on 27.1.2012 seized some liquor bottles without Tamil Nadu Government Excise labels and batch numbers. The labels in seized bottles read "Not for sale in Maharashtra, but for sale in Karnataka only" and the bottles were handed over to the Inspector of Police, Enforcement Wing, Hosur. For the above irregularities committed by the licensee, the FL3 licence of Tvl. Rennaissancce Grand Hotel, Hosur was cancelled by the Commissioner of Prohibition and Excise in his Proceedings No.P&E2(4)/17127/2011 dated 10.5.2012. Against this cancellation order, Tvl.Rennaissancce Grand Hotel have filed their Appeal petition first read above before the Government. 2. At this juncture, Tvl. For the above irregularities committed by the licensee, the FL3 licence of Tvl. Rennaissancce Grand Hotel, Hosur was cancelled by the Commissioner of Prohibition and Excise in his Proceedings No.P&E2(4)/17127/2011 dated 10.5.2012. Against this cancellation order, Tvl.Rennaissancce Grand Hotel have filed their Appeal petition first read above before the Government. 2. At this juncture, Tvl. Rennaissancce Grand Hotel, Hosur filed Writ Petition in W.P.No.17070/2012 on the file of High Court of Madras, Chennai against the orders issued by the Commissioner of Prohibition and Excise cancelling their FL3 licence. The Hon'ble High Court of Madras, in its order dated 4.7.2012 has directed the Government to take up the appeal, consider the same and pass orders in accordance with law within a period of three weeks from the date of receipt of the copy of this order. 3. Based on the appeal petition, the petitioner has been given a personal hearing on 24.7.2012. The petitioner along with his counsel attended the hearing. 4. The Appeal petition has been examined by the Government based on the remarks of the Commissioner of Prohibition and Excise on the appeal petition and the oral statement of the petitioner during the personal hearing. After careful examination, the Government hereby direct that the appeal petition of Tvl. Rennaissancce Grand Hotel, Hosur, Krishnagiri District, against the cancellation orders of the Commissioner of Prohibition and Excise be rejected on the following grounds:- (i) During the inspection, 203 other State liquor bottles of 17 cases without Tamil Nadu Government Excise labels and batch Nos., had been found and seized by the Assistant Commissioner (Excise) Krishnagiri. (ii) The seized liquor bottles were kept in the cold storage in the hotel premises with the full knowledge of the petitioner. (iii) The petitioner has not submitted any additional points to consider his appeal petition against the cancellation order of the Commissioner of Prohibition and Excise." 11. The above order is under challenge in this writ petition on the following grounds:- (i) In spite of a specific plea taken in the appeal as additional grounds that the report of the District Collector dated 27.1.2012 has not been furnished, there is no discussion in the order in appeal on that issue even though additional grounds are referred to in the reference column of the order under challenge. The original authority-Commissioner of Prohibition and Excise also relied upon the report of the District Collector dated 27.1.2012, but he did not give the details of the report in the order. A copy of the report was not furnished to the petitioner so as to enable the petitioner to file his objections. The report is relied upon, but it is done behind the back of the petitioner, to cancel the licence and to order forfeiture of the security deposit as penalty. Therefore, the report, which forms the sole and primary reason in passing the original order cancelling the licence and forfeiture of security deposit without furnishing a copy of the same, would be fatal to the entire proceedings. The proceeding is therefore, arbitrary, besides, being violative of principles of natural justice. (ii) Neither the original authority which passed the order on 10.5.2012 nor the Government which passed the order in appeal on 28.8.2012 have realised that the licence had already expired on 31.3.2012 and there is only a renewal application pending. The original authority cancelled a dead licence and the appellate authority-Government also confirmed the said order, which only goes to show that there was total non-application of mind to the relevant factors. (iii) The original authority has imposed dual punishment of cancelling the licence as well as forfeiture of security deposit, whereas the show cause notice dated 15.3.2012 was issued only for cancellation of licence. Assuming that the licence, which was cancelled, is a dead licence, the further penalty imposed by the Commissioner of Prohibition and Excise ordering forfeiture of security deposit as penalty for transgression is unwarranted and in any event, it is beyond the scope of the show cause notice. As the issue of forfeiture of security deposit was not raised in the show cause notice, the petitioner had no opportunity to rebut the same. Hence the order is bad on this issue as well. (iv) The appellate authority