(2012) 261 KLR 080 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:
THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN THURSDAY, THE 28TH DAY OF JUNE 2012/7TH ASHADHA 1934 WP(C).No. 6494 of 2012 (J) ------------------------------------- PETITIONER: ------------------- M/S.HOTEL MALIKA RESIDENCY, BY SRI.C.C.THOMAS, SENIOR ADVOCATE, RESPONDENTS: ------------------------ 1. STATE OF KERALA, 2. THE EXCISE COMMISSIONER, 3. THE DEPUTY COMMISSIONER OF EXCISE, 4. THE CIRCLE INSPECTOR OF EXCISE, 5. K.N.SREEKUMAR, 6. JOBY CHERIAN, 7. BIJUMON THOMAS, 8. BYJU .K.N, R1 TO R4 BY SPL.GOVERNMENT PLEADER SRI. SUJITH MATHEW JOSE, THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28-06-2012, ALONG WITH W.P.(C).NOS. 32515/2011 AND 8414/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX PETITIONERS' EXHIBITS:
RESPONDENTS' EXHIBITS & ANNEXURE:
//TRUE COPY// P.A. TO JUDGE. Prv. C.R. P.N.RAVINDRAN, J. ------------------------------- W.P.(C)Nos.6494 & 8414 of 2012 & W.P.(C)No.32515 of 2011 ------------------------------------- Dated this the 28th day of June, 2012 Head Note:- Foreign Liquor Rules, 1972 - Rule 19 (ii) - Transfer of the licenced premises - Without the previous sanction of the Excise Commissioner - Whether there is any restriction in the Abkari Act or in the Foreign Liquor Rules or in the conditions of licence which prohibits transfer of the licenced premises without the previous sanction of the Excise Commissioner? No. Held:- Sub rule (i) of rule 19 stipulates that except with the previous sanction of the Excise Commissioner, a licence obtained under the rules shall not be transferred, sold or sub rented. Sub rule (ii) of rule 19 provides that certain other transactions which normally do not come under the meaning of the term transfer, shall also be deemed to be transfers and therefore require the previous sanction of the Excise Commissioner. It is stipulated therein that if by addition or deletion of members the partnership is reconstituted, there will be deemed transfer of the licence from the original partnership to the reconstituted partnership. The same is the case when there is a change in the Board of Directors of a company. In State of Kerala v. Panamoottil Investments (2010 (1) KLT 557) a Division Bench of this Court while repelling the challenge to the validity of rule 19 held that the intention is to ensure that the licence does not fall into undesirable hands. It was held that if such a provision is not there, the right to vend liquor will reach the hands of abkari offenders, without the knowledge of the Excise Commissioner and therefore, it cannot be said that the stipulation in the rule is illegal or irrational. The Division Bench held that an artificial meaning has been given to the term "transfer" to take within its fold any change in the partners who constitute the firm or any change in the Board of Directors of the company, if a firm or a company is the holder of the licence. In the instant case, as stated earlier, the official respondents have no case that the petitioner firm has parted with possession of the licence or the right to exploit the licence to any one else. The official respondents also do not dispute the fact that the petitioner firm is in possession of the premises which was sold as per Ext.P2 sale deed to another firm. All that is stated is that the sale of the hotel building and the appurtenant land without the previous sanction of the Excise Commissioner offends rule 19 of the rules. The official respondents have no case that the petitioner firm has exploited the licence in conjunction with any other person or persons who are not partners of the firm or that the firm has been reconstituted. In the absence of an express stipulation in rule 19(i) of the rules to the effect that transfer of the licenced premises will be deemed to be a transfer of the licence, I am of the opinion that rule 19 cannot be relied on to deny renewal of the licence. The rule making authority could have, as was done in the case of reconstitution of partnership firms or reconstitution of the Board of Directors of a company stipulated that the licencee should not sell or otherwise transfer the licenced premises without the previous sanction of the Excise Commissioner. In such circumstances, as rule 19(i) does not prohibit a transfer of the licenced premises and the licencee continues to be in possession of the licenced premises by virtue of a lease arrangement, though one of the lessors has questioned its validity, the official respondents cannot contend that for that reason, the petitioner firm is disabled from getting the licence renewed. The conditions set out in Ext.P1 licence also do not stipulate that the licencee cannot transfer possession of the licenced premises. That apart, rule 24 of the rules empowers the Excise Commissioner to permit the shifting of a bar hotel from one locality to another, subject to the limitations stipulated therein. It is only for shifting the bar hotel to another premises that the permission of the Excise Commissioner is required to be obtained. Rule 19 as it now stands does not in express terms prohibit the licencee of a bar hotel from selling the licenced premises of which he is the owner to another and to remain in possession of the premises under a lease arrangement with the purchaser and to continue to run the bar hotel in the very same premises. By implication also no such prohibition can be read into the rule. The prohibition is against the sale or transfer or sub-renting of the licence to another or the induction of a new partner in a firm in cases where the firm is the licencee or a new Director in a company in cases where the company is the licencee, without the previous sanction of the Excise Commissioner. I accordingly hold that the licencee in the instant case has not violated rule 19(i) of the Rules. Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 - Registration of a crime - Declining to renew the FL-3 licence - Whether on account of the registration of a crime pursuant to the complaint filed by the fifth respondent who claims to be in possession of the licenced premises, the respondents are justified in declining to renew the FL-3 licence? Held:- Ext.P2 sale deed was executed on 13.4.2010. The FL-3 licence was renewed for the year 2010-2011 without objection from any quarter. The fifth respondent has no case that the licencee was running the business elsewhere. On the terms of the licence, the licencee could not have run the business elsewhere. The official respondents do not have a case that the petitioner firm was exploiting the licence in another building which is not covered by the licence. Though the fifth respondent has in his counter affidavit claimed that he and his partners were running the hotel after Ext.P2 sale deed under the name and style "Hotel National Residency", the said claim cannot be accepted as representing the correct factual position. The additional seventh respondent has in the counter affidavit filed by him on his own behalf and on behalf of respondents 6 and 8 categorically stated that it was the petitioner firm which was running the bar hotel even after the execution of Ext.P2 sale deed. It was only on 2.12.2011, months after Ext.P1 licence was renewed on an application by the petitioner firm for the year 2011-2012, that the fifth respondent came forward with a case that he was running the bar hotel along with the other partners for the past two years, after the name of the hotel was changed as Hotel National Residency with the approval of the Deputy Excise Commissioner and that the other partners have now joined hands with the Managing Partner of the petitioner firm with a view to join the petitioner firm as partners. There is no material on record to substantiate the said contention. The official respondents also do not have such a case. That apart, it is not in dispute that the restaurant licence issued to the petitioner firm by the Ettumanoor Grama Panchayat under the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996, was being periodically renewed and it was renewed for the year 2011-2012 also. The restaurant licence was cancelled on 12.3.2012 on the ground that in respect of the very same building another licence had been issued in the name of respondents 5 to 8. The additional seventh respondent has in his counter affidavit positively averred that it was without the knowledge of respondents 6 to 8 that the fifth respondent applied for and obtained such a licence. They have also denied the allegation that Ext.P3 is a fabricated document. In such circumstances, as the petitioner is admittedly in possession of the building and was running the bar hotel on the strength of Ext.P1 licence without interruption, which fact is not disputed by official respondents, I am of the opinion that the mere registration of a crime pursuant to a complaint filed by the fifth respondent in November 2011 is not a reason to hold that the petitioner firm is not in lawful possession of the licenced premises or that it is not entitled to seek a renewal of Ext-P1 licence. Foreign Liquor Rules, 1972 - Rule 13(3) 7th proviso - Whether the expiry of the validity of the three star classification certificate can be held out against the petitioner to decline renewal of Ext.P1 licence? As per the Abkari Policy for the year 2010-2011, the Government have decided to regularise all FL-3 licences not having the requisite star classification and were functional during 2009-2010. The petitioner's hotel was admittedly having a three star classification which was a pre- requisite for a fresh grant in the year 2006. The petitioner's bar hotel was functioning during the year 2009-2010. The three star classification certificate issued to the petitioner's hotel was valid only till 30.4.2011. Notwithstanding that fact, the FL-3 licence issued to the Managing Partner of the petitioner firm was renewed for the year 2011-2012 without demur. The FL-3 licence issued to the Managing Partner of the petitioner firm was not suspended or revoked after 30.4.2011 on the ground that the petitioner's hotel no longer has a valid three star classification. If in terms of the 7th proviso to rule 13 (3) of the rules, a FL-3 licence not having the requisite star classification and was functional during 2009-2010 is entitled to have the licence regularised, I find no reason why the petitioner firm which admittedly was running the bar hotel on the strength of a validly renewed FL-3 licence during the year 2009-2010 and thereafter also, without any objection being raised by the respondents, should be denied renewal of the licence on the short ground that the validity of the three star classification certificate issued to the petitioner's hotel has expired. I therefore find no merit or force in the contention of the learned Government Pleader that the 7th proviso to rule 13(3) has no application to the case on hand. In view of the fact that a fresh FL-3 licence could have been issued in the year 2009-2010 only to hotels having three star classification and above, it cannot be said that the 7th proviso to rule 13(3) does not apply to three star hotels which had the requisite qualification for sometime or that it applies only to licences governed by the 6th proviso. In the absence of any express stipulation to the effect that the 7th proviso to rule 13(3) of the rules will not govern hotels which had the requisite classification for some time, I find no reason to hold that the petitioner firm cannot claim the benefit of the 7th proviso to rule 13(3) of the rules. Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 - Renewal of the FL 3 licence - Whether the mere fact that the restaurant licence issued to the petitioner firm by the local authority for the year 2011-12 was cancelled on 12.3.2012, disentitles the petitioner to seek a renewal of the FL 3 licence? Held:- The licence issued for the year 2011-12 was cancelled on 12.3.2012, when the period of validity was about to expire, on the ground that in respect of the same premises a restaurant licence has been issued to respondents 5 to 8. Challenging that order the petitioner has filed a revision petition before the Tribunal for Local Self Government Institutions and it is stated to be pending. Respondents 6 to 8 have in categorical terms stated that it was the petitioner firm which was running the hotel in the licensed premises even after Ext.P2 sale deed was executed and registered and that the fifth respondent had applied for and obtained a restaurant licence without their knowledge. As stated earlier, the fifth respondent has not proved with cogent material that he and the other partners of his firm, were running the hotel after Ext.P2 sale deed was executed and registered. The official respondents also do not have such a case. In such circumstances as the petitioner firm was lawfully running the hotel on the strength of the restaurant licence issued by the local authority under the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 and the licence was being periodically renewed and the petitioner is in lawful possession of the premises even after Ext.P2 sale deed, I am of the opinion that nothing turns on the cancellation of the restaurant licence on 12.3.2012 when its validity was about to expire on 31.3.2012. In the light of the stand taken by respondents 6 to 8 that the petitioner is in lawful possession of the hotel building and the appurtenant land, the local authority cannot decline to renew the licence, merely because the fifth respondent has raised an objection. That apart, as stated earlier, the petitioner firm has applied for renewal of the restaurant licence for the year 2012-13 by submitting an application dated 15.3.2012 and the said application is stated to be pending. In such circumstances, I find no reason to hold that the non-issuance of a restaurant licence will disqualify the petitioner from seeking a renewal of the FL-3 licence. J U D G M E N T A common question arises in these writ petitions. The parties are also the same. They were therefore heard together and are being disposed of by this common judgment. W.P.