TaxTMI 
TaxTMI 
2012 (7) TMI 1086
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....above Rules. Later through another amendment by SRO No. 202/2012 dated 27-03-2012 [GO(P) No. 48/2012/TD] another prohibition was introduced by inserting sub-rule (3E) to Rule 13 whereunder even four star and above category hotels constructed within a radius of 3 Kms. in Grama Panchayats and 1 Km. in Municipal/Corporation limits, from another hotel/Restaurant with FL-3 licence, were declared disentitled for the grant of new FL-3 licence. 2. The appellants/petitioners contend that they have in the course of last 1-2 years constructed star hotels spending more than Rs. 10 crores for each Hotel, mostly with borrowed funds obtained from public sector financial institutions like Kerala Financial Corporation, Kerala State Industrial Development Corporation and from Nationalized Banks, and all these three star and above category hotels cannot be run viably without Bar licence. The Hotels of all appellants/petitioners are all having classification of "Three Star" and above. The petitioners in W.P.(C). Nos. 8878 of 2012, 9518 of 2012, 8152 of 2012 and 8840 of 2012 have "Four Star" classification and the petitioners in W.P.(C). Nos. 11555 of 2012 and 14225 of 2012 respectively have "Five S....
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....learned Additional Advocate General took us through the decision in Ugar Sugar Works Ltd. v. Delhi Administration [ (2001) 3 SCC 635], which held that mere business interests of a party cannot justify interference in the policy matters if the same is not touched by mala fides and is not unfair, unreasonable or arbitrary. Reliance was also placed on the decision in State of M.P. v. Narmada Bachao Andolan [ (2011) 7 SCC 639], by which the Hon'ble Supreme Court held that the High Court cannot strike down a policy decision merely because another decision would have been fairer, more logical or wiser. 5. The learned counsel for the appellants/petitioners, however have brought to our notice the Constitution Bench decision of the Supreme Court in Khoday Distilleries Ltd. & Ors v. State of Karnataka [ (1995) 1 SCC 574] wherein the Supreme Court has clearly stated that even though right to carry on liquor business is not a fundamental right, once it is permitted in the State, the State has to make Rules and permit the business without any arbitrariness or discrimination and in conformity with Article 14 of the Constitution of India. Keeping the principles laid down by the Supreme Court i....
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....vernment of India, no such licence shall be issued if located within 50 (fifty) metres from any educational institution, temple, church, mosque, burial ground or scheduled caste/scheduled tribe colony. The applicant shall produce from the Abkari Workers Welfare Fund Inspector a certificate to the effect that he has remitted before the date of application for the licence/renewal of licence, the arrears of contributions, if any, payable up to the 31st of December of the preceding year. The existing licensees who do not maintain two star standards will be allowed time up to 31st March 2007 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 forfeiture of rental paid by them. licensees shall have no claim for compensation. The applicant shall produce from the Abkari Worker's Welfare Fund Inspector a Certificate to the effect that he has remitted before the date of application for the licence/renewal of licence, the arrears of contributions, if any, payable up to 31st day of December preceding year. The question whether a hotel or restaurant confo....
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.... xxx Provided further that all existing licences not having the above classification and are functional as on 31st March, 2007 shall be regularised. Provided also that all FL-3 licences not having the requisite star classification and are functional during 2009-2010 shall be regularised. xxx xxx xxx (3B) No liquor shal....
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.... of business presently going on, as pointed out by the counsel on both sides. In Kerala, the wholesale business in foreign liquor is the monopoly business of a fully owned Government Company by name Kerala State Beverages (Manufacturing and Marketing) Corporation Limited, which Corporation is the only source from which liquor can be purchased by any retailer including every bar hotel in the State. Besides the monopoly wholesale business carried on by this Corporation, the Government under Rule 13(1) of the Rules has issued licence to this Corporation for retail sale of liquor in bottles through their various outlets in the State. As of today, this Corporation alone has 384 retail depots selling liquor in bottles in the State. Apart from this Corporation, the Government has permitted retail sales through few outlets of other two Government controlled Corporations, which are the Kerala State Civil Supplies Corporation Limited and Kerala State Co-operative Consumer Marketing Federation Limited. These Government Companies are the sole retail sellers of liquor in bottles. All the three Government Companies with FL-1 licence issued under Rule 13(1) of the Rules are together running aroun....