neither thought it fit to consider the nature of liquor bottles seized nor their quantum. All that is stated by the appellate authority is that certain quantity of liquor bottles without the Tamil Nadu Government Excise labels and batch numbers were seized. What is the nature of goods seized, their quantum and relevance have not been considered by the appellate authority. All that is stated by the appellate authority is that certain quantity of liquor bottles without the Tamil Nadu Government Excise labels and batch numbers were seized. What is the nature of goods seized, their quantum and relevance have not been considered by the appellate authority. This assumes significance as a specific plea has been raised by the petitioner that the seized bottles are only beer bottles and not Indian Made Foreign Liquor bottles which has more value and, therefore, there was no need for the petitioner-licence holder to indulge in the stocking of beer bottles from other State. The Government thought it fit to reject the appeal on three grounds, namely, that the seized liquor bottles did not bear the Tamil Nadu Government Excise label or batch numbers; they were kept in cold storage in the hotel with the full knowledge of the petitioner and that no new points were raised. This apparently is wrong because of the additional grounds raised and not considered. (v) It was also pleaded by the petitioner that there is tampering of mahazar. 12. The learned counsel for the petitioner relied upon the additional typed set filed to show that action has been taken against the Bar incharge and Food & Beverage Manager of the hotel for the alleged misconduct and their admission of the guilt, to emphasise that the management had no knowledge of the incident. This plea was taken at the first instance in the reply to the show cause notice, but, has not been considered. This plea should have been considered for awarding lesser punishment than the one imposed by the original authority and confirmed by the appellate authority, if they did not agree with the prima facie case. It is pleaded that there was no violation of any kind in the past nearly five years from July, 2007. The FL-3 licence is being renewed time and again. The authorities have been regularly checking the hotel and there is no adverse remarks so far and the renewal was not rejected so far. The petitioner further pleads that they earn valuable foreign exchange and the number of visitors of foreign origin is substantial and they contribute to the foreign exchange earnings. On this plea, leniency is pleaded if the merits are not convincing. 13. The petitioner further pleads that they earn valuable foreign exchange and the number of visitors of foreign origin is substantial and they contribute to the foreign exchange earnings. On this plea, leniency is pleaded if the merits are not convincing. 13. A counter affidavit has been filed by the second respondent-Commissioner of Prohibition and Excise in support of the two orders, one passed by the original authority and the other by the appellate authority. In reply to ground (c), it has been stated as follows:- "It is submitted that as stated by the petitioner no illegality was committed by the 2nd respondent in non-supplying of the recommendation report of the 3rd respondent to the petitioner before passing order of cancellation as there was no representation or request by the petitioner for supplying the same and it is not mandatory to supply the copy of report of 3rd respondent to the petitioner before passing orders. Hence the averments made in ground c are not acceptable." Hence non furnishing of the District Collector's report dated 27.1.2012 is not in dispute and that report is the mainstay of the two orders. 14. Having considered the rival contentions, it is to be noticed that when a specific ground has been raised before the Government that the report dated 27.1.2012 of the District Collector has not been furnished, the appellate authority should have considered the said plea and should have interfered with the order of the original authority when there is a failure to furnish the copy of the report. This will be in consonance with the principles of audi alteram partem. It is seen from the order in original passed by the second respondent that the report of the District Collector is relied upon primarily for initiating action for cancellation of FL.3. Therefore, it is all the more necessary that the report of the District Collector dated 27.1.2012, which forms the mainstay of the department's case, should have been furnished to the petitioner, who can rebut the same, if aggrieved by the contents of the report. Placing reliance on the District Collector's report without furnishing it along with the show cause notice is fatal to the proceedings. The first respondent has failed to consider the additional grounds raised on the issue that the District Collector's report has not been furnished. Placing reliance on the District Collector's report without furnishing it along with the show cause notice is