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TMI Blog2014 (3) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... cations. As these hotels were functioning for long periods, they were regularised based on Abkari Policy 2007-08 - as per Rules the licences are issued each year and the standard for granting licence are still three star standard - Government, 15 years after extending time limit for the first time, again extended (12 March 2007) the time limit up to 31 March 2007 and stated that failure to comply with the standards would lead to cancellation of licences. However, on the very next day, i.e. 13 March 2007 the Government added a proviso to Rule 13 that all existing licensees not having the above classification and which were functional as on 31 March 2007 shall be regularised. The Abkari policy for 2008-09 (February 2008) stated that the Government would insist on minimum facility and hygienic conditions in all the 418 bar hotels which did not have 2-star status, but which were regularised during 2007-08. Consequences of the amendment of 2012 will be that four star and five star hotels would not be permitted to have FL-3 licences only on the ground that they are within the prohibited distance from such hotels which have poor hygiene standards, and which are not following norms laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dv. Ms. Anita Soni, Adv. Mr. G. Prakash,Adv. Mr. Himinder Lal,Adv. Mr. Radha Shyam Jena,Adv. Mr. Amarjit Singh Bedi, Adv. Mr. Sanand Ramakrishnan, Adv. Mr. M.P. Vinod, Adv. Mr. Romy Chacko, Adv. For the Respondent : Mr. Sanand Ramakrishnan, Adv. Mr. Roy Abraham,Adv. mr. Himinder Lal,Adv. Mr. Deepak Prakash, Adv. Mr.Biju P.Raman, Adv. Ms.Haritha V.A.,Adv. Ms. Yogmaya, Adv. Ms. Usha Nandini V.,Adv. Ms. Sumita Hazarika,Adv. Ms. Ipsita Behuria, Adv. Mr. T. Mitra, Adv. Mr.Venkita Subramoniam T.R., Adv. Mr. Rohit Kumar Singh, Adv. Mr. Sajith P., Adv. Mr. Alex Joseph, Adv. Mr. G. Prakash, Adv. Mr. V.K. Sidharthan, Adv. Mr. Ramesh Babu M.R., Adv. Mr. Shiv Sagar Tiwari, Adv. JUDGMENT H.L. Gokhale J. Leave granted 2. This group of Civil Appeals raises the questions with respect to the legality and validity of two amendments introduced by the first appellant-State of Kerala, in pursuance of its Abkari Policy framed in 2011- 2012, in the Foreign Liquor Rules framed under the Kerala Abkari Act, since those amendments have been struck down as unconstitutional by the impugned judgment and order rendered by the High Court of Kerala. 3. Rule 13 of the Foreign Liquor Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee star hotel on the basis of the first amendment effected by notification dated 9.12.2011. The writ petition was dismissed by a Single Judge by his judgment and order dated 7.3.2012. Being aggrieved by the said judgment and order, he preferred Writ Appeal No.470/2012. Some other persons whose writ petitions were rejected, filed similar Writ Appeals. The distance rule introduced with the addition of Rule (3E) in Rule 13 w.e.f. 27.3.2012 was also challenged by some other persons by filing Writ Petitions directly to the Division Bench. All these Writ Appeals and Writ Petitions were allowed by a Division Bench of the High Court by its common judgment and order dated 27.7.2012, which struck down the two amendments as unconstitutional. Being aggrieved by the said judgment and order, these appeals have been filed by the appellant-State of Kerala and its concerned officers of the Excise Department. Abkari Policy of the Government of Kerala for the year 2011-2012:- 6. Before we deal with the impugned judgment and the amendments, we must first refer to the Abkari Policy of the Government of Kerala which led to the two disputed amendments to Rule 13. The Government of Kerala announced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the interest of promotion of tourism in the State, to hotels which have obtained (three star)1, four star, five star, five star deluxe, heritage, heritage grand or heritage classic classification from Ministry of Tourism, Government of India, where the privilege of sale of foreign liquor in such hotels have been purchased on payment of an annual rental of Rs. 22,00,000 (Rupees twenty two lakhs only). But no such licence shall be issued to hotels which are located within 200 (two hundred) metres from an educational institution, temple, church, mosque or burial ground. Hotels other than those in the private sector having four star, five star, five star deluxe classification will be exempted from the distance restrictions in the interest of promotion of tourism in the State. In the case of hotels in the private sector of the above categories and hotels having heritage, heritage grand and heritage classic classification issued by the Ministry of Tourism, Government 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of families and others where no liquor shall be served: Provided further that the holder of an FL-3 licence may serve liquor along with meals by the side of swimming pools and in the lawns and roof gardens of the hotel if he obtains a special permit for the purpose from the Commissioner of Excise, on payment of additional annual rental of [Rs. 50,000(Rupees Fifty Thousand only)]. Provided also that for serving liquor at restaurants to persons other than residents, the licencee shall pay an additional annual fee of [Rs. 25,000 (Rupees Twenty Five Thousand)]. xxx xxx xxx (3E) 2 Notwithstanding anything contained in these rules, no new FL- 3 licence shall be granted to hotels which are located within a radius of three kilometers in Grama Panchayat and one kilometer in Municipal Corporation/City Corporation, from another hotel having an FL-3 licence granted under this rule]. 