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....d from Rule 13 (3); 7th proviso was brought in, again permitting existing licensees not having the requisite star classification and functional in the previous year, i.e., 2009-10, to be regularized. As noticed above, the subsequent amendment introduced by sub-rule (3E) after sub-rule (3D) resulted in prohibition against grant of licences to any new Hotel with 4-Star and above classification within the radius of 3 Kms./1 Km. in the respective areas, from existing licensees. Hence, a Hotel having "four-Star" or above or with Heritage classification applying for FL-3 licence would be denied the same, if such Hotel is within the above prohibited distance from an FL-3 licence holder irrespective of whether such licensee is a Star Hotel or not. 10. The above is the background in which we are called upon to consider the challenge raised by the appellants/petitioners against the disqualification introduced to 3-Star and above category Hotels from getting bar licence through the amendments made to the Rules, which are challenged by them on the ground that hasty decisions taken are mala fide and discriminatory and is only to promote and protect the monopoly business of the existing Gover....
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.... entitle them for bar licence for promotion of tourism in the State it also ensured that the existing licensees continued without any hindrance. 13. Tourism as an industry has engaged the attention of both Central and State Governments. The thrust for promotion of tourism industry is primarily due to the sizable amount of foreign exchange brought into the country. So far as the Tourism Policy of the State Government is concerned, the Government is making all efforts to promote tourism and in this regard it would not be out of place to refer to the budget speech made by the Finance Minister presenting the Finance Bill, 2012 in the Assembly, wherein he states the Policy of the Government on tourism as follows:- "215. As per statistics for the year 2010, tourism sector has created around 12 lakh employment opportunities, earned an income of Rs. 17,000 crore, mobilized investments worth Rs. 1,000 crore and earned foreign currency worth Rs. 3,797 crore. A new tourism policy has, therefore, been formulated aimed at comprehensive development of Kerala. Emphasis has been given to infrastructural development of the tourism centres in Kerala in the 12th Plan. An amount of Rs. 15 crore ....
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.... regularising licence to all and sundry existing Restaurants and Hotels and at the same time new three star and above class Hotels are disabled from getting FL-3 licence. 15. The Policy change to deny bar licence to "Three-star" hotels has to be considered with reference to the objective covered by the Policy. It may be noticed that the last Government declared the Abkari Policy vide G.O.M.S. 107/11 dated 17.8.2011 produced as Ext. P5 in W.P.(C) No. 6964/2012 stating that all hotels with three star facility will be issued licence up to 31/3/2012. However, abruptly, the new Government changed the Policy introducing prohibition against new 3-star hotels from getting bar licence including those who have completed construction and obtained star classification before 31/3/2012. Most of the appellants/petitioners would get the licence had the Policy originally announced was continued. In this context, learned Additional Advocate General argued in support of the Policy introduced through the amendment to the Rules by stating that the objective is to reduce consumption of alcohol in the State and the ultimate objective of the Government is to achieve the objective of Article 47 of the C....
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....ioners contend that the endeavor propounded by Article 47 is totally absent in the State action as is revealed by the Abkari policy in the present year as also the previous years. Such endeavor being totally absent, it is the contention, that the present amendment as also the various provisos results in only excluding similarly situated persons and vanquishing the minimal competition. The State already having monopoly of wholesale sale of liquor within the State is attempting to confine the retail sales too to itself and the existing hotels and restaurants without any classification are also allowed to retain the licences. We have no doubt in our mind that if the impugned amendments achieve or at least are capable of achieving the objective, that is, to reduce consumption of liquor by people in the State, this court should not interfere with the amendments. It is only commonsense, argues the Counsel for petitioners, that no local man goes to stay in expensive three star hotels, which is intended to accommodate rich tourists both from India and abroad. Therefore, consumption cannot be reduced by denying liquor availability in Star Hotels above Three Star where the customers are not ....
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....re well aware that when liquor sales are prohibited any place in the State, spurious liquor will take its place, causing revenue loss to the State and at times leading to liquor tragedies resulting even in loss of life. However, retention of liquor sales in the State itself is by reason of the fact that revenue from liquor sale is a major source, accounting for 30% of the total revenue of the State. 20. It may also be noticed that some States, for example Andhra Pradesh, tried total prohibition of liquor, some years back, which was an utter failure leading to widespread sale of spurious liquor in the market, causing revenue loss and frequent liquor tragedies. Consequently, the State reversed the prohibition experiment in an attempt to ensure safe and quality liquor in the State. On the whole, the network allowed to be maintained by any Government for retail sale of liquor is not to promote alcoholism but only means that spurious liquor should not be permitted in the State. Therefore, the answer to the question posed by us above, as is evident, is in the negative in as much as under the present disposition of availability of liquor in every nook and corner of the State in ordinar....
