2010 (1) TMI 1204 - SC - Indian Laws

Whether an application for grant of FL-3 Licence should be considered with reference to the Rules as they existed when the application was made or in accordance with the Rules in force on the date of consideration - HELD THAT - Considering the facts that the State has exclusive privilege of manufacture and sale of liquor, and no citizen has a fundamental right to carry on trade or business in liquor, the applicant did not have a vested right to get a licence. Where there is no vested right, the application for licence requires verification, inspection and processing. In such circumstances it has to be held that the consideration of application of FL-3 licence should be only with reference to the rules/law prevailing or in force on the date of consideration of the application by the excise authorities, with reference to the law and not as on the date of application. Consequently the direction by the High Court that the application for licence should be considered with reference to the Rules as they existed on the date of application cannot be sustained. Whether the amendment to Rule 13(3) of Foreign Liquor Rules substituting the last proviso is valid - HELD THAT - Rule 13(3) provides for grant of licences to sell foreign liquor in Hotels (Restaurants). The substitution of the last proviso to Rule 13(3) by the notification dated 20.2.2002 provided that no new licences under the said Rule shall be issued. The proviso does not nullify the licences already granted. Nor does it interfere with renewal of the existing licences. It only prohibits grant of further licences. The issue of such licences was to promote tourism in the State. The promotion of tourism should be balanced with the general public interest. If on account of the fact that sufficient licences had already been granted or in public interest, the State takes a policy decision not to grant further licences, it cannot be said to defeat the Rules. It merely gives effect to the policy of the State not to grant fresh licences until further orders. If the State on a periodical re-assessment of policy changed the policy, it may amend the Rules by adding, modifying or omitting any rule, to give effect to the policy. If the policy is not open to challenge, the amendments to implement the policy are also not open to challenge. When the amendment was made on 20.2.2002, the object of the newly added proviso was to stop the grant of fresh licences until a policy was finalized. Ultimately the proviso has to be construed upon its terms. Merely because it suspends or stops further operation of the main provision, the proviso does not become invalid. The challenge to the validity of the proviso is therefore rejected. In view of the above, the appeals filed by the State are allowed in part and the appeals filed by the applicants for licences are dismissed, subject to the following clarifications.

Issues Involved:
1. Whether an application for grant of FL-3 Licence should be considered with reference to the Rules as they existed when the application was made or in accordance with the Rules in force on the date of consideration.
2. Whether the amendment to Rule 13(3) of Foreign Liquor Rules substituting the last proviso is valid.

Issue-wise Detailed Analysis:

Re: Question (i)

The primary question is whether applications for FL-3 licences should be considered based on the rules at the time of application or at the time of consideration. This issue is directly addressed by the Supreme Court's decision in *Kuldeep Singh v. Govt. of NCT of Delhi (2006) 5 SCC 702*, which held that in the context of liquor licences, the applicable policy is the one in force on the date of grant, not the date of application. The rationale is that the State has exclusive privilege over liquor trade, and there is no fundamental right for citizens to engage in such business. Consequently, no vested right exists for applicants, and applications should be scrutinized based on the current rules at the time of consideration.

Further, the Supreme Court referenced earlier decisions to reinforce this principle. In *State of Tamil Nadu v. Hind Stone & Ors. (1981 (2) SCC 205)*, it was established that applications should be dealt with according to the rules in force at the time of their disposal, not at the time of application. Similarly, in *Union of India & Ors. v. Indian Charge Chrome & Anr. (1999) 7 SCC 314*, the Court held that applications must be decided based on the law applicable at the time of consideration.

The applicant argued that the High Court's time-bound orders created a vested right, but this was rejected by referencing *Howrah Municipal Corporation v. Ganges Rope Co. Ltd. (2004 (1) SCC 663)*, which clarified that no vested right exists to have applications considered under unamended rules. The Court emphasized that statutory provisions override any "settled expectation" based on previous rules.

Ultimately, the Supreme Court concluded that applications for FL-3 licences should be considered based on the rules in force at the time of consideration, not the date of application. The High Court's direction to consider applications based on the rules at the time of application was thus unsustainable.

Re: Question (ii)

The second issue concerns the validity of the amendment to Rule 13(3) of the Foreign Liquor Rules, which added a proviso barring the issuance of new licences. The applicants contended that this proviso nullified the main provision of Rule 13(3) and was therefore invalid.

Rule 13(3) allows the issuance of FL-3 licences to hotels and restaurants meeting specified standards to promote tourism. The amended proviso, effective from 20.2.2002, stated that no new licences would be issued. This proviso did not affect existing licences or their renewal but only prohibited new licences, reflecting a policy decision by the State to balance tourism promotion with public interest.

The Supreme Court noted that the State periodically reassesses its policies and may amend rules to reflect these changes. The amendment on 20.2.2002 was intended to halt new licences temporarily until a new policy was finalized. The Court held that a proviso could suspend or stop the operation of the main provision temporarily without invalidating it. Therefore, the challenge to the validity of the proviso was rejected.

Conclusion:

The appeals filed by the State were allowed in part, and the appeals by the applicants were dismissed with clarifications:
1. Licences granted or regularized during the litigation based on further amendments will not be affected.
2. Licences granted under interim orders will continue until the end of the current excise year.
3. The decision does not preclude fresh applications being made and considered according to the law.

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