(C)No.6494 of 2012 is treated as the main case and unless otherwise mentioned, the parties and documents referred to, are with reference to the said writ petition. The brief facts of the case are as follows: 2. "M/s. Hotel Malika Residency", the petitioner in W.P.(C) No.6494 of 2012 is a partnership firm. It is running a hotel at Ettumanoor under the name and style "Hotel Malika Residency". Ext.P1 licence in form FL-3 was issued to the Managing Partner of the petitioner firm under rule 13(3) of the Foreign Liquor Rules, 1972 (hereinafter referred to as "the rules" for short) on 8.8.2006. The licence which was initially valid till 31.3.2007, was being periodically renewed and the last of the renewals was valid till 31.3.2012. After the FL-3 licence was renewed for the year 2010-2011, the partners of the petitioner firm transferred the land and the building where "Hotel Malika Residency" is situate, to respondents 5 to 8, who are partners of yet another firm M/s. Bee Bees Palace, as per Ext.P2 sale deed dated 13.4.2010, that was registered on the same day. The petitioner states that on the very same day, the purchaser firm M/s. Bee Bees Palace, leased back the property conveyed to it as per Ext.P2 sale deed, to the petitioner firm as per Ext.P3 lease deed dated 13.4.2010 for a period of five years, with effect from 13.4.2010 with the obligation to pay the sum of Rs.2,50,000/- per mensem as rent. It is stipulated therein that the petitioner firm will be at liberty to use the entire hotel building and the premises and can obtain hotel, lodging licence, etc., for running the bar attached hotel named "Hotel Malika Residency." Though the fifth respondent later raised a dispute and also filed a complaint in the Court of the Judicial Magistrate of the First Class, Ettumanoor alleging that Ext.P3 is a forgery and the court below forwarded the complaint to the Ettumanoor Police for investigation under section 156(3) of the Code of Criminal Procedure and the Ettumanoor Police registered Crime No.1263 of 2011 on 28.11.2011, it is not in dispute that Ext.P1 licence was renewed for the year 2011- 2012 also, without any objection being raised to the renewal either by the department or by respondents 5 to 8. When Ext.P1 licence was issued for the first time to the petitioner firm, the hotel had a three star classification which was required for the grant of a fresh FL-3 licence at the relevant time. Rule 13(3) of the rules was amended with effect from 9.12.2011 and thereafter, an FL-3 licence can be issued only to hotels which have obtained four star, five star, five star deluxe, heritage, heritage grant or heritage classic, classification from the Ministry of Tourism of the Government of India. 3. Long after Ext.P2 sale deed was executed, the fifth respondent filed Ext.P5 complaint dated 2.12.2011 produced in W.P. (C) No.32515 of 2011 before the Commissioner of Excise, Kerala, the Deputy Commissioner of Excise, Kottayam and the Circle Inspector of Excise, Ettumanoor alleging that Ext.P3 lease deed is a forgery and that he has objection to the FL-3 licence in the name of the petitioner firm being renewed. The fifth respondent thereafter filed W.P.(C) No.32515 of 2011 in this Court for an order directing the Commissioner of Excise, Thiruvananthapuram and the Deputy Excise Commissioner, Kottayam to enquire into Ext.P5 complaint filed by him and to take action to cancel or suspend the licence issued to the Managing Partner of the petitioner firm. He also sought an order directing them not to permit the Managing Partner of the petitioner firm to run the bar attached hotel on the strength of Ext.P1 licence. The Managing Partner of the petitioner firm thereafter moved the third respondent for renewal of Ext.P1 licence for the year 2012-2013. The third respondent then took the stand that as the petitioner firm had transferred the hotel building and the appurtenant land to the partnership firm of which respondents 5 to 8 are partners, without the previous sanction of the Excise Commissioner, he is not entitled to seek a renewal of the licence in view of the stipulations contained in rule 19 of the rules. W.P.(C) No.6494 of 2012 was thereupon filed on 14.3.2012 seeking a declaration that the petitioner firm is entitled to have Ext.P1 licence renewed in terms of the policy of the Government and a direction to the official respondents to renew Ext.P1 licence for the year 2012-13 and in the subsequent years. 4. When W.P.(C) No. 6494 of 2012 came up for hearing on 29.3.2012, after notice to the respondents, a learned single Judge of this Court after hearing both sides passed the following interim order: "The writ petition need be heard in detail. In view of the mid summer holidays, post the matter for hearing immediately after reopening. There will be an interim direction to the third respondent to provisionally grant renewal in favour of the petitioner for a period of three months subject to payment of the requisite licence fee and complying with other formalities re queried. It is made clear that the provisional renewal ordered above will be subject to result of this writ petition and that the petitioner cannot claim any right on the basis of this interim order if it is ultimately found that the petitioner is not entitled for getting the licence renewed". 5. Aggrieved thereby, the fifth respondent filed W.A. No.721 of 2012. Though initially, a Division Bench of this Court passed an interim order staying the operation of the interim order passed by the learned single Judge on 29.3.2012, the writ appeal was dismissed by judgment delivered on 12.4.2012. Special Leave Petition (Civil) No.13436 of 2012 filed by the fifth respondent in the Apex Court was dismissed by Ext.P6 order dated 27.4.2012 with the observation that renewal of the licence in terms of the order passed by the learned single Judge, shall be strictly in terms of the procedure laid down in rule 13 of the Foreign Liquor Rules. In the meanwhile, as directed by the Excise Commissioner, the Joint Excise Commissioner, Southern Zone, Thiruvananthapuram, enquired into Ext.P5 complaint produced in W.P. (C) No.32515 of 2011 and submitted a report dated 12.3.2012, a copy of which is produced as Ext.R5(c) in W.P.