fatal to the proceedings. The first respondent has failed to consider the additional grounds raised on the issue that the District Collector's report has not been furnished. Therefore, it is evident that the Government has not considered the said plea at all in the appeal. The non-furnishing of the District Collector's report is in violation of the principles of natural justice, and the principles of audi alteram partem as relying upon such report without furnishing a copy of the same would strike at the root of the proceedings, more particularly, when civil consequences resulting in the cancellation of licence and forfeiture of security deposit in terms of the Tamil Nadu Liquor (Licence and Permit) Rules has been ordered. The petitioner's plea on that score appears to be justified. The entire exercise is, therefore, in violation of the above stated legal principle. 15. The next point raised is that the licence was to expire on 31.3.2012 and the renewal application was filed and pending on the date of passing of the original order. Though a show cause notice was issued on 15.3.2012, neither the original authority nor the appellate authority thought it fit to consider the consequence of the expiry of the licence on 31.3.2012 itself, well before the first order was passed by the second respondent on 10.5.2012 and the order of the Government in appeal on 28.8.2012. The plea of non application of mind to the above facts of the case at the time of taking decision is apparent. 16. The documents produced before the appellate authority along with records containing the copies of the function bills, etc., of the hotel have not been considered at all, as the petitioner's plea, in reply to the show cause notice, is that the seized beer bottles do not belong to them, but they belong to the guests. This aspect also has not been considered by the Government. Before this Court a specific plea as above has been taken supported by the documents as presented before the Government. It is one of the mitigating circumstances that should have been considered by the Government while proceeding to accept an extreme measure to cancel the licence and impose penalty by way of forfeiture of security deposit. That factor has not been considered in this case. 17. It is one of the mitigating circumstances that should have been considered by the Government while proceeding to accept an extreme measure to cancel the licence and impose penalty by way of forfeiture of security deposit. That factor has not been considered in this case. 17. The show cause notice is issued to cancel the licence but the order goes further by way of forfeiture of security deposit. The legal plea that the order goes beyond the show cause notice is justified. In any event, the petitioner is justified in pleading prejudice by forfeiture of security deposit without being put to notice. 18. The plea of the petitioner that the offending goods do not belong to them but the guest supported by guest bills and vouchers placed before appellate authority has not been considered. It is evident from the cursory nature of the order passed in appeal. 19. As regards the plea of mala fides is concerned, though it has been raised in the writ petition, there is no reply in the counter affidavit. Assuming it is so, this Court is not inclined to go into that issue, as the concerned Officer is not a party respondent. 20. As regards the plea of tampering of mahazar is concerned, though such a plea is taken before this Court, such a plea was neither raised before the original authority while replying to the show cause notice nor before the appellate authority in the grounds of appeal or additional grounds. Therefore, this Court is not inclined to go into the plea of tampering of mahazar, though it may be a relevant factor for the purpose of proving that the entire issue is an orchestrated episode due to ill-will of one or other officer in any relevant proceedings. 21. Rule 22 of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981 relates to cancellation or suspension of licences. Rule 22(1)(2)(3) of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981 reads as follows:- 22. 21. Rule 22 of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981 relates to cancellation or suspension of licences. Rule 22(1)(2)(3) of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981 reads as follows:- 22. Cancellation or suspension of licences:-(1) The licensing authority may, after giving in writing to the licence holder an opportunity to show cause within a reasonable time not exceeding fourteen days against the action proposed to be taken or order proposed to be issued, stating the reasons therefor, by an order in writing specifying the reasons, cancel the licence under these Rules or suspend it for such period as it thinks fit, if in its opinion, the licence holder has failed to comply with any of the conditions of the licence or of any of the provisions of the Act or the Rules made thereunder. (2) Notwithstanding anything contained in sub-rule (1), the licensing