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....suance of bar licence to star hotels for serving the guests in the hotels. So much so, the only question is whether the progressive deletion of 1, 2 and now, specifically, three-star hotels from entitlement for licence goes against the purpose of Rule 13(3), which is promotion of tourism industry. The Government is actively promoting tourism by providing Rs. 15 crores towards investment in tourism promotional activities in the current financial year. In this context, we feel that the law makers were well aware of Article 47 of the Constitution of India while introducing Rule 13(3) in the Rules because liquor is an essential service in the tourism industry and providing it inside the said star hotels for controlled consumption within the premises is not going to encourage liquor consumption among local people. This cannot and will not stand in the way of achieving the objective of prohibition contained in Article 47 of the Constitution of India. 23. It may be noticed that even in States where there is prohibition, star hotels are allowed to retain bar licence on strict licensing regime, to cater to the needs of tourists. Consequence of the amendment is such that new three star ho....
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....estion of fundamental right to carry on trade or business in the negative, the Supreme Court held that the correct interpretation to be placed on the expression "the right to practise any profession, or to carry on any occupation, trade or business" is to interpret it to "mean the right to practise any profession or to carry on any occupation, trade or business which can be legitimately pursued in a civilised society being not abhorrent to the generally accepted standards of its morality" (sic.). While the right to create a monopoly in favour of the State was conceded, it was also held: "The contention further that till prohibition is introduced, a citizen has a fundamental right to carry on trade or business in potable liquor has also no merit. All that the citizen can claim in such a situation is an equal right to carry on trade or business in potable liquor as against the other citizens. He cannot claim equal right to carry on the business against the State when the State reserves to itself the exclusive right to carry on such trade or business. When the State neither prohibits or monopolizes the said business, the citizens cannot be discriminated against while granting....
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....e denial of bar licence through the impugned amendment to new three star hotels is arbitrary and violative of Article 14 of the Constitution of India and going by the principle settled by the decision of the Supreme Court in Khoday's case, the appellants/petitioners are entitled to have SRO No. 779/2011 [GO(P) No. 192/2011/TD dated 09/12/2011] deleting three star hotels from the Rule struck down and consequential declaration for retention of three star hotels also in the said Rule and we order accordingly. 27. The next category of hotels are four star, five star and Heritage hotels, which are denied licence by virtue of introduction of sub-Rule (3E) to Rule 13 of the Rules, where under it is stated that no bar licence to new four star and five star and heritage hotels, otherwise entitled to bar licence under Rule 13(3), will be issued, if there is in existence any other restaurant/hotel with bar licence within 1 Km. in Municipal areas and within 3 Km. in Panchayat area. In this context, all our observations and findings with regard to three-star hotels apply to four-star and five-star hotels, which cater exclusively to the rich and outstandingly rich Foreign and Indian tourists.....
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....f Bar Hotels functioning within 1 Km. limit in Municipal and 3 Km. limit in other areas. 29. Further, the appellants/petitioners rightly pointed out that realistically anybody can imagine certain areas and spots important for tourism. For example Kovalam, a favored tourist destination in the Thiruvananthapuram coast line with two beaches and access to the ocean, comprises only an area of around 3 - 4 Kms. The presence of one hotel with bar licence in that area is a disability for all new hotels being set up and it would only put an end to the expansion of the tourism industry. Therefore, realistically it can be noticed that all star hotels are mostly located in tourism centers and they are constructed side by side and are providing facilities exclusively to their guests. The distance regulation introduced in sub-rule (3E) to Rule 13 is completely destructive of the tourism policy of the government and the tourism industry by prohibiting promoters from venturing into hotel construction in places which are sought after tourist destinations. Competition is stultified and optional choices reduced. It is notorious that tourism sites are not fully developed anywhere in India, much les....
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....ment of India much before the introduction of the amendment and their applications have been recommended by the Excise Commissioner before the amendment. Sanction was not accorded by the Government due to the amendment. In some instances, based on the direction of this Court the question of sanction was reconsidered and while reconsidering the case, the Rule proposed to be amended was taken into consideration for rejecting the sanction. So far as the other cases are concerned, in the original order, the position prior to the amendment was reckoned and if so, the amended provision cannot be relied on by the respondents to deny the licence. The State has relied on the decision of the Supreme Court reported in Kuldeep Singh v. Govt. of NCT of Delhi [MANU/SC/8215/2006 : (2006) 5 SCC 702] and State of Kerala v. B. Six Holiday Resorts (P) Ltd., [MANU/SC/0173/2010 : (2010) 5 SCC 186], wherein the Supreme Court held that the law applicable as on the date of consideration of application for grant of licence is to be applied. The learned counsel for the appellants/petitioners have relied on a Division Bench judgment of this Court in W.A. No. 469 of 2012 dated 14.03.2012, wherein this Court h....