1. Deleted by impugned Amendment of 2011. 2. Introduced by impugned Amendment of 2012. Judgment of the Single Judge:- 9. The learned single Judge who heard the matter concerning the denial of licences to new three star hotels held that there was no vested right to get a licence, leave asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned huge revenue from this sale, and the State Government's annual collection was over 7000 crores. If these sales by the shops run by the State are to be permitted, why should the privately owned restaurants and bars not be permitted to vend liquor? 12. The Division Bench was of the view that whereas on the one hand, the policy of the State perpetuated the monopoly of the existing hotels having three star or higher classification, on the other hand by preventing new star hotels from coming up, it would encourage consumption of spurious liquor. The Court was of the view that there was no distinction between the existing three star hotels and the new three star hotels, to be opened. Besides most of these hotels were set up in areas where there was a thriving tourism business like the Kovalam Beach near Thiruvanantapuram. The decision to set up hotels ought to be left to the hoteliers. The State Government will defeat the tourism policy by introducing, by amendment, the distance rule. For all these reasons the Court held that the two amendments were discriminatory, and will not achieve the policy which they intended to achieve. The Court, therefore, held the two amendments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. iv) In continuation of the policy of the Government to reduce sale and distribution of Liquor, Abkari policy of 2011 was announced interalia restricting issue of FL-3 Licence to only having 4 star and above classification. Thereafter, the distance rule has been brought in 2012 by adding Rule (3E) in Rule 13. It was submitted that all these changes in the rules have been made with the object of gradually reducing the sale and distribution of liquor in the State. 16. Mr. Giri emphasized the observations in sub-para (c) and (d) of para 60 of Khoday Distilleries (supra) to the following effect:- (c) Potable liquor as a beverage is an intoxicating and depressant drink which is dangerous and injurious to health and is, therefore, an article which is res extra commercium being inherently harmful. A citizen has, therefore, no fundamental right to do trade or business in liquor. Hence the trade or business in liquor can be completely prohibited. (d) Article 47 of the Constitution considers intoxicating drinks and drugs as injurious to health and impeding the raising of level of nutrition and the standard of living of the people and improvement of the public health. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready 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. This is evident from the explanatory note to the amendment dated 20.2.2002. The introduction of the proviso enabled the State to assess the situation and reframe the excise policy. 31. It was submitted on behalf of the State Government that Rule 13(3) was again amended with effect from 1.4.2002 to implement a new policy. By the said amendment, the minimum eligibility for licence was increased from Two-star categorization to Three-Star categorization and the ban on issue of fresh licences was removed by deleting the proviso which was inserted by the amendment dated 20.2.2002. It was contended that the amendments merely implemented the policies of the government from time to time. There is considerable force in the contention of the State. 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 cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery large number of restaurants and liquor bars having FL-3 licences spread over the State, in the Grama Panchayat and in the municipal areas. The objective behind introducing the distance rule is to prevent any more restaurants and bars selling liquor coming up in the near vicinity of the existing ones. The existing restaurants and hotels have caused sufficient damage to the younger generation, and it is to prevent further damaging effects on the health of the society that the subsequent amendments had been brought in, by introducing Rule (3E) in the year 2012. The High Court should not have interfered, and held this added rule as unconstitutional on the ground of alleged discrimination against parties which had not set up their hotels as yet. The State was trying to do its best in furtherance to the Directive Principle contained in Article 47 of the Constitution, and as Article 37 of the Constitution states, the principles laid down in the Directive Principles are fundamental in the governance of the country, and the State has the duty to apply them in making the laws. He submitted that as held in Khoday Distilleries Ltd. (supra) the correct way to describe the Fundamental Rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo children from taking up office as a member of Panchayat. This Court held in that matter that Fundamental Rights are not to be read in isolation, and they have to be read alongwith the Chapter on Directive Principles. Under Article 47 the State has the duty to raise the level of nutrition and standard of living and to improve public health. These aspects cannot be ignored. He thereafter referred to paragraph 93 of the judgment of this Court in Balco Employees Union vs. Union of India reported in 2002 (2) SCC 333 to submit that it is not for the Court to decide the policy matters. The affected persons are women and children also, and the State has taken steps to protect their interest. 