(C) No.6494 of 2012. In that report he recommended that the FL-3 licence issued to the petitioner firm may be suspended and may be renewed only after the dispute between the parties is settled. The fifth respondent thereupon filed W.P.(C) No.8414 of 2012 for an order directing the Excise Commissioner to take immediate action upon that report and for an order directing the Excise Commissioner to suspend the licence issued to the petitioner firm for the reason that the petitioner firm does not possess a valid licence issued by the Ettumanoor Grama Panchayat to run a hotel/restaurant in the premises mentioned in the licence . 6. The main contention raised in W.P.(C) No.6494 of 2012 is that there is no restriction in the Abkari Act or in the Foreign Liquor Rules or in the conditions of licence which prohibits transfer of the licenced premises without the previous sanction of the Excise Commissioner and therefore, the stand taken by the respondents that the licencee has violated rule 19 of the rules cannot be sustained. It is contended that the restriction contained in rule 19 of the rules and in the conditions of licence is only as regards as sale, transfer or sub renting of the licence and not of the licenced premises and as Managing Partner of the petitioner firm has admittedly not transferred the licence and the licence still stands in his name and it was renewed even after the licenced premises was sold under Ext.P2, the petitioner firm is entitled to have the FL-3 licence renewed. 7. The third respondent, the Deputy Commissioner of Excise, Kottayam has sworn to a counter affidavit dated 21.6.2012 on his own behalf and on behalf of the second respondent, Excise Commissioner. In paragraph 3 thereof it is stated that though the partners of the petitioner firm constructed a three star classified hotel named "Hotel Malika Residency" and obtained an FL-3 licence as per order No.XC7- 12038/06 dated 4.8.2006 issued by the Excise Commissioner, that FL3 licence to Hotel Malika Residency was granted in the name of the Managing Partner, that it is still in the name of the Managing Partner, that the validity of the three star classification certificate issued to Hotel Malika Residency expired on 30.4.2011, that a three star classification certificate is essential to renew the FL-3 licence and therefore, the FL-3 licence cannot be renewed. It is contended that as the petitioner's hotel possessed a three star classification certificate when the FL-3 licence was first granted in the year 2006, no reliance can be placed on the 7th proviso to rule 13(3) of the rules. In paragraph 4 of the counter affidavit it is stated that the partners of the firm "Hotel Malika Residency" sold the land and building as per Ext.P2 sale deed to M/s. Bee Bees Palace, another partnership firm, without obtaining the previous sanction of the Excise Commissioner thereby violating rule 19 (i) of the rules and therefore, action under rule 34 of the rules was recommended against the licencee. It is stated that one of the partners of the purchaser firm (the petitioner in the connected writ petitions) has disputed the lease arrangement and denied having affixed his signature thereto, that the genuineness of the lease agreement can be established only in a competent court and the Police are also investigating into the matter. In paragraph 5 it is stated that upon receipt of Ext.P5 complaint produced in W.P.(C) No.32515 of 2011, an enquiry was conducted by the Joint Excise Commissioner and in the enquiry it was revealed that without obtaining the previous sanction of the Excise Commissioner, the hotel building and the appurtenant land were assigned to M/s. Bee Bees Palace, thereby violating rule 19(i) of the rules. In paragraph 6 it is stated that in view of the above reasons and also for the reason that Hotel Malika Residency does not have a valid restaurant licence, the licence cannot be renewed for the year 2012-13. A reading of paragraphs 6 and 7 of the counter affidavit makes it evident that the official respondents have no case that the FL-3 licence was transferred without the previous sanction of the Excise Commissioner. The case set out is that the sale of the hotel building and the appurtenant land without the previous sanction of the Excise Commissioner is illegal and therefore, the licence cannot be renewed. The other reasons given are that the validity of the three star classification certificate expired on 30.4.2011 and the hotel does not have a licence to run a restaurant. 8. The fifth respondent in W.P.(C) No.6494 of 2012 (the petitioner in the connected writ petitions) has filed a counter affidavit dated 22.3.2012. In paragraph 2 it is stated that after Ext.P2 sale deed was executed, respondents 5 to 8 changed the name of the hotel from Hotel Malika Residency to Hotel National Residency and on the strength of Ext.P1 licence he along with the other partners conducted the bar hotel. It is stated that the licencee C.P. Viswanatha Menon had in the year 2010 requested the Excise Commissioner to change the name of the hotel as Hotel National Residency and the local authority had issued a licence in the name of Hotel National Residency during the year 2010-11 and 2011-12. The fifth respondent has also produced along with the counter affidavit as Ext.R5(a), a copy of the licence issued by the Special Grade Secretary of Ettumanoor Grama Panchayat under the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 on 23.11.2010 to respondents 5 to 8 to run a restaurant or hotel in premises bearing door No.VIII/729 G, for the year 2010-11. In paragraph 3 of the counter affidavit, the fifth respondent has alleged that he has not executed Ext.P3 lease deed as alleged by the petitioner, that it is a false document created for the purpose of defending W.P.(C) No.32515 of 2011, that on his complaint the Ettumanoor Police have registered Crime No.1263 of 2011 and the investigation is in progress. He has also contended that apart from the fact that Ext.P3 is a false document, it is not a registered instrument and therefore, no reliance can be placed on it. The fifth respondent has also stated that the Joint Excise Commissioner has after enquiry into the complaint filed by him recommended suspension of the FL-3 licence and therefore, the reliefs prayed for by the petitioner cannot be granted. It is stated that the Managing Partner of the petitioner firm has in collusion with respondents 6 to 8 entered into a new partnership agreement and applied to the Excise Commissioner for previous sanction to reconstitute the firm, in an attempt to defeat his rights. 