authority may temporarily suspend the licence for a period not exceeding ninety days pending framing of charges for violation or irregularities noticed. In such a case, the reason for suspension shall be communicated to the licence holder within five days from the date of suspension. (3) When a licence is cancelled or suspended or temporarily suspended or is not renewed after its expiry the licence holder shall not sell, use or otherwise dispose of any of the stock of liquor or medicated wine held by him under the licence at the time of such cancellation, suspension, temporary suspension or expiry and shall abide the orders of the licensing authority regarding the disposal of such stock. The licence holder shall not also be entitled to claim any compensation on account of cancellation, suspension, temporary suspension or non-renewal of the licence. The authority is given the discretion either to cancel the licence or suspend the licence based on an opinion to be formed. Exercise of such power presupposes application of mind to relevant factors and recording of reason to resort to cancellation or suspension. The cancellation of licence is not mandatory, but discretionary. Discretion that has to be exercised by an authority has to based on reasons. If reasons are not clear it will amount to non consideration of relevant facts and as a consequence the order cancelling the licence can be challenged as excessive. 22. The cancellation of licence is not mandatory, but discretionary. Discretion that has to be exercised by an authority has to based on reasons. If reasons are not clear it will amount to non consideration of relevant facts and as a consequence the order cancelling the licence can be challenged as excessive. 22. Rule 23 of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981 relates to security deposit and the said rule reads as under:- "23. Security.--In the case of application for licences in Form F.L.1, F.L.2, F.L.3, F.L.3 (A), F.L.3(AA), F.L.5, F.L.6, F.L.10, F.M.1 or F.M.2 the licensing authority shall before granting the licence, require the applicant to execute a counterpart agreement in Form F.M.5 in conformity with the tenure of his licence and also to deposit with the Commissioner in cash or Government Promissory Note, as security for the due observance of the conditions of the licence. The amount of security deposit for licence specified above except F.L.1, F.L.2 and F.L.3 and F.L.3(AA) including additional F.L.3 and F.L.10 shall be equivalent to the licence fee for the respective licence and in the case of licence in Form F.L.1, the amount of security deposit shall be rupees five thousand only and in the case of licensees in Form F.L.2 and F.L.3 and F.L.3(AA), the amount of security deposit shall be Rs.50,000/-(Rupees fifty thousand only) and in the case of an additional permit room in the same hotel under additional licence in Form F.L.3 the amount of security deposit shall be Rs.75,000 (Rupees seventy five thousand only) in the case of licence in Form F.L.10 the amount of security deposit shall be Rs.50,000 (Rupees fifty thousand only). In cases on non-observance or any breach of the condition of licence the security deposit in whole or part may be forfeited to the Government by the licensing authority or by any officer authorised by him in this behalf and the licence may be cancelled by the licensing authority. In cases on non-observance or any breach of the condition of licence the security deposit in whole or part may be forfeited to the Government by the licensing authority or by any officer authorised by him in this behalf and the licence may be cancelled by the licensing authority. The forfeiture of the deposit and the cancellation of the licence under this or the preceding rule shall not be held to prevent the licence-holder from being proceeded against in a Court of law under the provisions of the Act or the Rules made thereunder or any other law for the time being in force: Provided that the absence of a counterpart agreement shall not vitiate anything done or any action taken prior to the execution of the counterpart agreement for violation of the condition of the licence or the provisions of the Rules. A licence already issued shall be liable for cancellation, if the licence fails to execute the counterpart agreement within the time stipulated by the licensing authority." (emphasis added) Rule 23 contemplates that for non-observance or breach of condition of licence, security deposit can be forfeited in whole or in part to the Government by the licensing authority. Here again a discretion is given to the authority. In effect what is the nature of penal consequences to be imposed has to be considered and a reasoned order has to be passed. That is lacking in the present case. 23. In the present case, there is violation of the principles of natural justice, as the report of the District Collector, which forms the basis of the order of the second respondent, has not been furnished along with the show cause notice. The specific plea about the non furnishing of the District Collector's report taken in the appeal has also not been considered. The fact that the licence expired on 31.3.2012 has not been considered while passing the order of cancellation of licence. The show cause notice is issued only to cancel the licence, whereas the order proceeds to impose penalty by way of forfeiture. Since, the order goes beyond the show cause notice, the said legal plea is justified. 