Liquor licensing policy and Article 14: exclusion of three-star hotels upheld, but distance-based restriction struck down.

A liquor licensing policy may be revised by the State, and the deletion of three-star hotels from FL-3 eligibility was upheld as a valid policy reassessment under the regulatory scheme. However, the distance restriction introduced in Rule 13(3E) was struck down because it lacked a rational nexus with the stated objectives of public health and tourism promotion and operated arbitrarily in the circumstances, particularly where existing bar hotels were themselves non-standard and repeatedly regularised. The challenge therefore succeeded only in part: the exclusion of three-star hotels stood, while the distance-based restriction was invalidated under Article 14.

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Issues: (i) Whether the 2011 amendment deleting three-star hotels from the class eligible for FL-3 licences under Rule 13(3) was valid; (ii) Whether the 2012 amendment introducing the distance restriction in Rule 13(3E) was valid.

Issue (i): Whether the 2011 amendment deleting three-star hotels from the class eligible for FL-3 licences under Rule 13(3) was valid.

Analysis: The licensing scheme for foreign liquor sale is regulatory in nature and may be altered by the State in accordance with policy. The earlier exclusion of two-star hotels had already been upheld, and the Court treated the deletion of three-star hotels as a similar policy reassessment. The tourism classification scheme also showed that a bar licence was not indispensable for a three-star hotel, while the State was entitled to balance tourism with public interest and the objective of curbing liquor consumption.

Conclusion: The 2011 amendment deleting three-star hotels from eligibility for FL-3 licences was held valid.

Issue (ii): Whether the 2012 amendment introducing the distance restriction in Rule 13(3E) was valid.

Analysis: The distance restriction was tested against Article 14 and the stated objectives of the Abkari policy. The Court found that the rule would operate by excluding new higher-category hotels because of the presence of existing bar hotels that were themselves non-standard and had been repeatedly regularised. In view of the audit findings and the continuing tolerance of deficient establishments, the correlation between the restriction and the professed object of public health and promotion of tourism was not satisfactorily established, making the measure arbitrary in the circumstances.

Conclusion: The 2012 amendment introducing Rule 13(3E) was held bad in law.

Final Conclusion: The challenge succeeded only in part. The deletion of three-star hotels from FL-3 eligibility was sustained, but the distance-based restriction was invalidated.

Ratio Decidendi: A liquor-regulating policy may be altered by the State, but where permitted trade is classified or restricted, the measure must bear a rational nexus to the stated object and must not operate arbitrarily or discriminatorily under Article 14.

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