9. The petitioner has filed a reply affidavit dated 1.6.2012 contending inter-alia that rule 19 of the rules has no application, that the prohibition therein is only against the sale, transfer and sub renting of the licence, that in the instant case there is admittedly no sale or transfer or sub renting of the licence and even in cases where the licence was transferred to third parties without prior sanction, the Excise Commissioner has ratified the action and regularised the transfers by imposing a fine and by directing payment of fee in accordance with the stipulations in the rules. Reliance is placed on Exts.P7, P8 and P9 orders issued recently by the Excise Commissioner in that regard. As regards the licence to be issued by the Ettumanoor Grama Panchayat it is contended that an application for renewal of the restaurant licence issued under the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 submitted on 15.3.2012 is pending with the Secretary of the Ettumanoor Grama Panchayat and as the period of 30 days prescribed in sub rule (3) of rule 12 of the said rules has expired after the application for licence was submitted and it has not so far been rejected, the licence should be deemed to have been granted. With reference to the three star classification certificate it is contended that in view of the 7th proviso to rule 13(3) of the rules, the FL-3 issued in the year 2006 licence stands regularised with effect from 1.4.2010. 10. The additional seventh respondent has sworn to a counter affidavit dated 11.6.2012 on his own behalf and on behalf of additional respondents 6 and 8. In paragraph 3 thereof he has stated that respondents 6 to 8 along with the fifth respondent who are partners of the firm M/s. Bee Bees Palace purchased the hotel building and the appurtenant land as per Ext.P2 sale deed dated 13.4.2010 and on the same day itself they jointly executed Ext.P3 lease deed in favour of the petitioner firm to enable the petitioner firm to continue to run the bar hotel in the very same premises and that on the terms of Ext.P3 lease deed, respondents 5 to 8 are being paid Rs.2,50,000/- per mensem as rent. It is also stated that the petitioner firm is in possession of the licence without objection from any quarter and that the bar hotel is being run by the petitioner firm itself. In paragraph 4 it is stated that the eighth respondent who is the brother of the fifth respondent is married to Smt. Jessy Cherian, sister of the sixth respondent, that the marriage between the eighth respondent and Smt. Jessy Cherian was not to the liking of the fifth respondent and his family members and this has led to disputes and differences between them. It is stated that it was only in November, 2011 that the fifth respondent came forward with the complaint that the lease deed is a forgery. The eighth respondent has in paragraph 6 of the counter affidavit stated that Ext.R5(a) licence was obtained from the Ettumanoor Grama Panchayat without the consent of respondents 6 to 8. He has also denied the allegation that Ext.P3 lease deed is a false document and has stated that to purchase the hotel from the petitioner firm, he and the other partners had to avail a loan of Rs.2,50,00,000/- from the Kerala Financial Corporation, that the monthly repayment instalment is Rs.5,00,000/- which they are in a position to pay because of receipt of rental income received from the petitioner firm, that the fifth respondent is not making any contribution for repayment of the loan ever since disputes arose between them and that the loan is secured by a mortgage of the properties belonging to respondents 6 to 8. 11. I heard Sri.C.C.Thomas, learned Senior Advocate appearing for the petitioner in W.P.(C) No.6494 of 2012, Sri. Sujith Mathew Jose, learned Government Pleader appearing for the official respondents, Sri.P.S. Biju, learned counsel appearing for the fifth respondent and Sri.N.Raghuraj, learned counsel appearing for additional respondents 6 to 8. Sri.C.C.Thomas, learned Senior Advocate appearing for the petitioner in W.P.(C) No.6494 of 2012 contended that the prohibition in rule 19 of the rules is against the sale, transfer or sub renting of the licence without the previous sanction of the Excise Commissioner, that even according to the respondents the licence has not been transferred and therefore, no action against the petitioner firm is warranted. The learned senior counsel contended that the respondents have no case that the petitioner has violated condition No.7 of the licence by running the business outside the licenced premises or condition No.13 which stipulates that the licencee shall not lease out, sell or otherwise transfer his licence without the written consent of the Excise Commissioner and therefore, there is no reason why the licence should not be renewed as was done in the year 2011-2012. As regards the three star classification certificate, the validity of which expired on 30.4.2011, the learned senior counsel contended that notwithstanding that fact, the FL-3 licence was renewed without any objection for the year 2011-2012 and was not revoked, cancelled or suspended after the validity of the three star classification certificate expired on 30.4.2011 and that in any case, in view of the 7th proviso to rule 13 (3) of the rules, the petitioner firm is entitled to have the FL-3 licence renewed. As regards the restaurant licence, the learned senior counsel contended that the restaurant licence which was issued for the year 2011-12 in continuation of the licence issued in the earlier years was cancelled on 12.3.2012 a few days before its validity expired, that challenging that order the petitioner firm has moved the Tribunal for Local Self Government Institutions by filing a revision petition, that the said revision petition is pending and that the petitioner firm has also applied for a fresh licence on 15.3.2012, but till date the said application has not been rejected or disposed of and therefore, in view of the stipulations contained in sub rule (3) of rule 12 of the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996, the application should be deemed to have been granted. As regards the allegation that Ext.P3 is a false document, the learned senior counsel contended that as three out of the four partners of the purchaser firm admit the execution of the lease deed and also the fact that the petitioner firm is in possession of the property, in the absence of a finding by the competent court to the effect that Ext.P3 is a forgery, the respondents cannot decline to renew the licence on that ground. 