24. The fact that the licence expired on 31.3.2012 has not been considered while passing the order of cancellation of licence. The show cause notice is issued only to cancel the licence, whereas the order proceeds to impose penalty by way of forfeiture. Since, the order goes beyond the show cause notice, the said legal plea is justified. 24. Considering all these factors, assuming for a moment that there has been some breach or violation of the prohibition laws, the authority has the liberty to either cancel or suspend the licence at the first instance in terms of Rule 22 of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981. In this case, the show cause notice was issued only for cancellation of licence and there was no valid licence on the date of cancellation. The authority should have also considered the bona fide claim of misuse by the guests with the connivance of the staff of the hotel to consider and impose a lesser punishment in the nature of of suspension. There is no allegation of previous misuse or abuse of the prohibition laws for nearly five years. The deviant act is alleged for the first time as is evident from the records. As provided under Rule, the authority could have considered lesser punishment of suspension together with forfeiture that too by stating so in the show cause notice. 25. The Court, taking note of the above legal and factual plea and the admitted facts in the case and also taking note of the reasons given by the Government which did not consider the legal plea, but decided only on three factual aspects, namely, seizure of bottles without excise labels and batch numbers and holding that the petitioner had knowledge and no additional points to be considered in appeal, has no hesitation to hold that there is no proper application of mind by the authorities to all the issues raised by the petitioner and the approach is cursory. The additional grounds raised has not at all been considered as is evident from the third finding. In these circumstances, the Court does not find any justification in the order of the original authority, as confirmed by the first respondent to impose the punishment of cancellation of licence and forfeiture of security deposit which is passed without appreciating the plea of violation of principles of natural justice and the other legal plea. In these circumstances, the Court does not find any justification in the order of the original authority, as confirmed by the first respondent to impose the punishment of cancellation of licence and forfeiture of security deposit which is passed without appreciating the plea of violation of principles of natural justice and the other legal plea. The order is beyond the show cause notice. When it is clearly admitted in the counter affidavit that the report of the District Collector was not furnished, the appellate authority ought to have considered the prima facie plea as stated in additional grounds and could have modified the order of the second respondent and imposed a lesser punishment. The non furnishing of the report of the District Collector is fatal to the proceedings as it goes against the principles of audi alterm partem. 26. The principle of audi alteram partem is the basic concept of principle of natural justice and it connotes that a person must be given an opportunity to defend himself. This principle covers various phases right from issuing of notice to the passing of the final order. The principle of audi alteram partem contemplates that a person against whom action is sought to be taken should be given a fair hearing, which includes: (i) a notice giving sufficient time clearly indicating the allegations against the person; (ii) such person should be permitted to present his case and produce evidence; (iii) all the adverse evidence relied on should be disclosed to the person; (iv) he should be permitted to rebut the evidence put against him; and (v) thereafter, a speaking order with reasons should be passed. Any violation of any one of the phases enunciated above, would cause substantial prejudice to the affected party and would result in violation of the principle of audi alteram partem. The petitioner's case squarely falls under the above parameter. 