22. The submissions of Mr. Giri were supported by learned senior counsel Mr. Bali. He represented the earlier referred Kerala Pradesh Madhya Virudha Samithy. It has filed a separate SLP challenging the impugned judgment bearing No. 38251/2012. He drew our attention to various judgments. The salient from amongst them are mentioned hereafter. Firstly he referred to the judgment of this Court in State of Andhra Pradesh and Ors. vs. Mc Dowell and Co. reported in 1996 (3) SCC 709, wherein a bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IMFL for supply within the territory of Delhi on the basis of Minimum Sales Figures (MSF), as a criterion of eligibility for grant of licence. It was challenged as violating Article 14 and 19(1)(g) of the Constitution. This Court held that laying down the requirement for achieving minimum sale figure of a particular brand of liquor in other States, as a mode for determination of the acceptability of that brand of liquor, could not be held to be irrelevant, irrational or unreasonable. 24. Mr. K. Padmanabhan Nair, learned senior counsel appeared for respondent No. 3 in SLP No. 14956/2003. Respondent No. 3 is one Shashidharan, a resident of a village in Distt. Thrissur. He is objecting to a bar hotel being set up in his village, and his submission was that he should be heard in case a licence is to be given to set up a hotel in that village. He supported the policy of the State Government and the submission of Mr. Giri and Mr. Bali. Reply on behalf of the respondents:- 25. The learned senior counsel appearing for the respondents submitted that as can be seen from paragraph 5 of the impugned judgment, the High Court has considered the relevant observations of this Court in Kho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... star hotels to be set up and the existing three star hotels. It will create a monopoly in favour of the existing three star hotels. 28. It was submitted by them that on the one hand the Government itself is selling liquor from large number of depots and shops, through the FL-1 licences, where the liquor bottles are purchased and taken home. The very fact that the Government is earning more than 7000 crores annually shows the consumption permitted by the Government. Although the government is contending that it is not looking at it from the point of revenue, it is not reducing the number of depots and shops which are set up by itself. Reliance was placed in this behalf on the judgment in the case of Rashbihari Panda vs. State of Orissa reported in 1969 (1) SCC 414. This case involved the creation of a monopoly, with respect to Kendu leaves, by the Government, in favour of those licensees who had worked satisfactorily in the previous year and had paid the amounts due from them regularly, to continue their licences with the added provision that the agents with whom they had been working in 1967 will also work during 1968. This was challenged on the ground that the Government, by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 from the judgment of this court in Reliance Energy Limited vs. Maharashtra State Road Development Corporation reported in 2007 (8) SCC 1 wherein it was held that Article 14 requires a level playing field, though it is subject to public interest. The report of the Comptroller and Auditor General (CAG) of India on the working of the Kerala Excise Department for the year 2006-2007 to 2010- 2011:- 30. The respondents have relied upon the report made by the CAG of India under Section 16 of the CAG's (Duties, Powers and Conditions of Service) Act, 1971. This report contained the results of the audit on the working of the State Excise Department for the year 2006-07 to 2010-11, and it was submitted to the Governor of Kerala under Article 151(2) of the Constitution of India. In paragraph 5.3.1.1, the report deals with the issue as to whether the FL3 licences were issued and renewed to non- standard hotels/restaurants. The report was relied upon to point out that many hotels which were not meeting the standards were permitted and regularized, initially upto 30.6.1992. Thereafter, the regularization was extended till 31.3.2007, and on the next day (that is on 1.4.2007) all exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar and five star unattractive. This will undoubtedly affect the objective of tourism which the State otherwise proclaims to support. The amendment of 2012 is therefore, clearly arbitrary and unjustified according to the respondents. Consideration of the Submissions:- 32. We have considered the submissions on behalf of the State and of those supporting the State, as well as of those on behalf of the respondents. We do not dispute the intention of the State of Kerala, nor do we dispute the problem that it is facing, and the desire to curb the situation that exists in the State. There cannot be any dispute on the proposition that, there is no fundamental right to trade in liquor. At the same time we cannot ignore the dicta of the Supreme Court in Khoday Distilleries (supra) and particularly in para 60(g) where the Apex Court has laid down that where such a trade is permitted, there can not be any room for discrimination. 