12. Per contra, Sri.Sujith Mathew Jose, learned Government Pleader appearing for respondents 1 to 4 and Sri.P.S.Biju, learned counsel appearing for the fifth respondent contended that the FL-3 licence was issued in respect of a hotel, that with the execution of Ext.P2 sale deed the petitioner firm parted with possession of the hotel and even assuming that the property was leased back to the petitioner firm later, as the petitioner firm lost possession of the hotel building in the interregnum, it is not entitled to operate the licence. The learned counsel also relied on rules 13(3) and 19 of the rules to contend that as the licence is issued to a hotel, in a case where the hotel itself is sold, it amounts to transfer of the FL-3 licence. The learned counsel contended that as the petitioner admits having transferred the licenced premises to another firm, the consequences mentioned in rule 34 of the rules including cancellation of the licence can follow. The learned counsel contended that in any case as the validity of the three star classification certificate issued to the petitioner's hotel expired on 30.4.2012 and the petitioner firm does not possess a valid restaurant licence issued by the local authority, the licence cannot be renewed especially since the licence was first issued in the year 2006 on the petitioner firm producing a three star classification certificate. The learned counsel also contended that the 7th proviso to rule 13(3) of the rules has no application and therefore the petitioner firm cannot take shelter under the said proviso to contend that the firm is entitled to have the FL-3 licence renewed. Sri.N.Raghuraj, learned counsel appearing for respondents 6 to 8 submitted that that they do not dispute the validity or genuineness of Ext.P3 lease deed, they stand by it and have no objection to the FL-3 licence being renewed. 13. I have considered the submissions made at the Bar by the learned counsel on either side. It is not in dispute that the petitioner firm has not transferred the licence as such either to the firm of which respondents 5 to 8 are partners or to any one among them. It is evident from averments in paragraphs 4 and 5 of the counter affidavit filed by the Deputy Excise Commissioner that the main objection to the renewal of the FL-3 licence is the transfer of the hotel building and appurtenant land to the firm of which respondents 5 to 8 are partners, without obtaining the previous sanction of the Excise Commissioner. The stand taken by the official respondents is that the sale of the hotel building amounts to sale of the licence itself, thereby attracting rule 19 of the rules. Rule 19 of the Foreign Liquor Rules reads as follows: "19(i) Under no circumstances shall any licence obtained under this notification be sold, transferred or sub rented without the previous sanction of the Excise Commissioner. (ii) Reconstitution of partnership by addition or deletion of members of reconstitution of Directors in a Company resulting in change of ownership which owns/manages or operates any licence issued under this rule shall be deemed to be transfer of licence. (iii) Reconstitution of partnership/Directors of a company may be allowed on payment of Rs.50,000 (rupees fifty thousand only). (iv) Change of name of licencee may be allowed on payment of Rs.2 lakhs (Rupees two lakhs only). (v) Notwithstanding anything contained in this rule, in the case of death of a licencee of a proprietorship concern or partner or a director of a partnership firm or a director of a company that hold an FL-3 licence, the change of name of the licencee, the reconstitution of partnership or Board of Directors of a Company, as the case may be, will be allowed on payment of Rs.2 lakhs (Rupees two lakhs only) even if the hotel is not having star classification. Provided that such change shall be allowed only if the incumbent in whose name the licence is to be granted is eligible otherwise for obtaining a licence under these rules. [Provided further that, constitution/reconstitution of partnership deed/Director Board of a Company will be allowed only if the hotel is having two star classification certificate issued by Ministry of Tourism, Government of India.] (Note:-'Hotel' includes classified restaurants and such other hotels or restaurants having classifications or certificates issued by concerned Government departments on the strength of which FL3 licences have been obtained." 14. Sub rule (i) of rule 19 stipulates that except with the previous sanction of the Excise Commissioner, a licence obtained under the rules shall not be transferred, sold or sub rented. Sub rule (ii) of rule 19 provides that certain other transactions which normally do not come under the meaning of the term transfer, shall also be deemed to be transfers and therefore require the previous sanction of the Excise Commissioner. It is stipulated therein that if by addition or deletion of members the partnership is reconstituted, there will be deemed transfer of the licence from the original partnership to the reconstituted partnership. The same is the case when there is a change in the Board of Directors of a company. In State of Kerala v. Panamoottil Investments (2010 (1) KLT 557) a Division Bench of this Court while repelling the challenge to the validity of rule 19 held that the intention is to ensure that the licence does not fall into undesirable hands. It was held that if such a provision is not there, the right to vend liquor will reach the hands of abkari offenders, without the knowledge of the Excise Commissioner and therefore, it cannot be said that the stipulation in the rule is illegal or irrational. The Division Bench held that an artificial meaning has been given to the term "transfer" to take within its fold any change in the partners who constitute the firm or any change in the Board of Directors of the company, if a firm or a company is the holder of the licence. 