27. Further, when the show cause notice does not contemplate the forfeiture of security deposit, the Government ought to have considered the plea that both cancellation and forfeiture is not justified, to correct the licensee for the alleged breach. Taking note of the above factors, since it is apparent that the petitioner had accepted the breach to the extent that there is violation by the guests in connivance with the staff of the hotel, necessary consequence has to follow. Taking note of the above factors, since it is apparent that the petitioner had accepted the breach to the extent that there is violation by the guests in connivance with the staff of the hotel, necessary consequence has to follow. The non renewal of licence and closure of the bar for a period of more than ten months itself is sufficient punishment in terms of Rule 23 of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981. The petitioner's further plea is that the hotel is earning valuable foreign exchange and, therefore, it should be allowed to run the bar by way of renewal of the FL-3 licence, can be considered as Rules 22 and 23 of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981 are provisions to correct the licensee, if there is breach giving the authority the discretion to decide the quantum from case to case. The period during which the bar was closed (i.e.) 10 months is sufficient punishment together with forfeiture as penalty. In such circumstances, the renewal can be considered as equitable remedy. 28. The records now produced before the Court as well as before the appellate authority clearly establish that there is an element of bona fide on the part of the petitioner-hotel that the guests had in fact booked the marriage hall and consumed food and beverages on 26.1.2012 and 27.1.2012. The non application of mind to relevant facts and failure to exercise discretion properly is also evident from the findings above. Considering all these factors this Court is of the view that a balance can be struck between the punishment and penalty suffered by the petitioner and the interest of the Excise of Prohibition Department to correct such errant actions. 29. All that Rules 22 and 23 of the Tamil Nadu Liquor (Licence and Permit) Rules provide is that in appropriate cases, there can be cancellation or suspension and forfeiture can be partial or full depending upon the facts of each case. The authority is given discretion to exercise this power depending on gravity and conduct of the party. It is not the case of the respondents that the petitioner were habitual in breaching the licence conditions. The authority is given discretion to exercise this power depending on gravity and conduct of the party. It is not the case of the respondents that the petitioner were habitual in breaching the licence conditions. Taking note of the above factors, this Court is of the view that instead of cancelling a licence, which is no more in force, the balance period of licence from 27.1.2012 till 31.3.2012 can be treated as period of suspension and the forfeiture of security deposit as penalty for transgression would suffice. The bar licence in this case has not been renewed for many months, thereby depriving the petitioner of the income while running a three-star category hotel. It virtually amounts to suspension of business in the bar for a period of more than ten months and it is a deterrent and warning by itself. It is to be noted that the cancellation of licence will apply to the period of validity of licence which in this case is over by 31.3.2012. Therefore, the Court, while upholding the order so far as the forfeiture of security deposit as penalty for the alleged breach, is inclined to set aside the order of cancellation of licence to be modified as suspension for the purpose of considering the claim for renewal of licence for the subsequent period. The period from 27.1.2012 to 31.3.2012 will be treated as period of suspension of licence. The petitioner shall not make any claim towards cost or damages on the respondents for the period from 27.1.2012 to the date of this order on the ground of non renewal of licence. The order as above is passed to give equitable remedy after modifying the order of cancellation to that of suspension together with forfeiture of security deposit. The court has also noticed the past record of no breach and the amount of foreign exchange it will earn if the bar is allowed to run considering the number of foreigners who have visited the hotel during the year 2011-12 as stated in the renewal application. In appropriate cases, court will have to strike a balance and grant relief taking note of the purpose of the prohibition law and the purpose behind the proposed action which is more in the nature of deterrent on the licensees to avoid breach. In appropriate cases, court will have to strike a balance and grant relief taking note of the purpose of the prohibition law and the purpose behind the proposed action which is more in the nature of deterrent on the licensees to avoid breach. It will be ideal if total prohibition is imposed as is advocated by many especially, mai women of our country. 