33. There are two amendments which are under challenge. We will have to deal with these two amendments in the light of the factual scenario and the law governing the same. As far as the deletion of three star hotels is concerned, we do have a judgment of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a local law prohibits the issuance of a bar licence to four star, five star, five star deluxe, heritage classic and heritage grand categories, which is otherwise necessary, such local law will prevail. In any case three star hotels will have to be placed in a different category as against the hotels with four star and higher classification, since it is not necessary for three star hotels to have an FL3 licence. 35. The position with respect to the distance rule introduced in 2012 is, however, different. As far as the amendment brought in 2012 introducing the distance rule is concerned, we cannot ignore the hard realities which are recorded in the report of the Comptroller and Auditor General who is a constitutional functionary, and who has made the report on receiving the necessary information from the State Government. This above referred para 5.3.1.1 of this report speaks for itself and reads as follows:- 5.3.1.1 Were FL3 licenses issued and renewed to non-standard hotels/restaurants? The minimum standard eligible for obtaining an FL3 licence was 2-star standards from April 1982 and 3-star and above from April 2002. We noticed that licenses were issued and renewed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tels. However, no action was taken by the Department on these reports. The Excise Commissioner sent a letter (January 2011) to the Government highlighting the poor standards maintained by the 418 unclassified bars and requested not to grant fresh FL3 licenses for areas other than tourism notified areas. In the letter the Excise Commissioner, inter alia, stated that the restaurant segment of the unclassified hotels were functioning for name sake only and during the last one year seven people had died due to excessive drinking in the unclassified hotels. He also pointed out that he had personally seen that almost all the customers went there to drink liquor and not for taking food. We noticed that even though the Excise Commissioner had requested not to issue fresh FL3 licenses, seven more FL3 licenses were issued between 12 January and 31 March 2011. Moreover in the Abkari Policy for 2010-11, the Government declared that the FL3 licensees not having the requisite star qualification and who were functional during 2009-10 should be regularised. Thus, the Government has made it a regular feature to regularise ineligible licensees. We are of the opinion that the Government has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2013. We hope that the commission will take into consideration the hard realities which are reflected in the report of the CAG and make necessary recommendations. As far as this Court is concerned, we cannot uphold the validity of the amendment of 2012, in the present circumstances. 38. We may as well refer, at this stage, to the judgment of this Court in P.N.Kausal and Ors. vs. Union of India Ors. reported in 1978 (3) SCC 558. In that matter what the Punjab Government had done was to prohibit the sale of liquor on Tuesdays and Fridays, but that was applicable only to hotels, restaurants and other institutions, and was not applicable to the institutions run by the Government. The Court held this to be prima-facie discriminatory. In the words of Krishna Iyer,J who wrote the judgment for a bench of three Judges It suggests a dubious dealing by State Power . The Learned Judge observed that such hollow homage to Article 47 and the Father of the Nation gives diminishing credibility mileage in a democratic polity . Thankfully, the Additional Solicitor General made a statement to the Court which is recorded in paragraph 42 of that judgment that the Government readily agreed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poly, it is of no use for it to direct the private sector alone to function in a particular manner. The Government must as well behave in conformity with the mandate of Article 47. 40. Before we conclude the proceedings, we may refer to one more development in this matter. In as much as this court had not granted any stay of the impugned judgment and order of the High Court, an order was passed by this Court on 19/9/2012 that the applications of the claimants for the licenses be considered in eight weeks. Since no decision was forthcoming, some of the respondents filed Contempt Petitions bearing Nos. 449 of 2012 and other contempt petitions. A notice was issued on the Contempt Petition no. 449 of 2012 filed by respondent B. Surendra Das. A reply was filed on behalf of the appellants on 25.01.2013 that they had considered the applications, some of them were rejected, and in the rest further information was sought. These steps were initiated within the time stipulated by this court, and due to the large number of applications, the decision was taking its own time. On 8.02.2013, this court directed that the Contempt Petitions be heard alongwith the special leave petitions. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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