15. In the instant case, as stated earlier, the official respondents have no case that the petitioner firm has parted with possession of the licence or the right to exploit the licence to any one else. The official respondents also do not dispute the fact that the petitioner firm is in possession of the premises which was sold as per Ext.P2 sale deed to another firm. All that is stated is that the sale of the hotel building and the appurtenant land without the previous sanction of the Excise Commissioner offends rule 19 of the rules. The official respondents have no case that the petitioner firm has exploited the licence in conjunction with any other person or persons who are not partners of the firm or that the firm has been reconstituted. In the absence of an express stipulation in rule 19(i) of the rules to the effect that transfer of the licenced premises will be deemed to be a transfer of the licence, I am of the opinion that rule 19 cannot be relied on to deny renewal of the licence. The rule making authority could have, as was done in the case of reconstitution of partnership firms or reconstitution of the Board of Directors of a company stipulated that the licencee should not sell or otherwise transfer the licenced premises without the previous sanction of the Excise Commissioner. In such circumstances, as rule 19(i) does not prohibit a transfer of the licenced premises and the licencee continues to be in possession of the licenced premises by virtue of a lease arrangement, though one of the lessors has questioned its validity, the official respondents cannot contend that for that reason, the petitioner firm is disabled from getting the licence renewed. The conditions set out in Ext.P1 licence also do not stipulate that the licencee cannot transfer possession of the licenced premises. That apart, rule 24 of the rules empowers the Excise Commissioner to permit the shifting of a bar hotel from one locality to another, subject to the limitations stipulated therein. It is only for shifting the bar hotel to another premises that the permission of the Excise Commissioner is required to be obtained. Rule 19 as it now stands does not in express terms prohibit the licencee of a bar hotel from selling the licenced premises of which he is the owner to another and to remain in possession of the premises under a lease arrangement with the purchaser and to continue to run the bar hotel in the very same premises. By implication also no such prohibition can be read into the rule. The prohibition is against the sale or transfer or sub-renting of the licence to another or the induction of a new partner in a firm in cases where the firm is the licencee or a new Director in a company in cases where the company is the licencee, without the previous sanction of the Excise Commissioner. I accordingly hold that the licencee in the instant case has not violated rule 19(i) of the Rules. 16. That takes me to the question whether on account of the registration of a crime pursuant to the complaint filed by the fifth respondent who claims to be in possession of the licenced premises, the respondents are justified in declining to renew the FL-3 licence. Ext.P2 sale deed was executed on 13.4.2010. The FL-3 licence was renewed for the year 2010-2011 without objection from any quarter. The fifth respondent has no case that the licencee was running the business elsewhere. On the terms of the licence, the licencee could not have run the business elsewhere. The official respondents do not have a case that the petitioner firm was exploiting the licence in another building which is not covered by the licence. Though the fifth respondent has in his counter affidavit claimed that he and his partners were running the hotel after Ext.P2 sale deed under the name and style "Hotel National Residency", the said claim cannot be accepted as representing the correct factual position. The additional seventh respondent has in the counter affidavit filed by him on his own behalf and on behalf of respondents 6 and 8 categorically stated that it was the petitioner firm which was running the bar hotel even after the execution of Ext.P2 sale deed. It was only on 2.12.2011, months after Ext.P1 licence was renewed on an application by the petitioner firm for the year 2011-2012, that the fifth respondent came forward with a case that he was running the bar hotel along with the other partners for the past two years, after the name of the hotel was changed as Hotel National Residency with the approval of the Deputy Excise Commissioner and that the other partners have now joined hands with the Managing Partner of the petitioner firm with a view to join the petitioner firm as partners. There is no material on record to substantiate the said contention. The official respondents also do not have such a case. That apart, it is not in dispute that the restaurant licence issued to the petitioner firm by the Ettumanoor Grama Panchayat under the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996, was being periodically renewed and it was renewed for the year 2011-2012 also. The restaurant licence was cancelled on 12.3.2012 on the ground that in respect of the very same building another licence had been issued in the name of respondents 5 to 8. The additional seventh respondent has in his counter affidavit positively averred that it was without the knowledge of respondents 6 to 8 that the fifth respondent applied for and obtained such a licence. They have also denied the allegation that Ext.P3 is a fabricated document. In such circumstances, as the petitioner is admittedly in possession of the building and was running the bar hotel on the strength of Ext.P1 licence without interruption, which fact is not disputed by official respondents, I am of the opinion that the mere registration of a crime pursuant to a complaint filed by the fifth respondent in November 2011 is not a reason to hold that the petitioner firm is not in lawful possession of the licenced premises or that it is not entitled to seek a renewal of Ext-P1 licence. 17. The next question to be considered is whether the expiry of the validity of the three star classification certificate can be held out against the petitioner to decline renewal of Ext.P1 licence. As per rule 13(3) which stood in force in the year 2006, an FL-3 licence could have been issued only to hotels which have obtained three star, four star, five star, five star deluxe, heritage, heritage grand or heritage classic, classification from the Ministry of Tourism of the Government of India. The petitioner's hotel had a valid three star classification when Ext.P1 licence was first issued on 8.8.2006. Though as per the rules, privately run two star hotels ceased to be eligible to apply for the grant or renewal of a FL-3 licence with effect from 1.4.1993, the Government was periodically granting existing licencees time till 31.3.2007 to upgrade their hotels to two star standards. Later, by the 6th proviso to rule 13(3) which was introduced with effect from 1.4.2007 it was stipulated that all existing licences not having three star and higher classification (which was the requirement as on 31.3.2007) and are functional as on 31.3.2007 shall be regularised. Thus, the licenses issued to hotels which did not have three star classification were regularised, if they were functional as on 31.3.2007. Later, the 7th proviso was introduced in rule 13(3) of the rules with effect from 1.4.2010 as per G.O.(P) No.67/2010/TD dated 15.3.2010. The 7th proviso to rule 13(3) reads as follows: "Provided also that all FL-3 licences not having the requisite star classification and are functional during 2009-2010 shall be regularized." The explanatory note to the Government order dated 15.3.2010 reads as follows: As per G.O.