30. This court is inclined to mould the relief to curtail further litigation and allow the business to run and in this context, reference can be made to the judgment of the Supreme Court in Badrinath v. Government of Tamil Nadu and others, (2000) 8 SCC 395 , where the Apex Court held as follows:- "88. We may, however, point out that it is not as if there are no exceptions to this general principle. The occasions where the Court issued a writ of certiorari and quashed an Order and had also issued a mandamus at the same time to the State or public authority could be very rare but we might emphasise that the power of this Court to mould the relief in the interests of justice in extraordinary cases cannot be doubted. In Comptroller & Auditor General of India v. K.S. Jagannathan, (1986) 2 SCC 679 , such a power on the part of this Court was accepted by a three-Judge Bench. Madon, J. referred to the observations of Subba Rao, J. (as he then was) in Dwarka Nath v. ITO, AIR 1966 SC 81 , wherein the learned Judge explained that our Constitution designedly used wide language in Article 226 to enable the Courts to reach justice wherever found necessary and to mould the reliefs to meet peculiar and complicated requirements of this country. Justice Madon also referred to Rochester Corpn. v. R. 1858 EB & E 1024, R. v. Revising Barrister for the Borough of Hanley, (1912) 3 KB 518, Padfield v. Minister of Agriculture Fisheries and Food, 1968 AC 997 and to a passage from Halsbury's Laws of England, 4th Edn. Vol. 1, p. 59. Finally Madon, J. observed: (SCC pp. 692-93, para 20) 20. v. R. 1858 EB & E 1024, R. v. Revising Barrister for the Borough of Hanley, (1912) 3 KB 518, Padfield v. Minister of Agriculture Fisheries and Food, 1968 AC 997 and to a passage from Halsbury's Laws of England, 4th Edn. Vol. 1, p. 59. Finally Madon, J. observed: (SCC pp. 692-93, para 20) 20. There is thus no doubt that the High Courts in India exercising their jurisdiction under Article 226 have the power to issue a writ of mandamus or a writ in the nature of mandamus or to pass orders and give necessary directions where the Government or a public authority has failed to exercise or has wrongly exercised the discretion conferred upon it by a statute or a rule or a policy decision of the Government or has exercised such discretion mala fide or on irrelevant considerations or by ignoring the relevant considerations and materials or in such a manner as to frustrate the object of conferring such discretion or the policy for implementing which such discretion has been conferred. In all such cases and in any other fit and proper case a High Court can, in the exercise of its jurisdiction under Article 226, issue a writ of mandamus or a writ in the nature of mandamus or pass orders and give directions to compel the performance in a proper and lawful manner of the discretion conferred upon the Government or a public authority, and in a proper case, in order to prevent injustice resulting to the parties concerned, the court may itself pass an order or give directions which the Government or the public authority should have passed or given had it properly and lawfully exercised its discretion. (emphasis supplied) We emphasise the words underlined in the above passage to the effect that the Court may in some rare situations itself pass on order or give directions which the Government or the public authority should have passed or given had it properly and lawfully exercised its discretion. The same view was expressed by another three-Judge Bench in B.C. Chaturvedi v. Union of India, (1995) 6 SCC 749 even regarding disciplinary cases. Verma, J. (as he then was) observed (at SCC p. 762, para 18) as follows: The High Court/Tribunal, while exercising the power of judicial review, cannot normally substitute its own conclusion on penalty and impose some other penalty. Verma, J. (as he then was) observed (at SCC p. 762, para 18) as follows: The High Court/Tribunal, while exercising the power of judicial review, cannot normally substitute its own conclusion on penalty and impose some other penalty. If the punishment imposed by the disciplinary authority or the appellate authority shocks the conscience of the High Court/Tribunal, it would appropriately mould the relief, either directing the disciplinary/appellate authority to reconsider the penalty imposed, or to shorten the litigation, it may itself, in exceptional and rare cases, impose appropriate punishment with cogent reasons in support thereof. (emphasis supplied) The underlined words reiterate the powers of this Court in rare and exceptional cases." 31. In view of the above, the impugned order is set aside and the period between 27.1.2012 till 31.3.2012 will be treated as period of suspension in terms of Section 22 of the Tamil Nadu Liquor (Licence and Permit) Rules, 1981. The forfeiture of security deposit is confirmed. The second respondent is, however, directed to take up the application for renewal of the FL-3 licence and grant the licence for the balance period (i.e.) 2012-13, subject to the petitioner complying with all other formalities as required under the Prohibition laws. The authority is directed to pass an order on receipt of the order of this Court. The writ petition is ordered on the above terms. Consequently, connected M.P.Nos.1 to 3 of 2012 are closed. No costs.