(Ms)55/2010/TD dated 5th March, 2010 Government have announced the Abkari Policy for the year 2010-2011 in which it is decided to regularise all FL- 3 licences not having the requisite star classification and are functional during 2009-2010 and to enhance the rental of the FL-4A licence from Rs.8 lakhs to Rs.15 lakhs. It is also decided to extend the period of payment of gallonage fee up to 10th May of every year and to exclude liquor transferred from one FL-9 premises to another FL-9 premises of Kerala State Beverages Corporation and godown breakage of liquor in FL-9 premises from the purview of sale of liquor. 18. It is stated in the explanatory note quoted above that as per the Abkari Policy for the year 2010-2011, the Government have decided to regularise all FL-3 licences not having the requisite star classification and were functional during 2009-2010. The petitioner's hotel was admittedly having a three star classification which was a pre- requisite for a fresh grant in the year 2006. The petitioner's bar hotel was functioning during the year 2009-2010. The three star classification certificate issued to the petitioner's hotel was valid only till 30.4.2011. Notwithstanding that fact, the FL-3 licence issued to the Managing Partner of the petitioner firm was renewed for the year 2011-2012 without demur. The FL-3 licence issued to the Managing Partner of the petitioner firm was not suspended or revoked after 30.4.2011 on the ground that the petitioner's hotel no longer has a valid three star classification. If in terms of the 7th proviso to rule 13 (3) of the rules, a FL-3 licence not having the requisite star classification and was functional during 2009-2010 is entitled to have the licence regularised, I find no reason why the petitioner firm which admittedly was running the bar hotel on the strength of a validly renewed FL-3 licence during the year 2009-2010 and thereafter also, without any objection being raised by the respondents, should be denied renewal of the licence on the short ground that the validity of the three star classification certificate issued to the petitioner's hotel has expired. I therefore find no merit or force in the contention of the learned Government Pleader that the 7th proviso to rule 13(3) has no application to the case on hand. In view of the fact that a fresh FL-3 licence could have been issued in the year 2009-2010 only to hotels having three star classification and above, it cannot be said that the 7th proviso to rule 13(3) does not apply to three star hotels which had the requisite qualification for sometime or that it applies only to licences governed by the 6th proviso. In the absence of any express stipulation to the effect that the 7th proviso to rule 13(3) of the rules will not govern hotels which had the requisite classification for some time, I find no reason to hold that the petitioner firm cannot claim the benefit of the 7th proviso to rule 13(3) of the rules. 19. I shall now consider whether the mere fact that the restaurant licence issued to the petitioner firm by the local authority for the year 2011-12 was cancelled on 12.3.2012, disentitles the petitioner to seek a renewal of the FL 3 licence. It is not in dispute that ever since 2006 the Secretary of Ettumanoor Grama Panchayat was periodically issuing a restaurant licence to the petitioner firm to run Hotel Malika Residency in terms of the provisions contained in Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996. The licence issued for the year 2011-12 was cancelled on 12.3.2012, when the period of validity was about to expire, on the ground that in respect of the same premises a restaurant licence has been issued to respondents 5 to 8. Challenging that order the petitioner has filed a revision petition before the Tribunal for Local Self Government Institutions and it is stated to be pending. Respondents 6 to 8 have in categorical terms stated that it was the petitioner firm which was running the hotel in the licensed premises even after Ext.P2 sale deed was executed and registered and that the fifth respondent had applied for and obtained a restaurant licence without their knowledge. As stated earlier, the fifth respondent has not proved with cogent material that he and the other partners of his firm, were running the hotel after Ext.P2 sale deed was executed and registered. The official respondents also do not have such a case. In such circumstances as the petitioner firm was lawfully running the hotel on the strength of the restaurant licence issued by the local authority under the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 and the licence was being periodically renewed and the petitioner is in lawful possession of the premises even after Ext.P2 sale deed, I am of the opinion that nothing turns on the cancellation of the restaurant licence on 12.3.2012 when its validity was about to expire on 31.3.2012. In the light of the stand taken by respondents 6 to 8 that the petitioner is in lawful possession of the hotel building and the appurtenant land, the local authority cannot decline to renew the licence, merely because the fifth respondent has raised an objection. The principles laid down by the Division Bench of this Court in Marimuthu v. Director General of Police, 1999 (3) KLT 662 will in my opinion apply on all fours to the case on hand. That apart, as stated earlier, the petitioner firm has applied for renewal of the restaurant licence for the year 2012-13 by submitting an application dated 15.3.2012 and the said application is stated to be pending. In such circumstances, I find no reason to hold that the non-issuance of a restaurant licence will disqualify the petitioner from seeking a renewal of the FL-3 licence. I accordingly dispose of W.P.(C) No.6494 of 2011 with a direction to the Excise Commissioner to renew Ext.P1 licence for the year 2012-2013 by issuing appropriate orders within one week from the date on which the petitioner produces a certified copy of this judgment. W.P.(C) Nos.32515 of 2011 and 8414 of 2012 are dismissed reserving liberty with the petitioner therein to prosecute the complaint filed by him before the Police. The contentions of both sides as regards that aspect of the matter are kept open to be raised in other appropriate proceedings. Until formal orders are issued by the Excise Commissioner in terms of this judgment, it will be open to the petitioner to continue to run the bar hotel on the strength of the licence issued pursuant to the interim order passed by this Court on 29.3.2012. The parties shall bear their respective costs. P.N.RAVINDRAN, (JUDGE) vps |
